Sydney and NSW market update - May 2021

Traditionally the onset of winter means the property market takes a bit of a breather, but as CoreLogic's figures for May suggest that's very much not the case this year. 

After easing to a small degree in April, price growth in NSW has picked up steam once again, with Sydney median values jumping up +3.0 per cent for the month and regional NSW following close behind on +2.5 per cent. 

A slight reduction in new Sydney listings in May was met with more feverish demand from buyers and, as a result, auction clearance rates are still nearing 80 per cent each week. 

Meanwhile, destinations on the state's North Coast have emerged as the fastest-growing regional market in the country, and there are no signs of slowing down. 

So what's the state of play in the Premier State?

Sydney market update - May 2021

The +3.0 per cent boost in Sydney's median dwelling price is again second only to Darwin this month, which recorded a +3.2 per cent uptick. 

The median Sydney property now costs $970,355, around $20,000 more than it did last month. 

CoreLogic's head of research Tim Lawless explains "from a geographic perspective, it was the smaller capital cities that led the housing market out of the COVID slump, but now Sydney has risen through the ranks to record the largest capital gain over the past three months with values up +9.3 per cent."

Houses continue to be the star attraction, with values soaring another +3.5 per cent—just shy of a $40,000 increase. That takes the total uplift for the year so far to a staggering +15.1 per cent. 

As was the case last month, the upper quartile of properties (ie. the most expensive 25 per cent) are leading the charge, and that's due in part to the squeeze on house stock as opposed to units. 

While growing at a slower pace than their detached counterparts, units are still creeping up to the $800,000 median milestone, a substantially higher mark than in any other market. 

Regional NSW market update - May 2021

Outside of Sydney, NSW took the top spot for regional market growth in May. 

In fact, regional NSW has the highest growth of any state so far in 2021, with a year-to-date increase of +11.7 per cent. 

In dollar terms, the median regional property has risen in value by more than $70,000 since the year began.

CoreLogic's most recent regional market update shows the Richmond-Tweed region of the NSW North Coast had the highest annual rate of house price growth of anywhere in the country. 

Coveted coastal towns like Byron Bay, Lennox Head and Tweed Heads proved to be among the most desirable destinations for Australian buyers, with the region soaring +21.9 per cent over a 12 month period. 

As Christian Sergiacomi of Pacifico Property in Byron Bay tells it, "the market just kept taking itself to another level each week."

Regional NSW units also had a particularly strong May, matching the house value increase of +2.5 per cent. 

Sydney and NSW rental market update

While sales have been booming so far this year, the rental market has been decidedly more subdued, especially in Sydney where rents are still down -3.0 per cent over 12 months. 

But after such a difficult 2020, with people moving away from CBDs in droves and immigration at a standstill, things have been steadily picking up again.

Sydney rents increased +2.0 per cent for houses and +1.8 per cent for units this quarter.

CoreLogic notes that growth has eased this month, which in terms of normal seasonality is to be expected. 

Once international borders reopen and overseas students and workers can return to Australian shores, it's predicted the rental market's fortunes in Sydney and Melbourne especially will be flipped on their heads. 

Where gross rental yields currently sit at just 2.6 per cent in Sydney, there are better opportunities for cash-flow-positive investments in regional NSW where gross yields are at 4.2 per cent. 

This is still around the bottom of the pack when compared to other states, but certain pockets like the Richmond-Tweed region are thriving. 

Tony Holland of McGrath Coolangatta/Tweed Heads says "our offices have over 1500 properties under management, and we have less than 4 vacant.

"There are more people inspecting rental properties than there are at open homes, which says a lot because there are a lot of people at open homes."

What's next for the Sydney and NSW markets?

At this stage, not much has changed with the hot market conditions we've seen so far in 2021. 

The Reserve Bank of Australia continues to hold firm on its message that they don't expect to raise interest rates from their current record lows until 2024. 

Stock is still being sold at a faster rate than new listings are coming in the market, meaning the widely felt FOMO between buyers hasn't dissipated. 

Now it also looks like investor activity is on the rise, meaning competition for properties could be heating up rather than easing. 

As CoreLogic put it, "Australia’s housing market remains firmly entrenched in a housing boom across most regions of the country."

Affordability issues in Sydney and regional NSW could further deter first home buyers, who have been a big driver in the 2021 surge, but investors and other owner-occupiers appear to be poised to fill that gap. 

Mr Sergiacomo expects "while listings are low it seems like things are just going to keep tracking."

It looks like 2021's property mania is set to continue.