Sydney's median unit price on track to hit $1 million within a few years, experts say

Sydney’s median unit price is on track to hit $1 million within a few years, experts say.

Domain data shows the median is currently $812,863, and would have to rise by another 23 per cent, or $187,137, to surpass the $1 million mark.

The Sydney unit market has seen annual price growth of at least 20 per cent in the past. While it is unlikely to see a figure like that in the next 12 months, the city is well on the path to the mileston, says Domain chief of research and economics Dr Nicola Powell. 

“I think it is possible for a couple of reasons,” she says. “Number one is, more of us are living in apartments. 

“Some of that is driven by affordability, but we’ve got different demographics opting to live in apartments. Baby Boomers are opting to downsize and move into that lifestyle apartment. But we’ve also got first-home buyers and those in their 30s and 40s, and more families, living in apartments. 

“It’s a growing trend,” Powell adds.

Sydney’s median house price is $1.6 million, double that of the unit median, which makes apartments a relatively more affordable option for first-home buyers.

While Sydney’s unit prices are higher than any other capital city, units can still offer a more realistic pathway into home ownership, says UNSW professor of housing research and policy Hal Pawson.

“It’s a kind of logical thing for first-home buyers to consider [buying units], even if they cost much more than they did before COVID,” he says.

While there has been a flurry of new developments, especially in the apartment sector, amid a push for more medium and high-density living, supply will still be unable to keep up with general demand, so prices will not slow down any time soon, Pawson says.

“The housing system has really lagged in the last three or four years,” he says. 

“We may have reached the bottom of the cycle with construction because commencements did tick up a little bit in the latest [ABS] figures. But that’s way below where output was [pre-COVID].”

Since 2018 there has been a quarterly decline in dwelling units completed in NSW, according to ABS. As construction costs continue to be expensive, it appears unlikely that the number of completed units will be able to keep up with the growing demand. 

The Sydney unit market may fire up if expected rate cuts materialise, pushing prices up quicker, says PRD real estate chief economist Dr Diaswati Mardiasmo.

“Sydney does have quite a lot of units in the pipeline, but you can’t put up an apartment within a month or two, and so the timing of the construction will always have some lag in comparison to demand and cash rate cuts,” she says.

But a median beyond $1 million? That’s the point at which Mardiasmo believes the market could really slow down.

“If the government then decides to add more to the First Home Guarantee Scheme or incentives or whatever else, then the possibility of it going to $1 million is higher,” Mardiasmo says. “But then for it to go beyond that in 2027, for example, that’s when it will start to most likely stagnate and stabilise because that’s a couple of years away, and how long it takes for new apartments [being constructed to enter the market].”

Sydney’s already high unit prices are not putting off first-home buyers from trying to get onto the property ladder, says Sydney-based buyers agent Brady Yoshia.

“It’s still going to be very important for first-time buyers to be able to get into the market,” she says. “But what we will also see is that more [Sydney] first-time buyers will be buying out of the areas that they want to live in.

“So they’ll be buying more investment opportunities, as opposed to primary residence.”

If prices continue to be unaffordable, then rentvesting – buying investment properties while renting a home – will become more of a norm, Pawson says.

“If affordability doesn’t improve, then there will be this tendency to resume that pattern of continuation of the rising numbers of renters and fewer and fewer people making it to home ownership in the future.”