Sydney property prices: massive jump in prices but warnings on affordability

Sydney’s median house price is now $1.37m, a 25 per cent rise, but an affordability crunch looms for homebuyers, a new report says.

Sydney property prices jumped an extraordinary 25 per cent during 2021 – ­capping off an incredible year that also saw the highest number of sales on record in Australia.

The boom in real estate saw house prices grow at the fastest rate of annual growth since the heady days of the 1980s, a new report has found.

But unlike those bumper years, wages and household incomes are now hardly moving, which will create “higher barriers to entry”, the latest figures from CoreLogic show.

And real estate experts are predicting housing affordability will become a hot political topic during this year’s federal election campaign.

Leafy suburb on Sydney’s Lower North shore - Sydney’s real estate costs have skyrocketed.

CoreLogic research director Tim Lawless said the massive jump in prices was partly due to a “significant mismatch” ­between available housing supply and the high level of ­demand.

The median-value house in Sydney is now $1.37m – although values dipped slightly in the final months of 2021 as more homes hit the market.

“The slowing trend in Sydney and Melbourne can be explained by a bigger deposit hurdle caused by higher housing prices alongside low income growth, as well as a recent surge in advertised inventory levels,” the report found.

CoreLogic estimates there were approximately 653,000 house and unit settlements over the calendar year, the highest number of annual sales on record and up 40 per cent on the decade average.

“Such a significant mismatch between available ­housing supply and the level of demand is a ­fundamental reason why housing prices have risen so sharply,” Mr Lawless said. “As stock levels normalise and affordability constraints along with tighter credit conditions drag down demand, it’s reasonable to expect growth conditions will be more subdued in 2022.”

Sydney unit prices rose 18.8 per cent over the year, while houses rose a whopping 29.6 per cent.

And the Covid-19 pandemic has also played a part in boosting regional prices, which have leapt 30 per cent in NSW. The Southern Highlands and the Shoalhaven recorded the highest annual rise in home values in the entire nation – up an eye-watering 37.7 per cent.

“It is likely regional markets … will continue to benefit from higher demand as remote working policies are more normalised,” the report said.

“The good news for prospective homeowners is that total listings have started to rise.”