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Sydney Property Market: End Of Year Update

We’ve all seen the headlines about the amazing year the Sydney property market experienced over 2021, with buyer demand outstripping supply and homes and prices rising at an almost unprecedented pace.

We look at the year that was in 2021 for the inner city Sydney property market.

The Sydney property market in 2021

Australian housing values have risen for every one of the last 14 months straight, the latest CoreLogic data reveals. That includes an increase of 1.3% over November 2021. Far from property market activity slowing towards the end of the year, the last weekend in November was the busiest in Corelogic’s reporting history, with more than 4,000 properties going under the hammer across the combined capital cities.

Here in Sydney, property prices are up an incredible 25.8% a year ago. In our area of inner-city Sydney, the story may not have been quite as dramatic as some areas – not least because the pace of growth in house prices has outstripped the pace of growth in apartment prices – but it has still been very positive news.

According to data from realestate.com.au, the median unit price in Sydney City has risen from $975,000 to $1,050,000 since December 2021.

In Ultimo, the median unit price has stayed reasonably stable over 2021 at $736,000, while the median house price has skyrocketed from $1,215,000 to $1,620,000. In nearby Pyrmont, unit values have risen from $1,050,000 to $1,197,500.

Strong sales in our area

We were delighted that 2021 was the best year our agency has ever had despite the many challenges.

We achieved several record prices including:

323/298 Sussex Street, Sydney. This two-bedroom, two-bathroom unit with stellar views and double parking sold for $1,280,000.

2503/348-352 Sussex Street. With excellent views, this two-bedroom, two-bathroom unit in the Landmark building was immaculately finished and sold for $1,410,000.

2401/2 Cunningham Street, Haymarket. Located in a building with excellent amenities this two-bedroom, two-bathroom apartment in a central location sold for $1,100,000.

10/38 Mary Street, Surry Hills. This unique New York-style loft apartment with a double-height living area and three bedrooms held huge buyer appeal and didn’t last long.

How 2021 changed the Sydney property market

As we wrote earlier this year, with Sydney’s four-month lockdown forcing many of us to work from home, many have started to rethink their property requirements. Number one on a lot of people’s search criteria – regardless of whether they are renting or buying – is more room to move. We saw a much higher level of inquiries from people looking to upgrade to a larger apartment so that they could accommodate a home office, extra bedroom or larger living area.

We’ve also seen more first home buyers in the market than pre-pandemic. A lot of these buyers are being enticed to stop renting and become homeowners by the record low-interest rates. The cost of borrowing has reduced the gap between the monthly cost of buying and renting and, in some cases, has made it cheaper to buy.

Investors are also slowly returning to the market, buoyed by the same low-interest rates and the potential for stronger yields.

The residential rental market

When it came to rentals, we started 2021 strongly, with low vacancy rates across our portfolio. In June, we entered a four-month lockdown. However, interestingly, it didn’t have the same impact on rental prices we saw from the first lockdown in early 2020.

What did happen was that vacancy rates rose higher. SQM Research recorded that the vacancy rate for the Sydney 2000 postcode rose from 6.2% in January 2021 to a peak of 8.2% in September 2021. It then settled down to 7.5% in October.

We found that through this period, owners who were flexible and open to adjustment found they gained a tenant faster.

We also saw some owners selling, having decided to get out of the city/unit apartment and put their money into houses or land in regional locations, or other investments, including bitcoin. Landlords who stayed the course discovered that after the lockdown ended the market sped up with more competition from all directions.

Looking to 2022

There’s little doubt that, over 2021, Sydney’s CBD was impacted by border closures, lockdowns and the lack of international students. However, the overall property market recovered well from the first wave of the pandemic, and we knew more about what to expect when the second wave hit in 2021. This helped prices remain steady.

As more people come back into the office and overseas travellers and students begin to return, the city should see improvements to both the vacancy rate and rental prices.

Metro Realty’s Principal, Joseph Fairchild, believes that we have some catchup to play in terms of value.

“We’re sitting at pre-Covid prices, and supply is currently a little higher than demand for strata units, but that will level out,” Joseph says. “So I’m looking forward to price growth for both sales and rentals in 2022.”

Joseph isn’t alone in forecasting a strong start to 2022. In September, all of the Big Four banks revised their property market expectations upwards, thanks to stellar growth over the first three quarters of 2021. Collectively, they’re forecasting a 3-5% increase over 2022. That’s much less than the incredible rises we’ve seen this year but we believe it represents a welcome return to a more sustainable market, which is fair for both sellers and buyers. This forecast could alter if we see the RBA begin lifting interest rates rapidly.

Commercial real estate over 2021

With fewer people in the city centres, it’s only natural that we’ve seen a slowdown in the commercial property market. This is most acute in retail premises, as well as small-to-medium-sized offices. The businesses that usually let these spaces are more likely to have been impacted by the pandemic and we’re seeing rents start to fall in many buildings as businesses terminate leases.

We’ve also seen small businesses move to new premises, motivated by rent reductions.

And finally…

2021 has been a unique year for the Sydney property market, especially in the centre of the city. We’re looking forward to a positive 2022, and wish you and your family a very Merry Christmas and a Happy New Year.

If you’d like to know more about the state of the current market or how Metro Realty can help you contact our expert team today.

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