4 Reasons The Inner City and Inner West Property Market is Outperforming Sydney

The inner city and inner west have been some of Sydney’s best performing property markets over the past couple of years.

The median house price in our area rose 13.8% over 2023 and several suburbs have already recorded double digit growth for 2024, even though we’re only just past the year’s midpoint.

With that in mind, we thought it was time we took a long, hard look at why the Inner City and Inner West are performing so well, and what it means for buyers and sellers.

1. Too few properties for sale

Put simply, there are far too few properties for sale in Sydney’s inner city and inner west right now compared with the number of buyers. SQM Research shows that, since February 2024 the number of properties on the market for 30 days has ranged between 2,553 and 2,814.

As a result, realestate.com.au’s browser data reveals there is incredible interest in every property that does come to market. In Marrickville, for instance, there are 2,455 interested buyers for every house that comes online. For every apartment there are 2,018 interested buyers. This same pattern of far more buyers than properties is repeated through virtually every suburb in the inner city and inner west.

One interesting statistic we noticed is that roughly 75% of properties that now come up for sale in Sydney’s inner city and inner are apartments, while 25% houses. A decade ago, the ratio was closer to 50/50.

This may go a long way to explaining why house values have tended to rise more rapidly than apartment values in recent years.

2. The returning popularity of urban living

A key reason for the number of buyers looking in Sydney’s inner city and inner west is that urban living is fashionable once again. More and more people are deciding they want to be close to the action and within an easy commute of the city centre, and this is reflected in the exceptionally high demand we’re now seeing.

While this may seem obvious, it contrasts markedly with the pandemic property market, when many people started to favour larger homes and bigger blocks far from the city centre (often in regional areas).

3. The rise of cash buyers

While interest rates may have been rising over the past couple of years, a growing number of buyers are immune from any changes to the cost of borrowing. That’s because data shows the proportion of cash buyers in the market is growing.

Our experience is that a fair percentage of these are prestige buyers (not many people buy an $8 million with an 80% mortgage). However, easily the most important demographic of mortgage-free buyers is downsizers.

Downsizers have often sold the family home, and they’re looking for something closer to the action that offers a ‘lock up and leave’ lifestyle. They tend to be in a strong financial position, they’re largely immune from rate rises and cost of living pressures, and they’re prepared to act fast.

As our population ages, downsizers are becoming far more numerous. But they're also becoming younger. We’re seeing more people downsize while they’re still working and even while the kids are still living at home. These buyers have often just decided that cutting down on commutes, housework and weekend chores offers their family a much better lifestyle.

4. The return of investors

While prices may have been charging ahead in the pandemic property boom of late 2020 and 2021, investors were noticeably absent. Instead, we saw owner-occupiers - most notably upsizers - capitalising on low interest rates to move the family up the property ladder.

Over the last year or so, however, there has been a noticeable shift, with investors once again a noticeable factor in the market. This is reflected in the fact that the value of new loans to investors in the April 2024 quarter was 5.6% higher than the previous quarter, and 36.1% higher than April 2023.

Many investors are specifically taking advantage of the higher yields and relative value Sydney's inner city apartments offer.

After all, ours is an area that has always been in strong demand with tenants and this is reflected in the income investors can achieve. For instance, while the citywide median yield is 3.1%, the yield on Alexandria apartments is 4.8% and on Zetland apartments it’s 5.1%.