- 13 May 2025
- By Specialist Mortgage
A great divide has emerged in the Sydney property market when it comes to price growth but will the gulf between the inner and outer suburbs continue into 2026?
A divide in the Sydney property market has evolved into a major gulf.
Three quarters of suburbs within five kilometres of central Sydney have recorded property prices falls in the past 12 months.
A complete reversal in fortunes is playing out in the more affordable outer areas, with four in every five suburbs more than 20 kilometres from the Sydney GPO clocking up price gains.
It’s a scenario that is playing out in a similar pattern around the country but Sydney’s far higher property prices have made the trend more emphatic in the Harbour City.
Reinforcing the extent of the great divide, all of the top 20 suburbs for annual growth were at least 20km from the CBD, with Fairfield, Liverpool and Blacktown LGAs dominating the city’s top 20 list.
New Cotality (formerly CoreLogic) data confirms the nation’s strongest housing conditions are concentrated in the fringes of each capital city.
The lower quartile of the housing market has led capital growth over the past 12 months, reflecting heightened demand for more affordable homes as buyers navigate continued serviceability constraints and stretched affordability metrics.
With the median priced property in Australia now out of reach for the median income earner, who would need to dedicate over half of their income to a mortgage (after paying a 20 per cent deposit), buyers are being forced to the fringes.
That situation is more pronounced in Australia’s largest and most expensive property market.
Jason Simoes, Director, XS Property, said the outer suburbs are offering better value per square metre, larger land sizes, and often more modern housing stock.
“Additionally, infrastructure investment across LGAs like Fairfield, Liverpool and Blacktown is improving transport links and amenities, helping to close the housing gap between inner and outer areas.”
He identified the five areas that stood to be the main beneficiaries of this investment in terms of delivering more capital growth over the next few years.
Sydney’s highest 12-month value growth (dwellings)
“Seven Hills is benefiting from the ripple effect out of Blacktown and solid transport links.
“Campbelltown is being boosted by major infrastructure plans and urban renewal projects, while Riverstone has strong population growth and is part of the North West Growth Area.
“Kingswood, close to Western Sydney University and Nepean Hospital, is attracting tenants and owner-occupiers, which is a lure for property investors.
“Closer to the city, Belmore in the Inner South-West is still relatively affordable, with increasing appeal as buyers look for value within 15km of the CBD.”
Sydney values remain 1.1 per cent below their September 2024 high but 81 per cent of suburbs 20km or more from Sydney’s GPO recorded annual gains, compared with only 26 per cent of those within 5km.
Greater competition for these appreciating outer suburban homes and the newer, more modern homes would continue to drive prices higher, according to Allen Habbouchi, Principal Licensee – Sydney, aussieproperty.com.
“This shift in demand often contributes to heightened competition and subsequent price growth in these more affordable markets.
“Outer suburbs often provide larger homes, more land, and access to greener spaces, which appeal to families and individuals seeking a higher quality of life, especially with the rise of remote work.
“Sydney’s population growth and urban sprawl have led to increased demand for housing in outer areas, supporting strong market performance, along with the changes in lifestyle preferences, especially post-pandemic, that have increased demand for properties outside the city centre.”
Mr Habbouchi said investors see outer suburbs as offering higher potential for growth and better rental yields, fuelling further activity and the need for more development in these areas to cope with the lack of properties currently available in Sydney.
For buyers looking for price gains in 2025 and beyond, he said major infrastructure upgrades at state and council level meant Parramatta’s outskirts, including Merrylands, Mays Hill, Pendle Hill and Granville, Blacktown and Rouse Hill, were the standouts.
Inner city comeback on the cards
With more than 650,000 new residents expected to move to Sydney by 2034, strong population growth is fuelling long-term demand for residential property.
When interest rates move, higher priced property markets have proven to be the most responsive.
With interest rates expected fall throughout 2025, the more expensive inner suburbs or Sydney could be the first to experience increased demand and price pressure.
Post-Covid, the following graph highlights the catch-up potential of the city’s top quartile of the real estate market.
Rhiannan Jenkins, Director, Sourced Property, said Sydney’s inner suburbs have seen phenomenal price growth that has driven those wanting a home to look for alternatives but said the inner suburban areas could soon regain their lost momentum.
“Scarcity is one of the biggest drivers of property price growth and when supply is limited—such as a character-filled Newtown terrace built in the early 1900s or a large parcel of land in Marrickville above 500sqm—demand tends to increase, simply because these types of properties are no longer being replicated.
“While we can increase housing supply through apartment developments, this tends to dilute scarcity in that particular category, making the existing stock of unique or character properties even more valuable over time.
“By contrast, in the outer suburbs, the more greenfield estates that are developed, the more uniform the housing becomes and this homogeneity leads to more choice for buyers and could mean less bargaining power for sellers.”
The quest for more affordable property options has not translated into higher unit prices.
The past three months have seen the value of houses rise by 1.1 per cent across the combined capitals, more than double the 0.5 per cent lift recorded across the unit sector.
This trend is mostly being driven by Sydney, where house values were up 1.4 per cent over the rolling quarter compared with a 0.3 per cent fall in unit values over the same period.
“In my experience, areas and property types that are genuinely scarce tend to experience stronger demand,” Ms Jenkins said.
“Over the long term, inner-city suburbs are likely to see stronger price growth—driven by factors such as scarcity, desirability and limited supply.”
Article Q&A
Where in Sydney are property prices performing the strongest?
Three quarters of suburbs within five kilometres of central Sydney have recorded property prices falls in the past 12 months. A complete reversal in fortunes is playing out in the more affordable outer areas, with four in every five suburbs more than 20 kilometres from the Sydney GPO clocking up price gains.
Which property markets are delivering the highest capital growth in Australia?
The nation’s strongest housing conditions are concentrated in the fringes of each capital city. The lower quartile of the housing market has led capital growth over the past 12 months, reflecting heightened demand for more affordable homes as buyers navigate continued serviceability constraints and stretched affordability metrics.
