This month, the Sydney housing market continues to present significant challenges as affordability issues persist and supply shortages remain unresolved. Despite government initiatives aimed at increasing housing stock and regulating rental prices, many residents face mounting financial pressure due to rising interest rates, inflation, and stagnant wage growth. At the same time, existing property owners and international investors are benefiting from substantial capital gains, further widening the divide between those who own property and those struggling to enter the market. This report explores key themes from the latest analyses of Sydney’s housing market, providing insights into how these dynamics are shaping the future of housing in the city.

1. Australia’s New Homes Supply Target: Tough But Not Unattainable, Summit Told

https://www.domain.com.au/news/australias-new-homes-supply-target-tough-but-not-unattainable-summit-told-1317942/

At the Australian Financial Review’s annual Property Summit, experts discussed the critical challenge posed by the country’s housing crisis, with the federal government’s target of building 1.2 million homes over five years being seen as ambitious but achievable. Housing Minister Clare O’Neil emphasised the need for a proactive approach to increase housing supply, improve planning systems, and address the shortage of skilled construction workers. While progress is being made, there are concerns about construction capacity, high costs, and regulatory barriers. Industry leaders called for reforms, such as easing taxes, improving foreign investment conditions, and adopting innovative building methods like prefabricated homes to address the housing shortfall. The summit concluded with the consensus that government cooperation at all levels is essential to tackling the housing crisis, but execution remains the biggest challenge.

2. There Is No Such Thing as a National Property Market in Australia Anymore

https://www.domain.com.au/news/there-is-no-such-thing-as-a-national-property-market-in-australia-anymore-1317807/

The article highlights the growing divergence in Australia’s property markets, with no longer a unified “national property market.” While Perth, Adelaide, and southeast Queensland are experiencing rapid price growth, markets in Sydney, Melbourne, Canberra, and Hobart are either cooling or stagnating. Experts like Westpac’s Matthew Hassan and Dr. Nicola Powell from Domain explain that, although broader trends like interest rates and inflation affect all markets, local factors such as state policies and migration patterns are now the dominant forces driving these differences. Perth, for example, is booming due to strong local demand and government support for new home building, while Sydney and Melbourne are seeing a slowdown. The pandemic’s impact had previously synchronized housing markets across the country, but with varying local conditions, Australia now faces a “multi-speed” market with different dynamics in each capital city.

Bankstown Square

Manly

3. How the Gap Between the Property “Haves” and “Have-Nots” Just Got Wider

https://www.domain.com.au/news/how-the-gap-between-the-property-haves-and-have-nots-just-got-wider-2-1318035/

The article highlights the widening gap between homeowners and prospective buyers, driven by soaring property profits in recent years. Sellers in cities like Sydney, Melbourne, and Brisbane have seen significant gains, with Sydneysiders in 2024 making a median profit of $655,000—double that of 2015. However, this has made it increasingly difficult for those without equity or financial support to enter the market. Homeowners are using their profits to fund moves or assist their children in buying property, further deepening the divide. Experts like Domain’s Dr Nicola Powell and economist Peter Tulip warn that this growing inequality is becoming a critical social issue, with rising property values outpacing wage growth and inflation. The article suggests that increased housing supply, particularly in affordable options, is essential, though political and generational conflicts make this problem challenging to solve.

4. Housing Affordability Crisis Persists Despite Government Assistance: REIA

https://www.therealestateconversation.com.au/news/2024/09/10/housing-affordability-crisis-persists-despite-government-assistance-reia/1725930021

The Real Estate Institute of Australia (REIA) reports that despite the positive impact of the Home Guarantee Scheme (HGS) on first home buyers, Australia’s housing affordability crisis persists due to a lack of housing stock and rising financial pressures. REIA President Leanne Pilkington noted that while the HGS has helped many Australians enter home ownership, high interest rates and inflation continue to drive up costs. The latest Housing Affordability Report shows loan repayments now account for 48.1% of median family income, a 1.3% increase from the previous quarter, marking the lowest affordability level since 1996. Despite a rise in first home buyers, with 36.6% of owner-occupier dwelling commitments, many Australians are still struggling with affordability challenges exacerbated by housing shortages and economic conditions.

