By Herron Todd White
In previous years, the sub $500,000 price point in the wider Sydney metropolitan was an ever diminishing market. As values increased, the number of properties meeting this criteria reduced each year. In the past two years however, the wider market has contracted and as a result, we now have more options in play in this market.
That being said, when buying property at this price point, purchasers will still have to sacrifice in some aspect, be it location, commute time, accommodation or the overall condition and features they desire.
It should come as no surprise that western Sydney provides buyers with the most options in the sub- $500,000 price range, however, there are still some options available in most parts of Sydney. Whilst these may be restricted to units, a number of these areas are now seeing the entry point for houses at well below $1 million, something that may not have been conceivable a year or two ago.
Western Sydney Property Updates
Parramatta provides two major options for buyers with $500,000 or less to spend. You can pick up a semi-modern, one-bedroom, one-bathroom unit or an older two-bedroom, one-bathroom unit. A recent example is a one-bedroom unit selling for $488,888 on level eight in the Escen development. This is a late 2000s built development with common pool, sauna and gym and within close proximity of the CBD and rail.
Further west in Penrith, you have the option of a modern two-bedroom, two-bathroom unit or an early 2000s three-bedroom townhouse for sub- $500,000. Given the wider market cooling over the past 12 to 18 months, detached houses in Penrith are now becoming available for sub $500,000. These properties are generally in fair condition with irregular blocks or located on busy roads but provide an entry point for buyers wanting a detached dwelling on circa 600 square metres blocks. With some smart renovations, these houses could prove to be a savvy buy in the long term. A recent example of this is a neat brick dwelling selling for $480,000 in March. Externally the property is neat but is prime for updating internally.
West Ryde is close to the geographical centre of Sydney and doesn’t usually feature in this topic, but with the downturn over the past 12 to 18 months, there are now more opportunities for investors and first home buyers with older one-bedroom units selling for early $400,000s within close proximity of the rail and shops.
Campbelltown provides the most options for the sub-$500,000 market. You have the option of three-bedroom detached houses on circa 700 square metre blocks, modern two and one-bedroom units, or a variety of villas and townhouses. A recent example is an older 1960s three-bedroom, one-bathroom dwelling on 691 square metres of land selling for $450,000. The house had some minor updates throughout and would be perfect for a first home or investment. If you are after a modern unit, there have been some recent sales between $420,000 and $500,000 of modern built, two-bedroom, two-bathroom units.
The sub-$500,000 price point is mostly made up of first home buyers and investors. These participants are generally sensitive to price and interest rate movements. A number of the major lenders recently reducing their interest rates is likely to have a positive impact on this sector of the market.
Within the new estates in western Sydney, buyers with a budget of up to $500,000 can mostly only find land. Examples would include a rectangular shaped 350 to 500 square metre parcel in Box Hill in the north-west or Austral in the south-west. The variance in price will depend on frontage and position within the developing suburbs. Given this, we have recently seen some three-bedroom, two bathroom villas for sale at this price point in Austral and there are units proposed for Box Hill which will fall under $500,000.
For even better value, buyers can head to North Richmond, where for $475,000 to $500,000 you can acquire a 650 to 700 square metre, rectangular shaped block. The commute is circa 70 kilometres from the Sydney CBD, but more importantly circa 50 kilometres from both Parramatta CBD and the proposed second airport at Badgerys Creek.
Speak with a Parramatta Mortgage Broker today.
Northern Beaches Property Updates
There would be no great surprise to most that the sub-$500,000 market is still thin in the Northern Beaches. That being said, there is currently a greater amount of stock, a wider variety and located in a number of additional suburbs than there has been for several years.
A Narrabeen sale in June for $450,000 with a 4.7 per cent yield, a Balgowlah sale in April for $425,000 with a 4.8 per cent yield, an Avalon sale in May for $450,000 with a 4.4 per cent yield and a Dee Why sale in May for $450,000 with a five per cent yield, are all areas in which older style one bedroom units have sold in 2019.
