Key takeaways
Sydney home prices lifted 4.5% over the last year and are now at a new peak.
Buyer demand is absorbing an uplift in new listings hitting the market in Sydney, and auction clearance rates have remained high throughout the year showing the depth of buyer demand.
New dwelling approvals are declining at a time when the housing supply shortage is at crisis point showing Government’s approach has created a “perfect storm” which will only see prices and rentals increase.
With vacancy rates at historic lows, rentals are skyrocketing in Sydney.
ANZ Bank forcast that SYdney property values will rise a further 5% or so in 2025
Are you wondering what’s ahead for the Sydney property market in 2025?
Well…Sydney’s home values have continued to increase throughout this year, although the pace of growth is slowing.
The surge in properties for sale in Sydney hasn’t yet slowed demand, with prices rising 0.2% in September and 4.5% over the past year.
Both buyer and seller confidence has increased with the thought that potential rate cuts could boost borrowing capacity, giving buyers more money to spend.
New dwelling approvals are declining at a time when the housing supply shortage is at crisis point showing Government’s approach has created a “perfect storm” which will only see prices and rentals increase.
Here is the latest data on the median property prices for Sydney.
| Property | Median price | Δ MoM | Δ QoQ | Δ Annual |
|---|---|---|---|---|
| All Capital city dwellings | $1,188,912 | 0.2% | 0.5% | 4.5% |
| Capital city houses | $1,473,775 | 0.1% | 0.3% | 4.9% |
| Capital city units | $860,849 | 0.6% | 0.9% | 3.5% |
| Regional dwellings | $740,981 | 0.2% | 0.4% | 3.6% |
Source: CoreLogic, 1st October 2024
According to CoreLogic, Sydney dwelling prices rose 25.4% from the onset of COVID-19 to their cyclical peak in January 2022 before suffering a 13.8% fall through to the January 2023 trough.
The latest data shows prices are only -1.4% below their previous peak… so a new records will be set soon.
Of course, there is no "one" Sydney housing market and some areas are strongly outperforming others.
It's a bit like having one hand in a bucket of hot water and the other in a bucket of cold water and saying: On average I'm feeling comfortable.
Sydney property market update
Despite more homes being listed for sale and rising prices making property less affordable, the Sydney property market is expected to keep steaming ahead over the balance of 2024 and well into 2025.
A slowdown in construction has hampered the supply of new housing, concentrating demand on existing properties.
Both buyer and seller confidences increased in the early part of this year, with the thought that potential rate cuts could boost borrowing capacity, giving buyers more money to spend.
At Metropole Sydney we’re finding that strategic investors and homebuyers are back actively looking to upgrade, picking the eyes out of the market.
While the high end of the Sydney property market led this new phase of the property cycle in 2023, more recently cheaper properties are recording stronger price growth.
Buyer and seller confidence will increase as interest rates fall over the next year or two, and buyers will return to the Sydney property market.
However, affordability will still be an issue for many potential buyers, and buyers will only be able to pay up to the limit of what they can afford, so I would only invest in locations where wages are increasing faster than average and residents have multiple streams of income, not just wages.
This means investing in the more affluent inner-ring suburbs and the gentrifying middle-ring suburbs of Sydney which will outperform the cheaper suburbs, where residents will still find it difficult to afford to buy a home.
The Best Performing Residential Investment Properties in Sydney for 2025
As we look ahead to Sydney's property market in 2025, it's clear that certain types of residential investments will outperform others, fuelled by demographic shifts, evolving lifestyle preferences, and economic factors.
Family Homes in Premium Suburbs
The ongoing preference for space, especially among families, means demand for quality houses in established, affluent suburbs will remain high.
While Sydney's median house prices are steep, well-positioned family homes in prestigious areas continue to offer solid long-term capital growth.
Investors should look for 3-4 bedroom houses on sizable blocks in well-established neighbourhoods with access to good schools, amenities, transport links, and green spaces.
Eastern suburbs like Randwick, Coogee, and Maroubr continue to be sought after by families due to their proximity to the CBD, beaches, quality schools, and lifestyle amenities. They offer strong long-term growth and steady rental demand.
