The great Sydney property boom has now been raging for half a decade, with prices jumping on average $100,000 a year.

In 2012, the median house price was $646,000. Today, it is $1.15 million and the city’s population is largely split between property millionaires and perennial renters.

But the five-year surge has changed more than just the price of real estate.

The boom has altered the geography of the city, created a wealth divide and fuelled a culture of property investing that will impact the market for years to come.

Parramatta has been one of the fastest changing suburbs since 2012. Credit: Quentin Jones Out and up

Despite the record number of cranes in the sky and new apartment blocks in once suburban enclaves, the affordable options for new buyers have largely vanished.

In April 2017, a significant cultural benchmark was reached. It was the first time in Australia more apartments had been built than houses and Sydney was one of the driving cities behind this shift.

Parramatta in particular has been through some of the most significant changes in terms of high-rise development, repeatedly being described as the building hotspot of Sydney, Tract Consultants senior town planner Georgia Sedgmen said.

“There has been a huge infrastructure boom … and a bigger focus on the west and the lifestyle of people in the western suburbs in terms of culture,” Ms Sedgmen said.

“Five years ago I don’t think anyone cared to bring [arts and entertainment] out west.”

Now, bringing the Powerhouse Museum to Parramatta is top of the local agenda, and the western suburbs have become a centre for festivals and culture.

It has also started to change the demographics of Parramatta, she said, turning it into the next university student “hipster” area – a title previously reserved for inner-west suburbs.

“It’s getting too expensive to rent in the inner areas – I can’t see how musicians could afford [to rent there] so it only makes sense they’re looking at areas like Parramatta.”

They might also look at Badgerys Creek, which, along with Parramatta and the CBD, has become part of the new focus on a “three-city Sydney”, she said. Or they might consider areas, such as the Hills, where apartments are being built in once-McMansion areas.

These rising rents and surging house prices has, for some, made them a fortune. For others, it has never been more difficult to buy an entry-level home.

The development of Kellyville from 2011 to 2016, 36 kilometres north-west of the CBD.

The missing rung on the ladder

With interest rates at record lows – down from 4.25 per cent in late-2011 to 1.5 per cent in 2017 – those who own homes are benefiting. The rate cutting cycle is widely seen as one of the major factors of the boom and they are of huge benefit to those who are paying a mortgage.

Hence, the real winner is the top end of town, for these Sydneysiders have seen the value of their homes surge and the mortgage payments shrink, Domain Group chief economist Andrew Wilson said.

Across the city, 78 suburbs now boast a median house price of $2 million or more, compared to six suburbs in 2012.

But for those saving for a deposit, it’s much harder with lower rates.

And that is happening as even the cheapest areas are becoming out of reach – five years ago there were more than 150 suburbs with median house prices under $500,000. By 2017, there were four suburbs remaining.

“If you’re not on the ladder, you’ll find there isn’t a bottom rung anymore,” Dr Wilson said.

McGrath founder and director John McGrath said there had been an “unfortunate degree of fear creep into the psyche of those not yet in the market”.

But he said those wanting to buy were getting creative – living at home for longer, becoming a “rentvestor” or using Airbnb to help afford a mortgage.

“Not only have prices almost doubled in many areas but this has shaped a number of social patterns as a result,” he said.

This includes a shift towards rentvesting – where the tenant invests in property while renting – which has been part of a rise in investment culture and a growing group of Sydneysiders treating property as an asset class.

The rise of investor culture

In Sydney, traditionally the overall home ownership to investor rate has been about 70 per cent to 30 per cent, BIS Economics managing director Robert Mellor said.

Now, this is “more like 60/40”, he said.

During the boom, NSW investors hit a record high proportion of the market – in some months buying more than half of all properties sold.

This was in part due to the snowball effect in the housing market, and exuberance and growing equity as prices increased, but was also a phenomenon of investors looking for different asset classes post-Global Financial Crisis.

He warned this could also create more volatility in the property market – homeowners tend to batten down the hatches when the market slows or there is financial difficulty. Investors are more prone to selling, sometimes all at once.

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It’s also impacting how neighbourhoods and communities operate. Typically, renters would move out “after 18 months”, but he said renters might soon be more long-term.

These changes in tenure, and how regularly people move home, were anticipated to have future social consequences.

The social consequences

UNSW City Futures Research Centre director Bill Randolph said there was “no doubt that an asset-based divide is opening up in Australia, driven by differential housing wealth but also differential superannuation wealth”.

He warned the result of the boom was “class-based as well as inter-generationally based inequality” in Australian society with the “winners” being those who owned property or whose parents owned property in the right location.

“I think we are at something of a turning point in housing wealth that will be much more down to cumulative inherited outcomes – including access to ‘good’ education, jobs and opportunities as a well as housing wealth – rather than what you do for yourself, which has been the case for the last couple of generations,” he said.

And it’s set to become more polarised, with the higher-priced property areas with high amenity expected to outperform in the long-term.

Mr Mellor warned there would be huge “social and economic consequences” for Sydneysiders – particularly the young.

“There will be a massive reduction in the under-35 age group home ownership.”

In the 2011 Census, 43 per cent of those from 18 to 35 owned their own home – he expects this will drop to below 30 per cent in the 2016 Census data.

“The look and feel of the city is changing dramatically. The next five or six years after the price growth will be critical to see what the future will look like.”