Home prices fall below pre-pandemic levels in 18 Sydney suburbs

Property prices have fallen by up to $300,000 below what they cost before Covid hit in a range of Sydney suburbs that have been heavily affected by interest rate rises.

Property prices have fallen by up to $300,000 below pre-pandemic levels in parts of Sydney as interest rate hikes continue to drag the market down.

Analysis of PropTrack data revealed 18 suburbs where property prices were now below what they were in early 2020, erasing the specular value gains recorded over 2021 when rates were at record lows.

It signals a dramatic change for the market considering prices had remained well above pre-pandemic levels across the city despite recent falls precipitated by the first interest rate rises in May.

The average price of a Greater Sydney residential property is about 7 per cent lower than it was a year ago, but remains nearly 20 per cent higher than in 2020.

Unit prices in Kirribilli are cheaper now than three years ago.

The suburbs where prices dropped to under their pre-pandemic levels were mostly high-density areas dominated by apartments, including the Parramatta CBD, and nearby Auburn and Harris Park.

Inner suburb Haymarket had the biggest drops, with average unit prices now nearly 26 per cent below levels recorded in early 2020 when the Covid pandemic first hit Australia.

A typical apartment in the suburb now costs $860,000, $300,000 cheaper than three years ago.

Unit prices in Rushcutters Bay were down 17.5 per cent, or $135,000 from three years ago.

Each suburb was flush with one-bedroom apartments, which have been a hard sell in recent times because of reduced demand from investors – historically the main buyers for this category of housing.

Prices were also lower in suburbs dominated by luxury apartments, including Kirribilli and neighbouring McMahons Point, reflecting growing weakness in the top end of the market.

Unit prices in both suburbs were now about $165,000 lower than three years ago.

My Housing Market economist Andrew Wilson said he expected this weakness to continue as interest rate rises pushed home buyers to more affordable areas.

“The weak link in the market will be higher priced properties,” he said. “Buyer’s at that end of the market can be more discretionary.

“All the energy at the moment is coming from the bottom upwards. First homebuyers, migrants and those simply chasing better value are driving the market.”

Three-year falls in the Parramatta CBD and its surrounds were about 3-13 per cent, allowing home seekers to snap up units for about $25,000-$75,000 below their pre-pandemic prices.

Parramatta-region suburbs such as Harris Park and Auburn had a high-level of high-rise unit development in previous years, creating a glut of new units aimed at investors.

Local agents in this region said the higher supply of “investor-grade” apartment stock at a time of lacklustre investment activity put downward pressure on prices.

Large-scale unit construction in the Parramatta CBD and surrounding areas has pushed down prices in the region. Picture: Damian Shaw

PropTrack economist Angus Moore said more price falls were on the cards over the coming months in some areas due to further interest rate increases.

The Reserve Bank of Australia’s succession of rate rises since May have shrunk buyers’ borrowing capacity by about 25 per cent, Mr Moore said. A further rise in the cash rate is expected to be announced at the next RBA board meeting in February.