Sydney house prices could have topped $2.2m, modeling shows

Sydneysiders would be forking out more than $2.2m for the average house by the end of next year if prices had continued to grow at pandemic levels, modeling shows.

House prices across the country surged in the 18 months following the first lockdown in 2020 as Aussies unable to travel took advantage of record low interest rates and extra savings to buy property.

While prices have gone backwards in Sydney over the past six months, modeling by Ray White shows the extent to which prices would have soared had the unprecedented growth during Covid continued.

It comes as the Property Council of Australia warns the current targets for new housing in Sydney fall short of demand, putting further pressure on housing affordability.

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House values ​​soared 32 per cent across the country from March 2020 to December 2021 before showing signs of a slowdown early this year.

Ray White data shows if property prices continued to grow at this rate, the national median would rise to $1m by December 2023, while Sydney’s median would come close to doubling its current value of $1.38m to a new median of $2.2m.

Prices have fallen 1.4 per cent over the past six months in Sydney, bringing the extreme growth seen during Covid to an end.

Ray White forecast the median price in Sydney would continue to grow to $1.48m by the end of next year in line with the current slowdown, rather than falling further from current levels.

Ray White chief economist Nerida Conisbee said while the market had slowed down considerably since last year, there was “little evidence of a sharp correction.”

“The market isn’t free falling and we are continuing to move into a much more normal market than what we have experienced over the past two years,” Ms Conisbee said.

She said the slowdown would come as “a relief to most” as housing affordability continued to rank low in global standards.

“Clearly this red hot growth had to finish at some point,” she said.

“Many first home buyers feel increasingly locked out of the housing market, particularly those that can’t rely on help from family. Lack of affordable housing is a challenge for government at all levels, is expensive to fix using tax incentives and politically unpopular to use planning policy.”

Data released by the Property Council of Australia and Gyde Consulting shows several districts of Sydney are struggling to deliver enough housing to meet underlying demand, potentially putting further pressure on housing affordability as population growth continues.

While targets for new housing were exceeded in the 2017-18 and 2018-19 financial years, the current targets fail to incorporate the deficit into dwelling demand, resulting in a persistent shortfall that could put upwards pressure on prices, the analysis shows.

Property Council’s NSW executive director Luke Achterstraat said councils in Western Sydney led the pack when it came to delivering new housing, with Blacktown, The Hills, Penrith, Liverpool and Wollondilly delivering beyond the five year targets set by the Greater Sydney Commission.

But he said more work needed to be done to address the current shortfall.

“In order to keep pace with future demand, Western Sydney requires the delivery of 25,530 dwellings per year – and we are presently 6,000 homes short of this number,” he said.

BuyersBuyers CEO Doron Peleg said prices could start rising again in the more affordable suburbs of NSW as first home buyers take advantage of tax reforms.

“In New South Wales, we expect there to be a sharp rebound in sentiment and activity in early 2023, especially in the sub $1.5 million price brackets, as the long-discussed stamp duty reform kicks in for first homebuyers from January,” he said .

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Originally published as Sydney house prices could have topped $2.2m, modeling shows

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