Sydney Property Market Forecast 2025
The Sydney property market is the largest metropolitan real estate sector in Australia. Indeed, there is not just one market, there are markets within markets and in some cases, given the diversity of dwelling types in a particular suburb, you could say in some cases there are micro markets within the one suburb. Sydney remains the most expensive property market in Australia with the median house price being around $1.3m and an apartment at just over $800,000.
Expert Market Analysis
Watch as Property Market Expert Dominic Cavagnino from Binnari Property, breaks down the Sydney property market forecast for 2025, including supply challenges, price trends, and investment opportunities across different market segments.
Recent Market Performance and Drivers
To understand the Sydney property market forecast 2025, we should look at the past 4 years to see how the market has performed and what has driven it.
- March 2020 to March 2024, Sydney’s market was strong with real estate values increasing by 30%.
- Hasn’t performed as strong as Brisbane and Perth.
- Late 2024 into early 2025 has seen four consecutive months of decline:
- House prices dropped 1.9%
- Apartment prices fell 1.2%
- Recent falls have coincided with higher advertised stock levels – assuming housing demand has remained constant, with more supply, prices will fall.
- CoreLogic data shows Sydney dwelling values are now 1.7% below their peak in September 2024.
Supply and Migration Impact
A constant feature of the Sydney housing market since the turn of the century has been an undersupply of available housing. This is driven by a strong population growth that in large part is a result of overseas migration. During COVID-19, immigration was effectively halted. Since restrictions were eased in 2022, Australia’s net migration has increased to over 400,000. Many of those land in Sydney and ultimately decide to reside there.
Currently Sydney is building around 30,000 new homes a year but more than double that is needed. Similarly as in any market, when supply is limited, prices increase which is what has happened in Sydney. Indeed, whilst many predicted that COVID-19 would result in property prices decreasing significantly, the opposite happened – they increased significantly due to supply issues.
Current Market Conditions
In the second and third quarter of 2024 prices eased due to cost of living pressures and the rapid rise in high interest rates that were imposed on borrowers from May 2022 to December 2023. At this point buyers are sitting on their hands and are no longer meeting the price expectations of vendors. Until vendors do so, the market is likely to remain stagnant as evidenced by auction clearance rates, which in some areas are hovering at around 50%, and the average time a property is on the market, which has increased. So far in the first quarter of 2025, homes are taking over 40 days to sell whereas in the same quarter of 2024, it was averaging less than 40 days.
Government Housing Initiatives
The NSW government has released a 5 year housing completion target for 43 councils across the state. Quite a number of those councils are located in Sydney. If the councils do not act to approve more medium and higher density development, then the state government will step in and approve the projects instead. The pressure is on councils to approve more housing developments to take the pressure off prices and rentals.
Investment Opportunities
For property investors, finding affordable real estate with good rental returns will be the key challenge in the Sydney property market 2025.
- Areas such as Parramatta and Zetland offer high-density living near transport and work hubs, making them attractive investment options.
- Investing under $1 million is often more affordable and a better investment proposition than the price on a boutique apartment where prices are upwards of $2 million.
- The NSW Government’s development plans will create opportunities for both owner occupier and investors.
Sydney Property Market Forecast 2025
Looking at the Sydney property market forecast for 2025, the market will most likely remain subdued in the first half of 2025.
Our main trading partners, like the US and UK, have started to lower interest rates recently. This is because inflation has decreased in those countries. Australia has seen inflation ease. However, it is unclear how much the Reserve Bank will lower rates and when. This uncertainty will continue to affect the Sydney property market and the Australian market overall.
If there are only one or two small interest rate cuts of 0.25%, it may not help the Sydney market much. Interest rates are not the only thing affecting household budgets. If the cuts are larger or last longer, they will affect market sentiment. This will likely lead to more property transactions and higher prices.
We predict that there will not be more interest rate cuts right after the 0.25% cut by the RBA in February. Any cuts will happen slowly over time. They are more likely to occur in the second half of 2025 than in the first half. Borrower cash rates will likely settle by the end of this year. They should be in the mid to high 5% range. Right now, they are in the low to mid 6% range.
If we looked at the Sydney property market by price instead of location, we would notice a clear trend. In recent years, properties in the lower price range have seen stronger price growth. Meanwhile, properties in the higher price range have mostly stayed the same. This trend will continue through 2025. However, there is a reason to believe that high-end properties may strengthen in the third and fourth quarters.
Affordability will still be a problem for many buyers. Because of this, buyers, especially investors, should avoid areas with mortgage stress. This includes places like Liverpool and Campbelltown in Sydney’s southwest. Rather than pointing to specific suburbs, as a general guide middle ring suburbs of Sydney are most likely the ones to remain resilient to potential impacts of macro economic forces in 2025 and if affordability allows, inner-ring suburbs are also more likely to see price growth over the remainder of 2025.
The Sydney property market 2025 is in a transitional phase. While affordability remains a challenge, factors like interest rate movements, government initiatives, and strategic investments will shape the market.
For home buyers, be strategic and consider timing your purchase around interest rate changes.
For investors, look at growth corridors near transport hubs and government backed infrastructure projects.
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The content of this blog reflects the personal views of the author and is for information purposes only. It does not constitute financial, investment or professional advice. Readers should conduct their own research and consult a qualified financial or property adviser before making any decisions to invest in property. The author and the blog are not responsible for any actions taken based on the content.
