By Herron Todd White
July 2020

COVID Update

The past month has seen a number of restrictions being eased which has seen activity begin to increase in the market. Auction numbers have steadily increased and the number of auctions is now in line with the same period last year when the market was beginning its recovery from the previous downturn. Clearance rates are tracking above this time last year but are still below those being achieved in February and March prior to the COVID-19 lockdowns.

Despite activity increasing, according to CoreLogic the number of new properties listed for sale is down 6.6 per cent on this time last year, while the number of total listings is down 21.2 per cent. This lack of stock is likely insulating prices somewhat, although we are now seeing the Sydney median price starting to decline, down 0.3 per cent in the week ending 21 June and down 0.8 per cent in the month ending at that date.

We are still seeing some strong results in the market with quality product still generally performing quite well. The lack of stock has seen quality homes continue to do well in the COVID-19 property market. Pagewood, located eight kilometres from the Sydney CBD, has seen strong results with two suburb records in May. A dwelling at 24 Macarthur Avenue, Pagewood sold for the suburb record of $3.15 million and a brand new duplex at 58a Ocean Street, Pagewood sold for $2.17 million. Local agents are also taking advantage of their buyer database which in one case led to an off market sale of 138 Bay Street, Pagewood for $2.625 million.

Another record sale of $2.205 million was recorded in Beaumont Hills for 37 Guardian Avenue. This property is a six-bedroom, four-bathroom, contemporary style dwelling with excellent street appeal and quality finishes and ancillaries such as an indoor pool and outdoor kitchen with a land size of 838 square metres. With a suburb median of $1.165 million, this record sale is almost double the median value.

In the prestige space, above $5 million, the limited number of transactions has made it difficult to ascertain how this market is performing since the COVID-19 lockdowns. A recent Vaucluse sale of a modest single level home, set slightly back from the water with expansive harbour views towards the city and Harbour Bridge, may be a sign of the market having softened. The property just sold for $10.9 million in June, having previously sold just under 12 months ago for $11.8 million according to CoreLogic.

On the flip side, Middle Dural recorded a record breaking sale in April at 52A Cranstons Road. The property is a five-bedroom, four-bathroom executive style dwelling with extensive landscaping, inground pool and a tennis court with a land size of 1.44 hectares. The property sold through LJ Hooker Dural, with the price currently confidential, however reports have suggested an $8 million plus figure which is a significant result for a sub twohectare block.

A Lazy $700,000

In a property market as diverse as Sydney, $700,000 is going to buy you very little in some parts whilst in others it can still mean a good quality home on a decent sized block of land. We’ve gone around the grounds to show the type of property you would be looking at for this price point in some of the regions in Sydney.

Western Sydney Property Update

The sub-$700,000 price point still provides attractive offerings within Western Sydney to its key buyers, being first home buyers, investors and those looking to upgrade their existing residence, due to its more diverse options and lower price point in comparison to other areas in Sydney.

In relation to strata options, established areas in Western Sydney can provide two to threebedroom units and in some cases townhouses. In Parramatta, with its wider supply of units, the $700,000 mark allows for a near new twobedroom, two-bathroom unit. An example of this is a circa 2019 unit, 101/23 Hassall Street which sold in February for $690,000, however previously sold off the plan in 2016 for $759,000.

In Blacktown, you would only need $650,000 for a three-bedroom strata townhouse as shown by the sale of 4/16-20 Kent Street in April for $640,000.

Opportunities at this price point for dwellings can be found for first home buyers and investors who wish to buy older style homes with a decent sized block of land in order to add value. 18 Killarney Avenue, Blacktown, a mostly original, threebedroom, one-bathroom home with 601 square metres of land sold for $670,000 in April and would provide ample opportunity for value adding. For a good investment, a house and granny flat in St Marys would provide a higher cash flow in the short term and potential for longer term capital growth. St Marys is set to be connected to the Western Sydney Aerotropolis at Badgerys Creek. A house and granny flat, 21 & 21A Marsden Road, St Marys, which sold for $699,900 in April, has a potential rental income of $740 per week and yield of 5.5 per cent.

House and land packages are also an option in newer estates such as Marsden Park, Box Hill and Jordan Springs. At this price point though, buyers will have to compromise on size to put together a package with land of between 250 and 350 square metres estates such as Marsden Park, Box Hill and Jordan Springs. At this price point though, buyers will have to compromise on size to put together a package with land of between 250 and 350 square metres.

An example of this is the current listing of Lot 6181 Annan Avenue, Marsden Park, a single level, fourbedroom, two-bathroom Metricon built dwelling with a single garage, improved upon a 312 square metre block available for $699,546.

Within the new estates you don’t need $700,000 to purchase land; for much less you can pick up a block to build your dream home. Prices are dependent on the size, location, frontage and topography of the allotment. A comparison can be found for a few suburbs in the table below.

In the rental market, with a current oversupply of available property relative to demand and the effects on the various markets of COVID-19, the rental market has contracted leading to increased vacancy rates and lower asking rents.

