Demand for apartments, townhouses very strong, says Hotspotting
Sydney’s property market is bouncing back, with a new report from residential real estate data firm Hotspotting showing that more than half of Sydney suburbs have rising property markets.
The Hotspotting Top 5 Sydney Hotspot Report, which was provided exclusively to MPA, shows that some areas of Sydney – namely the cities of Canterbury-Bankstown, Sydney, Liverpool, Inner West Sydney and Penrith – are forecast to perform better than others.
The Hotspotting report analysed sales activity and buyer demand, major infrastructure projects and rental market metrics to determine where homebuyers and investors should be targeting in the next six months.
Hotspotting director Terry Ryder (pictured above) said more than 80% of suburbs in Greater Sydney had positive readings at the tail-end of last year with market conditions strengthening since that time.
“Of those suburbs, some 51% were classified as rising markets, which was the strongest in the nation, according to our research, and means Sydney has started this year with significant market momentum,” Ryder said.
“Whichever way we look at the numbers, Sydney has a strong market, with rising buyer demand in sectors right across the Greater Sydney area, from the Sydney CBD to Penrith.”
Hotspotting general manager Tim Graham said there was also rising buyer demand in locations with high concentrations of apartments.
“The City of Sydney LGA is one of the busiest in the Greater Sydney Area,” Graham said. “Of the 22 Sydney city suburbs in our latest quarterly analysis, 20 had positive classifications, including 15 rising markets.
“Other precincts with a high component of attached dwellings also had strong markets, notably suburbs in the Inner West, Parramatta, Ryde, Canada Bay and Strathfield LGAs.”
Ryder said mortgage brokers wanting to target areas of growth should be focusing on apartments in Sydney and other parts of NSW.
“That’s a very strong trend,” Ryder said. “With apartments there’s different processes and things customers would need to know, whether buying as an investor or as a home buyer, with factors such as strata and body corporate. But it’s a massive opportunity.”
Ryder said more people in Sydney were opting to buy attached homes – units, townhouses, and apartments – for lifestyle and affordability reasons.
He said people wanted to live in well-located suburbs such as in Canterbury-Bankstown and the Inner West, close to amenities and close to the CBD, but they couldn’t afford houses.
“But apartments are within reach of more people,” he said. “In a city like Sydney, perhaps more so than anywhere else, where median house prices are up to $1.5 million, you can buy apartments for maybe $600,000 or $700,000. I think that’s going to be a big factor in the Sydney market this year.”
Hotspotting’s top five Sydney hotspots
In Hotspotting’s report, five areas of Sydney were highlighted:
- City of Canterbury-Bankstown
- City of Sydney
- City of Liverpool
- Inner West Sydney
- City of Penrith
Hotspot: Canterbury-Bankstown
Ryder said Canterbury-Bankstown’s affordable property prices had attracted both first home buyers and investors, who were also attracted to its excellent amenities, well-connected road network, and public transport links.
“The Canterbury-Bankstown LGA is a contender for the title of ‘strongest Sydney market’ in our assessment,” Ryder said. “Such is the health of its property market, the LGA has also been listed as one of Australia’s top 10 municipalities.”
Ryder said among its leading suburbs, Bass Hill had rising growing quarterly sales, as did Condell Park.
“Canterbury-Bankstown’s success is undoubtedly backed by its relative affordability with research previously showing that it offers the most affordable price per square metre of land within 10 kilometres of the Sydney CBD,” he said.
Hotspot: City of Sydney
Graham said the rise of the apartment market helped the City of Sydney emerge as one of the most robust property markets in Greater Sydney.
“Despite the high prices compared to typical suburbia across the country, the 25 square kilometre section of prime real estate on the southern edge of Sydney Harbour still offers opportunities for discerning buyers,” Graham said.
“Often wrongly branded as one of the world’s most expensive cities, there are still relatively affordable options within a couple of kilometres of the Sydney Town Hall.
“Townhouses and units are the most popular and accessible housing options so close to the city, with units available in harbour-adjacent Ultimo at around $750,000.”
Closer to the epicentre, Haymarket has units available at a median price of $950,000 while several other walk-to-work in the city locations were priced under $1 million.
Hotspot: City of Liverpool
Ryder said a raft of residential developments were under way or in the pipeline in the Liverpool LGA, with expectations that south-west Sydney would boast a population of more than 1.5 million residents by 2036.
“Combined forces are underpinning a powerful local property market, which has proven its resilience and steadiness through various cycles, including the pandemic,” Ryder said. “The City of Liverpool remains highly affordable, attracting plenty of buyers with the region being one of NSW’s top locations for first home buyers.”
Within Liverpool, 13 of the 17 suburbs analysed for the Price Predictor Index summer edition had positive rankings, including rising markets at Casula, Hinchinbrook, and Moorebank.
