Oversupply an 'urban myth': 10 suburbs where apartment prices are surging

Record building in Sydney has failed to dampen demand for apartments near the city, with prices surging almost 30 per cent in some suburbs, new data shows.

In the 12 months to June, unit prices in the city and eastern suburbs increased 2.4 per cent, the Domain House Price Report found. This was the strongest yearly result for any region.

However, suburbs such as Chippendale, Wolloomooloo, Redfern, Ultimo and Rose Bay grew by up to 30 per cent.

These areas have been particularly strong due to very few sellers in the market compared to buyers, experts say.

This was particularly the case in Darlinghurst, which was a top performer with median apartment prices jumping 29.4 per cent to $960,000.

One-bedroom 1404/227 Victoria Street, Darlinghurst sold in December 2014 for $1.8 million. It could be converted back into a two-bedroom home and had harbour views.

Last month, the same apartment sold for $2.4 million through Ray White Elizabeth Bay sales agent Nick Thompson.

“I only had it on the market for seven or eight days … there were a couple of good offers straight away,” Mr Thompson said.

Well positioned Darlinghurst apartments are selling after just days on the market. Photo: Ray White Elizabeth Bay

And it’s the top end of town that’s moving the fastest, with “prestige suburbs doing very well,” Domain Group chief economist Andrew Wilson said. 

All the suburbs with the most apartment growth had prices well above the Sydney-wide median apartment price of $669,830. Five of them had median prices above $1 million.

“The oversupply is becoming almost an urban myth, a truism, with no data to support it,” Dr Wilson said.

“There’s lower numbers of stock creating upwards pressure,” he said.

A lack of listings has caused there to be far fewer homes available in the eastern suburbs than those wanting to buy, McGrath Edgecliff partner and sales agent Ben Collier said.

This has been due to seasonality and more buyers in a lower interest rate environment, he said.

“What [future growth] is going to boil down to is supply levels and whether there’s a lot more to choose from in spring.

“If you’re prepared to sell first, sell in this quarter and organise a long settlement.”​

Homes in the inner, blue-chip areas of Sydney are at a shortage not seen since the aftermath of the Global Financial Crisis, EPS Property Search buyer’s agent Patrick Bright said.

“I have plenty of clients wanting to buy, but we have no properties to purchase,” he said. 

“To get properties in the last six months, people have had to pay more than I feel is good value.”

And even for those able and willing to stretch their budget, there are no guarantees. This is especially the case in the $500,000 to $1.4 million bracket, which all the top 10 suburbs fall within.

“For some buyers, increasing the budget 10 per cent to 20 per cent won’t make a difference,” Mr Bright said. 

Record building in Sydney hasn’t dampened the appetite for inner city apartments. Photo: Fiona Morris

But while the city and eastern suburbs dominated the list of suburbs where apartment prices were skyrocketing, it was a northern beaches postcode that topped them all.

In Manly, the median unit price is up 29.3 per cent to $1,318,500 over the year.

In this area, sellers are thin on the ground, with just 15 apartments on the market, Red Property Manly selling agent Christine Barnabas said.

Sellers are hesitant to move because of the high costs involved and the lack of homes to buy and instead are choosing to renovate, she said.

So it’s no surprise that some open homes have “up to 30 interested groups” in attendance, Ms Barnabas said.

“Apartments are regularly selling above [expectations] or in the upper range of the price guide,” she said. 

For houses, the top performer was Hunters Hill, where property prices were up 42.4 per cent over the year. The median price is $3.19 million.

A knock down in the suburb recently sold for $2.2 million, Belle Property Hunters Hill sales consultant George Gialouris said.

While an original condition home on Augustine Street sold for $2.95 million in May. It last sold seven years ago for $957,000.

“The market is performing exceptionally well and there’s not a lot of stock around. It will change come spring time,” Mr Gialouris said.