5. Housing Affordability Plummets to Its Lowest Point in Almost Three Decades: REIA

https://www.therealestateconversation.com.au/news/2024/09/06/housing-affordability-plummets-its-lowest-point-almost-three-decades-reia/1725594471

The latest Housing Affordability Report from the Real Estate Institute of Australia (REIA) reveals that housing affordability in Australia has dropped to its lowest level since 1996. According to REIA President Leanne Pilkington, average loan repayments now consume 48.1% of the median family income, driven by rising interest rates and inflation. While there were marginal improvements in affordability in Victoria, the Northern Territory, and the Australian Capital Territory, most states saw declines, with South Australia experiencing the largest drop. Rental affordability also declined, with the proportion of income required for rent increasing to 24.6%. Despite these challenges, the number of first-home buyers rose 18.6% from the previous quarter, though the average loan size for first-home buyers also increased. Overall, loan commitments for owner-occupied dwellings grew across all states and territories, reflecting the ongoing financial pressures faced by Australians in the housing market.

6. The Property Hotspots Attracting the World’s Biggest Investors

https://www.commercialrealestate.com.au/news/the-property-hotspots-attracting-the-worlds-biggest-investors-1318365/

The article discusses how global property investors are adapting to a more challenging market environment, as highlighted at The Australian Financial Review Property Summit. Richard Massey of Singaporean sovereign wealth fund GIC and Ruban Kaneshamoorthy from Brookfield Asset Management emphasize that, with rising interest rates and various economic risks, the days of easy returns in real estate are over. Investors are shifting focus to sectors such as hotels, self-storage, manufactured housing, and student accommodation, which offer better returns through operational improvements and strategic asset selection. Meanwhile, Lendlease is targeting high-end residential apartments and the life sciences sector, while Dexus is concentrating on a more active management approach to asset selection and investment.

7. Landlords Could Once Hike Rents by 20% a Year. That’s Changing

https://www.domain.com.au/news/landlords-could-once-hike-rents-by-20-per-cent-a-year-thats-changing-2-1318367/

This article discusses recent legislative changes aimed at capping rent increases in Australia. Previously, landlords were able to raise rents by as much as 20% per year in some areas, contributing to a rental affordability crisis. New laws, however, have capped annual rent increases, providing some relief to tenants. The article explores whether these new regulations will be sufficient to alleviate the pressure on renters, especially in markets like Sydney, where demand for rental properties remains high.

8. 13,000 New Affordable Homes Have Been Greenlit: Is It Enough?

https://www.domain.com.au/news/13000-new-affordable-homes-have-been-greenlit-is-it-enough-1320276/

The Australian government has greenlit a $9.2 billion investment to build over 13,700 social and affordable homes under the Housing Australia Future Fund (HAFF) and National Housing Accord programs, marking the largest commitment to affordable housing in more than a decade. While about 5,500 homes are expected to start construction this year, only 4,220 of the total will be designated as social housing, with the rest classified as affordable housing. The initiative, led by Prime Minister Anthony Albanese, aims to alleviate housing stress, with a particular focus on women and children fleeing domestic violence. Despite this progress, the Property Council of Australia emphasised the need for continued efforts to address the housing deficit by building more homes.

9. Every Cent Counts: How People Keep Up in Sydney’s Most Mortgage-Stressed Suburb

https://www.domain.com.au/news/every-cent-counts-how-people-keep-up-in-sydneys-most-mortgage-stressed-suburb-1323281/

In the Sydney suburb of Casula, residents are facing severe mortgage stress, with 3.16% of borrowers falling behind on payments—the highest rate in Australia. Many homeowners are adopting various strategies to cope, such as taking on second jobs, dipping into superannuation, growing their own food, and cutting out luxuries like takeaway. Civil engineer Kurt Bridde, who struggled to keep up with repayments, represents many families in Casula who dedicate a large portion of their income to mortgage payments. Other residents, like Lee Crossley and Huu Nguyen, have had to make sacrifices, including withdrawing from superannuation and growing their own produce to reduce costs. With house prices rising sharply and the Reserve Bank keeping interest rates high, the suburb remains a focal point of Sydney’s growing mortgage stress. Experts like Nicola Powell and Anthony Landahl advise borrowers to reassess budgets and negotiate better rates as they await potential relief from future interest rate cuts.