South-Western Sydney Property Update

For under $700,000, the Liverpool LGA still provides opportunities for investors and home occupiers to get into the market or grow their portfolio. Within the strata titled market, the Liverpool LGA offers an array of choice, from CBD living to a more traditional residential community setting. The Liverpool CBD unit market has struggled over

the past 18 months. We consider that the amount of supply entering the market and the lack of business growth within the CBD has contributed to values remaining steady or even decreasing. An example of this is a 2004 built three-bedroom, twobathroom unit at 10/25-27 Castlereagh Street. The unit sold in May 2015 for $520,000 and recently resold in May 2020 for $510,000.

Whilst the Liverpool CBD unit market has struggled in recent times for investors, price levels in the sub $550,000 range do allow first home owners to enter the market in a central location close to shops, schools and train lines. Compared to the Parramatta CBD, it offers very affordable living.

However, it’s not all doom and gloom for Liverpool, which is seen as Sydney’s third city. The development of the Western Sydney Airport and the rezoning of 25 hectares of land in the heart of Liverpool will reinvigorate life and promote more commercial space in the area. The ultimate aim is to remove the need for workers to travel to the traditional Parramatta and City hubs. This may be just what Liverpool needs to breathe life back into the Liverpool unit market in years to come.

Within the Liverpool LGA, the Torrens Titled market under the $700,000 mark is constantly decreasing in opportunity, however suburbs such as Busby, Cartwright and Ashcroft which have generally been overlooked do provide great hidden opportunities for owner-occupiers and investors as shown in the examples below. Geographically speaking, these suburbs are within 20 minutes drive of Sydney’s third CBD (Liverpool CBD) and only 30 minutes from the Western Sydney Airport and Aerotropolis precinct.

The style of housing and land size in this area provide a very affordable investment to either owner occupy, knockdown rebuild, sit and hold, or look to construct a granny flat on the site to obtain a second rental stream.

An example is 63 Mawson Drive, Cartwright which sold in May for $565,000. For the price typically reserved for units, the property affords three bedrooms and one bathroom on 579 square metres of land. A second dwelling is possible, however subject to council approval.

Another example is 8 Kelvin Place, Busby, which sold in February for $625,000. The property affords a renovated three-bedroom, onebathroom home on 651 square metres of land. Detached at the rear is a council approved onebedroom, one-bathroom, self-contained granny flat. The achievable rental for the main dwelling is $440 per week and $220 per week for the granny flat, calculating to a strong 5.5 per cent gross return.

Inner Sydney/Eastern Suburbs Property Update

6/1 Darley Street, Darlinghurst was advertised for sale throughout April and May with an asking price range of $550,000 to $580,000, and sold for $513,000 on 29 May 2020. Interestingly, the previous sale was five years ago in July 2015 for the same price of $513,000 when it sold prior to auction.

This is a small, one-bedroom apartment with an approximate living area of 37 square metres and no outdoor areas or parking. This style of property is aimed at investors, or to a lesser extent, first home buyers. The rental market has been negatively impacted due to COVID-19 which directly affects how much investors are willing to pay for investment properties of this nature. Furthermore, the rental history for this property as per RP Data indicates that the asking rent during 2010 was $425 per week and the recent asking rent as at March 2020 was $495 per week, however this appears to have now reduced to approximately $400 per week.

This is a good example of an entry-level property below $700,000 within a popular inner-east location and approximately two kilometres of the Sydney CBD. This property also benefits from heritage character and could prove to be a good purchase for a first home buyer, or a steady longer-term investment, provided of course that you could cope with the reduced rental income in the current market. Other matters to consider for this type of property are some lending policies on properties with a living area of less than 50 square metres requiring a larger deposit.

8/73 Warren Road, Marrickville is another example of an entry-level property in the inner west region of Sydney. It is located approximately 9 kilometres from the CBD and sold for $655,000 on 13 June 2020.

This is a two-bedroom, one-bathroom apartment situated within a two-level walk-up building constructed circa 1970. The unit benefits from updated interiors and a single car space. The property is positioned in a quiet street and located approximately 500 metres from Marrickville train station and local shops. Similar two-bedroom units can achieve a rental income of approximately $450 to $500 per week.

Within the inner suburbs of Sydney, buyers with a budget of $700,000 or less are limited to studio, one- or two-bedroom apartments, however there is still a wide range of factors to consider such as location, size and quality of development, living area size, aspect and natural light, parking and many other fundamental aspects such as nearby infrastructure and potential oversupply issues within the immediate area.

If considering buying within this market segment, it is generally important to purchase something to which you can add value by doing minor renovations and buy within smaller scale, good quality buildings that have some character and are located in convenient positions where people want to live, close to public transport, schools, parks, local shops and cafés, etc.

In the east, you are generally looking at studio or one-bedroom units with car accommodation at this price point, which is entry level for first home buyers or local investors. Slightly further away in the inner south, suburbs such as Botany, Mascot, Rosebery, Zetland and Waterloo, which typically have a large supply of modern units, provide more options for those looking to buy in the area.

