Sydney and NSW market update - June 2021

This month, property analytics giant CoreLogic made the suggestion that, while price growth in June was a substantial +1.9 per cent for the country, they expect things to cool off in the coming months. 

Try telling that to anybody near the Sydney property market, though, where a further +2.6 per cent rise in dwelling prices for the month brought that median within touching distance of the $1 million milestone. 

Regional NSW kept pace with the capital too, with June's gains of +2.4 per cent capping off an astonishing 12 months of growth beyond the +20 per cent mark. 

So will the market ease back, or is there plenty more to come in this east coast boom?

Sydney market update

As of the end of June, CoreLogic have Sydney's median property price sitting at $994,298, around $24,000 more than the previous month. 

That's about $5,500 a week or $800 a day. 

It's another stride in a staggering 2021 run, which has seen homes in the Harbour City go up in value by +15.4 per cent in just six months. 

The boom continues to be house-led, with detached stock appreciating in value faster than anywhere else in the country, although units are nearing a milestone of their own—a median price of $800,000. 

Auction clearance rates remained either just above or just below the 80 per cent level in Sydney throughout June, the highest consistent level of all the capitals, and days on market for houses was 26 days, second only to Hobart. 

All this is to say that Sydney is very much at the front of this upward surge, and while the current Covid outbreak has seen a predictable dip in activity, CoreLogic notes that these 'circuit-breaker' lockdowns tend to result in a sharp drop in activity followed by an equally swift recovery. 

NSW regional market update

Outside of the capital there's been no shortage of action either, as regional NSW turned in another standout performance in June. 

The regional market kept pace with Sydney once again with a +2.4 per cent increase in median home prices for the month, capping off an incredible year. 

Over the past 12 months, regional NSW properties have soared by +21.1 per cent, the highest rate of annual growth out of any Australian market. 

That means the median regional home is now worth nearly $120,000 more than it was mid-way through 2020. 

CoreLogic's new Million Dollar Markets report, released mid-way through June, found that 30 regional NSW markets broke through the million-dollar median barrier in May 2021 compared to 12 months ago. 

Many of them were found in the Richmond-Tweed or Illawarra areas, with some suburbs in the Southern Highlands and Shoalhaven region also featuring on the list. 

Sydney and NSW rental market update

While rental markets have been doing it tough this past year, especially in the biggest cities, things have continued to climb back towards normality over recent months. 

House rents in Sydney are now up +5.9 per cent from where they were in June last year, while units—which continued to tumble down towards the end of 2020—are recovering and are now only -1.1 per cent lower than they were 12 months ago. 

According to REINSW, vacancies are on a downward trend, with the latest data showing Sydney rental properties had a 3.1 per cent vacancy rate in June, a full 1.2 per cent lower than April, and particular Inner Ring suburbs were demonstrating a strong recovery. 

REINSW CEO Tim McKibbin said that "while it is still very early days, this is a positive sign particularly for the Inner Ring which has endured a lacklustre performance during the past 12-months with no international students and tourism to boost vacancy rates."

As property prices continue to rocket upwards, though, investors may be wary that gross rental yields in Sydney are still lower than anywhere else in the country, sitting on just 2.6 per cent. 

Regional NSW is also at the bottom of the pack for gross rental yields, bringing returns of 4.1 per cent. 

Vacancy rates in the regions, though, appear much tighter than in the capital. They're down to 1.0 per cent in the Hunter, 1.3 per cent in the Illawarra and only 0.6 per cent on the Mid-North Coast. 

What's next for the Sydney and NSW markets? 

Sydney and regional NSW continue to serve up substantial gains every month, but there are signs that things could ease off over the coming months. 

Banks and pundits alike are predicting interest rates will rise sooner than the RBA's 2024 projection, meaning mortgage rates are expected to start creeping up. 

CoreLogic also points out that lending criteria may become more conservative, raising the barrier for entry to buyers looking for a home loan. 

The current lockdown in Greater Sydney and further Covid-related restrictions around the state should pump the brakes on the market temporarily, and while a short-term lockdown should be followed by a rapid recovery, anything more extensive could have lasting effects. 

Then there's the ever-growing issue of housing affordability and owner-occupiers—especially first home buyers—being squeezed out of the market, potentially putting a dampener on demand. 

Investor activity continues to swell, though, so as one type of buyer looks set to cool off, another may be ready to take their place. 

The ride isn't over by any means, but it looks like it might be slowing down a bit in the coming months.