10. How Much Money You Need to Earn to Buy a House in Sydney

https://www.domain.com.au/news/how-much-money-you-need-to-earn-to-buy-a-house-in-sydney-1321587/

The article outlines how high property prices in Sydney are making it increasingly difficult for potential buyers to afford a home, with many needing a six-figure income to manage mortgage repayments. According to Canstar’s modelling, couples in Sydney’s eastern suburbs would need to earn $308,000 each to afford a median-priced house, with similar high-income requirements in other regions like North Sydney and the northern beaches. Single buyers are mostly limited to purchasing units in more affordable areas. Canstar’s Sally Tindall highlights that those without equity or significant financial help are unlikely to afford homes in premium suburbs, while some buyers are resorting to strategies such as rentvesting or receiving financial assistance from family to secure a property. Experts like Dr. Lawrence Uren suggest that many Australians may be entirely priced out of homeownership, and buyers are urged to be cautious with their financial commitments as housing affordability remains a challenge.

11. International Students Make Up Less Than Seven Percent of All Rental Homes

https://www.therealestateconversation.com.au/news/2024/09/18/international-students-make-less-seven-cent-all-rental-homes/1726617854

The article discusses recent government modelling that confirms international students account for less than 7% of all rental homes in Australia, aligning with findings from the Student Accommodation Council’s previous report. Executive Director Torie Brown commended the government for finally conducting this analysis, which reveals that international students predominantly live in CBD areas and near universities, primarily in apartments and purpose-built student accommodation, rather than competing for suburban family homes. Brown emphasised that the housing crisis is the result of long-term structural issues, including low housing supply, slow planning systems, and changing household dynamics, rather than the influx of international students. She advocated for better support for international students, including helping them secure accommodation before arrival, and urged the government to address the deeper issues affecting housing supply.

12. Australians Pocket Record Median Profit of $285,000 When Reselling Their Property

https://www.therealestateconversation.com.au/news/2024/09/18/australians-pocket-record-median-profit-285000-when-reselling-their-property

CoreLogic’s latest Pain & Gain report reveals that Australians achieved a record median profit of $285,000 from property resales in the June 2024 quarter, driven by rising national housing values. Of the 91,000 resales analysed, 94.5% resulted in a nominal gain, with total profits reaching $31.8 billion. Brisbane led the way as the most profitable city, while Darwin and Hobart saw the largest increase in loss-making sales. Houses proved significantly more profitable than units, with a 97.2% profit rate compared to 89.4% for units. The report also noted regional markets outpacing capital cities in profitability, though some pockets, such as WA’s Outback North, continued to see losses. While the market outlook remains positive, CoreLogic’s Head of Research, Eliza Owen, warned that high interest rates and cost-of-living pressures may test buyer demand in the coming months.

Monthly Summary

This month, the Sydney housing market remains dominated by ongoing issues of affordability and supply shortages. Key themes emerging from the latest reports include:

Housing Affordability Crisis: Affordability has reached its lowest point in almost three decades, as rising interest rates, inflation, and high property prices continue to outpace wage growth. Many first-home buyers and renters are increasingly priced out of the market, with some Sydney suburbs experiencing severe mortgage stress.

• Supply Shortages: While the government has approved new initiatives, including 13,000 affordable homes, these efforts are falling short of meeting demand. The new housing supply target remains ambitious, but significant reforms to planning processes are required to make meaningful progress.
• Widening Inequality: The divide between property owners and those trying to enter the market continues to grow. Existing homeowners are benefiting from rising property values, with record resale profits, while renters and potential buyers struggle to keep up with soaring prices and limited rental supply.
• International Investment: Sydney remains a hotspot for international investors, particularly in the commercial and residential real estate sectors. This foreign capital is driving up property prices, contributing to further competition for local buyers, particularly in high-demand suburbs undergoing significant development.
• Legislative Changes: New rental regulations aimed at capping rent increases have provided some relief but have not significantly alleviated the broader rental affordability crisis. Demand continues to outstrip supply, putting pressure on tenants across the city.

These themes highlight the continued complexity of Sydney’s housing market, where government interventions, market forces, and global investment interests intersect, creating a challenging environment for buyers and renters alike.