An increasing number of Sydney properties are remaining unsold for extended periods as rising interest rates and recent government tax reforms continue to dampen buyer demand.

New data from SQM Research shows a growing number of “stale listings” — homes that have been on the market for more than six months without selling. During May alone, the number of these listings increased by 10 per cent, highlighting a significant slowdown across parts of the Sydney housing market.

Many of the properties struggling to attract buyers were once highly sought after by investors. However, investor activity has weakened considerably following major policy changes announced in the federal budget. The reforms replaced existing capital gains tax discounts with an inflation-linked indexation system and limited negative gearing benefits to newly built homes.

At the same time, higher borrowing costs have reduced purchasing power, particularly for buyers considering more expensive properties. Industry experts say many of the homes remaining on the market fall into higher price brackets that are now beyond the reach of a growing number of purchasers.

Despite the changing market conditions, many sellers have been reluctant to lower their asking prices. This has contributed to properties remaining listed for longer periods, even as values soften.

Recent figures from PropTrack indicate that property prices across Greater Sydney have declined by nearly 2 per cent since February. Some of the city’s most expensive coastal and inner-city suburbs have experienced price falls of between 5 and 10 per cent.

According to LJ Hooker head of research Mathew Tiller, buyers have become increasingly cautious as they assess the impact of policy changes and broader economic pressures.

He said higher interest rates, rising living costs and tighter household budgets have encouraged buyers to take more time before making purchasing decisions. Mr Tiller also noted that softer market conditions are likely to persist as investors continue to reassess their position in response to the tax reforms.

SQM Research director Louis Christopher said unrealistic price expectations were also contributing to the rise in unsold properties.

In stronger markets, he explained, rising values often allow sellers’ expectations to be met over time. However, in a flat or declining market, asking prices that exceed current market value are less likely to be achieved, resulting in properties sitting unsold for extended periods.

Mr Christopher warned that homes remaining on the market for too long can develop a negative perception among buyers, even after multiple price reductions.

“When a property lingers on the market, buyers may begin to assume there is an underlying issue,” he said.

He added that the strongest buyer interest typically occurs within the first few weeks of a listing, making accurate pricing from the outset crucial.

Further evidence of softer conditions can be seen in Sydney’s auction market. Clearance rates at the beginning of June fell to 41.3 per cent, marking their weakest level in almost eight years. This is a sharp contrast to last year, when more than 70 per cent of auctioned properties were regularly selling each week.

Ray White NSW Head of Auctions David McMahon said sellers entering the market should take current conditions into account and rely on recent sales data when setting price expectations.

With several months of recent transaction data now available, vendors have a clearer picture of where their property is likely to sit in today’s market, he said.

Mr Tiller added that properties continuing to sell are generally those priced in line with current market realities. He noted that stock remaining on the market often includes investor-focused apartments and properties at the upper end of the market, where buyer demand has softened the most.

As interest rates remain elevated and investors reassess their strategies, Sydney’s property market appears set to face ongoing challenges, with realistic pricing becoming increasingly important for sellers hoping to secure a sale.