Sydney property investment has seen continued strength in the Sydney market early in 2017, most analysts put this down to a strong state of the economy coupled with increasing population growth. In fact Western Sydney has the fifth largest economy in the country. However, the market is reaching a critical point after a growth phase that never seemed to end. At some point it’s going to have to let up because it is unsustainable.
Sydney has seen the greatest housing price increase of any city by a substantial margin. The Sydney property market also topped Australian Property Monitors quarterly analysis of price movements, with houses and units showing consistent price increases.
The Sydney property market also has four out of the 10 suburbs that were most in demand by potential buyers online, according to a survey by realestate.com.au
The Sydney rental market remains among Australia’s highest. Mosman was identified as the country’s second most expensive rental suburb by R.P. Data, with a median rental rate of $1,500 per week. Woollahra, Seaforth, Roseville and St Ives were not far behind.
National Australia Bank predicts the New South Wales property market will weaken over the next two years.
R.P. Data also warns that growth rates in the Sydney property investment market may have peaked, as the low-yielding, high priced environment discourages property investing activity.
Important to note that a number of Sydney property market factors are at play here and this is explained more broadly in the free information pack.
The population of NSW has grown consistently over the past decade but the rate of home building has failed to keep pace. Based on population and demographic projections prepared by the ABS (Australian Bureau of Statistics), the Housing Industry of Australia (HIA) in their housing to 2020 report estimates that NSW will be home to an additional 412,300 households by 2020.
The Sydney Metropolitan Strategy says Sydney needs to cater for an extra 1.12 million people in the next 25 years.
As the population balloons to 5.3 million by 2031, 640,000 new homes will be needed. About a third will be directed towards new releases but the rest -some 440,000 homes- are to be built in established suburbs. The most development will be in the CBD, equating to about 55,000 new homes by 2031.
The plan is to have these homes concentrated around established suburbs within walking distance to shops and services. It is envisaged that two-thirds of the extra homes built in the next 25 years will be within 800m of a train station or 400m of high frequency bus services in the morning peak time. About a third of this type of development will be in the inner west while about 42 percent will be directed towards the west-central region taking in Parramatta and Fairfield.
Large infrastructure development can be an important leading indicator for future population movements and hence property prices.
Whenever a sizeable piece of infrastructure is opened, you have an impact on the local market. The M7 and M4 freeway and link systems in Sydney will have a “profound” effect on population shifts. This was very evident on the Gold Coast as a result of the Brisbane to Robina rail link. The centre of Sydney is moving westward and the new road infrastructure has accelerated this. The Cross City Tunnel has made coffee in Norton Street, Leichhardt an easy option for Bondi residents.
The challenge, if you are going to buy an investment property in this market, is you need to have an eye for both up-and-coming suburbs and the critical issue of rental yield. Premium suburbs within 10 to 12km of the CBD, those near water and those that have scarcity value are likely to perform well.
The downside here is that the property prices in these areas are already very high relative to investment levels in other Australian capital cities. For further information Request Free Information Pack.
For those thinking of property investment in the Sydney real estate market there are many issues to consider. The gains can be great, but it’s important to make prudent decisions regarding location, type of property, the amount you want to spend and the returns you can expect.
Of course, there are many factors to consider when planning a property investment, including:
· Location – suburb and proximity to transport and facilities;
· Cost – areas where price growth has been good in recent years now have a high entry level;
· Previous capital gains experienced by other properties in the area;
· Rental returns currently being achieved in the area;
· Any planned changes to the area that will make it more or less desirable for renters.
Remember property investment is a long term strategy. The idea is to accumulate property in between each property “boom” during your working life without affecting your lifestyle. Property booms will inevitably slow down, but the factors that influence this are simply part of the property cycle.
Contact us for more information on recommended suburbs and locations in the Sydney property investment market.