A quarter of Sydney’s suburbs are multi-million dollar markets, but there’s still room for savvy buyers and investors

According to data from domain.com.au.

Property prices in the port city have seen extraordinary growth since the start of the pandemic. In the calendar year 2021 alone, property prices rose by 29.6%, according to data from CoreLogic, adding nearly A$1,000 every day to the value of an average home.

And although Australian data analysts now indicate that housing growth is losing momentum, a surge in rental demand across sydney points to a perfect real estate storm for potential home buyers and investors looking to drop below the A$2 million threshold.

Experts suggest looking to outlying areas of the city and seaside suburbs to find the next hotspots for price gains. Potential buyers in these regions, however, should not expect any immediate price growth.

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Of Australia’s eight capitals, Sydney’s growth rate posted the largest slowdown in CoreLogic’s April Hedonic Homes Index. Housing values ​​(including apartments and houses) fell from a high of 9.3% in the three months to May 2021 to a subtle change of 0.3% in the first quarter of 2022.

“The sharpest downturn has been in Sydney, where house prices are most unaffordable. Advertised supply is up and sales activity is down over the year,” said CoreLogic Research Director Tim Lawless.

Rental demand holds steady

While the rapid pace of price growth is obviously slowing, there are still plenty of indicators that Sydney home values ​​won’t head south in a hurry. Cameron Kusher, director of economic research at real estate.com.auPropTrack’s research arm and author of the PropTrack Rental Report, said a shrinking rental stock combined with soaring activity among tenants is already keeping rental prices up. Therefore, investors are sure to call.

“While annual rental growth in Sydney [and Melbourne] remains slow compared to other parts of the country, these cities are starting to experience shortages and prices are starting to rise as lockdowns are over, borders have reopened and migration is returning,” he said. he declares.

According to the PropTrack Rental Report’s demand-per-listing metric, which measures the number of potential tenants viewing properties on realestate.com.au, Sydney saw the largest year-on-year increase, up by 52.2%.

Where to find a property under AU$2 million

PropTrack analysts have highlighted Sydney suburbs that are currently home to medians just below the AU$2 million price tag. Given the slow but steady local market, coupled with pent-up demand for some of Sydney’s lifestyle neighborhoods, some listed locations may simply exceed the multi-million median in the short to medium term.

As of March 1, there were 60 suburbs in the greater Sydney area with a median house value above A$1.75 million. All have seen significant annual price growth, but some have seen little to no (or negative) movement in the last quarter. Each suburb had a minimum of 100 homes sold during the period.

Suburb Median home price $A Annual change Quarter on Quarter Change
Pennant Hills $1.991 million 21% 2%
Eastern Kurrajong $1.986 million 39% 13%
Dulwich Hill $1.981 million 11% -1%
Petersham $1,980,000 12% 1%
Oatlands $1.976 million 14% 3%
Denistone $1.973 million 4% 1%
red fern $1.970 million 25% 0%
Ashbury $1.961 million 12% 3%
Leichhardt $1.958 million 20% 0%
Lewisham $1.945 million 22% 4%

Source: PropTrack

With some Sydney suburbs on the verge of a median of A$2 million, Mr Kusher warned potential buyers should proceed with caution and not necessarily assume immediate price growth.

“The suburbs listed are those closest to crossing the A$2 million median value mark. Although they are currently close, it is uncertain whether we will see them hitting the A$2 million mark any time soon given the general slowdown in the housing market in Sydney, as underlined by a number of factors. , notably the fall in value recorded in Sydney during the last quarter. , and the prospect of higher interest rates shortly,” he said.

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Looking for a house under 2 million Australian dollars

Mark Cadry of BuyEast Buyers Agency said that while a price of A$2 million would not allow a buyer to secure high-profile property in most of Sydney, there were still suburbs with medians below this amount that offered value to investors.

“With Sydney prices having seen such growth over the past two years, we are looking for areas on the outskirts to find the next hotspot for capital growth,” he said.

NSW’s central coast, a semi-urban area north of Sydney that has become popular with commuters, has potential according to Mr Cadry.

“In suburbs like Umina [on the Central Coast] we find that average sale prices are still below the A$1 million mark and central Sydney is only 1 hour and 15 minutes drive away. It’s family-friendly, has beach access, and with cafes and exclusive beaches like Patonga and Pearl Beach as neighbors, demand will surely continue to grow as urban sprawl continues.

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For shoppers shopping within the confines of Sydney, he suggested the outskirts of town and the beachside suburbs.

“If you want to be in the heart of metropolitan Sydney, look no further than Redfern for great value. Average prices are under AU$2 million and CBD is less than 10 minutes away,” he said.

“You also can’t beat Bondi Beach, Australia’s most famous beach filled with influencers, surfers and the ultra-rich. You might not find a home below AU$2 million, but average unit prices are still well below that and you are guaranteed to see strong capital growth and strong rental demand for investors.

Cadry suggested savvy buyers head south to the exclusive Eastern Suburbs to find value with growth potential.

“That would mean areas like Hillsdale or Beaconsfield, which are still close to the city but are a bit further from it,” he said.

“I also like Little Bay and Malabar where prices have always been low due to their proximity to Long Bay Prison. The prison now needs to be relocated, which would increase prices dramatically as soon as it moves,” Mr Cadry added, referring to Sydney’s oldest operating prison, which covers 79 acres in an exclusive position on the edge water in the eastern suburbs, 10 miles south of downtown.

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Look beyond the numbers

Veronica Morgan, co-founder of suburbhelp.com.au and director of Good Deeds Property Advisors specializes in buying around Sydney’s western suburbs and said buyers looking for growth should dig deeper than the surface-level medians.

“In the Inner West, you certainly have the opportunity to buy homes under A$2 million, but location alone is not enough. You always have to make sure you buy a good house,” she said. “Many investors will proudly talk about buying ‘below the median’, but that can often mean buying crap. Because in reality 50% of properties are priced above the median, so in this case you are buying in the bottom half. »

Alternatively, Ms Morgan said if the variety of stocks in a particular suburb is diverse, the numbers make more sense.

“If you have a mix of two-, three-, and four-bedroom homes, for example, then buying below the midpoint may be acceptable. Because what makes up this median is a nice variety of housing, rather than a homogeneous housing stock.

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“People have to be careful to find the right balance. Choose a good location, not too far from town, close to transportation and amenities. You need to understand the economy well. At the end of the day, it’s about finding all those things in a good suburb and then making sure you can afford to buy quality property there,” she said.

The key to smart investing that will see price growth even during a downturn, Ms. Morgan said, is to buy where and what others want so you can rent it or sell it for a nice profit later.

“I hear investors say, ‘I just have to calculate the numbers’, but remember we’re talking about residential property, and who lives in residential property? Human being. I believe that people who make home ownership decisions solely based on numbers and completely ignoring emotion, make mistakes more often than they make good decisions.

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