Sydney and NSW property market update - December 2020

The Sydney property market finished the year with another month of growth, up +0.7 per cent. 

Values in regional NSW climbed a more significant +1.7 per cent over December as buyers continue to look to regional areas for lifestyle properties.

Sydney market update

Houses

$1,015,354

Monthly change: +1.1%

Units

$733,852

Monthly change: -0.7%

Sydney property prices continue in their recovery with another month of growth, with overall dwellings up +0.7 per cent. The median value of a Sydney property now sits at $871,749.  

Houses performed better than units over the month with houses up +1.1 per cent while units declined -0.1 per cent. 

In the longer term, growth has been mild in comparison to other capital cities with values increasing +1.3 per cent over the past three months and +2.7 per cent over the year. 

Auction activity in the nation’s largest market continued to perform strongly in the leadup to Christmas with the week ending Sunday 13th of December posting an impressive clearance rate of 73.1 per cent across 1009 auctions. 

This marks the 8th consecutive week the city has recorded over 70 per cent clearance rates.  

Compared to the same period in 2019, a lower clearance rate of 68.8 was recorded across 875 auctions. 

Strong performance is also seen in Sydney’s most expensive quartile of the market which is bouncing back, recording a rise of +0.70 per cent over December compared with a +0.63 per cent increase across the most affordable quartile. 

The rebound of the top end of the market usually occurs during an upswing of the property cycle, meaning that this recovery may be an indication that the market will continue to gain momentum in the months ahead. 

The resilience of luxury markets in Australia is highlighted in CoreLogic’s Best of the Best report for 2020 which analyses the top performing suburbs around the country. 

In the report, suburbs in Sydney’s eastern suburbs top the list for the nation’s highest median value for houses and units. 

The waterfront suburb of Darling Point is revealed as the most expensive suburb to purchase a house with an eye-watering median value of $7.06m. 

For units, the exclusive suburb of Point Piper tops the list where a unit will set you back a median of $2.28m. 

Eliza Owen, CoreLogic’s Head of Research says that the top end of the market has proved to be remarkably resilient. 

“It is not to say these suburbs have been unaffected by the pandemic; indeed the high end of the Sydney market is generally more volatile to changes in economic conditions. 

“However, this volatility also tends to see a rapid recovery in the wake of lower mortgage rates and an improvement in consumer sentiment,” she said

Regional NSW market update

Houses

$521,519

Monthly change: +1.8%

Units

$425,135

Monthly change: +1.2%

Regional NSW properties have significantly outperformed their capital city counterparts, with growth more than double that of Sydney’s. 

Over December, regional NSW properties climbed +1.7 per cent to a median of $503,744. 

Regional houses and units both posted gains in December with houses up +1.8 per cent and units following behind at +1.2 per cent. 

Growth in home values have been sustained over the longer term with prices up +4.3 per cent over the past three months and +8.3 per cent over the year. 

The latest figures in the Best of the Best report affirms the growing popularity of lifestyle markets with NSW’s top performing suburbs dominated by regional areas. 

According to the report, the suburb with the highest increase in house value is Bombala, in the Capital Region, where property prices have risen an impressive +22.6 per cent over the year.  

For units, the suburb of Griffith in the Riverina posts the highest increase in value in NSW, up +18.6 per cent. 

In the rental market, there’s good news for investors in the Southern Highlands and Shoalhaven, where suburbs in these regions top the list for the highest increase in rents for both houses and units. 

The small coastal town of Manyana has the greatest change in rents over the past 12 months with rents up +22.8 per cent. 

The town of Mittagong in the Southern Highlands has the greatest increase in unit rents with prices up +20.6 per cent over the year. 

The top performer for house rental yield is Bourke, in Far West and Orana, at +13.4 per cent and Mittagong, in the Southern Highlands and Shoalhaven, posting a +8.0 per cent unit rental yield. 

Sydney and NSW rental market update

Annual house rents have increased a mild +1.5 per cent, while annual unit rents have declined -5.7 per cent. 

According to Tim Lawless, CoreLogic’s Research Director, the weak demand and oversupply supply in the Sydney unit market has driven this decline in rents. 

“Weak demand for inner city unit rentals has been exacerbated by a recent history of high rise apartment construction in Melbourne and Sydney, with the pipeline of new units that are still under construction remaining well above the decade average. 

“Weak rental conditions across the unit sector are likely to persist until overseas migration starts to ramp up and the higher levels of supply are absorbed,” he said. 

Tim McKibbin, CEO of the Real Estate Institute of NSW (REINSW) agrees with this sentiment. 

“Supply and demand factors dictate the market and the absence of foreign students has adversely impacted specific areas. 

“Until these numbers return, conditions in those markets will likely remain unchanged,” he said. 

Mr McKibbin also predicts that strong growth in regional rental markets will continue due to prospective tenants seeking lifestyle changes. 

“Some people considering a regional move are test driving the idea using rental accommodation. With more people embarking on the same path, we are likely to see inner city vacancy rates remain higher, while outer Sydney and regional markets will continue to see demand exceeding supply,” he says. 

Gross rental yield in Sydney is the lowest of all the capital cities at +2.9 per cent with regional NSW performing better at +4.4 per cent yield. 

What does this mean for the Sydney market and what can you expect in future?

Most industry experts and economists have revised their forecasts and now predict growth for Sydney properties in 2021. 

SQM Research Managing Director Louis Christopher forecasts a 7 to 11 per cent dwelling price increase with growth particularly in freestanding houses. 

This optimistic outlook is based on the quick recovery of Sydney prices so far, the proposed NSW Stamp Duty/Land Tax opt-in for home buyers, sustained low interest rates and the scheduled rollout of a Covid-19 vaccine. 

Most industry experts and economists have revised their forecasts and now predict growth for Sydney properties in 2021. 

Ms Owen agrees with this optimistic view, stating that the housing market will continue to be supported by Government incentives. 

“Overall, the housing market outlook for 2021 is positive, given highly accommodative monetary and fiscal policy, signs of an economic recovery and many first home buyer incentives remaining in place through to early next year,” she said.