In the Lower North Shore investors should consider Willoughby, Lane Cove, and Artarmon. These family-friendly suburbs with excellent schools, green spaces, and easy access to the city are perennial favourites among renters and home buyers alike.
On Sydney’s Northern Beaches the suburbs of Dee Why, Mona Vale, and Freshwater attract families looking for a relaxed lifestyle close to the beach, good schools, and outdoor activities. They offer strong growth potential as more people prioritise lifestyle and work-from-home options.
Townhouses in Middle-Ring Suburbs
Townhouses represent an increasingly popular choice for both investors and owner-occupiers due to their affordability relative to standalone houses and the lifestyle advantages they offer.
With Sydney's shift towards medium-density living, townhouses are expected to remain in demand, especially in middle-ring suburbs experiencing gentrification.
Investors should target 3-4 bedroom modern townhouses in low-density developments with a focus on functional living spaces, private courtyards, and proximity to amenities.
Sydney’s Inner West offers excellent opportunities for townhouse investments. The suburbs of Marrickville, Dulwich Hill, and Petersham offer a vibrant culture, proximity to the CBD, and ongoing gentrification.
These suburbs are popular with young professionals and families looking for a balance between urban living and suburban space.
In the St George area Hurstville, Kogarah, and Carlton have been experiencing significant growth due to infrastructure upgrades and its proximity to Sydney’s CBD and airport. The demand for townhouses in these suburbs is strong, particularly among families and professionals.
Sydney’s North-West growth corridor has become an attractive location for townhouse investments. Rouse Hill, Kellyville, and Castle Hill are areas worth considering, with expanding infrastructure, shopping centers, and schools, these suburbs offer a blend of affordability, accessibility, and lifestyle.
Boutique Apartments in Lifestyle Hubs
I would avoid high-density apartment developments, but boutique “family friendly” apartments in lifestyle hubs have proven resilient over the last few years and are likely to to continue to outperform in the future as currently investors can buy established apartments considerably below replacement cost.
The key is to target smaller, low-rise complexes in vibrant areas where demand from young professionals, students, and downsizers remains high.
Look for spacious, high-quality 1-2 bedroom apartments with balconies, modern finishes, and access to cafes, restaurants, and public transport.
Boutique apartments in Sydney’s eastern suburbs of Bondi, Bronte, and Coogee always attract high demand due to their proximity to the beach, CBD, and a plethora of dining and shopping options.
Quality apartments with ocean views or easy beach access will always outperform.
Investors should also consider apartments in the inner suburbs of Surry Hills, Darlinghurst, and Redfern.
These lifestyle-focused suburbs are popular with young professionals and couples seeking a vibrant, urban lifestyle close to work, dining, and entertainment.
Apartments in well-designed, low-rise developments here continue to offer strong rental yields and capital growth.
What's happening in the Sydney property market?
While Sydney property buyers are back in force, they are currently being cautious - their pockets are shallower and borrowing capacity significantly reduced.
But more investors are getting into the Sydney market now recognising that there is a current window of opportunity and that in 12 months’ time, the properties they purchased today will look like a bargain.
However, despite the overall caution, buyer demand is still strong which will continue to push Sydney’s property market through its revival.
Sellers are also coming back to the market with total property listings for Sydney marginally higher than in the same month last year, although the stock of older listings is slimmer so overall supply remains constrained.
Source: SQM Research
Sydney’s auction clearance rates are a good indicator of the depth of buyer and seller sentiment and auction clearance rates have been strong throughout 2024 suggesting more price increases are ahead.
While the data is insightful, as we know, Sydney’s market is not a one-size-fits-all property market.
There is a clear flight to quality with A-grade homes and investment-grade properties still in short supply for the prevailing strong demand, but B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties.
After all, some of the city’s suburbs are so tightly held that an available property for sale comes around once in a blue moon with homeowners holding onto their houses for as long as 20 years.
And areas in lifestyle or coastal suburbs are still in particularly strong demand as homebuyers wait to secure their dream property.
At Metropole Sydney, we’re finding that strategic investors are looking to take advantage of the window of opportunity currently available to them, while homebuyers are still actively looking to upgrade, picking the eyes out of the market.
While overall Sydney property values are likely to gain some more ground, like all our capital cities there is not one Sydney property market, and A-grade homes and investment-grade properties remain in strong demand and are likely to outperform, many holding their values well.
