Flexibility and greater affordability on offer for wise Sydney property buyers
The smart money is on this part of the nation’s most expensive capital as prices hold steady and yields continue to perform consistently
The smart money is on this part of the nation’s most expensive capital as prices hold steady and yields continue to perform consistently
Western Sydney is increasingly the smart choice for canny property investors, a new report suggests.
The Month in Review report for March 2023 by property valuation and advisory group Herron Todd White singled out the region as representing more varied and affordable options with consistently strong yields for both units and houses over the next few months as investors and owner-occupiers navigate a volatile property market.
“Western Sydney has always been a smart choice for investors and owner-occupiers alike and despite the weaker market, we consider this should continue throughout 2023,” the report said. “The high level of infrastructure investment in the region coupled with relatively lower median house prices and the shift to more people working from home has highlighted that more affordable and larger homes with backyards are still hot property and good long-term propositions.
“The ever-popular house and granny flat is a staple for Western Sydney investors given the larger block sizes and versatile living arrangements for extended families or as a pure investment.”
While values have softened over the past 12 months, the falls have not been nearly as substantial as they have been in other parts of Sydney. The report points to areas such as Blacktown where median values dropped by just 1.2 percent over the past year to $870,000 while yields have increased by 7.5 percent to $457 a week over the same period. The results are even more significant in Penrith, where median rent for a two-bedroom unit now sits at $420 per week, an increase in yield of 4.1 percent. At the same time, the median price of a two-bedroom unit has risen by 11.4 percent to $532,500 over the past year. The report points to the area’s relative affordability and planned infrastructure to account for the rise.
Greater demand for more rental units around universities as students return to the Australian higher education market has been responsible for increased yields around Macquarie Park, the report said, as staff and students at Macquarie University seek accommodation.
“There are only 110 units currently available for rent with an estimated 1500 renters actively looking for accommodation,” the report said. “Macquarie University is home to more than 44,000 students and 2000 staff members. The Australian Government predicts a further 40,000 international students are expected to arrive in Australia for first semester classes in 2023 commencing in March.”
At the moment, the rental yield for Macquarie Park is 3.6 percent, while the average yield for the rest of Sydney sits at 2.7 percent.
National director of residential at Herron Todd White, Ben Esau, said that there is likely to be further volatility in the residential market in the coming months as more borrowers come off fixed interest rates. Estimates suggest that up to a third of mortgage holders are fixed on lower rates, with most expected to end this year. While it may provide opportunity for those looking to add to their portfolio or enter the market, as the RBA continues to lift rates, caution is advised to those chasing higher yields.
“Although the prospect of increasing rental values may seem attractive as an investor, it may not be so straightforward as landlords need to grapple with the process of potentially passing on increasing interest rates to struggling tenants,” Mr Esau said.
“Of course, there are also investors who will be significantly impacted by the increasing costs to service an investment property, but where banks are generally well structured to deal with clients in financial distress, individual landlords may not have that capability and may need to navigate chasing increasing returns and the human impact of a fast-paced rental market.”
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There’s money to be made in the property market — if you know where to look.
If you’re a first homebuyer, owner/occupier or investor, you might feel that the property market is slim pickings in some of your favourite city suburbs. Either there’s no supply or the reserve is well above your budget threshold. However, for those property-savvy individuals prepared to look harder, there’s a growing number of suburbs in Australia’s major cities that are proving to be great investment opportunities…
—…you just need to know where to find them.
Independently-owned real estate agency, Little Real Estate, has released its annual report for the best Australian suburbs for investing. Investors searching for affordability, cash flow, and capital growth potential are being encouraged to consider regional locations, including four in Queensland.
“In 2024, we anticipate a surge in property prices fuelled by the relentless demand for housing outpacing the available supply,” says Little Real Estate executive general manager of sales, James Kirkland. “An exceptionally strong rental market, coupled with a shortage of housing, continues to exert upward pressure on house prices nationwide.”
Real estate analyst Hotspotting’s National Top 10 Positive Cashflow Hotspots echoes the findings of Little Real Estate’s annual report. Its analysis found that Queensland locations showed exponential capital growth, with the Sunshine State securing half of the top 10 locations.
“Cash flow has become increasingly important over the past two years, given the much higher mortgage repayments in play,” says Hotspotting director, Terry Ryder. “It is imperative that investors seek out areas that also offer capital growth prospects, often due to their booming local economies across a diverse range of industries.”
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It depends! According to Little Real Estate, in 2024, the Sydney suburbs of Wiley Park and Kensington come out on top, along with Caloundra West and Southport in South East Queensland, and Carlton and Moonee Ponds in Melbourne.
The property market is certainly inflated in Sydney in comparison to other states but investors can still find some gems in certain pockets of the city. Take Penrith, for example. According to REA data, the average cost of a unit in Penrith costs $540,000, with a rental yield of 4.3%.
It’s hard to go past Queensland as one of Australia’s best states for investment properties. With four out of ten suburbs in Queensland appearing in Little Real Estate’s annual report—including Southport, Caloundra West, Coomera and Bulimba—Queensland and its surrounding suburbs, typically regional, are presenting as great investment opportunities.
“Whether you’re an investor, a family looking for a new home, or a professional seeking the ideal work-life balance, these suburbs are the ones to watch for growth and potential in the upcoming year,” says Kirkland.
According to Smart Property Investment, the fastest growing suburb in Australia is Chelmer, Queensland – a south-western suburb in the city of Brisbane, with a quarterly price growth of 29.33 per ent. This is followed closely by Frenchs Forrest in NSW, and Greenmount in Queensland.
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