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Property market update: Sydney, January 2022

By Zarah Mae Torrazo 05 February 2022 | 1 minute read

Sydney upended expectations of growth fizzling out at the start of the year, as the nation’s most expensive property market bounced back in January. However, some experts are sceptical that the city can sustain the monthly pace in the following months.

<a href=https://www.smartpropertyinvestment.com.au/data/nsw/2000/sydney>Sydney</a>’s growth accelerated in January, bouncing back from its weak performance in December as listings failed to keep up with the strong buyer demand seen at the start of the year. However, the quarterly change continued to soften, indicating the longer-term trend of slowing growth in the city. “The early indication is that housing markets are starting 2022 with a similar trend to what we saw through late last year. Values are still broadly rising, but nowhere near as fast as they were in early 2021,” Tim Lawless, CoreLogic’s research director, said. The expert also noted that January “is a bit harder to read” and advised market observers not to rely on the monthly growth figures to determine the markets’ next direction. <div class="dfp-ticker interscroller f" data-catid="85" data-pcount1="90"> <div class="kevel" > </div> </div> “Volumes [in January] are much thinner, so I wouldn’t read too much into it, including trends,” he said. The recent listings data has defied real estate industry expectations that the number of homes for sale would skyrocket as capital markets returned to a new year out of lockdown, with some blaming the Omicron “shadow lockdown” for delays to owners listing their properties. <div class="b_gxh"> <div class="moduletable"> <script type="text/javascript"> var typesArray = { desktop: [882], tablet: [4223], mobile: [1578], }; var zoneArray = [253991]; var zoneDivId = '#mm-azk257428-zone'; changePlacements(true, zoneDivId, typesArray, zoneArray, ''); </script> <div id="mm-azk257428-zone"></div> <style> #mm-azk257428-zone { width: fit-content; margin: auto; } #mm-azk257428-zone img { max-width: 100%; height: auto; } </style> </div> </div> There was much anticipation among local NSW experts that expected January to be the busiest ever, but it did not materialise. “We were expecting it to be absolutely nuts, but we haven’t seen that,” Ray White NSW chief auctioneer Alex Pattaro. However, he is more optimistic that market activity will rebound during the autumn season. “Late February and early March are looking really strong though.” He believed vendors were taking a wait-and-see approach to the market, with some put off by the growing numbers of COVID-19 when the Omicron variant was at its worst. According to Mr Lawless, the next few months would help determine if the trend of rising prices is here to stay, given the start of the year typically has fewer sales. “The trends in advertised supply levels go a long way towards explaining the performance of housing values,” Mr Lawless explained. “<a href=https://www.smartpropertyinvestment.com.au/data/vic/3000/melbourne>Melbourne</a> and Sydney have seen inventory levels normalise over recent months, taking some urgency out of the market as supply and demand become more evenly balanced,” he commented. Will Sydney continue gathering momentum as the year progresses? Or will its growth continue to wind down once the stock stabilises and begins to flow into the market? For now, let’s see what unfolded in the harbour city’s market in January 2022. Property values CoreLogic’s latest data showed dwelling values in Sydney rose 0.6 per cent over January, double the 0.3 per cent growth seen in December 2021. On a quarterly basis, property values in the city have risen by 1.8 per cent, down from the 2.5 per cent seen in the previous three-month period. The NSW capital continued to be the most expensive capital city in the country, as the median price of a home in the city – based on sales of units, townhouses and houses – is currently 25.5 per cent higher than it was at this time in 2021 at $1,106,279. Sydney’s housing market led the gains during the month, recording a solid 0.8 per cent increase. The figures are up from the 0.4 per cent gain seen in December. Compared to the same period last year, house prices have risen by 29.8 per cent, with the median price at a new record high of $1,389,948. Meanwhile, the city’s unit market also managed to regain some momentum in January, welcoming the year with a 0.1 increase in January and rebounding from the 0.2 per cent decline in December. Compared to January 2021, units are up by 15.4 per cent, with a median price of $837,640. Over the month, house and unit median values increased by $14,978 and $2,536, respectively. According to Mr Lawless, the slowing growth in the city’s dwelling values can be explained by a bigger deposit hurdle caused by higher housing prices alongside low-income growth, coupled with a recent surge in advertised listings and weak demographic trends. Supply and demand Sellers are reportedly taking a wait-and-see approach to