12.07.2022 Local News

2022: The Year In Review

2022: The Year In Review

We take a look at what happened in Sydney’s eastern suburbs real estate market over 2022.

If you were to read most media reports about the Sydney property market over the past 12 months you’d probably come away believing it was all doom and gloom. But the reality is much more complex – and, in many cases more positive – than the headlines suggest, especially here in the eastern suburbs.

We look behind the data to explore what really happened in our local market over 2022, and give our view on what’s likely to occur in 2023.

The Sydney market in 2022

In January 2022, Sydney’s median house price peaked at $1,389,948 – 29.8% higher than 12 months before, and 41.4% higher than in September 2020.

Since then prices have fallen every month, so that by 30 October, the median house price stood at $1,257,625 – or 9.5% lower than its peak. The median apartment value, which never rose as much as the median house price in the boom of 2020 and 2021, fell slightly less, retreating -6.5% from $837,640 to $783,406.

The impact of interest rate rises

Perhaps the major cause of this decline has been rising interest rates. The RBA has lifted the official cash rate for seven consecutive months now taking it from 0.1% to 2.65%, and further rate rises loom. This has impacted would-be buyers’ budgets and restricted their borrowing power.

However, it’s also worth noting that Sydney property prices started their decline even before the RBA started raising the official cash rate. This suggests that rising the market may have run out of steam of its own accord anyway.

Interest rate rises merely added to the strength of the decline, especially when combined with high inflation, a rising cost of living, growing economic uncertainty and high levels of debt.

The prestige market still performed strongly

The eastern suburbs property market isn’t an amorphous whole. There are sub-markets and even markets within markets. Demand often depends on an individual property and prices can vary between suburbs and streets. So, while the macro trend maybe towards price falls, there were still many positive microtrends.

One of the most notable was that the eastern suburbs prestige market seemed to go from strength to strenght, with demand outstripping supply. This also led to several record sales.

Interest rate rises don’t tend to impact the prestige market in quite the same way as other segments. Few, if any, buyers purchase a $20 million home with an 80% mortgage. Instead, its health tends to be more affected by factors such as the strength of the global economy and the amount of M&A activity. As overseas, and especially expat buyers, are over-represented in this group, it’s also impacted by currency exchange rates.

A relatively weaker Australian Dollar has made Sydney property prices attractive to many affluent overseas-based buyers.

Shortage of downsizer properties

Another segment that remains strong is the downsizer market. For many years, there simply hasn’t been enough supply in this segment. This means prestige and boutique developments are in demand, as well as high spec single level apartments and smaller houses.

Today’s downsizers are often different from those of a decade ago and tend to be younger (often with kids still in the later years of high school) with many still working. They also have much more discerning requirements, expecting space for a home office as well as the family, as well as convenience and even a touch of luxury.

Renovated homes in demand

Residential construction costs soared by 11% over the year to September 2022, making it more expensive to renovate or rebuild a home. This was an interesting development because, over 2021, it became fashionable for many eastern suburbs home owners to undertake a full home renovation, or in some cases even demolish and rebuild their homedemolish and rebuild their home.  In the sales market, we often found people looking for properties ‘with potential’, rather than the finished product.

Over the course of 2022, however, the pendulum swung back towards renovated homes, with some buyers worried about the time and cost involved in hiring trades. So we found recently renovated homes usually sold for a premium.

Rental market in overdrive

While house prices broadly fell over 2022, low supply and surging demand sent the rental market into overdrive. The Sydney-wide vacancy rate now sits at 1.3%, according to SQM Research – less than a third of what it was in mid-2020. We’re seeing this translate into higher rents. For instance, in postcode 2021 (Paddington and Centennial Park) the median rent is now more than 50% higher than it was 18 months ago.

We expect that this, of itself, will begin to drive first home buyers into the market over the coming year. After all, in some suburbs there is little difference in the cost between buying and renting – so long as you can get together a 20% deposit. We expect that it will also bring out more investors in the coming year, and that this could kick start some parts of the market.

Green shoots appearing in late 2022

We’re generally hopeful that the worst of 2022’s falling property market may be behind us. We also believe we’re already starting to see some green shoots appear more broadly. For instance, CoreLogic reports that the pace of declines in Sydney’s property prices began to slow in September and that this trend continued into October.

Meanwhile, Sydney’s auction clearance rate is back around 60%, which usually indicates a neutral market rather than one in which prices are falling. (In mid-July the auction clearance rate fell as low as 47%.) Here in the eastern suburbs, the auction clearance rate is higher still and is now nudging 70%, according to the Wentworth Courier.

The real boost to the property market should come when the RBA stops lifting the official cash rate, and people have some certainty over their budgeting. That’s when we’ll see first home buyers and investors return in greater numbers, but also when people will feel confident enough to once again take the next step up the property ladder.

Our advice, however, is not to wait until then. Many of the best property plays are made at times exactly like this, when the heat is out of the market and there is more room for negotiation, as well as more time to get it right.

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Ben Collier team: sales highlights over 2022

Highest sale price

85 Wallaroy Road, Woollahra: $35,000,000

Occupying a 1,670sqm block, Woodlands is an iconic six-bedroom, seven-bathroom 1880’s colonial style mansion that has been redesigned by one of Australia’s most famous architects, Luigi Roselli.

Lowest sale price

33/51 Glenview Street, Paddington: $400,000

This peaceful top floor studio apartment holds a prime north facing position on the border of Paddington and Darlinghurst, and shows it’s still possible to buy into a prime eastern suburbs address on a budget.

Suburb Records

14 Lang Road, Centennial Park: $20,500,000

One of Centennial Park’s finest residences, this stately five-bedroom, six-bathrrom two-storey mansion has also been redesigned by Luigi Rosselli.

24 Lang Road, Centennial Park

Soon after 14 Lang Road sold, ‘Lactura’ went to market and set another suburb record. This grand home offers exceptional privacy on 1,031sqm of Will Dangar-designed gardens.

16 Frances Street, Randwick: Over $9,000,000

Occupying a private 772sqm parcel of land, ‘Wirringulla’ is one of Sydney’s most exquisite Federation-era homes.

148 Denison Street, Queens Park: $8,700,000

Designed by Hannah Tribe of Tribe Studio Architects, this masterful home exhibits a level of superior taste and attention to detail that simply cannot be replicated.

In short…

While the general trend may have been for Sydney property values to fall over 2022, that hasn’t necessarily been the case across the board – with several segment (and suburbs) still going strong.

While this may be our last article for the year, we’re not signing off just yet. Keep an eye on our website because we’ll be sending some great properties to market in the lead up to Christmas.

Wishing you and your family and safe holiday season and a happy and healthy 2023.

And, if you’re thinking about buying or selling in Sydney’s eastern suburbs contact my team today.