It’s better than the headlines seem when it comes to today’s property market.
While the news might lead you to believe that Sydney’s property market is doomed, the truth is nuanced and more positive than you might think.
This article examines seven things every buyer should know about the current eastern suburbs real estate market.
1. Headlines don’t help
According to CoreLogic, Sydney’s median property value fell -13.8% to $999,278 between January 2022 and January 2023. The median house value fell -15% to $1,205,618, while the median apartment value fell -10.4% to $772,807.
That is already the most significant price decline for the Sydney market on record after the market slump of 2017-2019 when prices dropped -14.9%. However, it took nearly two years for that to be realized. In a year, prices have dropped every day for the past 12 months.
Consequently, we’ve noticed that buyers are holding off and waiting to see where prices go.
2. The news isn’t all bad, though
Despite these falls, the local property market isn’t all bad news. For starters, it’s important to put the current situation in context. From mid-2020 to the end of 2021, Sydney’s median property value rose 27.7% before prices began to fall.
It is likely that anyone who bought before that growth cycle (or even partway into it) is in a very strong position, regardless of recent falls.
Furthermore, Sydney’s market does not behave in unison. Some suburbs, types of property, and markets remain active.
The prestige market is robust, with several suburb and street records over the past year due to strong buyer demand.
The eastern suburbs are also experiencing strong demand, as shown in the table below, which shows that several suburbs have made gains despite a general downturn in the market.
Suburb | Median house value | Growth | Median apartment value | Growth |
---|
Woollahra | $4,800,000 | 3.4% | $1,575,000 | 16.6% |
Rose Bay | $6,000,000 | 13.5% | $1,653,000 | 14.2% |
Bellevue Hill | $8,700,000 | 14.5% | $1,603,000 | 10.6% |
Bronte | $5,725,000 | 2.2% | $1,615,000 | 10.2% |
Tamarama | n/a | n/a | $2,575,000 | 5.1% |
Darling Point | n/a | n/a | $2,540,000 | 5.4% |
* Source: Realestate.com.au suburb profiles, accessed 13 Feb 2023
3. Generally, you’ll have more options
Even though some suburbs’ values have actually risen over the past year, the market heat of 2020 and 2021 has largely subsided.
In general, properties are taking longer to sell due to the lack of frenetic activity and fear of missing out (FOMO).
You’ll often have more time to decide and be more selective when looking to buy, and given that we tend to hold onto our properties for an average of around a decade, it’s vital that you make the right decision.
4. It’s a good time to upgrade
Most people wait until the market rises before buying their next home since they’re also selling. However, moving up the property ladder when the market is flat is much better.
It’s because property prices tend to narrow when they fall.
For instance, if your current home is worth $3 million and your new home is worth $4 million, there’s a $1 million gap. Your home will now be worth $2.550,000 million if both property values fall by 15%, but the house you want to move into will be worth $3.4 million – an $850,000 difference. As a result, you would need to borrow less than $150,000 – a significant difference in recent interest rate hikes.
5. You might also want to invest now
One of the key reasons for investors’ absence was Sydney property’s need for more income. The yield on houses fell as low as 2.5% in late 2021 as values soared over 2020 and 2021.
The equation is also rapidly changing, with prices down and rents rising rapidly. According to CoreLogic, Sydney houses are turning 2.8%, and houses are returning 3.9%. It’s likely that this will not be the last time.
6. Buying a first home at this time is a great opportunity
There is also the possibility that first-time homebuyers may find the current market a better one in which to acquire a property.
Since the median Sydney dwelling value has fallen, it has also brought down the cost of buying in. Moreover, as we recently argued, if you’re prepared to start in an apartment, you can get a foot in the door of the Sydney property market for a lot less today than it has in decades.
The hardest part of entering the property market in recent years has been saving a deposit. Lower property prices coupled with generous state and federal government subsidies may make this easier.
7. Eventually, the market will turn...
Last but not least, you should remember that property values in Sydney tend to rise over the long run, even if they tend to move up and down in the short term. Even if today’s flat conditions persist for some time, prices will eventually turn, and history shows that, when they do turn, they will turn rapidly.
Taking this into account, it’s usually better to purchase now, when conditions are slower, rather than wait until they run away.