Sydney has long been cast as ground zero for Australia’s housing affordability crisis.
asserted
Sydney → cast → crisis
The share of residents who live in a home they own is at historic lows, astronomical prices are a persistent source of public anxiety, and ambitious building targets have been set in the hope of making housing more attainable.
asserted
housing → live → hope
Since peaking in December 2025 the city’s median house price has fallen 7.9 per cent, Domain figures released this week show.
asserted
figures → peak → December
Dr Nicola Powell, Domain’s chief economist, says home values in Sydney have dropped faster than in any capital city this year.
asserted
values → say → city
“This is an entrenched downturn now for Sydney, and it is broadening,” she says.
asserted
she → broaden → Sydney
Many aspiring home buyers will welcome the recent pullback in prices, although four interest rate hikes by the Reserve Bank this year, which has driven the downturn, have made it harder for new home borrowers to service a mortgage.
asserted
borrowers → aspire → mortgage
The property slump and rising interest rates have also affected the outlook for residential building across the city.
asserted
slump → rise → city
Economists warn falling property values and higher borrowing costs could hamper the construction of new homes, at least in the short term.
uncertain
values → warn → term
So what does Sydney’s property price slump mean for the longer-term supply challenge at the heart of the housing crisis?
asserted
slump → mean → crisis
Sydney’s median home value rose by 60 per cent between 2019 and 2025, reaching a record $1.8 million just before Christmas.
asserted
value → rise → Christmas
That median has since fallen by $143,062 to $1.66 million, according to Domain’s data.
uncertain
median → fall → data
Prices dropped almost 5 per cent in the three months to September 30, the steepest quarterly decline in four years.
asserted
Prices → drop → years
Property prices in Sydney were quick to react to the upward shift in official interest rates which began with a 0.25 percentage point increase in February.
asserted
which → react → February
The Reserve Bank subsequently hiked rates in March, May and September, and some forecasters believe another increase is possible before Christmas.
uncertain
increase → hike → Christmas
Powell says the downturn has followed a traditional pattern for Sydney, with much bigger falls in premium-priced suburbs in the city’s north and east than in more affordable outer suburbs.
asserted
downturn → say → suburbs
On Sydney’s north shore house prices are nearly 18 per cent lower than a year ago, while the northern beaches and eastern suburbs have registered falls of about 10 per cent.
asserted
beaches → register → cent
However, property values continue to rise in pockets of western Sydney and the Central Coast.
asserted
values → continue → Sydney
“This is classic downturn territory for Sydney,” says Powell.
asserted
Powell → say → Sydney
“It is following the drumbeat of what we would normally see – the more premium suburbs react first, it then starts to ripple out and broaden geographically, and that is the point we’re at now.”
asserted
we → follow → what
The median price for a unit in Sydney – a housing option favoured by first home buyers – is down 4.5 per cent after peaking in the March quarter, a smaller decline than for houses.
asserted
price → favour → houses
The affordability paradox
Aspiring first home buyers confront a paradox as Sydney’s housing market weakens; prices may be falling but the main driver of the downturn – higher interest rates – has made servicing a new home loan more difficult.
uncertain
servicing → aspire → loan
Two separate measures of housing affordability – one published by the Housing Industry Association and another by realestate.com.au – showed affordability deteriorated during the June quarter in Sydney because the fall in house prices was not enough to offset the financial hit to new buyers from interest rate rises.
asserted
fall → publish → rises
Sydney has led the national property downturn, but the city’s median house price is still $509,000 – or 44 per cent – higher than Australia’s second most expensive city, Brisbane (with a median price of $1.15 million).
Sydney remains the hardest place in Australia to purchase a home, the Housing Industry Association’s affordability measure showed.
asserted
measure → lead → home
Peter Tulip, chief economist at the Centre for Independent Studies, says the “public is still stressed out” about the long-term deterioration in housing affordability despite recent price falls.
asserted
public → say → falls
“The big issue we face as a society is not how do we get property prices back to the level of 2025 or 2024, but how do we get the affordability of housing back to what it was in the 1980s and 1990s,” he said.
asserted
he → face → 1980s
In 2024, the NSW government adopted a target to build 377,000 new homes by 2029 (including about 263,00 in Greater Sydney).
asserted
government → adopt → Sydney
Nearly 50,000 new homes were completed across the state last year, the highest in five years, but that was still well short of the annual rate needed to reach the 2029 goal.
asserted
that → complete → goal
KPMG urban economist Terry Rawnsley expects Sydney’s property price slump to make the “housing supply crunch worse” in about 12 months’ time.
asserted
crunch → expect → time
“Developers will be doing their sums now and saying ‘if prices are falling, and they keep going down, my project’s not feasible, so I’ll just put that on ice,’” he said.
asserted
he → do → ice
“That’s usually something like a 6 to 12 month lag.”
asserted
That → ’ → lag
That disruption will make it even harder for the NSW government to achieve its building target.
asserted
government → make → target
“It’s a bit like a one-day international,” says Rawnsley.
asserted
Rawnsley → ’ → international
“The run rate required to reach the victory target is going in the wrong direction and a few maidens is only going to build the pressure.”
asserted
maidens → require → pressure
Rawnsley says the house price downturn comes at a difficult time for the residential construction sector.
asserted
downturn → say → sector
“I think it impacts confidence,” he says.
asserted
he → think → confidence
“It’s been a torrid five or six years for the development sector in NSW – they’ve had the COVID shock, supply shocks, they’ve had a lot of insolvencies, and they’ve seen their profit margins squeezed; so if they now feel nervous about being able to sell a product, they’re going to be cautiously pulling back on projects, or re-cutting them.
asserted
they → have → them
”
Average profits in the construction sector were less than half that across all industry sectors between 2022-23 and 2024-25, Rawnsley’s analysis of Bureau of Statistics industry data shows.
asserted
analysis → show → data
A report by the NSW Productivity and Equality Commission published in July found the cost of building a typical mid-rise apartment in Sydney rose from $918,000 in 2023 to $1.05 million in 2025.
asserted
cost → publish → 2025
The increase was “driven by higher construction costs and interest rates”.
asserted
increase → drive → costs
Tulip says many residential projects in Sydney are no longer profitable because the developers “did their sums” when property prices were still on the rise.
asserted
prices → say → rise
…and 8 more, not listed.
The Aporia
