sydney harbour
Sydney property prices boomed during the pandemic. Image supplied.
  • Price declines began back in April 2022, before the cash rate rise in May
  • Prices have risen by more than 40% in Sydney since the pandemic began
  • Prices in June 2025 are expected to be 8% below the median price recorded in June 2022

With affordability pressures and interest rate rises reversing price growth, and rents continuing to rise, the Sydney housing market remains the most at risk of further price declines.

Data shows that the strong recent house price boom witnessed in Sydney has run out of steam, with a downward swing underway.

The price declines began in April 2022, ahead of the cash rate increase in May, and worsened from there. Prices in Sydney had risen by more than 40% since the onset of the pandemic, including a 6% gain in 2021/22.

In June 2022, the median house price in Sydney was $1,531,000.

Affordability constraints will continue

With a high level of household indebtedness, the Sydney market is most at risk of rising interest rates and tighter lending conditions.

Median house prices in Sydney are expected to record the greatest peak-to-trough declines relative to other capital cities, declining 18% from its peak, slightly higher than previous property cycles, according to an analysis done by QBE in their Australian Housing Outlook report.

“It is not until late-2023 that soft growth is expected to return, supported by several factors including stamp duty reform in New South Wales which will allow first home buyers to opt-out of stamp duty in favour of land tax, essentially lowering the barrier to entry,” the report noted.

Therefore, the median price is expected to be $1,405,000 in the June 2025 quarter, with this figure representing an overall decline of some 8% from the June 2022 level.

nsw dwelling prices

How is the Sydney Unit Market performing?

It is clear that houses have substantially outperformed units over the past two years, mainly due to owners placing a preference towards space. This has meant the median unit price ahs only risen by 10% since the beginning of the pandemic.

However, the relative price between houses and units may attract homebuyers to apartments in the upcoming three years, given the affordability challenges in purchasing a house.

Despite this, price losses have occurred for units, with the median price falling from $875,000 in December 2021 to $851,000 in June 2022.

With the borders now open, Sydney’s rental market is recovering from the hit it initially experienced during the pandemic. Inner Sydney’s vacancy rate has fallen from 14.8% to 3.3% as of June 2022.

Demand for houses has been more resilient, thanks to the ‘race for space’ and demand across the middle and outer ring rental markets being insulated from lower net overseas migration.

Currently, unit rents are closing into the 2018 high following a 14% collapse.

Growth is anticipated, with unit rents increasing by a forecasted 15% in 2022/23, and houses by 13%.

Over the two years to 2024/25, stronger rental growth is expected for units than houses, with investor demand to be supported by strong growth in rents.

Therefore, QBE expects Sydney’s median unit price to soften in the short-term before rebounding, reaching $850,000 in June 2025.

What is going to happen to the regional New South Wales housing market?

During the pandemic, strong interstate migration from Sydney to regional New South Wales occurred, due to buyers seeking out more living space, both inside and outside.

The popularity of working from home and affordability advantages are expected to see the region’s population growth remain at an elevated level, boosting underlying demand for dwellings.

This shift is expected to only partially unwind, with this resulting in a more even geographical distribution of population to 2024/25. This is expected to benefit housing in locations such as Wollongong and Newcastle.


Curious to see the outlook for the other cities? Check out our Melbourne and Brisbane 2025 forecast articles.

You May Also Like

Australian building costs have continued to soar, but has your insurance cover kept pace?

MCG Quantity Surveyors analysis found underinsurance could cost homeowners over $100K to replace a property, with the issue even more profound in the commercial property sector.

When will Australian property prices fall? One major challenge continues to prop prices up

Property prices are up by over 35% across the country since Covid, and while not the same story in each city, that’s little solace to prospective buyers pulling their hair out.

A window of opportunity could be open for savvy Australian property investors, but time is ticking

One expert has noticed investors are on the move while there’s less competition and fewer buyers in the marketplace.

Why Aussie property buyers aren’t waiting for rate cuts anymore

A surge in home loans shows buyers aren’t waiting for interest rates to drop before taking the plunge.