$2 million houses set to become the new Sydney norm

Prices may have eased in Sydney’s housing market, but new modelling suggests the city’s affordability problem is far from over.

Realestate.com.au projections indicate houses priced below $1 million could all but disappear from Sydney within five years, while median house prices above $2 million become commonplace across large parts of the city during the 2030s.

The details

Realestate.com.au’s modelling projects that there will be no suburbs in the Sydney basin with a median house price below $1 million by 2031.

Across the Central Coast and Blue Mountains, which are included in the broader Greater Sydney region, only three suburbs are expected to remain below that level.

At the other end of the market, around 250 localities - roughly half of Sydney’s suburbs - are projected to have median house prices above $2 million by 2031, with 92 suburbs expected to have medians above $3 million.

In fact, by 2036, the modelling suggests house prices above $3 million could become the norm across more than one-third of Sydney.

The projections, based on past market performances and a 20-year projection trend, are striking because Sydney’s city-wide median house price only moved above $1 million for the first time in 2016.

For decades before that, a million-dollar house was associated with prestige locations and harbour views.

Under the new modelling, it could increasingly become the entry price for an ordinary house in large parts of the city.

Cheaper suburbs set for take-off

The areas with an expected $2 million price tag include major Western Sydney centres such as Liverpool and Fairfield, traditionally regarded as relatively affordable areas.

Realestate.com.au expects Liverpool, where the current median is $1,155,000, to reach $1,516,000 by 2031 and $2,009,000 by 2036.

Fairfield is expected to follow a similar trajectory.

The modelling also suggests some of Sydney’s cheapest suburbs could record the strongest price growth once the current property market downturn ends, as buyer demand remains strongest for lower-priced homes.

“The reality is that houses under $1m are already quite rare in most of Sydney,” Realestate.com.au Chief Economist Angus Moore says.

“Prices will not keep falling forever.

“We expect them to bottom out next year and as prices grow, more and more suburbs will get pushed out past $1m.”

The modelling suggests the strongest growth potential may sit at the cheaper end of the market, because there are more buyers able to compete for a $1 million property than for one priced at $3 million.

Mr Moore says lower-priced outer suburbs have been attracting stronger demand since the pandemic, helped by remote and hybrid working arrangements that made distance from the CBD less important for some households.

“We would expect that to continue,” he says.

Sydney’s housing shortage is another factor.

Mr Moore says Sydney is not building enough housing to keep pace with population growth, while Government tax changes are also likely to steer some investor demand towards cheaper suburbs where rental yields are higher.

That combination could keep upward pressure on the bottom end of the market even if prestige property performs more slowly.

In practical terms, it means the suburbs that still offer houses below $1 million today may not remain affordable for very long once the next price upswing begins.

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Where will the cheapest houses be?

By 2031, the most affordable house markets in Greater Sydney are projected to sit well away from the CBD.

Tuggerah and Mannering Park on the Central Coast and Mount Victoria in the Blue Mountains are expected to be among the cheapest options, with median house prices around $970,000 to $995,000.

All are more than 90 kilometres from central Sydney, which helps illustrate how far the city’s “affordability belt” is continuing to move outward.

Suburbs once considered peripheral or too distant are increasingly being pulled into the mainstream housing market as buyers trade proximity to the CBD for affordability.

Units remain the cheaper option

The picture is less extreme for apartments.

Realestate.com.au expects about half of Sydney suburbs to still have median unit prices below $1 million in 2031.

Most of those markets are projected to sit between about $800,000 and $950,000.

That means the price gap between houses and units could widen further, making apartments an increasingly important entry point for first-home buyers and investors priced out of detached housing.

It also suggests the old idea of buying a house first and upgrading later may become less realistic for many younger households.

Temporary downturn

Realestate.com.au’s projections assume the current market downturn ends by the second half of 2027.

Mr Moore argues that the longer-term forces pushing Sydney prices higher have not disappeared; population growth remains strong, new housing supply remains constrained and investor demand is increasingly being pushed towards more affordable, higher-yielding locations.

Prices could rise by more than $500,000 over the next five years in 141 Sydney suburbs if they follow the same growth trajectory seen over the past 20 years.

Realestate.com.au stresses the figures are projections, not guaranteed price increases.

Interest rates could remain high for longer, economic conditions could weaken and future housing policy could change.

But the broader message from the modelling is difficult to ignore.

Sydney’s current downturn may make some homes cheaper in the short term, but it doesn’t necessarily make them affordable over the medium or long term.

And if the projections are even vaguely accurate, the idea of finding a house below $1 million anywhere near Sydney could eventually become a distant memory, while $2 million becomes the new normal.