In the current market, investors should look away from over supplied areas and large unit developments and instead focus on older style walk-up units requiring renovation to add value. The oversupplied areas will always be more volatile due to large supply and many similar style developments. The properties likely to perform the best are those that are unique, with views or proximity to the beach or harbour, or those that can offer value add through renovations.

Northern Beaches Property Update

Risk appetite and investment strategy will play a large role in deciding where to invest. The entry level price point of $700,000 and products on offer appeal primarily to first home buyers and investors. An investor should be mindful of vacancy rates, competing stock levels and planned infrastructure upgrades, making sure to utilise the most recent market evidence to justify any decisions.

Value levels have performed better than forecast during the COVID-19 period, with CoreLogic reporting a 0.4 per cent decline in dwelling values across Sydney in May. Median data suggests the Northern Beaches is still currently well above 2019 levels for both unit and dwellings. Sqmresearch.com has current median listing prices of dwellings at $2 million, well above the May 2019 low of $1.69 million.

Given that $700,000 is well below the median dwelling value of $1.8 million (CoreLogic as at March 2020) it would take something fairly unusual and a property in Wheeler Heights just so happens to have sold recently. 65A Penrith Avenue, Wheeler Heights is a lower level duplex built circa 1970’s that has been renovated internally and features one bedroom, one bathroom, open plan living room and entertaining deck and courtyard. This compact semi-detached dwelling sold in February 2020 for $700,000 and was last leased for $450 per week in 2019.

A budget of $700,000 provides a plethora of opportunities in the unit market with a number of suburbs including Mona Vale, Dee Why, Avalon, Manly, Collaroy, Newport and Brookvale having a range of unit types available for under $700,000 (some as low as $450,000). One-bedroom units are available from as low as $500,000 in Dee Why, so $700,000 would allow the opportunity for a modern or renovated one-bedroom unit. Alternatively, older style two-bedroom units are available from circa $650,000. A recent example is 8/14 Lismore Avenue, Dee Why. The renovated circa 1970’s two-bedroom, one-bathroom unit sold for $665,000 on 28 May.

Dee Why would offer a higher yield potential (circa four per cent) although historically offers lower capital growth prospects in comparison to other nearby suburbs. Alternatively, an older style unit in a busier position in Balgowlah or Manly is available for a similar value level.

Lower North Shore Property Update

Normally when we mention Sydney’s Lower North Shore, we are referring to multi-million dollar prestige properties on expansive allotments with landmark views. However, there is another sector of the market on the Lower North Shore which fits the criteria for this month’s lazy $700,000 discussion. Admittedly, $700,000 is nearing the bottom end of this market, but it can still buy you a unit style property with plenty of up-side.

Looking at the suburb of Neutral Bay, just 1.5 kilometres from the Sydney CBD, a one-bedroom unit with parking within a classic circa 1960 or 1970 walk-up style unit complex is still readily available. Although at the lower end of the market, a unit such as this in Neutral Bay still offers proximity to amenities, restaurants and retail, public transport (buses and rail depending on position) and the harbour foreshore. An example of a recent sale of such a property is 9/389A Alfred Street, Neutral Bay, selling in March this year for $640,000. This is a 1960’s style, one-bedroom, one-bathroom, updated, north facing unit with a small balcony and a single car space

Typically, these units are in demand from young professionals, downsizers or investors. A unit such as the one described above would likely achieve a weekly rental of $500, resulting in an approximate yield of four per cent. Although this return is not setting any records, capital growth is historically strong on the Lower North Shore and this forms part of the attraction for investors.

We would expect this sector of the market to continue to perform well in the future, primarily underpinned by the central location, public transport and convenient access to the Sydney CBD.

Sutherland Shire Property Update

In the Sutherland Shire, $700,000 is a popular price point for first home buyers with agents noting that properties with a price of $750,000 and below are often quick to sell, even under current market conditions.

A good example of the type of property is the sale of a one-bedroom, one-bathroom unit with a one-car garage in Cronulla which sold in mid- June for $645,000. The first floor 1980’s unit has been updated internally and is located within 200 metres of the sand. A typical rent for this type of unit would be around $425 per week, representing around a 3.5 per cent gross return.

Whilst below the median price for all suburbs in the Sutherland region, you can still pick up a house for around the $700,000 mark, although they are pretty few and far between, meaning you have to make some compromises. 11 Rosebery Street in Heathcote sold for $690,000 in mid-April. The property was a single level cottage in need of repairs and renovations on a smaller than average lot of 416 square metres, however the property was well located to the railway station, local shops and local primary school.

With the current possibility of an oversupply of modern units in suburbs such as Caringbah and Miranda, at this price range an older style one- or onetwo- bedroom unit in a smaller development in a desirable location, such as a one-bedroom unit in Cronulla, is likely to be the best performer over the short to medium term for both value growth and rental return.