In other words, the various sectors of the Sydney property markets will be fragmented, which is a more “normal” property market.
Sydney’s rental markets remain exceptionally tight
Vacancy rates in Sydney’s rental market are traditionally very tight, usually hovering well below the national baseline.
But thanks to soaring demand and severe undersupply in the rental market, the national vacancy rate is exceptionally low today by historical standards.
SQM Research recorded Sydney’s vacancy rate has crept up a little to 1.7%.
By comparison, the vacancy rate which represents a balanced market is around 2-2.5%.
Source: SQM Research
This shows us that, like everywhere else in the country, Sydney’s rental market has plunged into crisis, with record-low vacancy rates, high rent prices, strong demand, and a rising population putting the city’s market into a pressure cooker environment.
And the data for vacancy rates and also weekly rent listings highlights that the distressing state of Sydney’s rental market leads to a bleak outlook for renters.
And at Metropole Property Management our vacancy rate is less than half the industry rate, in part because our clients have chosen investment-grade properties, but we'd like to think it also has a bit to do with our proactive property management policies.
Source: SQM Research
Sydney has been facing a rental housing shortage for several years now.
This has led to increased competition for available homes, driving up rentals and making it increasingly difficult for many Australians to afford a place to live.
One of the aspects of the housing market boom during the pandemic was that it was driven by owner-occupier buyers.
And since Australia’s international borders in early 2022, Sydney has become a major recipient of new residents, both skilled immigrants and overseas students, putting extra pressure on the Sydney property market, particularly the rental markets.
Sydney's population grew by 2.1% in the 12 months to 30 June 2023, according to ABS figures.
The state is expected to gain a million new citizens over the next decade, principally from overseas, bringing the population to 9.1 million by 2033, data from the federal government’s Centre for Population suggests.
And this will only serve to put even more pressure on Sydney’s rental crisis.
We're just not building enough dwellings in Sydney.
Australian Bureau of Statistics (ABS) data shows NSW dwelling approvals declined in June by an appalling 19%.
The 1,597 private houses approved in June is the lowest recorded figure for NSW since January 2013, according to the ABS.
These figures highlight the dire, and worsening, housing crisis in NSW:
- Through immigration, the NSW population is increasing by over 15,000 people each month (source: ABS);
- The average growth in the number of properties rented since September 2023 is 218 per month (source: NSW Rental Bonds Board);
- The total number of dwelling units approved in NSW fell by a disastrous 18.8% in June 2024, including a 19% fall in private houses.
REINSW CEO Tim McKibbin explained:
“The housing crisis continues to deteriorate on the back of a perfect storm of inhibitive taxation, approval delays and rental reforms which discourage investment
Demand is rising fast and the supply gap is widening at an increasing rate.
These are perfect storm conditions which must be reversed now.
To do so, a new approach is needed. Government must stop driving investors out of the residential market through anti-landlord reforms. These reforms reduce rental supply and compound the dire situation for tenants.
Government must urgently consider property taxation reform. The cost of new property is inflated by 40% through taxes and charges imposed by various levels of Government. It’s preventing new supply at a time when we desperately need more homes.
Delays in development approvals must be eradicated. Councils which fail to meet their housing quotas should have their planning powers revoked by the NSW Government. We have run out of time for excuses.
Key trends that will shape Sydney’s housing market in 2025
Suburbs benefiting from major infrastructure projects, such as new transport links, hospitals, or shopping precincts, are likely to outperform. These investments often lead to increased demand and rising property values.
Areas undergoing gentrification, where older properties are being renovated and lifestyle amenities are improving, often provide excellent capital growth opportunities. Look for signs such as new cafes, restaurants, and young families moving in.
Target suburbs with strong population growth driven by immigration, young professionals, or families, as this is a clear indicator of rising demand for both rental and owner-occupied properties.
Investing in Sydney's property market in 2025 offers significant opportunities, but it's crucial to choose the right property type and location.
Sydney's strong pace of growth has been remarkable in the face of the substantial deterioration in affordability that occurred with the sharp rise in interest rates.
It is also a testament to the strong demand aided by the pick-up in population growth, and limited supply that offset the effects of higher rates.
