Sydney median house price hits $1.15 million: Buying becoming 'out of the question'

Property prices have increased yet again in Sydney, to a record $1,151,565 median house price over the March quarter, data released on Thursday shows.

Sydney house prices grew 13.1 per cent over the year, according to Domain Group data.

But families looking for a house even at this price are in for a shock – a two-bedroom apartment-sized cottage in Leichhardt on just 126 square metres recently sold for $1.15 million.

The other option is 35 kilometres from the CBD in Kellyville, where a four-bedroom brick home sold for the same price.

The same home would have cost in the $700,000s if it had sold in 2013, Ray White Castle Hill sales agent Daniel Llamas said.

Heather Clarke, 30, her husband Chris, 35, and their two young children are looking in the Central Coast to buy a home for their family.

Ms Clarke, who is six months pregnant with their third child, said house prices have risen so fast they’ve been left behind.

“Three years is all it took for buying a house to be out of the question,” she said.

And this is from a young couple who are not even first-home buyers. They took the traditional approach of buying as soon as possible, buying a two-bedroom apartment in Parramatta in 2012.

But even selling it eight months ago didn’t leave them with enough money for a house to fit their family.

“We made a little bit of money but house prices have doubled in that time,” Ms Clarke said.

Paying $700 a week in rent, she said being a long-term tenant was not an option as many rental homes were below standard.

But as property prices continue to rise in Sydney – up 2.9 per cent in the three months to March – renting or looking elsewhere is very much becoming a reality.

And that’s with price growth at half the rate seen in the December quarter, which could mean price growth is finally slowing, Domain Group chief economist Andrew Wilson said.

Apartment prices increased 1.3 per cent to $717,899, with 6.1 per cent growth over the year.

“Auction clearance rates are stronger now than they were in 2015, and there’s more stock on the market. But we are seeing a moderation in price growth,” Dr Wilson said.

While he said this would be “good news for young house buyers”, it still left those yet to buy facing a seven-figure median price that continues to climb.

Economist and market commentator Saul Eslake anticipated prices would rise further in 2017 – though “not as rapidly as in the past”.

For this reason, he warned Sydney was likely to continue a “disturbing trend” of declining rates of home ownership for younger cohorts.

Historically, first-home buyers have made up about 18 per cent of the market. Now, just 5 per cent of the NSW market is first-home buyers.

“First-home buyers are squeezed out by investors … investors have crept up to 50 per cent of the [Sydney] market,” he said.

“There is no more telling evidence than that.”

Already, some home buyers have over-extended themselves, Uno Home Loans chief executive Vincent Turner warned, with many people “pushing the envelope on the percentage of the income they spend on their mortgage repayment”.

He said some home owners were likely spending close to 45 per cent of their income on mortgage repayments.

But at some point, the prices will have to plateau as the average Sydneysider found themselves unable to afford to buy, Compass Economics chief economist Hans Kunnen said.

“Is this growth sustainable? I fear not. It will strangle itself in due course,” Mr Kunnen said.

But he didn’t anticipate any falls in Sydney house prices without significant interest rate hikes, a spike in unemployment or significant limits on credit from APRA.

This meant housing affordability was in the hands of federal, state and local government. But he wasn’t getting his hopes up for the May budget announcement.

“I don’t think the government has the tools to be able to solve housing affordability in a budget. It’s an issue that has developed over a decade,” Mr Kunnen said.

“There’s no silver bullet.”