Sydney Property Market Overview

The Sydney property market has enjoyed a soft landing over the last 2 years and has now entered a phase of stabilisation and consolidation. During 2005 there was a steady slow down of the market and during the December 2005 Quarter a small amount of growth crept back into the Sydney market with a 1% increase in median house prices.

In 2006 the Sydney Property market has continued to plateau. We have also seen increasing sales volumes and auction clearance rates as vendors revise their boom time expectations. Rental vacancies are at a 6 year low and as a result, rents and rental yields are on the increase. Prior to this months 0.25% interest rate increase many were predicting the beginning of a modest market recovery.Time will tell if the rate increase will dampen any potential of a recovery this year.

The Inner City and the East have been performing well when compared to other areas of the Sydney market. Owner-occupier demand remains healthy in these areas and good quality stock is particularly low, which is one of the major factors holding up these markets.

The top end of the market has also performed very well across Sydney. A lack of stock and high demand is underpinning the top end of the market as is the resources boom. In the December 2005 Quarter the 10 highest priced houses in Sydney sold for a total of $107 million which is a 16% increase on the September Quarter. There has been a number of strong sales at the top end of the market in 2006; the most expensive is the $24 million sale of 9 Wolseley Crescent, Point Piper. For further details see Sales of Interest in the right-hand column.

Despite the recent increase, interest rates are still low, as are unemployment rates, rental markets are tight and overseas migration is historically high. These factors are keeping a floor under house prices and there is still underlying strength in many areas of the Sydney property market due to low stock and a large number of buyers in the market.

Sydney Auction Clearance Rate

Auction clearance rates in Sydney have been strong in 2006. The clearance rate was 61% in February and hit 62% in March and again in April. This is the highest clearance for over two years. The March figure is 8% higher than the clearance rate for March 2005 and the April figure is 13% higher than the April 2005 rate.  

Vendors revising their boom time expectations and a large number of buyers in the market have contributed to the increase in clearance rates. An increasing number of properties are being sold prior to auction, largely due to a lack of good quality stock and buyers not wanting to compete with others buyers for what good stock there is.

Sale volumes are increasing with over 1300 properties offered to the Sydney residential auction market during March and April.  Sales levels are also improving with over $646 million worth of property changing hands in April compared to $356 million a year ago.

Sydney Median Prices

The Sydney Property market has continued to plateau with a slowing decline in median prices. The median house price fell by 1.1% to $516,000 and the median unit price fell by 1.4% to $358,00 over the March Quarter. The housing market is still performing slightly better than the unit market as owner occupiers outweigh the number of investors in the market.

Sydney Rental Market

Sydney rental vacancy rates for March have fallen to a 6 year low of 2%. Vacancy rates have fallen from 3.4% two years ago and 2.4% this time last year.  Property research company BIS Shrapnel are predicting that rental vacancy rates will drop below 2 per cent and may hit 1 per cent in 2007.

Rents are starting to rise in response and rental yields are improving.  Over the 12 months to 31 March 2006 the average Sydney rent increase from $335 to $360 per week, an increase of approximately 7.5%.  Declining median prices and increasing rents have seen average rental yields for Sydney increase from 3.2% to 3.5%.

Suburb Snapshot - Darlinghurst

Darlinghurst is located in the Eastern Suburbs only 1.5km east of the CBD.   It is one of Sydney’s most cosmopolitan suburbs, famous for it buzzing cafes, boutiques, restaurants, hip bars and non-stop nightlife.  Darlinghurst is undergoing a similar gentrification to Paddington, while maintaining a hip urban edge and more affordable property prices.  

Darlinghurst has seen a strong increase in property prices and prestige over the last 10 years. Young professionals have moved into the area lured by the charm of its Victorian terraces and closeness to the CBD.  Darlinghurst provides a more affordable alternative for those who are determined to buy in the Eastern Suburbs. Darlinghurst is also benefiting from the continuing upgrading and cleaning up of Kings Cross.

Darlinghurst real estate is a mixture of newly renovated Victorian terraces standing alongside un-renovated terraces, flats and scattered houses.  It has experienced strong growth in house and apartment prices over the last 12 months with a 3.24% growth for houses and 7.06% growth for apartments. These growth rates are high in comparison to other suburbs for this period. 

Rental demand in Darlinghurst is strong due to its close proximity to the CBD. Gross rental yield over the 12 months to 31 Dec 2005 was 3.8% for houses and 4.4% for units.

Source: Residex Pty Limited – “rent yield” is the gross annual rental income as a proportion of the value of the property. These figures are a broad guideline only.

For an investment property, Darlinghurst provides a good balance between capital growth and rental yields. It also provides more accessible entry levels than neighbouring suburbs. If you are looking for a semi-renovated 3 bedroom terrace you can enter the market in Darlinghurst for around $800,000. In nearby Paddington a similar property will sell for over $1 million.