the property market, with new figures revealing that the number of new stocks in Sydney has not jumped compared to last January. New SQM Research data showed total residential listings in Sydney fell by 8.7 per cent in January to 23,136 from 25,345 in December. Compared to January 2021, the total number of properties for sale in the city was down by 8 per cent. New listings (or properties that have been on the market less than 30 days) in Sydney saw a 14.7 per cent decline over the month from 9,813 to 8,371. Over the year, new listings in the city are only up by 2.8 per cent Meanwhile, data showed that old listings or property listings over 180 days fell by 4.3 per cent from 3,818 in December to 3,655 in January. Year on year, old listings have fallen by 39.1 per cent. SQM Research founder Louis Christopher said that despite the great expectations of the new year, vendors had not flocked back to the market to sell out of concerns that prices may fall this year. “We were expecting a lot more listings coming through,” Mr Christopher stated. “But these numbers tell me that vendors are not panicking and selling – they’re either holding back or they’re sticking to their guns and withdrawing their house from sale to get their asking prices.” “Available properties on the market remain tight. At just under 201,000 properties available for sale, we are currently having the mildest of slowdowns in the national housing market,” he added. The number of listings less than 30 days have plummeted by 27.6 per cent nationwide over the month, with only 49,215 new properties added to the market, the SQM data shows. Mr Christopher said that while home values are still on track to slow sharply in the next 12 months, price growth could reaccelerate in the near term following a steep drop in listings in January. “I think the risks have moved to the upside that prices will rise by more than expected during the March quarter. “Arguably, this could just be temporary, but I think the stronger market performance during the first quarter will force APRA’s hand in the second quarter and trigger price falls in the second half, even without a rate hike,” he stated. He added that while he forecasts the auction market will be busier in February compared to last year, he is not expecting a massive surge in new listings. Meanwhile, CoreLogic’s latest data mirrored SQM’s findings, with the property data provider reporting that the trend in new listings is higher relative to the same period last year, but freshly advertised supply remains below average at a national level. In Sydney, new listings were down by 0.9 per cent from the previous five-year average. CoreLogic noted that the city was second to Melbourne (-0.1 per cent) in terms of proximity to the five-year median level. It’s generally expected that January will bring the biggest lull in sales for the year as people slowly re-emerge from the holiday period. Despite below-average new listings, transactions surged in January, with home sales in the first month of 2022 clocking in well above average levels. According to CoreLogic, sales activity across Australia was estimated to be 15.1 per cent higher than January last year and 39.4 per cent above the previous five-year average. Auction markets Auction markets were expected to roar back to life earlier than usual in January, but the figures showed that home sellers are taking their time before putting a “for sale sign” on their real estate. CoreLogic reported that during the last two weeks of January, a total of 404 properties went under the hammer in the city with a final clearance rate of 60.6 per cent. CoreLogic noted that despite the seasonal slowdown observed during the month, auction market activity in Sydney has ramped up during the recorded weeks. It also highlighted that the weekly figures are higher compared to the same period last year. Meanwhile, Mr Pattaro noted that while the number of properties on auction was lower than agents initially anticipated, they are still seeing strong buyer demand. “Numbers are really strong at open for inspections and auctions,” Mr Pattaro said. He expects auction markets to rebound in February and March. Mr Christopher is also forecasting a stronger number for auctions in the coming months. “Going forward, we are recording a move towards more auction listings over February with scheduled auctions up by about 15 per cent compared to this time last year,” he said. If you want to be in the loop about what’s happening across auction markets in the country, follow our weekly updates in our<a href="https://www.smartpropertyinvestment.com.au/news" target="_blank" rel="noopener noreferrer"> News section</a>. Rental market While the quarterly pace of growth in Australian rents has been easing since moving through a peak in March last year, Sydney’s rental market has shown the opposite trend. According to CoreLogic, this growth is more evident in the unit sector, which has seen increased demand as house rents in the city become more unaffordable. Data showed that on an annual basis, both house and unit rents in