“A range of factors have impacted the Greater Sydney and Liverpool housing markets and boosted activity and prices,” said Ryder. “These include a shortage of listings, the return of overseas migrants in large numbers, and an improvement in consumer sentiment.”
Hotspot: Inner West Sydney
Graham said while Sydney’s property market declined overall in 2022 before recovering in 2023, the Inner West precinct had consistently been one of the city’s most resilient sectors – boosted by the relative affordability of apartments throughout the precinct.
“With the Inner West offering apartment prices less than half the price of houses in the same suburbs, along with strong job and infrastructure nodes, properties in this LGA are worthy of attention by both homebuyers and investors,” Graham said.
“The Inner West is answering an increasing demand for apartments in near-city locations, where houses are too expensive, and buyers are turning to more affordable alternatives.
“This trend applies to first home buyers, down-sizers and families who want to remain close to the CBD – and the world’s most renowned harbour.”
Graham said he expected units to become a greater focus for buyers seeking affordable homes in inner-city locations, given the high price of houses through the Greater Sydney area.
Hotspot: City of Penrith
Ryder said the City of Penrith property market remained affordable compared to many suburbs closer to Sydney, with median house prices starting at $785,000 and units at $411,000.
“The outer-ring areas of Greater Sydney, notably the City of Penrith, are poised for future price growth on the back of rising buyer demand,” Ryder said.
“All but one of its suburbs analysed in the report have positive rankings in terms of transaction numbers with three locations, Jordan Springs, St Marys and Penrith in our National Top 100 Supercharged Suburbs.”
Ryder said the Penrith precinct offered a range of housing choices from central CBD living to acreage properties in rural areas of the LGA.
“Penrith has also already benefited from plans for Sydney’s second airport at Badgerys Creek, just a 30-minute drive away,” he said.
Factors affecting Sydney property price growth
Ryder said there was one word that summed up what was driving Sydney property price growth – shortages.
“Shortages of everything that matters – so shortages of rental properties, listings on the market are below historical levels, and you’re not building enough new homes,” Ryder said. “The building industry just can’t produce new homes at the rate that the country needs, because of all the inherent problems currently in the construction industry.”
Demand for property was strong but supply of everything was below where it needed to be.
“We’ve got a market that’s out of balance, with demand exceeding supply, and that’s a recipe for upward pressure on both rents and prices,” he said.
Ryder said Sydney started 2023 as quite a weak market but as time progressed it grew stronger.
“We saw sales activity picking up and up, despite the rising interest rates, demand continued to grow,” he said.
“So by the end of the year, Sydney prices had shown some of the strongest growth in the country, not quite as strong as Adelaide and Perth, but still in double digits above 10% growth in house prices, which is a much stronger year than the bank economist certainly expected.”
Ryder said the big year for property was during the pandemic in 2021 when average price growth across the nation was around 25%.
While the growth levels were not as a strong as in 2021, he said the current market could be described as moderate to strong.
“Sydney is what you would call a normal market, with good steady demand - there is an imbalance between supply and demand,” he said. “So prices are rising in a solid, steady fashion, but not booming.”
The impact of interest rate cuts
Ryder said the impact of interest rate trends on the property market was “incredibly overrated”.
“Bank economists tend to think that they’re the prime factor – we don’t agree with them,” he said.
“At the start of last year because interest rates had been rising and were still rising, economists predicted that prices would fall 15% to 20% in 2023. What we got, in fact, was quite healthy to strong price rises – Sydney around 10%, Perth and Adelaide stronger.”
“So despite those rising interest rates, demand continued to be high and because we had shortages, prices rose.”
Ryder said if the Reserve Bank cut interest rates in the second half of the year, it would have a small impact, improving people’s sentiment.
“It will make it a little bit easier to for people to get loans,” he said. “What I am expecting is the combination of that, plus the tax cuts … those two factors working together will see an improvement in people’s borrowing capacity and that would tend to have a positive impact on the property market.”
Greater listings on the way
When asked if more people would be putting their homes on the market this year, Ryder said he believed that would happen.
“That’s been one of the factors in the market – there’s been so little supply in terms of properties listed for sale,” he said. “There’s been a certain reticence by vendors, even though Sydney and many parts of Australia had been a good market to sell into.”
Ryder said more people were getting the message about price growth, good demand and shortage of listings.
“If you’re thinking about being a vendor, it’s a good time. I think we’re going to be seeing more of that and this should bring the market a little bit more into balance,” he said.
In Sydney, the trend of people leaving and seeking a more affordable and relaxed regional lifestyle would continue and it would also lead to more property listings.
Ryder said it was a trend that had been going on for 14 years, enabled by technology and the realisation that people could do their jobs from anywhere.
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