Sydney home prices hit another brutal milestone over May

Warnings of possible interest rate hikes have done little to calm the Sydney housing market – and recent price movements have gone the opposite way, new figures show.

Sydney home prices continued a relentless march upwards to hit a new peak in May, despite warnings of potential interest rate hikes.

PropTrack’s monthly Home Price Index released Saturday revealed the median price of a Sydney dwelling increased by just under half a per cent over the last month.

The average house now costs about $1.42m, while a typical unit is $812,000 – both unprecedented highs and well above levels recorded last year.

PropTrack economist Eleanor Creagh said expectations of prolonged higher interest rates took some heat out of the market, but the primary drivers of price rises remained entrenched.

This included soaring population growth at a time of lacklustre building activity.

House price rises were double the rate of unit price rises last month.

Many of the biggest spending buyers were also upgraders using large equity gains from previous market booms to fund their purchasers. These buyers were not as influenced by interest rates.

Mr Creagh said it was doubtful a recent rise in property listings (up 16 per cent annually) would change the current imbalance between supply and demand given new building activity was dire.

“Building activity remains challenged by capacity constraints and higher costs, with consequent tight housing supply pushing prices and rents higher,” she said.

“This mismatch between supply and demand is continuing to offset the higher interest rate environment. Further, current interest rate stability has sustained buyer and seller confidence.”

Ms Creagh added that some buyers may have been encouraged by the prospect of further price rises.

Demand has been cooling at auctions, but not by enough to change the overall direction of the housing market. Picture: Sam Ruttyn

“Ongoing home price rises are likely incentivising many to overcome affordability challenges and transact with the expectation of further growth,” she said.

PropTrack indicated that much of the recent Sydney price growth was driven by demand for houses, which remain tightly supplied across much of Sydney.

Unit price gains were smaller owing to the lower demand relative to supply. Unit prices rose by an average of 0.21 per cent – more than half the 0.48 per cent pace of house price increases.

Price rises were the most significant in the inner west and inner southwest, which includes much of the St George and Canterbury-Bankstown region.

Inner southwest house prices were up 11.1 per cent annually, while inner west prices were up 9.14 per cent. Prices in Parramatta and the Hills District were up by about 8-9 per cent annually.

Mr Creagh said it was likely modest growth in home prices would continue over the rest of the year.

“Despite some easing in the rate of population growth and more stock on market, home prices are expected to lift further in the months ahead, (but) it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late-2025.”

Originally published as Sydney home prices hit another brutal milestone over May