Sydney’s high house prices are driven by a combination of economic, demographic, and policy factors. Here are the key reasons:

1. Strong Demand

• Population Growth: Sydney is a highly desirable location due to its lifestyle, job opportunities, and infrastructure. Immigration and natural population growth increase housing demand.

• High-income Jobs: Sydney is Australia’s financial and business hub, attracting workers who can afford higher housing prices.

• Foreign Investment: Overseas investors, particularly from Asia, have historically bought properties in Sydney, driving up prices.

2. Limited Supply

• Geographical Constraints: Sydney is bounded by the ocean, mountains, and national parks, limiting the available land for housing development.

• Zoning and Planning Restrictions: Strict regulations on land use and lengthy approval processes slow the creation of new housing stock.

• Construction Costs: High labor and material costs also limit the ability to build affordable housing.

3. Low Interest Rates (Until Recently)

• For much of the past decade, historically low interest rates made borrowing cheaper, allowing buyers to bid higher for properties.

4. Investor Activity

• Tax Benefits: Australia’s tax policies, such as negative gearing and capital gains tax discounts, encourage property investment, increasing competition for homes.

• Rental Demand: A strong rental market in Sydney supports higher property prices, as investors can generate consistent income.

5. Cultural and Psychological Factors

• Property as Wealth: In Australia, property is seen as a key way to build wealth, creating a culture of homeownership and investment.

• FOMO (Fear of Missing Out): Buyers often rush into the market to avoid being priced out, pushing prices up further.

6. Global Economic Conditions

• Sydney’s stability and status as a global city attract international buyers looking for safe investments.

7. Infrastructure Development

• Investments in infrastructure (e.g., roads, public transport, and amenities) make suburbs more attractive, increasing prices in those areas.

8. Pandemic Effects

• During COVID-19, low interest rates, government incentives, and increased remote working made suburban and regional Sydney properties more appealing, further driving prices up.

While Sydney’s prices have seen some corrections in recent years due to rising interest rates, they remain high due to these structural factors.