Best suburbs to invest in Sydney 2024

If you’re thinking of selling or buying property in Sydney, now’s the time to take stock of what’s currently happening in the market and where it may be headed in 2024.  

We’ll start with an overview of how the market performed in 2023 before rounding up some expert house price predictions for Sydney in 2024.

What did the property market in Sydney look like in 2023?

Recent CoreLogic data reveals Sydney dwelling prices gained +9 per cent in 2023, taking the median dwelling value to $1,121,196.

For property expert John McGrath, the Sydney housing market’s recovery has been “swift” post-Covid. “After a +24.5 per cent lift in median home values during the pandemic, Sydney property prices fell rapidly by -13.8 per cent between their peak in January 2022 and their trough in January 2023,” John says. “Sydney returned to growth earlier than expected, given interest rates were still rising.”

CoreLogic records Sydney median dwelling values rose +11.6 per cent since their trough – the strongest recovery of all the capitals. John says a -18.4 per cent year-over-year decline in new listings and a surge in migration fuelled this growth.

“Migrants tend to rent first but with Sydney’s vacancy rate barely above +1 per cent, it is likely new arrivals are fast-tracking their first home purchase,” says John.

While John believes the Sydney housing market has resumed its long-term growth pattern, there was a slight downturn in October. CoreLogic data shows monthly growth dropped to +0.8 per cent, its lowest since returning to positive figures in February (+0.3 per cent).

As Australia’s most expensive capital city market, affordability may be impacting Sydney homebuyers. October’s slowdown coincided with wider economic challenges, including four accumulated interest rate rises by the RBA. In CBA data, median priced dwellings in Sydney now exceed the mortgage stress threshold, meaning households with two full-time average incomes use more than 30 per cent of household income for mortgage repayments – potentially pricing some homebuyers out of the market.

Mortgage stress may also be fuelling increased distressed listings. Louis Christopher, property analyst and founder of SQM Research, says that of the 1250 NSW properties listed as distressed since mid-2023, 450 are in Sydney. “These numbers… are trending up, which does illustrate the sensitivities of interest rate rises,” Louis says.

Kate Forbes, a National Director Property Strategy at Metropole, says an overall rise in listings is another factor impacting the Sydney housing market.

“The slowdown is occurring alongside a rise in vendor activity, with the flow of new listings added to the market rising +14 per cent since the end of winter,” says Kate.

“The pace of growth is still quite rapid, especially given the affordability challenges that persist across the market, but values aren’t rising as quickly as they were around the middle of the year.”

Sydney property market forecast 2024

Westpac forecasts Sydney dwelling prices will increase +6 per cent in 2024 and +4 per cent in 2025.

For those thinking of property investment in Sydney, John McGrath says now is the time to snap up high quality properties in the best locations for a great price.

“The fastest price recovery is being seen in Sydney’s prestige market following a -17.4 per cent decline in values during the correction,” says John. “Sydney is re-entering a period of normal market conditions where +2 to +5 per cent growth per year is a reasonable expectation.”

In its forecast, CBA projects Sydney housing prices to rise +4 per cent in 2024, compared to +5 per cent across Australia. “It’s likely Sydney is approaching affordability constraints in terms of dwelling growth,” says CBA economist Harry Ottley.

On the other hand, Louis Christopher believes further rate rises could renew a downtown in the Sydney housing market, dropping dwelling prices -4 to 0 per cent. This puts the Harbour City in a similar position to Melbourne (-5 to -1 per cent) but well behind top performers Perth (+5 to +9 per cent) and Brisbane (+4 to +8 per cent).

“I think [the slowdown] will be driven by a rise in unemployment, a slowing economy, overall,” Louis says. “I will be wrong if the population grows by another 100,000 people and/or the employment rate manages to stay under +5 per cent.”

In the event of strong population growth, Louis forecasts Sydney housing prices to rise -1 to +3 per cent.   

How are Sydney house prices expected to change in 2024?

Sydney house prices grew +12.1 per cent in 2023, with CoreLogic recording a median house price of $1,396,888, the highest of all the capitals. 

Despite being the least affordable for buying a house, KPMG predicts the Sydney housing market will strengthen as increased migration and rental costs outweigh high interest rates. It predicts Sydney house prices will rise +6.6 per cent in 2024 and +10.3 per cent by June 2025.

Property investment expert Michael Yardney says while house prices dropped further than apartments in 2022, house capital growth is now stronger.

“More than seven in 10 Sydney suburbs are now attracting more than a million-dollar median house price, compared to just one in two, before the pandemic,” says Michael.

For strong price growth, Michael says houses within desirable school zones have a proven track record while also recommending suburbs with the most higher income earners. “Houses in Sydney’s east, inner west and lower North Shore suburbs offer the best prospects of long-term capital growth,” says Michael.

What's the Sydney apartment market like?

In 2023, Sydney unit prices increased +8 per cent, with CoreLogic recording a median unit value of $832,222. 

KPMG forecasts Sydney unit prices to grow a further +6.6 per cent in 2024 and +8.6 per cent by June 2025. 

Michael Yardney believes affordability constraints will steer homebuyers towards apartments. “Family-friendly apartments in medium and low-rise buildings in Sydney’s inner and middle-ring suburbs are likely to perform well as investments,” says Michael. “The pricing gap between houses and apartments is around 67 percent, so I see increasing demand for these more affordable apartments.”

Rising rental demand could see established units become strong contenders for Sydney property investment. Over 2024-28, commercial real estate firm CBRE expects apartment delivery to average 14,000 pa while demand will average 33,000 pa. City-wide vacancy rates are predicted to drop to -0.8 per cent and average rent increase +6 per cent.

CBRE forecasts apartment supply will be greatest in The Hills, Western precincts and Sydney metro line suburbs while vacancy rates may plummet in suburbs near the CBD, including the Inner West and Lower North Shore. In terms of rental growth, CBRE says rents in Parramatta and the Eastern suburbs could increase +30 per cent over the next five years.

What are the best suburbs to invest in Sydney in 2024?

If you’re wondering where to buy a house in Sydney, these suburbs might be worth looking at.

PropertyUpdate’s top 5 best suburbs for property investment in Sydney fulfil the criteria of being within 15 kilometres of the CBD, have above-average household income, a good or above average Demand Supply Ratio Score, a population of 6,500+, and are “very walkable”:

• Coogee
• Kingsford
• Kensington
• Maroubra
• Neutral Bay

John McGrath’s top picks are a mix of well-appointed lifestyle suburbs with easy access to the CBD and/or proximity to major hubs:

• Gordon
• Glenorie
• Curl Curl
• Fairfield
• Chifley

Australian Property Investor names these three Sydney suburbs as showing promising potential for unit investment, with prices around $600,000-$750,000:

• Engadine
• Northmead
• Mortdale