Sydney’s pricey eastern suburbs will feel the brunt of the housing slump over the next two years, despite being one of the city’s most resilient markets over 2018.
A report from Moody’s Analytics revealed the region would have the largest falls in prices for 2019 due to unaffordable prices and buyers’ struggles to get financing.
The ratings agency forecast house prices in the region would fall by an average of about 6.7 per cent in 2019, while unit prices would fall 6.6 per cent.
The falls would continue into 2020, with house values expected to drop another 5.4 per cent.
Performance over both years would be well below the Sydney average.
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Moody’s predicted a 3.3 per cent fall in house prices across the city as a whole over 2019, with unit prices expected to grow 0.2 per cent.
Moody’s said the housing market in the eastern suburbs would be weaker because it had been a standout market when Sydney real estate was booming between 2013 and 2016.
Steep increases in prices at a time of lacklustre wage growth meant few buyers could now afford the local prices.
Their problems with affordability were exacerbated by tight lending requirements, which were limiting how much they could borrow.
Realestate.com.au chief economist Nerida Conisbee said the restrictive lending environment was becoming particularly damaging for sales above the $1.7 million mark.
“Once you go over that price, there is a big drop off in (demand),” she said.
CoreLogic data showed the majority of suburbs within Sydney’s belt of premium eastern suburbs have median house prices well over $2 million.
The cheapest suburb in the region is Chifley where the median price of a house is $1.7 million.
Even in Randwick, the region’s most popular suburb by number of sales, a median unit costs $930,000 while the median house price is $2.4 million.
CoreLogic analyst Cameron Kusher said affordability had become a major influence on sales.
This was partly because of the tight lending standards but also due to the growing impact of first home buyers.
Activity from first-time buyers has been growing, but they tended to gravitate toward sales below $800,000 in order to get government discounts on stamp duty, Mr Kusher said.
Housing supply has also been increasing in the regions surrounding Sydney’s east – including in areas such as Waterloo, Mascot and Wolli Creek.
The increased choice has given home buyers more room to negotiate prices.