Inner City And Inner West Market Update – January And February 2022

March 11th, 2022 - by Brad Gillespie

After the white-hot market of 2021, conditions are normalising, and the Sydney property market has had a steady start to the new year.

Over the twelve months to the end of February 2022, Sydney’s median house price rose by 25.95% to reach $1,410,128, according to CoreLogic, while the median unit price hit $831,793 following a 13.75% lift.

Here in the inner city and inner west, we’ve seen median house prices increase by 29.5% in Redfern since February 2021 to hit $1,877,500, while in Erskineville, they rose by 20.0% to reach $1,750,000.

Let’s take a look at the current trends in the inner city and inner west property market, as well as what we can expect in the next few months.

Price growth slows down

After last year’s real estate boom, every Australian capital city and regional market has now experienced a slowdown in the trend rate of growth, and Sydney is no exception. While quarterly results from CoreLogic show that Sydney property values rose by 0.8% in the last three months, the monthly data shows a tiny drop of 0.1% for overall Sydney housing values in February, the first decline since September 2020.

Of course, an average is just that, and some areas in Sydney are outperforming the average. Already this year, we’ve seen some incredible house and apartment sales here in the inner city and inner west. Our sale of the tri-level apartment P207/11 Power Avenue, Alexandria for $1,820,000 set a new building record for the acclaimed Atlas complex. Our team also sold the expansive penthouse retreat 17/19-23 Crown Street, St Peters for $2,150,000 at auction in February, as well as 12 Darley Street, Newtown, a freestanding designer sanctuary in the heart of vibrant Newtown, for $3,200,000.

Buyers are back …

Buyers were slightly hesitant to dip their toes in the water at the beginning of this year as Omicron continued its rapid spread and people waited to see what effect it might have on the market. As a result, the auction clearance rate for Saturday 29 January, the first auction weekend of the year, was only 68%, compared with 80% at the same time last year. But with COVID-19 numbers stabilising, vaccination rollouts continuing, and social distancing restrictions being relaxed, buyers are well and truly back in the swing of things, and by Saturday 5 March, auction clearance rates had lifted to 72%.

… but FOMO is a thing of the past

One of the hallmarks of the 2021 Sydney property market was a shortage of available homes for sale, which prompted serious FOMO (fear of missing out) amongst buyers, which in turn drove competition and pushed up prices. The balance of housing supply and demand is now returning to normal, and so buyers can afford to be less aggressive than they were last year. In the four weeks ending 27 February, total advertised stock in Sydney was 6.3% higher than last year, according to CoreLogic, although it was still 4.2% below the previous five-year average. An increase in the number of homes for sale means less pressure and more choice for both buyers and sellers. After all, sellers are usually looking to buy as well.

Property investor update

In good news for investors, Sydney house rents have risen by 8.7% in the last twelve months, while unit rents have gone up by 8.0%. Figures from CoreLogic show a national rise in rents in February, and it’s being driven by units. Demand for unit rentals in Sydney is growing, thanks to declining rental affordability deflecting would-be tenants away from houses, as well as anticipation of new demand for rental units from overseas visitors, students and migrants now that our borders have reopened. And because rental growth nudged higher than housing value growth in February, Sydney recorded a slight increase in gross yields.

What can we expect next?

Economists are forecasting further rises for the Sydney property market in 2022, albeit at a more subdued rate than we saw in 2021, with estimates ranging from 1.2% (NAB) to 5% (ANZ). This slowing down of price growth will no doubt come as a relief to buyers, particularly first home buyers who don’t already own property.

Many experts are predicting the market will reach its peak by mid-year, making now a great time to sell. And with Easter just around the corner, there’s only a couple of weeks left to get your property on the market before the holidays.

Property investor activity is likely to pick up as demand for rental properties from new overseas arrivals increases. And if rents continue to rise faster than property values, yields will continue to improve.

And of course, the Federal election, due to be announced any day now, will take place sometime before the end of May. It will be interesting to see how the market reacts to a potential change in government or the prospect of the incumbents remaining in power.

If you’re thinking of buying or selling in the inner city or inner west, my team can help. Get in touch today.