Sydney Housing Market Update: Tenants and Sellers Feeling the Pressure
The Sydney housing market is undergoing a shift, with rental trends changing and sales activity picking up. In recent months, certain inner-city suburbs in both Sydney and Melbourne have turned into tenants’ markets, with weekly rental prices dropping by as much as 7% in just three months, according to CoreLogic data. So, what’s driving these changes?
What’s Driving the Decline in Rental Demand?
Several factors are contributing to the slowing rental market. Experts highlight a drop in net overseas migration and an increase in household size as key reasons behind the reduced demand for rental properties. Despite low rental supply overall, these factors have resulted in a rise in vacancy rates, particularly in Sydney, where rental vacancies climbed to 2.4% in December.
One major trend to watch is the expected return of migration levels to pre-pandemic numbers by the 2026/27 financial year. This could mean around 90,000 fewer households in the rental market, putting downward pressure on rents over the next year. Since around 70% of new arrivals rent initially, this reduction in migration will likely have a significant impact on demand.
More Listings and Increased Seller Activity
On the sales side, Sydney and Melbourne are seeing a surge in property listings. Sellers are eager to list their properties before competition heats up. This increase in listings is partly due to properties that didn’t sell in the spring market last year, resulting in a higher volume of homes for sale, with some areas seeing a rise of over 50% in listings compared to last year.
In Sydney, there were 16,579 properties listed for sale in the four weeks to January 19, which was up 6.7% compared to the same time last year and 8.2% higher than the five-year average, according to CoreLogic. The current market conditions—high interest rates and a softening labour market—are likely putting pressure on homeowners, which could be driving more urgent sales as people try to avoid mortgage stress.
Record Land Prices and Cooling Lot Sales
Interestingly, while residential listings are up, land prices in Sydney have continued to rise. The median price per square metre for land reached a record high of $2,011 in December, marking a 9.3% increase from the previous year. However, this surge in land prices has contributed to a sharp 25% decline in lot sales in Greater Sydney. Only 621 lots were sold in the September quarter, down from 833 during the same period last year.
This disconnect between rising land prices and declining lot sales signals a market under strain. While sellers remain active, buyers may be hesitant, especially with higher interest rates and less favourable economic conditions.
What Does This Mean for Sydney’s Housing Market?
For renters, the current market offers opportunities. With rental prices cooling and vacancy rates rising, tenants may have more options and negotiating power in the months ahead.
For property sellers, the market is competitive. While there’s no shortage of listings, the combination of high land prices, interest rate pressure, and economic uncertainty means that achieving a successful sale may require careful planning, good timing, and strategic pricing.
As we move further into 2025, it’s likely we’ll see a mixed landscape for both renters and sellers in Sydney. The shift towards a tenants’ market, combined with increased seller activity and high land prices, creates an intriguing dynamic that could shape the year ahead.