Eastern suburbs house prices have been rising, and fast.
In fact, of the 10 Sydney suburbs that rose most in value in the past 12 months, no fewer than seven were in the eastern suburbs.
So why are prices here rising more rapidly than anywhere else in our city? Why is growth in house prices outpacing growth in apartment values? And which parts of the eastern suburbs are in highest demand for house buyers?
Fewer properties coming to market
The price of property is set by the laws of supply and demand, and on this front the supply of houses is dwindling.
According to SQM Research, in February 2024, 71.7% of all properties listed for sale in Sydney’s eastern suburbs were apartments – a rise of over 11% since October 2010, when only 60.5% were apartments.
A key reason for this is that we hold onto houses longer than apartments. The median hold time for a house in Sydney rose from 5.3 years to 10 years between 2002 and 2022.
This naturally means less stock comes to market. Unless of course, you’re building more stock, but new dwelling approvals across the city have actually been declining in recent years.
Growing ratio of apartments to houses
But, when new stock does get built, it tends to be apartments rather than houses. That means another phenomenon we’re seeing is that the proportion of houses to apartments coming to market is shrinking too.
As we discussed in a recent article, the growing imbalance between houses and apartments for sale is causing house prices to rise comparatively more rapidly.
In March 2020, Sydney houses were just 32.9% more expensive than apartments. By January 2024, that gap had grown much wider, reaching 68.4%.
Here in Sydney’s east, the gap can be even wider.
Demand for beachside houses driven by lifestyle
Then there is the demand side of the equation, which is causing houses in some parts of Sydney’s eastern suburbs to rise faster than others.
One factor here has been a real desire from many people for life by the beach. This has been helping drive prices in the eastern beaches far higher than in most parts of the city.
For instance, the median house price in North Bondi increased 11.9% over the past year to reach $4.7 million. Five years ago, the median house price in North Bondi was just $2.55 million. This means we’ve seen outstanding five year growth of 84% in this beachside area.
Bronte, meanwhile, has become the third most expensive suburb in all of the country. Prices here have grown with the median four bedroom house price now $5.8 million. The suburb-wide median here has grown 69.2% over the past five years.
The beaches are particularly popular with Gen X and Y, with the Sydney Morning Herald reporting last year that Gen Y or “millennials” now account for more eastern beaches residents than any other age group.
What are buyers looking for on the eastern beaches?
The key word here is lifestyle. Buyers are willing to pay for proximity to the beach, a sea breeze, and walkability to the shops, bars and restaurants that have made this area so desirable.
While many buyers want the finished turn-key home, others are willing to consider a major project to create their dream home – and the beaches are probably home to more knock down rebuilds than anywhere else in Sydney’s east.
Buyers here also tend to prize a garden or outdoor area – even if it’s compact – and off-street parking is incredibly desirable too. Families often prioritise an additional flexible lounge area, study or guest room.
Case study: 115 Blair Street, North Bondi
Location: Blair Street is a prominent street in North Bondi, just a few hundred metres to the beach in a popular area known for its classic low rise art deco, interwar streetscapes.
A short history: Number 115 is visible on this 1928 subdivision map being auctioned off as “lot 3” in the third stage of the Vicars Estate. The map shows that Bondi was serviced by both a tram and bus lines and the land to its east on the North Bondi cliffs, where the golf club is today, was marked as a “military reserve”. Many of the nearby streets were crown land that hadn’t yet been subdivided for housing.
Today: Fast forward ninety years, and the original 1920s art deco charm of this beachside cottage at 115 Blair Street has been retained, while an architecturally imaginative renovation has created a luxurious eco-friendly family retreat. The property offers three bedrooms and a light-filled living space with soaring ceilings.
There is also off-street parking, landscaped gardens, and a versatile loft-space. The price guide is over $4 million.
Moving back to the inner city
At the height of the pandemic, Sydney’s inner city lagged many other parts of the east, with people tending to prioritise larger spaces, and investors staying away.
That has changed over the past year or so, with houses in Sydney’s inner east moving to the level of extreme demand.
And, in coveted suburbs like Potts Point, where apartments make up the majority of housing stock, there simply aren’t enough to satisfy this – so it’s pushing up prices and breaking sales records in the process.
According to Census data there are only nine freestanding houses and 425 terraces in the entire suburb, and these are very tightly held.
Realstate.com.au data reveals that only seven houses (terrace or freestanding) sold in Potts Point in the last year, leaving it with too little data to even calculate a meaningful median house price.
What are buyers looking for in the inner city?
Freestanding homes are rare in inner city Sydney, so most buyers are willing to consider a terrace house. Character homes that have been renovated for modern living with high-end kitchens and bathrooms are popular. However, we also meet many buyers willing to take on a large project. Many of these involve turning a former commercial property – such as a hostel – back into a family home again.
Cash buyers are a genuine factor in this part of the eastern suburbs market. In fact, Potts Point was named in the top 10 suburbs for cash buyers last year, with 44.8% of buyers purchasing in cash.
The number of non-mortgaged buyers tends to lead to stiff competition for houses that do come to market, pushing prices higher still.
Case study: 29 Challis Avenue, Potts Point
Location: Challis Avenue is one of Potts Point’s grandest streets, and home to some of the finest examples of architecture from past eras that give our area its unique charm and character.
A short history: In 1889, 45 residential sites were auctioned from the Challis Estate between Macleay and Victoria Streets. Number 29 Challis Avenue is visible as “lot 2” and the quiet tree-lined street hasn’t changed that much in the 130 years that followed.
We sold 29 Challis Avenue, known as “Saraville” in 2016, for what was, at the time, the record-breaking price of $13 million. It had been completely renovated and reimagined by local interior designer, Heidi Onisforou.
Today: Number 29 Challis Avenue is now on the market again, with a guide price around $20-$22 million. A grand, four-bedroom oasis, this terrace is truly one of a kind. A 9.15m frontage combined with 4.2m ceilings gives it luxurious proportions and no expense has been spared in its modern interior, which pays homage to its Victorian origins. Off street parking for three cars and an amazing courtyard offer the best of inner city living.
Want more?
If you’re looking to buy or sell in Potts Point or Elizabeth Bay, contact my team today.
