Where to find Sydney’s best and worst property prices

Rapidly rising interest rates have taken a toll on Sydney’s housing market, and while some suburbs have been harder hit than others, new data shows none have been spared.

Sydney’s median house value dropped 9.7 per cent from the end of April to the end of September, CoreLogic figures show, and even more affordable suburbs - where prices have held up better - recorded falls.

Median apartment values in some inner city suburbs have climbed higher, despite rising interest rates.

Apartment values fell 5.5 per cent, but some western and south west suburbs, and inner-city pockets, recorded growth since the first rate rise in May. However, with a sixth consecutive rate hike handed down on Tuesday – taking the cash rate to a nine-year high of 2.6 per cent – experts do not expect that to last.

CoreLogic economist Kaytlin Ezzy said rising rates had reduced buyer borrowing power and demand, affecting property prices across the board.

“There was a few small rises in the unit market …but for the most part the increase in interest rates have put substantial downward pressure on house values across Sydney,” she said.

More affordable suburbs, and those that had subdued growth during the boom, largely held up best. Unit values were up more than 2 per cent in Rooty Hill and Ropes Crossing since April, and more than 1 per cent in Mount Druitt, Macquarie Fields and Moorebank. Meanwhile, in Haymarket, Sydney and Rushcutters Bay values were up between 0.2 and 0.9 per cent.

For houses, suburbs in the south west had the smallest declines. Values dropped 0.4 per cent in Austral, and less than 1 per cent in Carnes Hill, Ashcroft, Gledswood Hills and St Johns Park.

The largest suburb declines were mostly in the eastern suburbs, northern beaches and Sutherland Shire.

Narrabeen had the biggest house value drop at 19.5 per cent, followed by falls of at least 17 per cent in Taren Point and Kurnell.

Ezzy said higher levels of household debt made Sydney and its more expensive suburbs more sensitive to rising rates. The upper end of the market was more volatile, she added. It tended to lead price changes, and had more substantial upswings and downturns.

More affordable markets had less growth during the boom and would likely fall less. However, they were still likely to see prices decline, as rate rises continued, she said.

Commonwealth Bank’s head of Australian economics Gareth Aird said more expensive markets and properties tended to lead upswings and downturns, but price changes did spread over time.

The apartment market was also better supported by investor activity, due to stronger rental yields, Aird said, and reduced borrowing power could also be pushing buyers to more affordable price points.

Aird has forecast prices in Sydney to fall 18 per cent from peak to trough. While the pace of price declines eased slightly last month, momentum going forward would depend on how high rates climbed. He added that the impacts of rate rises also took time to flow through the market.

“[Prices] are declining at a pretty quick pace, the forecast profile is that we hit the trough in the second half of next year and that the RBA ends up cutting interest rates, and then the market starts to rally off the back of that, but again we don’t know how much higher [rates] are going to go,” he said.

“Until the RBA stop raising interest rates [prices will be soft]….as a lot of buyers are sitting and waiting to see what rates get to before deciding what they want to pay,” he said.

Laing + Simmons Mount Druitt and Rooty Hill principal Basel Nahas said apartments in the region were selling for similar prices to earlier this year, but were taking longer to trade. Demand for units was now primarily from first home buyers, but rising rental yields were increasing investor appeal.

“Units didn’t really boom in our area... so a lot of buyers can afford them. I haven’t had too many buyers say ‘no because of rising interest rates I can’t buy this’ just because the price bracket is at the lower end,” he said.

In the inner city, Ayre Real Estate principal Adrian Wilson said buyer demand, and property prices and rents, had recovered since the early stages of the pandemic when there was a flight to outer suburbs and regional markets.

Wilson said rising rental yields, which were attracting investors, and lower supply levels, were other key factors supporting prices in the inner city.

“[The reasons] people shied away from [the city], mainly [poor] rental yields and Covid preferences, are now dissipating. We didn’t enjoy the upswing as much, but we won’t see the downswing as much,” he said.