1 week ago
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Sydney’s once-common $500,000 houses have disappeared over the past 20 years, data shows, with runaway price growth transforming the city’s property market in that time.
In 2006, $459,000 could buy you a median-priced house in Sydney, but today, even the city’s cheapest house costs more than that.
The supply of affordable units has also dwindled. In 2006, a median-priced Sydney unit was about $372,000, but now, just 0.2 per cent of the city’s units cost that amount or less, on Cotality data.
Even a budget that once unlocked three out of four Sydney houses – $670,000 – no longer stretches far enough to buy any house.
Similarly, a budget of $484,000 could secure three out of four Sydney units in 2006, but now, only 2.7 per cent of units cost that amount or less.
Tim Lawless, head of research at Cotality, said home-buying hopefuls determined to pick up a unit at 2006 prices would have the best luck in Sydney’s central west.
“The cheapest unit markets in Sydney tend to be around Liverpool and Blacktown. The current median unit price in Warwick Farm is about $488,000, and in Mount Druitt it’s about $514,000.”
Those pockets aside, Lawless said the sheer rate of property price growth over the past 20 years had all but eliminated affordable housing in Sydney.
“In that time, house prices rose 214 per cent city-wide and unit prices rose 132 per cent, so it’s no surprise to see the portion of properties at those old median prices dwindling to almost nothing.”
While the rate of price growth hasn’t been consistent over the past 20 years, the strong upwards trend is “undeniable,” Lawless said.
“In 20 years, there have only been four years when values went backwards. The growth trend well and truly outweighs any negative periods.”
Wage growth over the same timespan lagged property price growth, contributing to the affordability crisis now gripping Sydney, Lawless said.
“At a NSW state level, the wage price index rose 78.5 per cent over the past 20 years. Dwelling values rose 180.5 per cent, or more than double the wage price index, in that time,” he said.
Independent economist Saul Eslake said a confluence of factors fuelled property price growth in Sydney from the mid-2000s into the 2010s.
“For a start, we saw strong growth in underlying demand driven by population growth. Demand from foreign investors was also strong until the rules around foreign purchases of existing properties were tightened in the late 2010s,” he said.
Declining interest rates from the mid-2000s to the mid-2010s further stoked demand, Eslake said.
Meanwhile, state-level zoning and planning rules first introduced in the 1990s constrained increases in housing supply more tightly than in other places.
“In every year but one of the past 20 years, more homes have been completed in Victoria than in NSW,” he said.
Since the turn of the century, 1,291,294 homes have been added to the stock of dwellings in Victoria, compared with 1,095,081 in NSW.
“That’s 18 per cent fewer new homes in NSW than in Victoria, even though NSW’s population has been on average 28 per cent larger than Victoria’s over the same period,” Eslake said.
Sydney’s geography has also played a role – and will continue to do so – by limiting sprawl.
“Sydney is hemmed in at the northern and southern ends by large national parks, on the western boundary by the Blue Mountains and in the east by the ocean, with three large waterways protruding into the urban area,” he said.
Anthony Landahl, managing director of mortgage brokerage Equilibria Finance, said he had watched prospective buyers increasingly stretch themselves to afford a home.
“Saving for a deposit is a much bigger challenge, and a much bigger portion of people’s salaries is now going towards their mortgage,” he said.
Landahl said Sydney’s traditional bastions of affordability had, almost without exception, become unrealistic for first home buyers.
“If you go back 15-odd years, 60 or 70 per cent of Sydney was deemed affordable. Districts like the Hills and the Inner West, and even the North Shore, were in reach of first-home buyers. That is no longer the case,” he said.
Rising house prices had left many upsizing Sydneysiders with no choice but to leave the areas where they had put down roots.
“Say you bought a unit in the Hills District. You’ve got no chance now of upgrading to a house because of the sheer gap between the unit and house prices, whereas 10 years ago, people were transitioning within the area as they grew their families,” he said.
Landahl said a growing proportion of his clients were looking beyond Sydney.
“It’s not their first choice but wages just haven’t kept up with house prices. So now the conversations are increasingly about Wollongong and the Central Coast.”
