Sydney’s property market has been in the news a lot over the past 12 months, but if you read most media reports, you’d probably get the impression it is all gloom and doom. However, the reality is much more complex – and, in many cases, more positive – than headlines suggest, especially in the eastern suburbs.
In this article, I explore what happened in our local market over 2022 and my predictions for 2023.
The Sydney market in 2022
Sydney’s median house price peaked in January 2022 at $1,389,948 – 29.8% higher than 12 months earlier and 41.4% higher than in September 2020.
In the following months, prices continued to fall, with the median house price standing at $1,257,625 on 30 October – 9.5% below its peak. Despite never rising as much as the median house price in the boom of 2020 and 2021, the median apartment price fell -6.5% from $837,640 to $783,406.
The impact of interest rate rises
It is likely that rising interest rates are a major cause of this decline. The RBA has increased the official cash rate for seven consecutive months, raising it from 0.1% to 2.65%, and further rate increases are expected. As a result, buyers have been restricted in their borrowing power and have had to tighten their budgets.
However, it’s also worth noting that Sydney property prices began to decline even before the RBA raised the official cash rate. This might suggest that a rising market was destined to fail.
The rise in interest rates merely strengthened the decline, especially when combined with high inflation, rising living costs, growing economic uncertainty, and high debt levels.
The prestige market still performed strongly.
There are submarkets and even markets within markets in the eastern suburbs property market. Demand for a property is often determined by the individual property, and prices can vary from suburb to suburb. Nevertheless, there were still a lot of positive microtrends even though the macro trend was towards price drops.
A particularly notable trend was the demand outstripping supply in the eastern suburbs’ prestige market, which led to several record sales. Compared to other segments, the prestige market is less affected by interest rate increases. Very few people purchase a $20 million home with an 80% mortgage. Instead, its health tends to be more affected by factors such as the strength of the global economy and the number of mergers and acquisitions. Due to the over-representation of overseas buyers, particularly ex-pats, in this group, currency exchange rates also impact it.
As the Australian dollar weakens, Sydney property prices are becoming more enticing to affluent overseas buyers.
Shortage of downsizer properties
In addition, there has been a supply shortage in the downsizer market for years. As a result, prestige and boutique developments are in demand, as well as single-level apartments and smaller homes.
There are often fewer downsizers today than there were a decade ago, and they tend to be younger (often with kids in their last years of high school) and still working. Furthermore, they are much more selective in what they expect, expecting room for the office as well as the family, convenience, and even a touch of luxury.
Renovated homes in demand
An 11% increase in residential construction costs was recorded between September 2022 and September 2023, making it more expensive to renovate or rebuild a house. In the year 2021, it became fashionable to undertake a full house renovation or even to demolish and rebuild a home in the eastern suburbs. In the sales market, we often found that people were looking for properties with potential rather than the finished product.
During 2022, however, the pendulum swung back towards renovated homes, as some buyers worried about the cost and time involved in hiring trades.
The rental market in overdrive
While house prices broadly fell over 2022, low supply and surging demand sent the rental market into overdrive. The Sydney-wide vacancy rate now sits at 1.3%, according to SQM Research – less than a third of what it was in mid-2020. We’re seeing this translate into higher rents. For instance, in postcode 2021 (Paddington and Centennial Park) the median rent is now more than 50% higher than it was 18 months ago.
Over the coming year, we anticipate that this will drive first-time buyers into the market. After all, in some suburbs, there is little difference between buying and renting. Renting – so long as you can get together a 20% deposit. We expect it will also bring out more investors in the coming year, and this could kick-start some parts of the market.
Green shoots appearing in late 2022
In my opinion, the worst of 2022’s falling property market is behind us. We also believe that there are already some signs of recovery. CoreLogic reports, for instance, that property prices in Sydney began to slow down in September and that this trend continued into October, indicating that the decline is in full swing.
In the meantime, Sydney’s auction clearance rate is back at about 60%, which indicates a neutral market rather than a falling market. (In mid-July, auction clearances fell as low as 47%.) In the eastern suburbs, auction clearances are still higher and are now approaching 70%, according to the Wentworth Courier.
Property prices should really rise once the RBA stops lifting the official cash rate, and people have more control over their budgets. During that time, first-home buyers and investors will return in greater numbers, but people will also feel more confident to take the next step.
Nevertheless, you should not wait until then. Many of the best property investments are made when the market is quieter, when there is more room for negotiation, and when there is more time to make a good decision.
Market activity



19 York Rd Bondi Junction
June 2022 Sold $7,450,000
92 Beach Rd Bondi Beach
Sep 2022 $5,745,000
26 Brighton Blve Nth Bondi
Sep 2022 $10,110,000



13 King St Bondi
July 2022 $6,848,000
5 lord Howe St Dover Heights
March 2022 $12,750,000
39 Portland St Dover Heights
Feb 2022 $14,250,000



69 Bulkara Rd Bellevue Hill Feb 2022 $17,500,000
24 Fairwaether St Bellevue Hill Nov 2022 $14,800,000
59 Boronia Rd Bellevue Hill
October 22 $8,100,000