The only suburb where a two-bedroom unit is available in this price range is Dee Why, with a unit at 2/7 Ilikai Place scraping in at $500,000 even, enjoying a 4.7 per cent yield.
The product types and price bracket obviously appeal primarily to first home buyers and investors. Interestingly, four of the five examples have been subsequently listed for rent immediately after the sale, which is a good indication of the target market. Yields between four and five per cent are fairly consistent across the board, with rents ranging between $380 and $465 per week for the above-mentioned properties.
By looking at buying the ugly duckling in a desired location, there is an opportunity to create value and it is much easier to renovate than relocate your unit. Whilst there should be no expectation of any significant capital growth over the next 12-month period, there are some early market indicators that the worst may be behind us.
The cheapest house sale of 2019 currently goes to 2 Ellis Road, Beacon Hill. The sale represents the absolute bottom end of the market, selling at auction for $850,000 in February, well below the Beacon Hill median house price of $1.421 million (source: CoreLogic). As you can imagine, the price discount comes at a cost to the location and the quality of the existing improvements. The property comprises the original circa 1960s timber weatherboard dwelling, situated on approximately 538 square metres of land and adversely located on the corner of a busy intersection to Warringah Road.
Speak with a Beacon Hill Mortgage Broker today.
Inner West Property Updates
A budget of $500,000 will generally restrict you to studio and one-bedroom apartments within this region of Sydney. In comparison to this time last year, there are probably slightly more properties for sale in this price bracket, however, it is still relatively slim pickings. A one-bedroom unit at 22/106 Wardell Road, Marrickville sold for $455,000 in June this year. A similar unit within the same development sold for $570,000 in March 2017 which was considered to be just before the peak of the current property cycle in Sydney. An expected rental return would likely be around $400 per week for the above example and this reflects an approximate gross annual return of 4.5 per cent (based on the purchase price of $455,000).
This property type and price point appeals to first home buyers and investors, however first home buyers are currently more active in the market and have stronger borrowing power as owner-occupiers, which gives them the upper hand over investors. This is a welcome change in comparison to the years prior to the peak of the market.
If purchasing for the right reasons, in line with financial and personal goals and with a longterm view, then there is a reason to purchase with confidence. However, if a first home buyer or investor is overextending themselves just to get into the market or is expecting to see strong capital growth within the next year, then there is a greater chance they could be disappointed.
Strata living is not for everyone so if you are looking for the absolute entry point for a Torrens Title dwelling, you will be looking at originally attached cottages on small allotments which typically require extensive renovation or restoration.
A property at 34 Flora Street, Erskineville, which sold for $720,000 in May is the most affordable house sold in the region this year. The dwelling is an original dilapidated one-bedroom cottage on 82 square metres of land and located adjacent to a unit building and within close proximity of railway lines.
There was a similar style property at 26 Flora Street that sold in July 2018 for $860,000. This is further indication of price reductions within this region over the past twelve months or so.
This type of property could be a good opportunity for someone in the financial and personal situation to buy the property and renovate it. This could be a tradesperson or someone who can do a lot of the work themselves or draw on industry connections. Alternatively, it could be a more established purchaser with funds to renovate.
However, we would advise that banks are likely to be cautious with lending for renovation or construction projects in the current market and this should be factored into a buyer’s decision making if they intend to borrow a large portion of the property value.
These entry-level properties will continue to remain subdued for the remainder of this year. Depending on local and wider economic conditions, we might start to see minimal growth at some point in 2020, although if needing to resell the property in the next year or so, it is unlikely that someone would see much of a profit if any, particularly after you consider stamp duty and other acquisition and selling costs.
Speak with a Erskineville Mortgage Broker today.
Eastern Suburbs Property Updates
The eastern suburbs of Sydney don’t usually conjure ideas of property in the sub $500,000 sector. At this price point, you will only find older style studio or one-bedroom units.
A one-bedroom, one-bathroom unit with single car space on Anzac Parade at Maroubra sold in May for $385,000. Although with a tight 24 square metres of living area, the top floor 1970s unit had been updated internally and provided a good first home or investment opportunity close to Maroubra Junction.