the city rose by 9.3 per cent and 8 per cent, respectively. Gross rental yields have continued to diminish during the month, falling to a record low nationally of 3.21 per cent, down from 3.69 per cent a year ago. Sydney and Melbourne remained the only capitals where gross yields are averaging below 3 per cent. Sydney showed the lowest rental returns of 2.4 per cent among capital cities due to lower rental growth relative to a high rate of capital gain. Although rents have been rising at an above-average pace through the pandemic, dwelling values have risen more substantially, pushing yields in most cities to the lowest level on record, according to CoreLogic. Vacancy rates Domain reported that Sydney’s rental vacancy rates are lower than they were before the pandemic hit, sitting at 1.9 per cent in January and down from 2.7 per cent a year ago. The recent figures are the lowest rate it’s been at since March 2018 and 0.5 percentage points off the lowest recorded level seen in May 2017. The steep decline also comes after two months of increases at the end of 2021 and is significantly lower than the 2.6 per cent seen in December. It was anticipated that the rental market would tighten in January following a boost in supply in December, with the end of the year seeing the end of leases and a better choice overall. According to Domain, the renewed demand in January results in a reduction in vacant rental listings over the month. There was a 27.5 per cent decrease month on month in the number of vacant rental listings in Sydney, with just under 11,000 listings in January. Year on year, stocks in the city are down 29.8 per cent. The areas with the highest vacancy rates in Sydney were Ku-ring-gai (3.1 per cent), <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2150/parramatta>Parramatta</a> (3.1 per cent), Canterbury<a href=https://www.smartpropertyinvestment.com.au/data/nsw/2193/canterbury>Canterbury, NSW</a> <a href=https://www.smartpropertyinvestment.com.au/data/vic/3126/canterbury>Canterbury, VIC</a> (2.8 per cent), <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2112/ryde>Ryde</a> – <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2110/hunters-hill>Hunters Hill</a> (2.6 per cent), and <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2077/hornsby>Hornsby</a> (2.5 per cent). Meanwhile, the areas with the lowest vacancy rates were Richmond<a href=https://www.smartpropertyinvestment.com.au/data/sa/5033/richmond>Richmond, SA</a> <a href=https://www.smartpropertyinvestment.com.au/data/vic/3121/richmond>Richmond, VIC</a> <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2753/richmond>Richmond, NSW</a> <a href=https://www.smartpropertyinvestment.com.au/data/tas/7025/richmond>Richmond, TAS</a> <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2753/richmond>Richmond, NSW</a> – Windsor<a href=https://www.smartpropertyinvestment.com.au/data/nsw/2756/south-windsor>Windsor, NSW</a> <a href=https://www.smartpropertyinvestment.com.au/data/vic/3181/windsor>Windsor, VIC</a> <a href=https://www.smartpropertyinvestment.com.au/data/qld/4030/windsor>Windsor, QLD</a> (0.3 per cent), <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2570/camden>Camden</a> (0.4 per cent), Blue Mountains (0.4 per cent), and <a href=https://www.smartpropertyinvestment.com.au/data/nsw/2259/wyong>Wyong</a> (0.4 per cent). Commenting on the record-low number of vacant properties for rent, Domain’s chief of research and economics Dr Nicola Powell said: “If conditions carry on in the same direction we’re likely to see competition and weekly asking rents continue to rise.” Outlook for Sydney’s market Although Sydney’s market is still moving out of the seasonal festive period slowdown, early indicators are showing conditions are starting the year similar to where they finished in 2021. CoreLogic noted that while the rate of capital gains remains positive, Sydney’s growth trend is generally slowing. Mr Lawless reiterated that multi-speed market dynamics are at play across the capitals, with Sydney and Melbourne seeing a substantial deceleration in growth. “A softening in growth conditions has been influenced by less government stimulus, worsening affordability, rising fixed term mortgage rates and, more recently, a slight tightening in credit conditions, and a surge in new listings through the final quarter of last year,” he explained. The theme of worsening affordability applies particularly to Sydney and Melbourne, where the hurdle to save a deposit has become increasingly difficult for many while wage growth remains relatively low. CoreLogic also noted that while new listings are likely to trend higher early this year, it is uncertain whether demand will keep pace. “If inventory levels rise and demand reduces, we should start to see vendors and buyers becoming more evenly balanced in the market, reducing the sense of FOMO that has been a key factor in pushing up prices through the pandemic,” Mr Lawless said. Additionally, market analysts are keeping their eye out for the trajectory of inflation and interest rates, which will be