A new industry report has revealed a significant gap between buyer expectations and listing prices for property around the Sydney CBD.
New findings from Domain show that buyer’s price expectations in the inner-city area are often misaligned from actual prices, with this gap widening to close to half a million dollars in the most extreme cases.
For houses located less than 10 kilometres from the Sydney central business district, Domain’s data recorded the searched price as $2,250,000, marking a $450,000 discrepancy from the median listing price of $2,700,000.
While the gap between buyer expectation and list price was not as drastic for medium and high-density housing in the inner-city area, Domain’s data still showed a price difference of $200,000 and $50,000 respectively for townhouses and units situated less than 10 kilometres from the Sydney CBD.
Domain’s chief of research and economics, Dr Nicola Powell, said the research “highlights the common mismatch between buyers’ and sellers’ expectations of house values, with most areas revealing a disparity between listing prices and searched prices”.
“Buyers’ budgets are not meeting sellers’ asking prices due to the strong demand for this type of property across Sydney, and this is especially pronounced in premium areas closer to the CBD or coastline, where properties are tightly held and infrequently sold,” Powell said.
The relationship between proximity and price
The distance of a property to the CBD had a clear influence on search price points, with house search prices rising by 1 per cent for every kilometre closer to the city, while unit prices followed an opposite trend, decreasing by 1 per cent for each kilometre further from the CBD.
While for houses there was still a vast pricing mismatch even up to 40 kilometres away from the CBD, alignment between buyers and sellers’ price expectations for other property types was reported to occur at certain distances.
For apartments, the price points of buyer searches become higher than listing prices 10 kilometres away from the CBD, with buyers willing to pay more for these property types in the middle and outer suburbs.
For townhouses, price alignment occurred even further at 20 kilometres from the CBD, with Domain reporting buyers will pay more in the outer suburbs.
Spotlighting the areas suffering most from demand for houses, Domain revealed that the Sydney Inner City, Botany, Parramatta, Auburn and North-Sydney Mosman areas have a ratio of search to supply that is over two times higher than the typical Sydney area.
Contrastingly, Domain stated that townhouse searches showed “no geographic bias” from prospective buyers, with the proportion of townhouse searches uniquely having no relationship to distance to the CBD, unlike houses and units.
Powell explained that the searched price for townhouses often surpasses the “listed price across various areas, indicating that townhouse buyers are willing to pay more than seller expectations, particularly in the outer suburbs”.
Even with these conditions around townhouse prices, Domain stressed that “townhouses represent a relatively small supply, which contributes to the stock imbalance in a number of areas”.
Changing property preferences in Sydney
While buyers in Sydney are increasingly considering other property types, Domain emphasised that houses remain the “clear preference for Sydneysiders”.
Domain’s research revealed that the 77.3 per cent of buyers considering houses far outweigh the 28.4 per cent and 25.4 per cent considering townhouses and units respectively, and clarified that the number of buyers considering multiple property types mean the figures do not add up to 100 per cent.
Nevertheless, demand for units in Sydney is still far outweighing the available supply, with the number of property searches for units growing by 94.3 per cent, while new listings for units has increased by only 7.5 per cent.
Weighing in on these findings, Powell highlighted that “Australia’s ageing population is another key factor driving unit demand, particularly among downsizers”.
“Based on the latest census, the percentage of people aged over 65 living in apartments was 19 per cent in Sydney, reflecting a demographic shift that is increasingly reshaping the property market. As this population segment grows, demand for units is expected to rise,” she said.
As a result of housing demand in Sydney far outweighing available supply, the report noted that “more targeted urban planning and development strategies will be crucial in addressing the growing housing needs of Sydney’s population”.
With Australia expected to add 1.97 million residents over the next five years, Powell commented that “search trends prove townhouses are the future, as they balance space and value”.
This article first appeared in REB.
