Since COVID-19 first arrived in early 2020, our property market has changed noticeably.
We explore five trends the pandemic set off or accelerated and look at where we’ve landed almost three years on.
1. Space became more important
One of the first things that happened when the pandemic struck was that many of us started working from home. During the 2021 Census, a massive 55.6% of those in Potts Point and Woolloomooloo said they worked from home. A lot of us still haven’t gone back to the office, at least not full-time. So, while a makeshift desk in the kitchen may have been fine for the first little while, many people started wanting an extra room for a home office or a dedicated study nook.
But it wasn’t just our work that placed space in demand. As we were spending more time at home, a lot of us started to feel a little cramped. Room to move – and get away from the partner or kids – was at a premium too.
This trend is reflected in the fact that the gap in value between two-bedroom apartments ($1.35 million) and three-bedroom apartments ($4.7 million) in Potts Point is now $3.35 million, the widest it has ever been.
2. A demand for lifestyle
The desire for more space was also part of a broader trend of people focusing on lifestyle. With borders closed and people confined to as little as a five-kilometre radius during lockdowns, more people wanted to have everything they needed on their doorstep.
Our area, which is probably Sydney’s most walkable place to live, does lifestyle in spades. From its cafes, bars and restaurants to art galleries and parks and its proximity to both the CBD and the harbour, this is a part of Sydney where it’s impossible to be bored.
Potts Point’s growing status as a lifestyle centre can be seen in the fact that between August 2020 and September 2021 (roughly the end of the two lockdowns), the median apartment value rose by 23.4% – well exceeding the median apartment price growth across the city.
3. Digital took off
From online shopping to remote working, so much of our lives moved online during COVID – and real estate was no exception. While video auctions and online inspections were available pre-pandemic, it was during lockdown and border closures that they really took off. Today, we think nothing of an overseas buyer purchasing an apartment without ever having seen it in real life.
The way real estate agents advertise properties and target buyers became much more digitised too. Social media – with its measurability, interactive nature and precision – began replacing traditional real estate advertising. In 2023, it’s probably more common to learn about a property through Facebook than through print media.
4. The prestige market separated from the general market
Sydney’s prestige market has always been driven by slightly different factors from the market more broadly. It isn’t as dominated by interest rate movements because people in this market segment tend not to buy with a mortgage. Instead broader economic factors tend to matter more, including the level of M&A activity. Given the large number of overseas and ex-pat buyers, it’s also influenced by the strength of the Australian Dollar.
During COVID, the prestige market was well and truly separated from the rest of the property market. When interest rates began rising in 2022 and dampening demand across Sydney, prestige was unaffected. We were still making building and suburb records right throughout 2022, including setting a record per square metre sales price in Harry Seidler’s Horizon building.
5. Rents became more expensive
The rental market is a big part of our area, with up to two-thirds of all properties rented out according to the last Census. When COVID-19 hit, the rental market instantly suffered. People moved out of the inner city, seeking more space. Borders shut, and landlords worried.
But it was temporary. The trend of rising rents started later that year for our area: Potts Points’ median asking rent rose 22.7% between September 2020 and May 2022.
The key to rent rises lay in the fact that listings started drying up. SQM Research data shows that in May 2020 – at the start of the pandemic – there were 544 rental listings in Potts Point. By November 2022, it had fallen to just 159.
COVID played a big part in drop, with a lot of renters tending to stay put rather than looking elsewhere. This restricted supply and caused an imbalance in the market. We also saw some rental properties getting bought by owner/occupiers (investors were noticeably absent from the market during 2020 and 2021), again taking them out of the supply pool.
By 2022 the rental market was charging ahead. It’s true that this was partly because rising interest rates made buying more expensive (so people stayed renting). In Darlinghurst, for example, rents rose 11.76% for houses, and 9.7% for units, while in Elizabeth Bay unit rents rose 6.12% in 2022. In both suburbs, investor yields are sitting above 3%.
With a genuine rental shortage and interest rates making buying more expensive, we don’t see this situation changing any time soon, making the 2011 postcode a great place to invest.
Want more?
If you’re interested in buying or selling in Potts Point contact my team today.