And, likely, the lack of supply of good properties at a time of increasing demand from homebuyers and investors and strong immigration will push Sydney property values higher throughout this year.
However, the Sydney property market will remain fragmented with the more affluent suburbs where people's incomes are higher, and homeowners have substantial equity in their properties outperforming the cheaper suburbs which are being harder hit by the rising cost of living and interest rates.
Top 10 NSW suburbs where property has earned more than the average worker.
Property prices in New South Wales grew 9.6% over the last year and the top performers are all located in Sydney’s most affluent areas, but western suburbs also made the very top of the list.
The eastern suburbs of Bellevue Hill and Vaucluse saw the highest year-on-year growth in property values, with an average increase of more than a million dollars.
Meanwhile, in the inner-west regions, houses in Strathfield and Abbotsford saw year-on-year price growth of $447,417 and $401,327, respectively.
Also out west of the CBD is Oatlands near Parramatta, which earned $312,909 for the year, and West Ryde and nearby Melrose Park which notched up $305,455 and $301,676 in price rises respectively.
Further down the affordability scale, houses in Condell Park and Wiley Park in Sydney's southwest still outperformed the average Australian wage, growing by $99,953 and $98,507 respectively.
Top 10 property earners in Sydney
| Suburb | Region | AVM 12 months ago | Current AVM | Change ($) |
|---|---|---|---|---|
| Bellevue Hill | Sydney - Eastern Suburbs | $7,917,472 | $9,230,311 | $1,312,840 |
| Vaucluse | Sydney - Eastern Suburbs | $7,957,341 | $8,980,058 | $1,022,717 |
| Dover Heights | Sydney - Eastern Suburbs | $6,137,873 | $6,944,833 | $806,960 |
| Rose Bay | Sydney - Eastern Suburbs | $5,620,247 | $6,125,406 | $505,159 |
| Strathfield | Sydney - Inner West | $3,114,452 | $3,561,869 | $447,417 |
| North Bondi | Sydney - Eastern Suburbs | $4,083,836 | $4,512,973 | $429,137 |
| South Coogee | Sydney - Eastern Suburbs | $3,375,920 | $3,802,614 | $426,695 |
| Bronte | Sydney - Eastern Suburbs | $5,034,836 | $5,448,932 | $414,096 |
| Abbotsford | Sydney - Inner West | $2,753,167 | $3,154,494 | $401,327 |
| Clontarf | Sydney - Northern Beaches | $4,977,224 | $5,378,500 | $401,276 |
Source: PropTrack / realestate.com.au
- Also read:Melbourne property market forecast for 2025
- Also read:Sydney property market forecast for 2025
- Also read:Latest property price forecasts for 2024 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:This week’s Australian Property Market Update – Latest Data, State by State September 24th 2024
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – September 2024
Sydney’s housing market - the forecast for 2025
ANZ Bank has recently updated its forecasts for Sydney property values for the next few years.
Oxford Economics recently made the following forecasts of where Sydney house prices will be in 3 years time.
3-year property price forecast (by June 2027)
| City | Median price | Total price growth | ||
|---|---|---|---|---|
| Houses | Units | Houses | Units | |
| Sydney | $1.93M | $1.09M | 18% | 22% |
| Combined capitals | $1.34M | $0.87M | 20% | 21% |
Source: Oxford Economics, PriceFinder
As buyers and sellers realise that we have reached a peak of interest rates and that inflation is coming under control and consumer confidence returns, buyer and seller activity will pick up.
So I currently see a window of opportunity to get into the property market before the crowd does.
If you look back at previous cycles, when the market turned property prices surged rapidly – look at what happened in the post-Covid property rebound in 2020 or in 2019 when the market suddenly turned after the Federal election.
Of course, those who acted then and purchased quality investment-grade properties are possibly of thousands of dollars ahead and have set themselves up for financial security.
The media are catching on to what’s happening and reporting more good news property stories.
This means the window of opportunity will close sooner rather than later as more homebuyers and investors into the market.
What we do know though, as I mentioned above, is that the flight to quality will continue so investment-grade properties in A-grade Sydney locations will remain in strong demand and are likely to outperform in the medium term.
You can read our Brisbane housing market update here.
