Sydney July 2017

The month in review: Sydney

By Herron Todd White
July 2017

This time last year we mentioned the diminishing opportunities to enter the south-west property market within the sub $500,000 price point. That trend has certainly continued in this market segment and that price point is now ultimately reserved to units or vacant land within new subdivisions further from the central hubs of Liverpool and Fairfield.

The Liverpool and Fairfield home unit market still offers plenty of stock available for under $500,000, although this is limited to older style, 1960s and 1970s low rise walk-up developments or new 1-bedroom units within modern or new high density developments. There are newer style 2000s built 2-bedroom units available under $500,000 however these are mostly second tier high density developments and no longer benefit from the brand new condition which appeals to investors and tenants alike.

Opportunities to enter the dwelling sub $500,000 market within these locations is basically nonexistent given that land value generally exceeds this price point. This market benefits from higher than average rental yields which can be appealing to investors, however this is usually a trade-off with weaker capital growth compared to coastal regions such as St George and Sutherland Shire LGAs south of Sydney or locations closer to the Sydney CBD.

Liverpool and Fairfield unit markets are currently steady with a healthy level of demand. This demand is likely to continue into the future given that these locations are the central hub of the south-west region and are easily accessible via motorways and public transport and within close proximity of the future Western Sydney Airport at Badgerys Creek. As with many regions of Sydney, the unit market is likely to face some downward pressure on values in the near future due to the increasing supply of similar stock and general market conditions, particularly given that this market is heavily investor driven.

Apart from home units, the other residential asset type sub $500,000 is vacant land located within new suburbs of the South West Priority Growth Area. This includes new suburbs such as Edmondson Park on the fringe of Liverpool LGA and further out such as Harrington Park within Camden LGA. Land values are continuing to rise in these suburbs with many lots now in the $400,000 to $500,000 range (or higher) and are generally 300 to 500 square metres. Once a parcel is secured, a buyer would then be looking at approximately $300,000 or more to build a family home. Such locations are more than 60 kilometres from the Sydney CBD, however are likely to benefit from the growth of the Parramatta and Liverpool regions and the future airport at Badgerys Creek.

Outer western Sydney
When searching for detached dwellings at circa $500,000 even in the outer ranges of the Blue Mountains there is very little product under $500,000.

Mount Victoria gives the greatest volume of property on the market for under $500,000. This typically comprises a 2- to 3-bedroom dated dwelling, often of fibro or clad construction. Currently on the market for $370,000 to $400,000 is a part two-level, hardiplank dwelling of 4-bedrooms and 1-bathroom situated on 650 square metres. It has internal updates but is situated along the Great Western Highway. A property that recently went under contract for around $400,000 is a mid 2000s imitation weatherboard, 2-bedroom, 1-bathroom dwelling of average fitout. It is situated on 5,000 square metres but this is predominantly uncleared sloping bush land.

It is important to note that Mount Victoria is situated some 120 kilometres outside the Sydney CBD.

If Mount Victoria is too far a commute to the CBD, then buyers can consider the developing suburb of Box Hill in the north-west approximately 50 kilometres from the CBD. For around $500,000 you can purchase a circa 400 square metre block of land. Unfortunately you may need another few hundred thousand to build a house.

In the suburb of Blacktown a $500,000 budget gives you a number of options for semi modern units. A 2010 2-bedroom, 1-bathroom unit recently sold for $480,000 in Fifth Avenue within close proximity to the station and shops. If you want an extra bathroom in the unit then you’ll need to contend with an older complex or a less preferred location for the same money.

The suburb of Willmot in the Blacktown LGA is the prime spot for circa $500,000 detached dwellings. Here buyers have more choice as the volume of property within the $400,000 to $500,000 bracket is larger than many other areas of Sydney. For around $500,000 buyers can secure a brick dwelling with 3-bedrooms and 1-bathroom with minor updates on a 600 square metre parcel. It is approximately 50 kilometres from Sydney CBD but more importantly around 13 kilometres from Penrith and 25 kilometres from the proposed second airport at Badgerys Creek.

Northern Sydney
In the northern suburbs of Sydney, $500,000 does not buy you much at all. Twelve months ago we highlighted some examples that could be purchased for sub $500,000. Unfortunately these do not exist anymore. The semi modern 1-bedroom unit in Waitara is now worth more and you will have to look for an older 1-bedroom unit in an inferior position to come in under the cap.

