Is there still opportunity in the unpredictable Sydney property market?
Insights May 15, 2018
Navigating a turbulent Sydney property market has left a lot of investors scratching their heads with what to do next. Between March 2012 and July 2017 investors and home owners have witnessed unparalleled annualised returns of 10.7% across Sydney. This phenomenon or unicorn as others might put it defies logic on many different levels – but for the local budding property investor who has entered the market the last 5 years this has set a benchmark for future investments.
Unfortunately the time has come where the Sydney property market is officially out of the upswing faze of the property cycle and has definitely slowed across all regions. Sydney dwelling values have fallen by -1.2% over the first 3 months of the year and are now -4.3% lower than the declared peak in July 2017.
Investors are looking elsewhere to seek the same sensation without understanding the factors which affect the Australian property market which has now hit $7.5 trillion dollars. Tighter lending measures implemented by APRA in 2016 and more recently the inquiry into banks and financial services malpractice by the Banking royal commission has definitely impaired the cost and availability of credit. This has affected up to 30% of borrowing capacities and unfortunately does not make buying a brand new 1 bedroom unit for more than half a million dollars any more enticing as it did a few years back.
Wondering eyes have made investors look beyond Sydney as a conservative step forward in adding to their portfolio by having more variety while maintaining a decent rental yield. As the average unit price in Sydney still remains above the $700k mark; it’s almost logical to leave your own backyard and buy at a lower price point elsewhere. It may be a good strategy for now; but is it the highest and best use of funds for 5 or 10 years?
The question then remains – is there still an opportunity in the Sydney property market?
With the media portraying that there is a severe oversupply of units being built; long term investors who purchased units decades ago for 5 digit figures are taking the opportunity to exit the market. Believe it or not; second hand Sydney units start as low as $290,000 and is almost on par with units in other major capital cities.
The main difference?
Unprecedented infrastructure investment from the NSW government has surpassed $70b + through transport, health and education projects across the state and specifically in Sydney. Coupled with record pace immigration & digital disruption– Sydney powers the nation, accounting for 41.2% of Australia’s economic growth.
Although Sydney rents are growing at a much slower pace than ever before; falling property prices and positive rent growth means that yields are now starting to come back to some sort of reality. With an abundant amount of units ripe for renovation and good track records of steady rental income; the second hand unit market definitely holds opportunity for buyers which are ready to pounce.
Growth in Education – Health – Financial Services – Major Infrastructure investment – You do the maths.