Your guide to the Sydney property market and house prices

Your guide to the Sydney property market and house prices

Kathryn Lee - 3 Jun, 2020

With an idyllic blend of beach and city, Sydney is one of Australia’s most popular cities to buy property.

Whether it’s the historic terraces of Surry Hills, a beachside apartment in the Northern Beaches or a larger home in the Western suburbs, there are many great investment opportunities in this urban oasis.

Current stakes

Sydney has seen strong capital growth over the last decade. Over the last quarter of the decade, Sydney’s house property rose by 6.7% for houses and 3.2% for apartments.  The market has been turbulent in the coronavirus environment, with the rate of Sydney’s annual change in dwelling values sitting at 14.3% as of May 2020. This is the highest in Australia.

The desirability of the city lifestyle, strong rental returns and constant demand can make Sydney a great choice for investors and owner-occupiers alike. That said it could be a difficult market to break into – especially for first-time buyers – due to steep prices and negative gearing. Read on for your guide to Sydney’s property market, including where to buy in Sydney.

Fast facts about the Sydney property market

1.   Sydney’s property market prices

There’s a reason Sydney’s property market has a reputation for being expensive – over 43 percent of suburbs in Sydney have a median value of over 1 million! Overall, the median property price was $1,168,806 as of March 2020.

In September 2019, only 5% of Sydney suburbs had a median house value less than $500,000, down from 22% five years ago. Meanwhile, only 29% had a median value of $500,000 or less, compared to 49% five years ago.

2. Sydney’s property market trends

Overall, Sydney’s property market has seen a trend of upwards growth in recent history. However, like all property markets, it’s recurrent and isn’t immune to fluctuations.

In November 2019, SQM Research forecasted that both Sydney house and apartment prices would double in 2020. So far, Sydney house prices have risen by 1.5% in January, and 0.3 % for apartments. Currently, it’s expected that house prices will fall due to the COVID-19 pandemic. House prices in Sydney are expected to drop 4% in the June quarter of the year and 2.5 % in the September quarter of the year.

3. Sydney’s average rental yield

According to data from Corelogic, Sydney’s average rental yield in 2019 was 3.3%, up from 3.2% the previous year. This has dropped to 3.0%, and Sydney now has the lowest rental yield in Australia. This can be attributed to the high vacancy rates that have come about due to reduced migration and a decrease in seasonal workers.

4. Sydney’s capital growth

As a city, Sydney’s property market has gone from strength to strength. Over the last 40 years, its average capital growth was 7.4%. Many properties have doubled in value every decade. However the weakening buyer demand and higher supply that is currently being experienced is expected to soften this capital growth.

What’s special about Sydney?

Diverse population

It may not be our nation’s capital, but Sydney is the most populated city in Australia. Currently, Sydney’s population is estimated to be around 5.57 million. Around half of its population were born overseas and more than 250 different languages are spoken, making it one of our most multicultural cities.

Sydney’s population is also quite diverse in terms of age, with younger demographics residing largely in city suburbs and older folks in suburban and the outer suburbs. The median age of Sydney residents is 35 years, and households comprised an average of 2.7 members.

Sydney’s changing demographic has had a significant impact on market trends. While a big house in suburbia was once the popular investment choice, the rise of young, single households has made inner-city living more desirable. Meanwhile, due to new transport infrastructure, more families are choosing to purchase homes on the outskirts of Sydney.

Sprawling layout

Sydney is a spread-out city. Extending 70 km to the west, 40 km to the North and 60 km to the South, it has around 650 suburbs in its metropolitan area. In the centre of Sydney, the CBD wraps around the iconic harbour. The business district extends north, all the way to the harbor-side North Shore. Venture South and you will reach the suburban ‘shire’ region, while the Western perimeter extends to the foothills of the Blue Mountains.

Impressive infrastructure

When it comes to infrastructure, Sydney is hard to beat. From leading universities to large shopping centres and the world’s largest natural harbour, there’s no shortage of features that make it a desirable place to live. Sydney features a robust transport system, including buses, trains, ferries and the recently launched light rail network. There are also future plans to extend the current rail system, to make the eastern suburbs more accessible. Sydney is also home to Australia’s busiest national airport, just 8 km from the CBD. This handles over 35 million passengers a year, flying to 100 destinations worldwide.

Powerhouse economy

Sydney has the largest economy in Australia and is known as the economic hub of Asia-Pacific. The city is comprised of various commercial areas spread out through the city – from the CBD to the docks of Botany and ‘mini-city’ of Parramatta. What was once essentially known as a manufacturing city has diversified into a hub for professional, knowledge-based jobs in the business and financial service industries. The tourism and hospitality industries have also experienced a boom in Sydney. With around 16.1 million tourists visiting Sydney each year, the city is thought to generate over $30 billion to the state (NSW) economy annually.

Sydney’s growth

Sydney’s strong manufacturing and tourism market has helped fuel job creation and contribute to the city’s rapid growth. Since the 1970s, Sydney and Melbourne have been neck-in-neck when it comes to the highest population growth, with both cities adding around 1.7 million new residents over 40 years.

