WATERSIDE and blue-chip suburbs will help Sydney's property market recover from its malaise, but the price rise will not be marked until the second half of this year.
Australian Property Monitors has identified the suburbs expected to be the best performers this year.
Its analysis of more than 700 areas - published exclusively in today's annual The Sun-Herald Sydney Property Guide - forecasts house prices in 18 suburbs and unit prices in another 13 will increase by at least 9 per cent.
However, the increases won't be significant until the third and fourth quarters of the year.
APM research director Louis Christopher predicts suburbs including Balmain East and Ultimo, Bronte, Centennial Park and Tamarama, Kangaroo Point, Kyle Bay, Ramsgate Beach and North Curl Curl, Whale Beach, Queenscliff and East Lindfield will be the best performers.
He said a suburb's proximity to the CBD, coastline and transport would dictate its market strength.
"If there is any recovery this year, some of the blue-chip suburbs that have been underperforming up until now will be the ones to bounce," Mr Christopher said. "The downturn has maybe hit some blue-chip suburbs too hard."
Units are expected to be most valued in Concord West, Dover Heights, Milsons Point, Paddington, Roseville, South Coogee, Turramurra and Woolloomooloo. Mr Christopher said the forecast was based on interest rates remaining steady this year.
Wallacia and Tamarama, were the best-performing suburbs last year, posting median price increases of more than 28 per cent to $410,000 and $2,578,000 respectively. By contrast, the downturn hit Kirribilli the hardest, where median house prices fell 36 per cent from $1,975,000 in 2004 to $1.25 million last year.
The Real Estate Institute of NSW's incoming president Cristine Castle said people were price conscious but the market was expected to become more competitive after winter.
Macquarie Bank's head of property research Rod Cornish said house prices would remain flat or show only moderate growth. "Affordability still needs to be rebalanced, wages to increase faster than mortgage repayments, interest rates need to remain steady, and houses need to return only moderate price growth," he said.
"Back in 2003 it took almost 40 per cent of a double income to meet mortgage payments. Now that figure is 34 per cent. The long-term average is 29 to 30 per cent."
