We take a look at the factors behind this year’s gains and give our view on what to expect in 2022.
2021 has been an exceptional year for the Sydney property market with the median dwelling price rising almost 25% over the year, according to CoreLogic data.
A lot of this growth happened at the start and middle of this year. Price growth peaked in March, when the median Sydney price lifted 3.7% in just 31 days.
Since then the rate of growth across Sydney has gradually been slowing (in November, Sydney recorded a rate of growth of 0.9%). However, here on the Lower North Shore, the property market has continued strongly through to year’s end.
High auction clearance rates means strong suburb growth
The continuing strength of the Lower North Shore market can be seen in the auction clearance rate which has stayed at record highs for almost the entire year. On 25 November 2021, the Mosman Daily reported a local auction clearance rate of a perfect 100%. The same weekend, the North Shore Times recorded a local auction clearance rate of 96%. It can also be seen in the incredible rate of growth that properties, particularly houses, in many Lower North Shore suburbs have experienced this year, as the table below shows.
Median House Price 31 Dec 2020*
|Median House Price 6 Dec 2021*
* Source: Realestate.com.au Suburb data
The factors influencing growth on the Lower North Shore
Obviously, growth on the Lower North Shore is partially linked to growth in Sydney’s - and even Australia’s - property market more generally. And there are several factors we’ve seen contributing to this more macro level growth.
The most obvious is record low interest rates. Since the pandemic hit, it has been cheaper to borrow than ever, and this means people are prepared to upsize their mortgages, and the banks are also prepared to lend more.
On top of this, we’ve seen a definite trend of people more willing to spend money on upsizing their home. This is the result of people increasingly working from home, as well as reassessing their priorities (and spending patterns) in light of COVID. This factor has driven house prices much higher than apartment prices in many areas.
But these macro level factors don’t account for the full story in our local area. After all, the Lower North Shore has a disproportionate amount of prestige properties, and these have been outperforming virtually every other segment. The reality is that virtually no one buys a $10 million home with an 80% mortgage - so low interest rates really don’t drive the market in quite the same way.
Instead, we’ve noticed a number of more localised trends playing out.
- Expat buyers. We’ve never seen a time when there has been so much overseas buyer interest in the Lower North Shore market. But this time, it’s overseas based Australians. Expat buyers have been out in force over the past 18 months, looking for a base in Australia, and what better base is there than one right here near the harbour in our country’s largest city? While many of these buyers have returned from places such as London, New York and Singapore, some are still living overseas and renting out their Sydney properties until the day they decide to come back home.
- Strong local economy. Since COVID-19 struck, there have been people and sectors that have gained (such as financial and professional services) and others that have lost out (such as entertainment and hospitality). Census data shows that the top three sectors Mosman Council residents work in are: Professional, Scientific and Technical Services, Financial and Insurance Services and Healthcare. All three have had a strong couple of years and this is creating enormous confidence.
- Emphasis on lifestyle. With more people placing emphasis on buying into lifestyle locations, the Lower North Shore has been in even greater demand than ever. Where else can you find great cafes and shopping, as well as harbour beaches and bushland so close to the city?
- Downsizers. With house price growth outstripping apartment price growth, these conditions are perfect for downsizers. As the year progressed, we saw more and more coming into the market, cashing in on the strong gains they’ve made on the family home since the COVID-19 outbreak.
Likely trends for 2022
It’s likely that we’ll see many of these same trends continue into 2022. But the signs are also there that the craziness of early 2021 has left us and we’re entering a period of more sustainable growth, where the playing field between buyer and seller is more even. Here are some of the factors we’re seeing contribute to this.
- Higher stock levels. One of the factors keeping prices high through the lockdown was a decided lack of stock. Many would-be vendors held off listing their properties, worried about how the Delta variant would impact our economy. The moment restrictions lifted we saw more properties hit the market. The signs are that this trend will continue into next year - a great thing for buyers but potentially also for sellers who need to find somewhere to live once they’ve sold their own place.
- Apartments to make a comeback. While apartment prices have risen over 2021, they haven’t kept up with house price growth. This means there is still real value in many parts of the apartment market. We expect people to notice this and for apartments to perform comparatively well over the next year or so.
- Interest rate rises. While the RBA initially said that it wouldn’t raise rates until 2024, it now looks almost certain that this will happen sooner. Most economists are forecasting interest rates to rise next year. This is likely to impact the first home buyer and investor market more than the top end of the market.
Of course, these are uncertain times, and everything could change if a new, more lethal variant again causes widespread lockdowns and higher unemployment. However, for the moment, we’re comfortable forecasting a reasonable year for Lower North Shore property over the next 12 months.
If you’d like to know more about the current market or receive an appraisal of your home please feel free to get in touch.