For Australia’s property market, the first half of 2022 looked very different compared to 2021.
We explore how the changed conditions have played out here on Sydney’s Upper North Shore, and what it means for buyers, sellers, investors and tenants.
A very different economic environment
For most Australians, the past few years have been anything but standard. That lack of normalcy extends to both the property market and the economy more generally.
Despite border closures and prolonged lockdowns, 2021 was one of the best years ever for Sydney’s property market, with the median price across the city lifting an incredible $400,000 – or $1,100 every single day. However, this year, with our borders and economy fully reopened, it has been a different story: the Sydney median price fell -1.4% in the three months to 31 May – and most economists forecast further falls still.
One of the main reasons for this is a rapidly changing lending environment. In May 2022, the RBA raised the cash rate for the first time since 2010. Then in June, it raised it another 0.5%. Higher interest rates tend to mean higher mortgage repayments and less borrowing power. That puts a natural brake on rising prices.
On top of this, we’re facing new levels of economic uncertainty, with rising living costs, inflation and overseas events – such as Russia’s invasion of Ukraine – all playing their part.
Different markets, different impacts
As we’ve said many times before, even though the trend across Sydney is for falling prices, this isn’t the case across the board. There are markets within markets, meaning different suburbs perform differently, as do different property types.
According to CoreLogic’s data, Sydney’s median apartment price (-1.6%) fell more rapidly than Sydney’s median house price (-1.3%) over the three months to 31 May. This was despite house prices rising at almost double the rate of apartment prices during the 2021 boom.
One reason for this is that higher interest rates tend to disproportionately impact those market segments that are most leveraged, such as the first home buyer market. These buyers often use apartments as a first step into the Sydney property market.
On the other hand, the prestige market tends to be less affected by interest rates and more impacted by factors such as the health of the sharemarket and the economy more generally. Few people buy a $15 million home with an 80% mortgage.
What’s driving our local suburbs right now?
We’re also noticing that the current conditions are having a different impact on various property types even within suburbs in the Ku-ring-gai and Hornsby Shires. Take, for instance, Killara. Domain reports that the median price for a two-bedroom apartment in this prestige suburb has actually lifted 12% in the past 12 months, while the price of a three-bedroom apartment has lifted 23.5%. Meanwhile, the median price of a four-bedroom home has risen 30.2% over the same time.
At the other end of our territory in Berowra, the median four-bedroom house price has actually risen 32.5% over the same time, while the price of a five-bedroom home has risen 33.7%.We’ve seen a similar story right across Ku-ring-gai and Hornsby Shire, demonstrating the real strength of our market and its status as one of Sydney’s most in-demand. We’ve also noted that the auction clearance rate in our area (60.3%) remains well above the Sydney average (54.3%), according to CoreLogic.
Even though there is notably less activity in the market right now, we think this is actually a much better time to make a property move than last year. Owners looking to sell will have locked in most of their gains, and people are still buying – albeit often post-auction.
The main advantage of moving right now though is the opportunity to transact in a much more equal market, meaning it’s more likely you will be able to find your perfect next home. This should be especially great news for downsizers, who have often struggled over the past few years to find quality properties in our area.
Rental market booming
For the past few years, we’ve had fewer investors than normal entering the market. Many potential investors were fearful of high vacancy rates and low yields. This means they often stayed away even as the sales market surged, delivering property owners strong capital gains.
We’re now seeing a very changed leasing market, with strong demand across the board and rental stock in tight supply. For the first time in a long time, rents are actually starting to rise, with Domain reporting an 11.1% average rent rise across North Sydney and Hornsby in the year to March 2022.
Anecdotally, we’re seeing this trend play out in our rental properties – especially in our Hornsby office. Rental open homes are once again often bursting at the seams and it’s not unusual to have multiple applications even at the end of just one open home.
If you’re interested in finding out more about the property market in Ku-ring-gai or Hornsby Shire, get in touch.