Sydney and NSW property market update - October 2020

By Emily Ng

The Sydney property market has turned a corner in October with prices increasing for the first time since April, by +0.1 per cent. 

Key indicators of consumer sentiment, listings and clearance rate have all performed positively over the month, suggesting that the market is in recovery.  

 
Track the value of your home
Compare recent sales and find out how much your property is worth
Get your free estimate now

Sydney market update

Houses
$993,927
Monthly change: +0.5%
Units
$735,350
Monthly change: -0.5%

After five months of consecutive declines in property values due to Covid-19, Sydney prices have moved back into positive territory over October. 

Latest figures show property values up +0.1 per cent over the month to a median value of $860,955. 

Performance between house and unit prices have started to diverge with Sydney house prices continuing to perform stronger than unit prices with house growth up +0.5 per cent to $993,927. 

Sydney units on the other hand declined -0.5 per cent over the month to $735,350. 

Units in the inner-city precincts of Sydney have been the hardest hit due to low levels of investment activity, relatively high supply of unit stock and international border closures. 

Latest figures show property values up +0.1 per cent over the month to a median value of $860,955. 

According to the Domain September House Price Report, the divergence of median house and unit prices over the September quarter has pushed the gap to the largest on record at 58 per cent.

Throughout the Covid-19 period, the most expensive quartile of the market has under-perfomed compared to the lower end and more affordable markets. 

In October however, the top end of the Sydney market led the rise in home values for the first time since February this year, up +0.3 per cent compared to the +0.2 per cent increase across the lower quartile. 

Historically, the top end of the market generally leads the downturn and upswing and while this is only one month’s worth of data, it will be interesting to see if the higher value properties continue to strengthen over the coming months. 

Domain Senior Research Analyst Nicola Powell comments on this positive trend. 

“The fact we’re now starting to see the upper end show stronger performance is an indicator that the market is turning around... prior to this it was showing greater weakness,” she said. 

The lift in property prices corresponds with other key indicators that have improved over the month. 

The Westpac-Melbourne Institute Index of Consumer Sentiment showed that confidence has lifted in all states with NSW confidence surging +17.5 per cent over October. 

Sydney listings increased in October by +8.4 per cent from 31,429 listings in September 2020 to 34,061. Compared to 12 months ago, listings are also up +13.6 per cent. 

“The lead indicators of listings - clearance rates - and asking prices suggest the market is starting to look up in Sydney”

Louis Christopher, Managing Director of SQM Research says the latest figures show that seasonality may be coming back in. 

“It seems like we are moving back to the usual spring selling season with all capital cities rising in October,” he said.  

Along with listings, clearance rates also strengthened in October with Mr Lawless noting Sydney as a stand-out performer. 

“Sydney’s clearance rate breached the 70 per cent mark in late October for the first time since early March, and auction volumes have been at similar levels as last year,” he said.  

Louis Christopher told the Sydney Morning Herald that the rise in auction numbers and clearance rates is a good sign. 

“The lead indicators of listings - clearance rates - and asking prices suggest the market is starting to look up in Sydney,” he said 

 
Preparing to sell? Let us do the research for you
Shortlist top local agents in advance
Find the right agent now

Regional NSW market update

Houses
$498,999
Monthly change: +1.2%
Units
$417,696
Monthly change: +1.0%

Regional NSW continues to outperform Sydney with overall dwellings up +1.1 per cent over the month to $483,683. 

Regional houses and units have performed similarly in October, up +1.2 per cent and 1.0 per cent respectively. 

Taking a look at buyer demand, according to the Domain Buyer Demand Indicator, which tracks demand for houses and units based on those ‘likely to buy,’ the pandemic has changed the way we use our homes and has altered purchasing decisions and property wish lists. 

The areas in highest demand over September were dominated by leafy, outer-suburban locations that offer larger block sizes, bigger homes and better affordability compared to suburbia. 

Regional NSW continues to outperform Sydney with overall dwellings up +1.1 per cent over the month to $483,683. 

Houses in Wollondilly, Richmond-Windsor and Camden have topped the list for largest demand increase since Covid-19. 

Mr Lawless comments on why buyers continue to flock to regional areas. 

“The newfound popularity of working from home is only one factor helping to support regional home prices. 

“More affordable price points, lower densities and lifestyle factors are also under-pinning the relative strength across many regional areas of the country,” he said. 

Sydney and NSW rental market update

Throughout Covid-19, house and unit rents have recorded a substantial divergence. 

From the end of March to October, units rents are down -5.8 per cent compared to the -1.0 per cent for houses. 

According to Mr Lawless, the divergence can be explained by the imbalance of supply and demand. On both Melbourne and Sydney, he notes that, “Both cities have a multiyear history of significant supply additions to the high-rise unit sector where the large majority of properties are owned by investors.

“From a demand side, the evaporation of overseas migrants, including foreign students, has led to a sudden and material drop in the number of renters requiring accommodation. 

“Additionally, weaker labour market conditions across industries where workers are more likely to rent than in any other sector have further impacted rental demand,” he said. 

From the end of March to October, units rents are down -5.8 per cent compared to the -1.0 per cent for houses.

While this is a good opportunity for tenants to get a lower price or be able to afford a property closer to amenities, landlords are taking a hit. 

A Reserve Bank of Australia (RBA) report, released as a part of its September Bulletin ‘The Rental Market and COVID-19,’ notes that rental income for landlords have fallen as a result of the decline in rents and increase in vacancy rates. 

“Many of these investors are lower-to-middle-income earners, and for some of these households a shock to their rental income would significantly impact their livelihood.” 

REINSW CEO Tim McKibbin agrees with this sentiment calling for the Government to lift the moratorium on tenants to support investors. 

“While low rates support buyers and existing property owners, more must be done to support landlords in New South Wales who are being adversely affected by the NSW Government’s rental moratorium. 

“There are increasing numbers of investors being forced to sell their retirement nest-eggs because the Government has unnecessarily extended the moratorium on tenants paying rent. 

“The NSW Government must urgently lift the rental moratorium and support these investors, as well as their tenants, so the state’s rental market can play its part in recovery, just as residential sales do,” he said. 

The moratorium is currently extended until 26 March 2021. 

What does this mean for the Sydney market and what can you expect in future?

It’s clear that the housing market is responding to the stimulus of low mortgage rates, improved sentiment from the 2020-21 Federal Budget, proposed relaxed lending standards for early next year, and low numbers of Covid-19 cases. 

The further cut of interest rates by the Reserve Bank to a record low of 0.1 per cent announced earlier this week will also play a key role in our economic recovery and support existing mortgage holders and further incentivise buyer activity. 

This support comes at an important time as October is the period most mortgage deferrals were set to expire. 

Mr Lawless told the Australian Financial Review that so far, it’s too early to tell if properties are selling due to distressed sales. 

"We are only just seeing the wind-down of JobKeeper now, and even though mortgage deferrals are starting to expire, we won't start to see mortgagee-in-possessions rising probably until after the first quarter of next year," he said. 

Looking ahead, early indicators show a recovery in the Sydney and NSW property market however there are still risks to the market when Government stimulus completely ends.  

Remember:

Market conditions will vary from suburb to suburb, and the value of your home is not only impacted by location, but also by property type and price point. While there may have been overall price drops Sydney, every suburb is different, and indeed some suburbs are showing strong performance in this market. 

For advice around the biggest market indicators that impact price growth, you can download this helpful guide.

 

Need help finding an agent to sell your home?

OpenAgent compares local agent sales and thousands of reviews to help you find the best agent

Help me find an agent

Peter Kosmina

OpenAgent customer

Help me find an agent

Recent posts