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This was published 4 months ago
Apartment prices across dozens of Sydney suburbs are lower than they were five years ago, with pockets of oversupply and reduced buyer demand in some markets pushing median prices down.
While the harbour city’s median apartment price reached a record high of about $802,000 last quarter, Domain data shows typical unit prices in a string of inner suburbs, and many more in the city’s west, were lower than they were five years earlier.
Increased unit supply and reduced demand from buyers and renters has seen median unit prices fall in some inner Sydney suburbs over the past five years. Credit:Louise Kennerley
Haymarket, Ultimo, Chippendale and Zetland were among the suburbs where median unit sale prices last year were at least 5 per cent below levels seen in late 2016 during the previous market boom, as were the likes of Eastgardens, North Ryde, Forest Lodge, Penrith and Parramatta.
Smaller declines were also seen in suburbs like Willoughby, St Leonards, Leichhardt and Newtown, with more than a quarter of some 190 analysed Sydney suburbs recording a lower median in 2021 than in 2016. Price comparisons were only made for suburbs which recorded a median in both years, requiring a minimum of 50 unit sales annually.
Greater Sydney’s median unit price, by comparison, was up 8 per cent over the five-year period, while the typical sale price for houses was up 42 per cent.
Leppington, in the city’s south-west, was the only suburb where house prices were below 2016 levels, with the median down 5.9 per cent over the five-year period to $690,000.
A pullback in buyer demand amid the pandemic, as well as the increased supply in units in previous years, had put downward pressure on apartment prices in the inner city and rapidly developing middle and outer ring suburbs, said Angie Zigomanis, director of research and strategy at Charter Keck Cramer.
Of 10,700 apartments completed in Sydney last year – down 65 per cent since the supply peak in 2018 – more than half were in middle ring suburbs, with almost 30 per cent in the city centre and inner suburbs, figures from the property advisory firm show.
The inner-city market had become less attractive to investors amid border closures, which cut off demand from international students and new arrivals at the same time as remote working and learning reduced demand for rentals close to the CBD and universities, sending rents falling, Mr Zigomanis said.
“Rents are lower and even though interest rates are lower it means it’s not as attractive for investors to come in and buy property, and arguably there have been investors who have been selling out of those markets [as well],” he said.
A drop in demand had also been seen in western suburbs with higher migrant populations, but unit oversupply was the larger driving factor for price falls in these markets, he added.
PRD chief economist Dr Diaswati Mardiasmo said new apartment supply in Sydney’s western corridor had been running two or three times higher than that in inner Sydney, and the area had lost a lot of international skilled migration.
However, she noted that supply in the inner city was still being completed at the same time as international border closures reduced new demand and residents moved out of the inner city due to lost income or the need to return to a home country.
Dr Mardiasmo expected demand for units could pick up, particularly from first home buyers, due to the lack of houses in inner Sydney and affordability constraints. While hundreds of units were still set to be built in the area in the coming years, supply would be more subdued than that expected in inner Melbourne.
Median apartment prices in Epping last quarter were 8.4 per cent lower than in 2016.
Mr Zigomanis added Sydney was moving into a period of lower apartment supply, and this combined with a recovering rental market – off the back of the reopening of international borders and more workers returning to the office – and increasing investor demand, could improve prices in impacted suburbs. However, he questioned whether rent rises would be strong enough to attract investors back into such markets, given looming interest rate rises.
Agents in weaker apartment markets across the city, from Eastgardens to Eastwood and Newtown, said new supply in the suburbs and neighbouring markets had given buyers greater choice ahead of a pullback in demand in the pandemic. While investor activity was picking up in some pockets, it remained sluggish in others.
Catherine Murphy, of The Agency North, said the Ryde and Epping regions had seen many more apartments built since 2016, resulting in an oversupply issue that has seen prices fall. The spike in demand for houses, amid the rise of remote working and more time spent at home, was also a factor.
She had not seen much shift in investor interest, noting lower rental yields in the area did not have great appeal. And given the cooling market and growing expectations that prices would peak this year as interest rates begin to rise, she imagined it would be some time before there was growth in the impacted unit markets, noting prices were more likely to hold or see a slight fall.
Supply was less of an issue in suburbs like Leichhardt, which Hudson McHugh director David Eastway said had been seeing a slow recovery from the previous market downturn before the pandemic hit. While demand and prices for houses had soared in the subsequent owner-occupier fuelled boom, apartments had remained undervalued.
While he has seen a few more investors around, overall enquiries from buyers had dropped right off, he noted. Houses were becoming harder to sell, and units would be ever harder to shift.
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