Sydney Housing Prices Surge to New Record Highs!
Broad Strength across All Regions and Sectors
Weekly Clearance Rates Between 85 – 90%
- 3.7% MONTHLY PRICE INCREASE FASTEST SINCE 1988
- PRICES +2.7% ABOVE PREVIOUS JULY 2017 PEAK
- MEDIAN DWELLING VALUE HITS $928,028; $1,112,671 FOR HOUSES AND $755,360 FOR UNITS
- WEEKLY CLEARANCE RATES (13 MARCH – 7 APRIL) OF 88%, 90%, 87% AND 85%
- 6.7% HOME VALUE INCREASE FOR 1ST QUARTER; TOTAL RETURN 7.9%; GROSS YIELD 2.7%
(CoreLogic and REIA figures. Chart Source: RBA 2021)
Sydney dwelling values surged a remarkable +3.7% in March, eclipsing the previous record high set in July 2017.
The +3.7% capital gain increase led all capitals and regional markets. Leading indicators including housing loan commitments and weekly auction clearance rates are also at or near record highs, setting the stage for powerful price increases into the second quarter before the market catches its breath over winter.
Sydney’s upper quartile increased +4.8% in March versus +2.2% for the lower quartile. This equates to a remarkable +1% increase per WEEK in prestige housing prices. For Sydney weekend auctions, where winning bids now average over $1.7m, this means the typical winning bid jumped $17,000 (approx.) per week throughout March. Strong marketing campaigns can increase these historic returns even further, generating strong pre-auction offers and record numbers of motivated bidders on auction day. Crowds of over 100 are not uncommon for most prestige properties, with registered bidders pushing prices well beyond aggressively priced reserves.
For the 1st quarter, Sydney houses appreciated +8.2%, reaching a median value of $1,112,671. For the same period, unit values increased +3.2% to $755,360. Median dwelling values increased +6.7% in the March quarter to reach a new record high of $928,028, almost $200,000 above second-place Melbourne.
Travel restrictions continue to impact the rental market for inner-city units, with rents down -3.8% YoY versus a rental increase of +5.2% for Sydney houses during the same period. The net result is a record-low gross rental yield of 2.7%.
The RBA’s Dilemma – Property or Wages?
In his April 7 2021 Monetary Policy Statement, Reserve Bank Governor Philip Lowe directly addressed growing concern about the stunning pace of Australia’s housing boom:
“Housing markets have strengthened further, with prices rising in most markets. Housing credit growth to owner-occupiers has picked up, with strong demand from first-home buyers. In contrast, investor credit growth remains subdued. Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
He goes on to say:
“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.”
In other words, the RBA is more focused on the graph below than on the graph of housing prices. Until this Wage Price Index starts turning up, record-low interest rates are set to continue, fueling further price increases in Sydney and throughout the nation. Possible brakes will include tighter lending standards and less fiscal support for the housing market (excluding first home buyers) from the Federal Government.
The Bottom Line – Where are the New Listings?
Real estate veterans know that too much of a good thing can lead to problems down the track. At the moment, the main problem is that housing supply is simply not keeping up with an historic surge in housing loans and housing demand. CoreLogic notes that total national listings are a full -25% below the five-year average. At the same time, the easing of credit conditions and record low interest rates have expanded the pool of buyers searching for their dream home.
In the medium term, higher property prices should bring in more supply to the market and establish a market-clearing balance between supply and demand. But until monthly price increases slow down or stabilize, undersupply of premium homes looks set to continue through the second quarter at minimum.
For sellers, the return on investment for a top-tier marketing campaign has never been greater. Be it drones, virtual furniture or simply perfect photography, V-Mark Design’s friendly team of imaging experts will work with you to generate the maximum return for your listing.
Continued success in this amazing property market!
The V-Mark Design Team