The Sydney property market started the new year with continued growth, up +0.4 per cent.
Home values in regional NSW rose more than three times the pace of properties in Sydney, climbing +1.5 per cent.
Sydney market update
Sydney property prices reported another month of growth with overall property values up +0.4 per cent to a median of $879,299.
While this monthly increase is relatively mild, Sydney values have slowly recovered from the impact of COVID-19, with prices +2.0 per cent higher than they were last year.
The declining demand for units throughout the pandemic, due to low levels of investor activity and changing housing preferences is reflected in the latest figures, which show house prices continue to outperform units.
In January, Sydney house prices rose +0.7 per cent while units declined -0.1 per cent.
According to CoreLogic’s Research Director, Tim Lawless, this may continue for some time as supply outstrips demand.
“While demand and supply remain imbalanced we are likely to see units continue to underperform relative to the detached housing market,” he said.
Auction activity in Sydney is ramping up again after the Christmas holidays with the week ending Sunday 31st of January posting a preliminary clearance rate of 82.9 per cent across 272 auctions.
Compared to the same period last year, the final clearance rate was recorded at 72.9 per cent across a lower volume of 158 auctions.
The latest figures from SQM Research show listing numbers in Sydney have declined -3.4 per cent over the month falling from 26,038 in December 2020 to 25,149 in January 2021.
Compared to 12 months ago, listings are still up by +4.5 per cent.
According to Louis Christopher, Managing Director of SQM Research, the decline in listings in January is a common trend.
“The month of January traditionally records falls in property listed for sale as the market is still in a summer holiday mode. This year was no exception,” he said.
While listings have trended down, demand has continued to increase with government stimulus and record-low interest rates fuelling buyer activity. In fact, NSW owner-occupier home loan commitments rose 6.5 per cent in December, while new loan commitments for first home buyers rose a more substantial 10.8 per cent.
Mr Lawless comments that the current conditions of low supply levels coupled with strong demand is a favourable time for sellers.
“With housing activity continuing to rise at above average levels while listing numbers remain well below average, the natural consequence is upwards pressure on housing prices,” he said.
The results of our latest Consumer Sentiment Survey reveals that NSW seller confidence is recovering strongly with 75 per cent of respondents believing property prices will rise in the next six months.
Of those surveyed, 22 per cent NSW respondents believe that property prices will stay the same and only 3 per cent believe prices will fall.
Regional NSW market update
The latest Australian Bureau of Statistics (ABS) internal migration data shows that over July, August and September, 11,200 people left Australian capital cities for the regions. This is the largest quarterly loss since records began in 2001.
The net loss is a result of fewer arrivals into capital cities as well as more people leaving to non-capital city areas.
This data confirms the trend that people are moving out of capital cities and into regional areas as working from home opportunities become more prevalent.
The surge of people living in regional areas is reflected in property prices, with home values in regional NSW rising more than three times the pace of properties in Sydney. Regional property prices rose +1.5% in January compared to the +0.4 per cent increase across Sydney homes.
Over the past twelve months, regional properties in NSW have seen solid growth, with an increase of +9.5 per cent.
Mr Lawless comments that the divergence between metro and regional housing demand is more pronounced in the largest markets of NSW and VIC as more people migrate to the outer fringe and regional markets.
“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements,” he said.
Sydney and NSW rental market update
Annual house rents have increased +2.1 per cent while annual unit rents are still in the negatives at -5.6 per cent.
While weak demand and an oversupply of units - particularly Sydney’s inner-city markets - have caused unit rents to freefall during the pandemic, the rate of decline has now eased.
This is good news for landlords. Over January Sydney unit rents posted the first month-on-month rise since March last year, up +0.8 per cent.
Mr Lawless says that workers returning to offices in the city could be a factor in this recovery.
“Part time job numbers are now fully recovered back to pre-COVID levels and more businesses are embarking on a return to work program which could be helping to support renewed demand towards inner city rentals accommodation,” he said.
Gross rental yields continue to be the lowest of all the capital cities at 2.9 per cent with regional NSW at +4.4 per cent.
What does this mean for the Sydney market and what can you expect in future?
In terms of the rental market, SQM Research Managing Director, Louis Christopher has seen signs of a slight reversal in the shift to regional areas.
“CBD and inner suburban vacancy rates have been falling again. And inner urban agents have been telling me demand has clearly picked up for such properties.
“But I don’t think it’s going to be a complete reversal. Demand for inner city property will remain affected by the closure of the international border as well as ongoing caution on future city lockdowns.
“This will mean 2021 will remain largely a tenant’s market in the inner cities but will also very much remain a landlord's market for regional Australia,” he said.
Listings are expected to lift throughout the year with early indicators suggesting that new listing numbers are set to rise and outpace levels from a year ago.
Mr Lawless states that while supply levels are low and demand is strong, it is a seller’s market.
“With sentiment rising and selling conditions favouring the vendor, it is reasonable to expect new listing numbers will rise as the year progresses,” he said.
According to Mr Lawless, while advertised stock is expected to increase, it may still not be enough to balance the increasing demand.
“At the moment, despite our expectation of a lift in new listings numbers, buyer demand is still outpacing new stock additions.
“If this trend persists, the rapid rate of absorption is likely to keep overall stock levels low, resulting in further upward pressure on housing prices,” he said.