The month in review: Sydney
By Herron Todd White
What can you get for $500,000 in Sydney when the median dwelling price is at $782,000 (CoreLogic, May 2016) with a 13.1% positive increase in year on year values (Corelogic, May 2016)?
If you have an open mind and are willing to compromise on at least one of the factors of floor space, distance to CBD or age of improvements, there are options throughout the greater metropolitan area.
For ease we have divided the city into geographic zones and offer the following information.
In the northern suburbs of Sydney, $500,000 doesn’t buy you much at all. Our investigations reveal that with that threshold limit, you have the options of a semi modern 1-bedroom unit with one car space in Waitara, a 1970s 1-bedroom unit with one car space in Lane Cove, or if there is some stretch available, a smaller semi modern studio in St Leonards without a car space. Further up towards the beaches you can still only just get a 1-bedroom unit but the closer you get to the city, the more likely you’ll have to contend with an older complex, dated inclusions, main road frontage and no car parking.
This price bracket is generally made up of investors and first home buyers, both of which are sensitive to price and interest rate movements. The current cash rate as at June on hold at 1.75% may impact the market but we believe current regulations on investment loans will play a larger role in how this market performs overall.
The south west property market over the past 12 months has seen the opportunities to buy into the market for sub $500,000 diminish.
The Fairfield sub $500,000 market is now predominantly made up of dated 1960s and 1970s low rise 2-bedroom 1-bathroom units, many requiring refurbishment or works to common property. Rarely available are units in modern developments and at this price point, a 2000s built 2-bedroom, 1/2-bathroom unit in a large high rise complex may be available but the limited access to sunlight and privacy from the balcony will need to be considered. The Liverpool sub $500,000 market is mainly focused on the unit market which is centred on the
CBD of this regional town. This is by far the best performing unit market for both quality of product and city centre location within the south west region. If you look towards the future, the Liverpool city hub will be the central focus point for living, working and entertainment in the south west region with the ease of access to the shopping centre, train station and schools major attractions for both owner occupiers and tenants.
This time 12 months ago we spoke about the potential to enter the sub $500,000 in suburbs such as Ashcroft, Busby, Miller and Cartwright. In the past six months this market has quickly evaporated. There is minimal evidence of such sales now and if they do appear, they are mainly near land value with the improvements usually presented in very poor condition and in need of a considerable amount of capital outlay to occupy.
Further afield, Campbelltown some 55 kilometres from the CBD, still offers plenty of opportunities to enter the sub $500,000 for both dwellings and units. Suburbs such as Ambarvale, Airds, Bradbury and Englorie Park offer an abundance of choice from 1970s 2-bedroom low rise units to 1990s 3-bedroom, 1-bathroom homes on sub 500 square metre parcels. These areas can only benefit from future urban sprawl.
After such strong growth over the past 18 months, there is little property in the eastern suburbs that can be found in the $500,000 price range other than small studios within the CBD and smaller 1-bedroom units around the city fringe suburbs of Potts Point, Chippendale, Elizabeth Bay and Surry Hills. With low vacancy rates and strong yields they still represent good investments with rental yields on average around 5%. As an example, an art deco style studio unit with no car accommodation, updated kitchen and bathroom, timber flooring and combined living/ bedroom with a rental estimate of $450 per week, sold in Greenknowe Avenue, Elizabeth Bay in May 2016 for $452,000.
Similar to the eastern suburbs this price point is limited to studio, 1-bedroom units and very modest older style 2-bedroom units with no car accommodation. A semi-modern studio unit on Parramatta Road, Camperdown with car space and currently rented for $425 per week sold in May 2016 for $490,000. Following the railway line, Ashfield, Summer Hill and Haberfield have old style 1-bedroom, 1-bathroom units that are near to the $500,000 range and still providing good rental returns and low vacancy rates with the opportunity for capital appreciation if the purchaser has access to funds to fully renovate in the future.
In the St George district, approximately ten kilometres to the south of the CBD, $500,000 will enable the buyer to extend their options. Modest, original, older style 1960s to 1970s 2-bedroom units with parking around Bexley, Rockdale and Kogarah will achieve average rental returns of $350 to $400 per week. With vacancy rates low and steady demand at this rental band, there are good investment opportunities available to those with the patience to seek them out.
Within the Sutherland Shire, the buyer may need to extend to $550,000 as this price point will only stretch as far as an older style 1970s to 1980s 1-bedroom unit of around 50 to 60 square metres near to the beach in Cronulla. A property on Elouera Road, Cronulla, sold in May for $530,000 and is described as a 1960s 1-bedroom, 1-bathroom unit within a renovated complex with an open car space. Renovated internally with a modern kitchen and bathroom it included a small balcony and detached store room. Expected rental return is approximately $400 per week.
On the western fringe of the Shire region towards Sutherland, Kirrawee, Gymea and Miranda, entry level 2-bedroom units are pushing towards the early to mid $500,000s. With many new developments planned along with a refurbishment of Kirrawee Village including a new shopping centre and hotel, demand for units in this area has been strong this past 12 months. A recent May sale in Auburn Street, Sutherland, for $502,500 is typical of the area. Described as an original 1970s 2-bedroom, 1-bathroom unit with single garage in an elevated ground floor position, the property has an expected rental of $400 per week.
There is a level of caution in the market regarding the outcome of the upcoming federal election in early July.
We believe capital gain in 2016 will be slower than previous years although we confirm there has been solid price growth in this value band across the metropolitan area due to overall supply and demand from both investors and entry level owner occupiers. A key issue yet to be resolved is the government’s proposal for negative gearing changes for investors and what the impact of that will be on the local market. Foreign investors are also likely to be hit with new State stamp duty and land tax charges applicable on purchasing property and the impact of that cannot be assessed until details are confirmed.
Last year we touched on a few of the suburbs mentioned above which saw good growth over the past 12 months with a slight adjustment to the end of 2015. With strong rental yields they are still a great investment to add to your portfolio.