critical for housing markets. AMP Capital chief economist Shane Oliver said the prospects for interest rate hikes would affect every market, but the two biggest cities, Sydney and Melbourne, would likely bear the brunt. “Melbourne is the most exposed because of the large supply overhang, and it has a more fragile economy given the damage done by multiple long lockdowns,” he said. “Sydney is also exposed given the strong price gains in the past year, which created a big affordability problem, forcing people to relocate elsewhere.” The <a href="https://www.smartpropertyinvestment.com.au/finance/23521-rba-makes-first-cash-rate-call-for-2022" target="_blank" rel="noopener noreferrer">Reserve Bank of Australia (RBA) kept the cash rate at a record low of 0.1 per cent in January</a> but upgraded its inflation forecast to 3.25 per cent this year. Dr Oliver predicted the RBA could start raising interest rates as early as June, following the higher-than-expected inflation reading last month. “I think we’re likely to see higher variable rates in the second half of the year, so consequently, we expect prices to peak earlier than expected,” he said. “Sydney and Melbourne could hit the peak by the middle of the year and nationally sometime in the September quarter.” Dr Oliver has reduced his forecast for growth in Sydney to zero this year, down from his previous forecast of 5 per cent. Nationally, he now expects property values to rise 3 per cent, down from a previous estimate of 5 per cent. Mr Lawless said the high level of household debt in Sydney and Melbourne also made them more vulnerable to interest rate increases. “Sydney and Melbourne have much higher median house prices, now both over a million dollars, so arguably household debt levels would be higher as well,” he said. “Sydney is around 10 times debt to income ratio, while Melbourne is approaching nine times, so arguably households would have stretched their budgets a bit more thinly. They could be the markets that are a little bit more at risk.” For more insights on NSW’s property market, check out our related articles, such as <a href="https://www.smartpropertyinvestment.com.au/research/23509-nsw-s-most-overvalued-and-undervalued-towns-revealed" target="_blank" rel="noopener noreferrer">NSW’s most “overvalued” and “undervalued” towns revealed</a> and <a href="https://www.smartpropertyinvestment.com.au/research/23519-the-regions-giving-the-capital-cities-a-run-for-their-money" target="_blank" rel="noopener noreferrer">The regions giving the capital cities a run for their money</a>. If you’re a first-time buyer looking to enter the real estate market, make sure to also check out Smart Property Investment’s brand-new white paper, <a href="https://www.smartpropertyinvestment.com.au/smart-property-investment-whitepaper-first-time-investors" target="_blank" rel="noopener noreferrer">Why 2022 is the right year to invest for beginners</a>. For more industry expert insights on the property market, check out our amazing <a href="https://www.smartpropertyinvestment.com.au/podcasts" target="_blank" rel="noopener noreferrer">podcasts</a>. Also, make sure to check our <a href="https://www.smartpropertyinvestment.com.au/news" target="_blank" rel="noopener noreferrer">News Section</a> for the latest property market reports, insights, news and useful tips and strategies for investors. <style>.b-glossaryTitle { padding: 0 0 5px 0;font: normal normal bold 16px/25px Poppins;letter-spacing: 0px;color: #000000;text-transform: uppercase;opacity: 1;text-align: left;border-bottom: 1px solid #d7d7d7;} .b-glossaryTerm { text-decoration: none !important;text-align: left;font: normal normal bold 16px/23px Poppins;letter-spacing: 0px;color: #EA5A1F !important;opacity: 1; }.b-glossaryDef {text-align: left;font: normal normal normal 16px/23px Questrial;letter-spacing: 0px;color: #000000;opacity: 1;}</style><div style="background-color:#FFFCFA;"><h2 class="b-glossaryTitle">RELATED TERMS</h2><div style="margin-bottom:5px;"><a class="b-glossaryTerm">Property</a>Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.</div></div><style>.b-autolinkshadowbox { display: inline; position: relative; cursor: pointer; color: #428bca;} .b-autolinkshadowbox:hover > span { display: block !important; } .b-autolinkshadowbox__links { white-space: nowrap; z-index: 999; display: none; left: 0; border: 1px solid #bfbfbf; border-radius: 5px; font-size: 12px; top: 12px;color: #000; padding: 10px; position: absolute; background-color: #FFF; box-shadow: 0px 0px 20px 1px #bfbfbf; } .b-autolinkshadowbox__links > a { display: block; padding: 3px 0; }</style>

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Zarah Mae Torrazo

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12 MONTH GROWTH

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Mirador

103.33%
Bawley Point

98.13%
Walla Walla

90.7%
Byron Bay

86.67%
Kiama Heights

85.93%
Greta

84.14%
Nulkaba

81%
South Hobart

78.78%
Diddillibah

76.25%
Lennox Head

73.98%

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Property market update: Sydney, January 2022