Stephanie bought her first home. It was only possible with her inheritance
Sydney house prices are on track to hit fresh highs by year’s end, sitting about $12,000 shy of the previous peak after recording a third consecutive quarter of growth.
The city’s median house price rose another 2.1 per cent to $1,578,099 in the September quarter, Domain’s latest House Price Report, released on Thursday, revealed. It is now 0.8 percentage points below the March 2022 peak.
Sydney’s unit prices also rose in the same period by 1.2 per cent to a median of $781,024. This is now 3 percentage points from the peak of December 2021.
The housing market recovery has recorded three consecutive quarters of house and unit price growth – a rising stretch not seen since 2021 that has surprised experts who expected last year’s downturn to last longer and have renewed their concerns about entrenched housing inequality.
Domain chief of research and economics Dr Nicola Powell said while the pace of house price growth has slowed down, Sydney’s property market has almost fully recovered from the downturn thanks to a stretch of red-hot demand for a scant number of homes on the market.
“Population growth is one of the key drivers for demand for housing. People who have big chunks of equity like downsizers, or first home buyers that are supported financially by the bank of Mum and Dad or getting inheritance earlier, they are probably a big driver of this demand side too,” she said.
She said there was a portion of Sydney being left behind as the city was on track to hit a fresh record for house prices this year and some time next year for units.
Inflation rose to 1.2 per cent in September, ABS figures show, which some economists warned could increase the chance of a November rate hike that would be the 13th since May last year.
Powell said rising prices fly in the face of the Reserve Bank’s rate hiking cycle that is trying to keep a lid on inflation.
“It almost defies logic, in terms of high levels of inflation, the cost of debt and the burden of holding debt has changed so significantly,” Powell said.
First home buyer Stephanie Freeman said she could not have bought her home without an inheritance.Credit: Peter Rae
For Marrickville first home buyer Stephanie Freeman, an inheritance was the only way she could move out of renting and into homeownership.
“It wouldn’t have happened if it wasn’t for my inheritance. I would have been in the same boat of saving a 10 per cent deposit and looking at a one to two bedroom unit,” Freeman said.
The 32-year-old photographer had been searching for a home for almost a year with the expectation that the downturn would last longer and acknowledged that many cannot buy a home in Sydney without some form of help.
”It’s very unrealistic that many people my age, without the help of their parents or inheritance, can buy property. It’s completely out of reach,” she said.
‘It wouldn’t have happened if it wasn’t for my inheritance.’
Stephanie Freeman, first home buyer in Marrickville
Westpac senior economist Matthew Hassan said while population growth was a clear primary driver, the strength of the recovery still caught many by surprise.
“It’s very much a price-led cycle. Turnover is quite subdued. We expect it to remain subdued, so it’s a fairly unusual circumstance,” Hassan said.
He noted that there was some evidence that pointed to more well-heeled buyers driving the recovery, including lower loan-to-value ratios, cash purchases and anecdotes of financial help from family.
With Westpac forecasting another 6 per cent increase in Sydney house prices next year, Hassan warned of entrenched housing inequality due to the widening gulf between house prices and interest rates.
“That’s the very real danger in this situation, the more we push out on this path, the more we see people priced out of the market and a wider disparity between different households,” he said.
Commonwealth Bank of Australia head of Australian economics Gareth Aird said the underlying demand from higher than expected population growth in a low listings environment had put upward pressure on property prices.
“It’s not an intuitive outcome given what happened last year given RBA raised rates and continued to raise rates this year and yet house prices have turned up. It has come as a surprise, and it’s surprised the RBA as well,” Aird said.
He said there is no obvious catalyst for house prices to go back down, even after another expected rate hike in November, making it more difficult for first home buyers to get into the market without financial assistance.
Over the past three months, house price gains were strongest in the Baulkham Hills and Hawkesbury region, up 8.1 per cent, followed by the city and inner south (up 5.5 per cent) and Parramatta (up 3.3 per cent).
House prices edged lower in the eastern suburbs, down 3.8 per cent in the September quarter.