The Median House Price In Sydney Has Surged To A Record High $1.75 Million

New figures from the latest Domain House Price Report, which landed on Wednesday, shows that the cost to buy a house in Sydney has now hit an unprecedented record of $1,751,728 as the median house price, compared to last year’s $1,647,598 and $1,559,090 in 2023. This means a price jump of $192,638 over the last two years.

The increase in pricing is most significant in housing, where Sydney house prices have jumped 6.3 per cent in just a year whereas units have only increased by 2.7 per cent.

Areas with the biggest increase in pricing since September last year include the South-West region with a fast growth of 18 per cent, with a median price now at a whopping $1,297,500, closely followed by Baulkham Hills and Hawkesbury with an increase of 13.8 per cent and to a median of $2 million.

The Eastern Suburbs remains the most expensive area to live in with an average median house price of $3,700,000, although this area has only had an increase of 1 per cent since last year.

Housing crisis: “Sydney is not building enough new houses”

James Graham, Senior Lecturer in Economics at The University of Sydney, says in a written answer that in Australia, house prices respond to interest rates, income growth, population growth, and government policy.

“Many of these factors point to elevated house price growth for a while to come”. But Graham also says it is harder to say why Sydney is growing particularly quickly, “Many economists point to very few listings in the short run, and not enough new housing construction over the longer-run.”

Domain’s report also describes how the current low interest rates are one of the main reasons why house prices in Sydney are currently going through the roof. Because of the low interest rates, the demand for permanent properties is being fuelled as this improves borrowing capacity for the general buyer, which means it is cheaper and easier for buyers to borrow. The problem with rising house prices therefore winds back to the classic expression: supply vs demand.

“House listings are due both to existing homeowners putting property up for sale and new builds coming into the market. Sydney has done a reasonable job of bringing new apartments to market, and you can see this in the slower growth of apartment prices vs. house prices. But apartments are only a small part of the overall market, and many households (particularly families) are still very keen on stand-alone houses on a plot of land.

Unfortunately, Sydney is not building enough new houses relative to meet demand, and this is reflected in rocketing prices for houses in particular,” explains Graham. Graham also adds, that he expects first-time buyers to become a smaller share of the market in the future as a result of this current trend. 

“While mortgage repayments will become more manageable as interest rates decline, the continuing rise in house prices will increase the size of required down payments, and this will push aspiring owners out of the market.”

While being reluctant to give concrete advice to first-time buyers on how best to enter the challenging housing market, reasoning, that it all depends on circumstances, Graham concludes. 

“On the one hand, it might seem like a good idea to wait a while to see how much higher your house could sell for. But on the other hand, the longer you wait the more expensive will be all of the other houses that you wish to purchase. A bit of a catch-22!”