Here’s why these suburbs will suffer more in the Sydney property downturn

Why is it that some suburbs are suffering more in the current property downturn than others?

While there are many factors causing the current slowdown, a large part of it is related to property investors leaving the Sydney property market.

Now it’s not because they’ve lost their appetite for Sydney property, they haven’t.

It’s because the bank’s tighter lending criteria is making it hard for new investors to get finance.

Sydney SuburbssAt the same time, many relatively new investors (those who haven’t invested through a full property cycle) are losing the nerve as they hear that property values could fall further and they’re selling up their investment properties.

Remember…home owners make the property market as they own around 70% of properties, but investors create the booms when they chase properties due to FOMO – the fear of missing out.

And they accentuate slumps when they lose their nerve and leave the market.

So locations where there are a greater proportion of tenants, meaning more investors owning properties than average, tend to be more volatile and experience wider drops in property values.

I’ve found investors to be fickle and more prepared to sell up when the market turns, while hone owners would rather eat dog food than give up their homes.

Avoid suburbs which have more tenants than owner occupiers

A recent report by the Committee for Sydney showed that more than 40 per cent of neighbourhoods across Greater Sydney now have a majority of renters.

The 2016 census revealed the share of renters in Sydney is now higher than those who own their home outright (with no mortgage).

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Source: Committee for Sydney

But when we research locations in which to invest, we dig even deeper

The research team at Metropole in Sydney dig deeper than just looking for areas with a high proportion of home owners.

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It’s important to look for stable areas where home owners have substantial equity in their homes.

For example, the more established parts of Sydney have the highest outright ownership, especially the northern suburbs and parts of the south.

On the other hand large areas of Sydney’s outer west and southwest had a majority of mortgaged homes, suggesting those regions are most at risk of financial hardship should interest rates start to rise.

These are the Sydney neighbourhoods with the highest proportion of renters

The report’s mapping analysis showed 42 per cent of neighbourhoods across Greater Sydney have a majority of renters.

The neighbourhood with the highest share of renters in Sydney was Parramatta-Rosehill (70 per cent) followed by Warwick Farm (67 per cent).

And a swag of inner-city neighbourhoods were also among the ten suburbs with the biggest proportion of renters, including Redfern-Chippendale (65 per cent), Potts Point-Woolloomooloo (65 per cent) and Pyrmont-Ultimo (64 per cent).

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Source of graphics: Sydney Morning Herald

These are the Sydney neighbourhoods with the highest proportion of renters

The Sydney neighbourhoods with the lowest share of renters were Woronora Heights (5 per cent) and Illawong-Alfords Point (7 per cent) in the city’s south and Glenhaven (6 per cent) in the northwest.

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Source of graphics: Sydney Morning Herald

Here’s what you can do about this:

Since location does around 80 percent of the heavy lifting of the performance of your property, choosing the right location is so critical.

Then of course you must own the right property in that location.

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© Metropole 2018

If you’d like to know a bit more about how to find investment grade locations in Sydney or to discuss your property investment options why not give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.

 

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Ahmad Imam

About

Ahmad is Director of Metropole Properties Sydney and a highly skilled wealth strategist. He is a passionate property investor, has a degree in Commerce, is a licensed estate agent and qualified property investment advisor and has personally coached and educated hundreds of clients to create wealth through property.
Visit www.SydneyBuyersAgent.com.au


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