Sydney and NSW property market update - February 2021

Sydney market update - February 2021

Houses

$1,061,229

Monthly change: +3.0%

Units

$738,254

Monthly change: +1.1%

The Sydney property market was among the strongest performers over February, recording a +2.5 per cent lift in home values. 

Both houses and units performed strongly over the month with Sydney houses recording the highest month-on-month growth of all capital cities, up +3.0 per cent to a median of $1,061,229. 

Sydney units reported growth for the first time since April last year, rising +1.2 per cent over the month, after a sustained period of weak performance due to closed international borders, increased prevalence of remote working and the trend towards larger living preferences. 

CoreLogic’s research director, Tim Lawless, says that the current acceleration of property prices could push property prices past peak values. 

“Whether this new found growth in Sydney and Melbourne can be sustained is unclear. 

“Both cities are still recording values below their earlier peaks, however at this current rate of appreciation it won’t be long before Australia’s two most expensive capital city markets are moving through new record highs,” he said. 

Auction activity in Sydney has been frenzied as buyers compete for the limited properties on the market. 

In the week ending 28th February 2021, 844 Sydney homes were taken to auction returning a final auction clearance rate of 85.3 per cent. This is the highest final result the city has recorded since June 2015 and the fourth consecutive week above the 80 per cent mark. 

According to Domain data, the median price for a house at auction in Sydney has reached a record high of $1.68 million as the sheer volume of buyers in the market are outstripping the supply of homes for sale. 

Domain’s senior research analyst, Nicola Powell comments on the strong month of auctions over February 

“So far, the median auction price is looking set to be a record, and the clearance rate is looking to be a record.

“What we’ve got are buyers coming to the market who didn’t secure their home at the end of 2020, record home loans being financed, record interest rates, that upsizer market is really fuelling these auction results and record prices are being achieved,” she said. 

The latest figures from SQM Research show listing numbers in Sydney have increased +6.5 per cent over the month from 25,149 in January 2021 to 26,772 in February 2021. 

Louis Christopher says that absorption rates are increasing as the level of demand remains at record levels. 

“The key takeaway from February's property listing numbers is that despite the rise in new listings nationwide, absorption rates are picking up pace… right now demand is swamping supply. 

Regional NSW market update

Houses

$546,986

Monthly change: +2.3%

Units

$442,250

Monthly change: +1.8%

Regional NSW home values continued on their upward trajectory over February, rising +2.2 per cent to a median of $527,673. 

Both houses and units saw month-on-month gains with houses climbing +2.3 per cent to a median of $546,986, while units rose +1.8 per cent to $442,250. 

According to the latest Riskwise Risks & Opportunities report from Riskwise Property Research, regional NSW enjoyed strong demand and delivered capital growth of 4.7 per cent over the past three months, substantially higher than Greater Sydney with 1.6 per cent over the same period. 

Areas that are attracting the most lifestyle buyers include Byron Bay, the Central Coast (North Avoca, Terrigal and Wamberal), the Hunter Valley, Wollongong, and the NSW South Coast with beachside suburbs particularly outperforming the wider market. 

The report notes that the increased popularity of lifestyle areas in NSW started well before COVID-19 and is likely to continue over the medium and long term, with lower and more sustainable price increases. 

Sydney and NSW rental market update

Annual change in house rents in Sydney have increased +2.7 per cent while unit rents are still in the negatives at -5.3 per cent. 

While the Sydney unit rental market has declined over the past year, the weak rental conditions look to be making a small recovery with the rental index recording two months of consecutive rises. 

Mr Lawless says that a return of workers to the city is likely to be the reason for the improved figures. 

“The improvement in unit rents across Australia's two largest cities is likely to be at least partially seasonal as demand from domestic students generally rises early in the year, but could also be attributed to more people returning to work in the inner cities as well as workers in some of the hardest hit industries such as hospitality, food and accommodation services returning to employment,” he said. 

The latest SQM Research figures support this trend with Sydney recording a decline in vacancy rates over January with the rental rate sitting at 3.2 per cent.  

Sharp falls were also recorded in the CBD rental market where vacancy rates fell to 6.2 per cent after a high of 16 per cent in May 2020. 

Louis Christopher, Managing Director of SQM Research comments on the latest data. 

“There is more evidence the worst is over for landlords in the Sydney and Melbourne rental markets. The falls in vacancy rates over the month in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to the outbreak of COVID-19,” he said.

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

Overall, the Australian housing market is in one of the strongest growth phases on record. 

Whether Sydney property prices will continue to rise to 2017 peak values is not yet known however strong auction clearance rates, high confidence and record home loan commitments indicate a market that is showing no signs of slowing down. 

Mr Lawless says that the mismatch of supply and demand is the driving factor in accelerated property prices and while listings are expected to lift in March, supply may still be limited. 

“Although listings are likely to track higher over coming months, if buyer demand continues to lift it’s likely overall advertised stock levels will remain low,” he said. 

My Christopher says that the rate of price growth will be dependent on the effect that the wind down of government stimulus will have on the property market. 

“Still, the big test is to come when JobKeeper ends at the end of this month. If there is no evidence of material fall in clearance rates over April, then nothing is going to stop the market until the day APRA steps in to regulate lending or we have a rate hike from the Reserve Bank,” he said. 

Pete Wargent, co-founder of BuyersBuyers.com.au gives advice to prospective buyers on the market saying they need to be prepared and ready to act fast in order to secure a property under current conditions. 

“A-grade properties in Sydney are selling quickly or with lots of competition at auction, so buyers need to prepare a game plan. There are still plenty of first home buyers around, but now the investors are coming back too” he said.