We highlighted last year that for a few more dollars you could secure a semi modern 1-bedroom unit without car parking in St Leonards. This hasn’t changed, but the few more dollars has risen substantially with a recent sale of a similar style unit for $580,000. Further up towards the beaches you can still only get a 1-bedroom unit but you will have to break the budget by around $30,000 to have any chance of securing one and closer to the city you’ll have to contend with older complexes, main roads, dated fittings and no car parking.

Central West
Over the past 12 to 18 months the buying power of $500,000 has been diminishing rapidly. Buying a Torrens titled house, land, townhouse or villa is out of the question. The sub $500,000 limits you to a strata titled unit. This market is generally driven by investors and first home buyers.

If we look at the Parramatta market, you can only expect to purchase a 1-bedroom unit or studio in a pre 2000s constructed building, for example 15 Campbell Street where you can pick up a one 1-bedroom unit for between $420,000 and $480,000. You may get lucky with the odd 2-bedroom unit becoming available, however you do get what you pay for, as they are generally smaller in size, located along main roads (such as the Great Western Highway) and require more capital by the purchaser to bring them up to a basic liveable standard.

You can venture out to adjoining suburbs of Granville, Auburn and Guildford, where $500,000 gives you a little bit more buying power. Generally in the Granville pocket just north of the Great Western Highway (for example around Meehen Street), you can get a small 2-bedroom, 1-bathroom unit in a 1970s to 1980s walkup complex for between $420,000 and $480,000. This is similar to the Auburn pocket just south of the Great Western Highway (for example around Dartbrook Road).

Guildford gives you further purchasing power, with purchasers having the option to buy 2-bedroom, 1- or even 2-bathroom (or second toilet in the laundry) units in 1990s to 2000s walk-up complexes. However you must be willing to sacrifice being close to local services such as the train station and local shops as even though these facilities are offered in Guildford, at this price point you will be a fair walk from them.

Eastern Sydney
When it comes to property on the eastern side of Sydney, your options are fairly limited with only $500,000 to spend. Studio units on the eastern fringe of the CBD in suburbs such as Darlinghurst and Elizabeth Bay, ranging in size from 25 to 45 square metres, are generally selling in the $400,000 to $500,000 range. Being well located to the CBD and services, they offer good rental returns for the investor in the 4% to 5% range. A renovated 1970s 27 square metre studio with no parking on title in Elizabeth Bay sold this month for $477,000. Caution though as some lenders have size restrictions and not all will lend on property under 30 square metres or on Company Title which is also common in this area.

Other options include older style 1-bedroom units in middle and outer ring suburbs such as Sutherland, Cronulla and Penshurst. This type of property, located close to railway services, is attractive to first home buyers and investors, generally returning rental yields between 4% and 5%.

A recent Penshurst sale of an updated 1970s 40 square metre unit with 1-bedroom, 1-bathroom and 1-car garage sold in May for $455,000.

A little bit different…
For those looking at property options outside the square, car spaces in the CBD and fringe suburbs may appeal, with most selling at between $100,000 and $200,000. A 15 square metre secure car space in Potts Point sold for $190,000 in February.

A heritage boat shed has been recently listed in Bundeena for $350,000. On a waterfront parcel of just 92 square metres with literally only a timber boat shed of nine square metres, the property does not have power or running water but does have 270 degree water views to Cronulla.

Or maybe an option to consider if you are into water activates is a holiday cabin on the banks of the Hawkesbury River at say Lower Portland? Situated in estates with common facilities, a freestanding 2-bedroom older style holiday cabin with common boat access will sell within the range of $380,000 to $400,000. Market movement is not guaranteed but at 60 odd kilometres from the CBD, it is within an easy travel distance each weekend.

We believe the circa $500,000 price bracket is generally made up of investors and first home buyers, both of which are sensitive to price and interest rate movements. While the cash rate is still on hold at 1.5% we believe the biggest impact to this market is the recently announced stamp duty concessions for first home buyers covering both new and existing property up to $650,000. We will have to wait and see the effects of this announcement on the market but as history shows us, any incentives for buyers will lead to higher prices in the end.

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