Western Sydney hotspots experience rapid price growth

Intense competition among first-home buyers targeting once affordable suburbs in Sydney’s West has turbo-charged demand, resulting in prices surging by up to 37% in some suburbs in just a year.

Experts warn that the imminent arrival of the Federal government’s revamped First Home Guarantee (FHG) scheme, which dramatically lifts eligible home price thresholds in Sydney and does away with income caps, will only serve to hasten price growth in these areas.

The details

New price data from Domain and InfoTrack shows that strong demand from first-home buyers in Western Sydney is having a profound impact on the property market.

Houses in South Wentworthville near Parramatta saw a 37.2% rise in just 12 months, units in Kingswood near Penrith saw a 24.4% lift, while houses in Mount Pritchard near Cabramatta saw a 20.3% rise.

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Domain Group’s Chief of Research and Economics, Nicola Powell, says prices in these first-home buyer hotspots are likely to increase further, following the expansion of the First Home Guarantee scheme, which comes online from October 1st this year.

The scheme allows first-home buyers to enter the property market by putting up as little as 5% of the purchase price, with the Federal government guaranteeing the remaining 15% of a traditional deposit, sparing buyers expensive lenders mortgage insurance.

“It’s the first wave of first-time buyers who are going to benefit the most from this deposit scheme,” Dr Powell says.

“The next wave of first-home buyers that come into some of these locations are going to be paying higher prices.”

Dr Powell says the effect of the FHG scheme will be in “bringing forward a whole lot of demand and the people that are going to be benefiting are current home owners.”

Tim McKibbin, the President of the Real Estate Institute of New South Wales, agrees.

“More buyers of any kind mean more competition and in an environment of constrained supply, like Sydney, the impact on prices is clear,” he says.

“They are rising.”

Certainly, activity has picked up in the Sydney property market.

Cotality reports 925 homes were auctioned in the city in the week of 14th-20th September with a very high preliminary clearance rate of 77.9%.

The following week (21st to 28th September), 1,171 homes went under the hammer with 73.5% achieving a successful result.

Domain’s Nicola Powell says first-home buyers targeting Western Sydney are also increasingly willing to compromise on property type.

She says this has caused “a domino effect” for price growth among both houses and units.

“When first-home buyers are pivoting to apartments, and also pivoting their suburbs, it creates that kind of domino effect in terms of price growth in that heartland corridor of affordability, which is Western Sydney,” she says.

That rapid price growth may soon see suburbs like South Wentworthville out of reach for first-time buyers.

Domain says South Wentworthville’s median house price growth pushed prices from $911,000 to $1.25 million in just a year - a jump of $338,000.

“Because the pricing is attractive, I have been coming across a lot of [first-home buyers] who were living in the Hills or Inner West,” Amit Nayak, a real estate agent at McGrath Parramatta, says.

“A lot of buyers who have been priced out of those areas started moving into the areas where you have the shopping centres, you have the public transport, you have easy access to the major arterial roads, and the prices were still fairly attractive.”

Nevertheless, the local agent quoted by Domain says all hope is not lost for first-home buyers, as it’s still possible to find well-located townhouses and villa units in South Wentworthville in the $850,000 to $900,000 range.

Other local agents point out that the sub-$800,000 market - usually units - remains particularly appealing in Western Sydney, as this is where first-home buyers can obtain the maximum benefit of the New South Wales stamp duty exemption.

The exemption for first-home buyers starts tapering off at the $800,000 mark, tapping out totally at $1 million.

Domain says that while prices continue to grow in these first-home buyer hotspots, pockets of affordability remain in Sydney’s West, nominating units in Parramatta (median price $620,000), Harris Park (median price $512,00) and Westmead (median price $572,500).