Although we have seen prices generally declining over the past 12 months, the chances of buying a house in the east for $500,000 are still far from a reality. However, we are starting to see some sale transactions well below $1 million, which two years ago would have been extremely hard to come by. Properties selling at this price point, of course, have all the attributes you would expect, including small blocks of land, renovation projects and secondary locations.
One such example is 37 Universal Street, Eastlakes which recently sold for a reported price of $860,000. This property was on the market for 48 days with an asking price of $909,000. As expected for this price point, the property comprises only one bedroom and one bathroom accommodation, in dated condition throughout with a full refurbishment needed and situated on a comparatively small allotment of 199 square metres. The marketing for this property was obviously aimed at the renovator market, with potential to add additional living area or bedrooms, subject to council approval. So, although positioned at the very bottom end of the house market, money is going to have to be spent undertaking renovation works to make it habitable, possibly eliminating some first home buyers.
Interestingly, Eastlakes had a median price of $1.7 million at the peak of the market in 2017, with the current median now significantly lower at $1.3 million (source: PriceFinder).
This sale in Eastlakes is not a one-off example of properties selling in this price range. 8 Tunbridge Street, Mascot sold in early June for an advised price of $890,000. The property comprises a small two-bedroom, one-bathroom semidetached timber weatherboard dwelling with no car accommodation, although it does feature renovated interiors.
Mascot had a median price of $1.409 million at the peak of the market in 2017, with the current median now significantly lower at $1.27 million (source: PriceFinder).
It is hard to envisage the housing market in the eastern suburbs declining much further. For the kind of money that the discussed properties sold for, we are seeing modern units selling for similar prices in some instances. Historically, purchasing land is superior for long term capital growth and we haven’t seen opportunities like this in a fairly long time. Now may be the opportune time to get your foot in the market if you are a first home buyer or looking to capitalise on a renovation property at this price point.
Speak with a Eastlakes Mortgage Broker today.
Southern Sydney Property Updates
In the sub-$500,000 range in St George and the Sutherland Shire, the properties available to you are going to be older style one and two bedroom units. This style of property is popular with investors or young singles or couples looking to enter the property market. Some suburbs within these areas such as Kirrawee and Miranda are currently also being flooded with new unit complexes which could raise problems with oversupply in the near future.
In the beachside suburb of Cronulla, older style one-bedroom, one-bathroom units are available in the $400,000 to $500,000 range. This style of property is usually aimed at investors and would achieve a rental of around $400 per week.
A recent sale in April, was a 39 square metre, one-bedroom, one-bathroom unit in a complex of ten in Wood Lane. The unit had a renovated kitchen and updated bathroom and although it is without parking, it was well located to Cronulla railway station and beaches. The property sold for $419,000 and was rented in 2018 for $370 per week.
Whilst there haven’t been any house sales in the Sutherland or St George areas below $500,000 this year, there have been a number in the high $600,000s, thanks to price declines over the past two years. As can be expected, to pick up a property in this price range, a purchaser will need to be making some concessions on aspects of the property.
A recent example of a house selling below $700,000 was a single level, brick veneer, 1990s built home in Jannali which sold in March for $670,000. The property, which was in original condition, comprised three bedrooms, two bathrooms and one-car garage located on a 391 square metre battle-axe block, backing onto a school and located opposite the railway line.
Another example was a property on the Princes Highway in Engadine which also sold in March for $680,000. This property was on a larger 582 square metre lot, but located on the very busy highway and also in close proximity to the railway line. The well-maintained brick and clad home has three bedrooms, one bathroom and tandem carport, with the additional features of a large family room with bar, covered outdoor barbecue area and workshop or shed.
With recent events around the election, interest rates and APRA restrictions, it is hard to imagine the bottom end of the market going any lower than what we have seen in the first part of 2019. These properties provide a good opportunity for first home buyers and investors to get into the market at what is most likely going to be the most affordable time in the current cycle.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.