The rise of Sydney’s Inner West

About 5 years after the event Sydney Morning Herald finally reports that the Inner West is the hot sector of the market in the Sydney property market with “investor interest and prices skyrocketing”.

Many of the once-industrial suburbs are now gentrified and are becoming phenomenally popular with buyers due to the easy proximity to the city and it being cheaper than the traditionally popular beachside Eastern Suburbs (the Eastern Suburbs are still a great area to own property if you have a little more to spend).

There is huge demand for apartments, but don’t be misled – spacious, period houses in leafy green streets can make superb homes and investments too.

The trouble is, if you are coming late to the party you probably need at least $1 million to buy a desirable 3 bedroom house in many of the Inner Western suburbs today.

But you can’t just buy anywhere or go for off-plan apartments along the congested Parramatta Road and expect capital growth to somehow magically follow.

In days of high inflation you could have bought virtually any property and experienced some “growth” as the value of debt was inflated away – but it won’t be that easy today. You need to buy the right type of property in the right locations.

For one thing, new properties tend to be very expensive and often offer significantly less value for money than the existing stock, which has been reflected in the recently depressed level of new home sales.

Both home buyers and property investors are targeting the same property types, those being existing properties that are reasonably affordable while interest rates remain at half-century lows.

You would normally be better served to seek out quality established properties in village-style suburbs with some open space, appealing village centres and suburbs which people actually want to live in.

One suburb I picked out years ago was Erskineville in the heart of the Inner West – it is only a few minutes from Central Station on the train and with a wonderful village centre with its cafes and pubs.

Just a short walk away is all the action at Newtown with its bohemian lifestyle and restaurants and wine bars.

Closer to the city I nominated Pyrmont which is easily walkable to the CBD.

Apartment prices have already leapt in Pyrmont as city-loving types seek more realistic alternatives to the new Barangaroo development where entry prices will be $2 million for 2 bedroom apartments according to the AFR.

Pyrmont has got everything from the casino to the fish markets, the weekend farmers markets, museums, Sydney Harbour and its wharves, leafy streets, shopping and entertainment.

With auction clearance rates at 85% in the Inner West last weekend as reported by APM, the market still has some way to run yet.

Some commentators will continue to recommend buying 50km-200km or more from the city centres.

Question: why?

OK, so in the short term you might get a higher rental yield.

But over the long term you will get stronger capital growth and far, far higher rental income investing in properties that people actually want to live in close to employment and close to entertainment and lifestyle.

But if you’ve been reading this blog since 2011, you already knew everything I have written today.

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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


'The rise of Sydney’s Inner West' have 5 comments

  1. March 30, 2013 @ 8:37 am Gerben

    Hi Peter,

    With a 600k budget and only able to buy new/off-plan (I am not an Australian resident), which suburbs would you recommend? I am advised by a reputable buyers agent to go for either Putney/Ryde, Gladesville or Lane Cove, because they don’t have much land available for large new developments. However, the 10 year average annual capital growth data tells me they barely achieve 5% per annum. Should I assume the next 10 years will be the same or better than this? Or should I raise my budget and go for inner west suburbs?

    Reply

  2. Pete Wargent

    April 1, 2013 @ 4:48 pm Pete Wargent

    Hi Gerben, although I have bought off plan in the inner west before and done well from it, it’s not a strategy I really go for. I mentioned in the article above some suburbs that I like, but much depends on your personal circumstances and goals.

    Reply

  3. October 17, 2013 @ 12:28 pm Chaia

    Hi Pete,
    Thanks for the great article. Good read.
    If you were to choose, a smaller unit 1 BR 56SQM in inner west Russell Lea Vs a 1 BR + Study – 70SQM – cheaper, both with car spaces and off the plan, which will you go for? I’m torn!

    Reply

    • October 17, 2013 @ 12:40 pm Michael Yardney

      Hi Chaia
      I know you asked Pete’s opinion and I’m sure he’ll respond, but please allow me to give you a word or warning.
      Not every property in the Inner West will make a good investment – careful property selection will be paramount. I would avoid buying off the plan and instead buy an established property. You’d get much better “bang” for your “bucks.”

      Reply

  4. Pete Wargent

    October 18, 2013 @ 1:07 pm Pete Wargent

    Hi Chaia – I can’t give specific advice for obvious reasons, but I agree with Michael – new property can be expensive as compared to established stock.

    Reply


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