‘It’s very disheartening’: Sydney’s median house price hits record $1.65m

Sydney’s median house price has reached a record $1.65 million, but there has been a marked slowdown in growth in the latest quarter as high interest rates and affordability pressures hit.

While the city’s median unit price also hit a record ($815,000), the pace of growth for the property type accelerated and outpaced houses as buyers searched for more affordable options, experts say.

Sydney’s median house price rose for the seventh consecutive quarter, increasing 0.6 per cent – or about $9000 – in the September quarter to $1,654,668, revealed the latest Domain House Price Report released on Tuesday.

The pace of growth halved from the previous quarter, marking the weakest performance since the decline in December 2022.

The northern beaches led the way, recording the strongest house price growth, up 4.1 per cent to a median $2,665,000 in the three months to September.

In contrast, Sydney’s median unit price rose 0.9 per cent – or $7000 – in the same period, reaching $815,258.

The city’s median unit price is $6500 higher than the previous peak recorded in December 2021.

Unit growth was driven by some of the most affordable pockets of the city. Sydney’s outer south-west led the way, jumping 12.5 per cent to a median $587,500 in the September quarter.

Domain’s chief of research and economics Dr Nicola Powell said despite property prices hitting record levels, higher interest rates were wearing down buyers and sellers.

“There’s been a rapid slowdown in house prices. The quarterly growth has halved since the previous quarter and it’s the weakest performance since the December 2022 quarter,” Powell said. “It’s the opposite for units. It’s absolutely [about] affordability.”

She said interest rate-sensitive buyers, who have also endured the higher cost of living, were waiting for a signal that rates would fall. At the same time, more sellers have listed their homes, leaving buyers with more choice and negotiation power.

“Overall supply is at the highest total supply since March 2019. It’s 21 per cent higher year-on-year and 21 per cent higher than the five-year average,” she said. “Buyers are waiting and they’ve got more choice. Buyers are using that choice as negotiation power.”

But the pick-up in unit prices was also driven by buyers chasing affordability, as well as investor activity because home loans to investors are above the decade average, she said.

AMP chief economist Dr Shane Oliver said higher interest rates had begun to make a material impact on Sydney property prices.

“Higher interest rates have begun to drag on the market as the price growth has hastened. Part of the housing market has been pushed into units. If rates stay higher, it’s quite conceivable that Sydney house prices could dip into negative territory,” Oliver said. “There’s a pick-up in listings. It’s more than the spring bounce. It looks like there’s a bit of distressed selling occurring.”

But he said many buyers in the higher interest rate environment had been supported by access to equity built up in existing homes, pandemic-era savings buffers or the bank of mum and dad, which all helped push the property market higher.

Hopeful homebuyer Jean Towill has been all-but locked out of the market thanks to the double whammy of higher interest rates and rising property prices.

“For me to be doing this on a single income, it’s hard to find. Most places, even if they’re a unit or a villa … are going for $600,000. My single income doesn’t fit within that budget,” the 58-year-old government worker said.

Jean Towill has been looking to buy in Windsor and surrounds for six months with a $600,000 budget to no avail.Credit: Wolter Peeters

Towill has been looking for six months in several areas including Windsor, Penrith and the lower Blue Mountains.

“It’s very disheartening to go to open homes and say, ‘Wow, this would be perfect for me,’ and then you sit back and go, ‘I’m just not eligible for a loan that size’,” she said.

Her mortgage broker, Rebecca Jarrett-Dalton of Two Red Shoes, said most buyers were struggling to purchase a home when prices were rising amid higher interest rates.

“We’re testing with a 3 per cent buffer on top of current rates, which is about 6 per cent. It’s super-hard for single people – it’s super-tough for families or a part-time mum,” Jarrett-Dalton said. “Affordability is really a challenge.”

She said while there was more choice in some pockets, many were delaying their purchase and others were taking a different approach.

“Some have moved into reinvesting. We’re seeing a few buying in other areas by making a move out of Sydney. Everybody’s affected.”