Market Report: June 2021

2021 has been a year of incredible growth for Sydney property prices.

In the five months to 31 May, the median Sydney dwelling price rose 12.5%, according to CoreLogic. The median house price (as opposed to unit price) has fared even better, lifting 15.1% to now stand at $1,186,518.

Low-interest rates, strong economy driving price growth

There’s little doubt that record low-interest rates are helping fuel these price rises. According to the Commonwealth government’s MoneySmart website, in April 2021 the average interest rate stood at just 2.35%. The big four banks are currently offering fixed-rate loans at rates well below this average. This is impacting both the amount home buyers are able to borrow, as well as the amount they’re willing to pay.

But low-interest rates only tell a part of the story. Buyers are usually only prepared to bid strongly when they’re confident they’ll be able to continue to meet their mortgage repayments. So today’s strong market is a vote of confidence in Sydney’s economy too. With unemployment at just 5.1% and GDP growth at levels not seen since the 1970s, why wouldn’t people be optimistic?

Interestingly, the Westpac-Melbourne Institute Index of Consumer Confidence shows that people in our state are actually the most confident of all Australians when it comes to our economic future.

Sydney’s inner west and inner city

In our local market, we’re seeing each of these trends play out in overdrive.

In fact, on the weekend of 19 June 2021, CoreLogic recorded an auction clearance rate in the Inner West of 94.4%. That’s a phenomenal result when you consider that anything above about 75% is generally considered a ‘hot’ property market.

This is driving prices upwards across our area and some suburbs are experiencing strong gains. For instance, the median price of an Alexandria house lifted 15.8% to $1.795 million, between May 2020 and May 2021, according to Realestate.com.au data. The median unit price in Alexandria lifted 14.7% to $780,000 over the same period.

As mentioned, one of the most pleasing aspects of the current strong market is that we’re seeing first home buyers enter the market in numbers that haven’t been visible in some time. ABS Data shows that this is part of a nationwide trend with first-time borrower commitments up almost 60% over the 12 months to April 2021.

In my experience, one of the biggest impediments to first home buyers getting on the property ladder is not the cost of servicing a mortgage but saving for a deposit. Government schemes such as the Commonwealth’s First Home Loan Deposit Scheme and the NSW Government’s stamp duty exemptions and concessions, are making this part of buying a home easier than in the past.

We’re also seeing the return of investors into our local market too and they are often competing with first-time buyers for the same entry-level properties. Again, this is reflected in ABS data which shows investor borrowing increasing 63% in the year to April 2021.

Stand out sales

As Sydney approached lockdown we experienced some stand out sales, including:

28/111 McEvoy St, Alexandria – Sold off market for a building record of $1,620,000.

75 Gerard St, Alexandria – This unrenovated terrace sold off market for $2,325,000.

20/9-13 Boronia St Redfern – Sold via online auction with 6 active bidders for a building record of $1,556,500.

28/525 Illawarra Rd, Marrickville – Sold to a first home buyer for $725,000.

What does the remainder of 2021 hold?

As it currently stands, demand is outstripping supply throughout the market and, unless we see a sudden surge in supply or a drop in demand, we believe this is set to continue. With that in mind, we think prices will continue to rise throughout 2021, albeit potentially at a slower pace than they have been.

That said, in times like these, nothing is certain. As we go into Sydney’s second lockdown there is always the remote chance of economic shock. But there’s a much greater probability that the current market strength will continue for some time yet.