Sydney’s population has risen by 123,813 people or around 1.6% just over the last year. This was the highest yearly increase the city had seen since 2017. The introduction of new transport infrastructure, motorways and road expansions is predicted to fuel further population growth, especially in areas further away from the CBD like Parramatta and Liverpool.

Exciting culture

With more than half of Sydney’s residents born overseas, the bustling city truly is a cultural melting pot. It’s a metropolis for dining, art and culture with far-reaching global influences. In most dining precincts, you can choose from a wide range of dining cuisines, from Greek and Middle-Eastern to Italian and Indonesian. While Sydney’s nightlife has declined since the introduction of the lockout laws in 2014, these restrictions have recently been loosened and will be on the amend once coronavirus restrictions ease.

Sydney is, of course, home to the iconic Sydney Opera House, which hosts over 40 musical, theatre and cultural shows every week. Many beautiful beaches, parks and other natural attractions are spread out over the city. Art is an important part of life in Sydney, from the popular Art Gallery of NSW to the yearly Vivid Festival of Light that brings in over 2 million visitors each year.


Which suburb is best in Sydney?

With Sydney’s property market being as diverse as its population, it cannot be thought of as one holistic entity. Rather, it can almost be thought of an ecosystem of sub-markets, divided by geographic location and price points.  So, if you’re wondering ‘where is the best place to buy in Sydney?’ there’s no one answer. However, you can check out a guide to some of the more liveable areas to buy in below.

Upper North Shore

If you’re chasing the ‘Great Australian dream’ of a big house on a block in suburbia, the Upper North Shore is a great option. Encompassing the areas between Roseville and Berowra, this area is known for its leafy streets and large lot sizes. It’s also statistically one of the safest areas in Sydney, making it a popular choice for families.

Lower North Shore

North of the Harbour Bridge, the Lower North Shore region offers a slice of solitude while still being close to the city. This region includes suburbs like Willoughby, Mosman, North Sydney and Hunter’s Hill. With many of these areas offering waterside views, it’s considered one of the most desirable places in Sydney to live. With a high density of apartments and easy access via motorways and public transport for the CBD, this is an extremely popular area for young professionals.

East Sydney

Nestled between the harbour and Sydney’s Eastern beaches in the East Sydney area, you’ll find the East Sydney area. This locale encompasses suburbs like Edgecliff, Rushcutters Bay, Darling Point and Elizabeth Bay. While apartments and terraces in these suburbs tend to be on the smaller side, they offer a great quality of life – including parks with harbour views, quiet neighbourhoods and many great cafes and restaurants within walking distance. This area is a popular choice for young couples.

Where is the best place to buy an investment property in Sydney?

Buying an investment property in Sydney is quite a different ballgame and comes with its own considerations. Of course, to ensure the value of your property increases over time, you’ll want to make sure it’s in a desirable area and close to employment hubs. However, you’ll also want to ensure there’s no further land available for release in the area, to keep demand high. Research from the Australian Housing and Urban Research Institute has found that apartments in suburbs within 5 to 15 km of the CBD outperform houses in suburban areas in terms of capital growth. Currently, some of the best investment opportunities in Sydney are established apartments in the Eastern Suburbs (including Coogee, Bronte and Clovelly), the lower North Shore and the Inner-West (such as Annandale, Dulwich Hill and Enmore) These apartments in the inner and middle ring suburbs are being purchased for lower prices than they were a few years ago, making for a promising investment opportunity.

Sydney requires the construction of around 41,000 new dwellings each year to maintain its current level of growth. This has led to an influx of high-rise construction properties since 2015. Due to the boom of off-the-plan apartments, there is now an oversupply of these kind of properties. This makes it another potential investment opportunity in Sydney – however, as the structural integrity of these kinds of apartments often leave something to be desired, it’s important to be discerning and to work with an experienced mortgage broker to ensure you’re getting a good deal for the long-term.

Are property prices going down in Sydney?

While Sydney’s property market experienced a downturn in June 2019, it has quickly picked up since due to lower interest rates and easier access to credit.  Late last year, SQM forecasted that overall, Sydney property values would rise between 10% to 14% in 2020. However, due to the impact of the COVID-19 outbreak on the Australian and global economy, it’s safe to say that housing prices will probably decrease across the board in Sydney.

Is it a good time to buy property in Sydney?

Currently, the answer to this question depends on your unique financial situation. If you are in a field that is facing uncertainty due to the Coronavirus outbreak, you may find it significantly more challenging to secure a loan to purchase a property in Sydney. However, if you are in a secure job and industry with a large deposit and minimal threat to your livelihood, you may be well-placed to take advantage of declining property prices. If you are looking to buy an investment property in Sydney, you may also be able to take advantage of the lower market entry point. However, it’s also important that you may receive a lower rental income until the market makes a full recovery.

Sydney is notoriously difficult property market to break into, so using a mortgage broker is recommended.

Words by Emma Norris

At eChoice, we have some of the top mortgage brokers in Sydney who can help you find the right home loan options for you during this time of economic uncertainty.

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