The month in review: Sydney
By Herron Todd White
July, 2010
To give justice to this topic in Sydney we have divided the greater metropolitan area into regions and highlighted
our picks from there.
This year’s focus on the lazy half million has seen a shift
from our 2009 suggestions which we consider reflects
the impact on the Sydney market following the upsides
achieved from the First Home Buyer Grant in 2009.
From our valuers speaking with local agents, recently, less
and less people are attending auctions. Interest rates have
scared off buyers and we believe it has hit the ceiling in
particular those areas that most benefitted from the FHB
boom and in the next year, prices may correct in value.
CITY FRINGE
Paddington and Darlinghurst
Investment of $500,000 in the areas of Paddington and
Darlinghurst generally allows investor to buy into a one
to two-bedroom unit. In light of the recent strong capital
values and strong yields in such areas, investors would be
wise to target both strengths as yields and capital growth
are forecast to further strengthen in the foreseeable
future.
The proximity of these areas to the CBD, beach and
other highly sought after local amenities ensure demand
and capital value will remain high for Paddington and
Darlinghurst.
Despite the impact of the GFC on the Sydney property
market, such areas displayed resilience with regard to
growth, rental return, demand and desirability.
EASTERN SUBURBS
Elizabeth Bay
The highly desirable tight real estate pocket of Elizabeth
Bay is a highly commendable investment decision for any
Lazy Half Million investor, which would buy you into a
one to two-bedroom unit.
Recent strong capital growth and yields in the area would
encourage investors to aspire in shooting for both growth
and yield.
The proximity of Elizabeth Bay to Sydney’s CBD and other
local amenities are pertinent factors contributing to the
area’s attraction. The impact of the current economic
and political climate has had no impact on Elizabeth Bay
given its proximity to the workplace, an advantage which
the area will continue to capitalise on.
NORTHSIDE
Neutral Bay
Neutral Bay remains popular with owners and investors
alike, thanks to its close proximity to Sydney CBD, North
Sydney employment centre, Sydney Harbour as well as
good public transport. Despite the suburbs consistent
performance in terms of growth, a lazy half million will
still buy you comfortably into the one-bedroom unit
market (with parking), where further capital growth may
be targeted.
Older, low rise, one-bedroom units with car parking can
be purchased around the $350,000 to $400,000 mark
with near new, recently renovated or units affording
city/harbour views generally selling between $400,000
and $500,000. Rents can range from $350 to $450 per
week and $450 up to $575 respectively. These top end
rents are generally only achieved by brand new unit
developments.
INNER WEST
Drummoyne
With current potential for capital growth exhausted in
many inner western suburbs, Drummoyne still offers good
investment opportunities in the sub $500,000 market. A
lazy half a million can buy you into the bottom end of
the unit market, which generally includes 1960s/1970s
low rise, walk up style unit blocks with a 2/1/1 or 1/1/1
accommodation mix. Rental income for these types of
properties ranges from around $400 to $500 per week
for a two-bedroom or $350 to $400 for a one-bedroom of
similar condition and style.
Recent market activity suggests surrounding suburbs
(such as Gladesville) are catching up in terms of values
achieved, so the likelihood of Drummoyne prices also
increasing looks promising. The current infrastructure
improvements being undertaken on the Iron Cove Bridge
may also reduce congestion in the suburb and further
enhance the suburbs popularity once completed.
NORTH WEST
The Ponds
The Ponds is an emerging residential suburb in north
west Sydney. Typically $500,000 will buy a new threebedroom,
one-bathroom project home on a 350–400sqm
allotment.
We see this as being a good investment with future, steady
capital growth. Typically this style of property appeals
to first home buyers of the young professional DINK’s.
The area is serviced by new schools, shopping centres
representing new, modern infrastructure and is close to
Rouse Hill regional centre and Blacktown City Centre.
This represents a good starting point for first buyers as
typically they will be surrounded by people in the same
demographic and there is likely to always be strong
demand in the western suburbs of Sydney.
Furthermore
this type of area and housing should always be attractive
to first home owners, a market that has been incentivised
by successive federal governments.
SOUTH WEST
Cabramatta – Shoot for Yield
Two bedroom units situated in the Cabramatta market
are coming back onto the market. With the end of the first
home buyers grant/market there will hopefully be more
opportunity for investors to come back into the market
and be able to snatch a unit for the right price and get a
substantial yield.
For under $500,000 market in Cabramatta, can get you a
substantial amount of property.
• Can get you two two-bedroom units.A 1980s - 1990s
brick home situated on a 500-750sqm block with rental
returns of $350 to $500 per week.
Cabramatta units range in value from $180,000 to
$260,000 with rental returns of $210 to $320 per week – depending on age of complex and internal condition
of unit.
MID WEST
Auburn
Auburn has benefited from good growth within
recent years and strong rental yields. The suburb has
infrastructure in place and good transport options.
Property under a lazy half million comprise of strata
units/townhouses/villas and two to three-bedroom
homes on an average block size of 550sqm. Units range in
value from $200,000 to $400,000 with rental returns from
$240 to $480 per week. Townhouses range in value from
$320,000 to $450,000 with rental returns of $350 to $500
per week. Rental returns of houses under half a million
dollars range from $350 to $520 per week.
BLUE MOUNTAINS
Wentworth Falls
Wentworth Falls is seen as a good location for property
around the $500,000 mark. This will typically buy a
1990s style, single level home of four bedrooms and two
bathrooms in good condition on a good sized allotment.
This is seen as a solid location for capital growth which
may see a future spike on completion of major upgrades
to the Great Western Highway over the next 18 months.
Conversely, current prices may be slightly depressed due
to traffic difficulties due to the current highway upgrade.
Wentworth Falls lends itself to many market segments
(first home buyer upgrade, tree changers, retirees) so
demand should stay reasonably strong.
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