Property Investment In Sydney – 20 Market Insights

Sydney’s property market has been the central focus of the real estate industry lately…

Particularly as Australia’s largest property market is on the move again having recorded its quickest turnaround in decades.

Since bottoming out after the election in May 2019, Sydney dwelling values have recovered by 11.2%.

Sydney house prices increased 1.5% over the month of January 2020 (6.7% over the last quarter) while apartment values increased by 0.3% over the last month (3.2% over the last quarter.)

At the current rate of growth we are likely to see Sydney real estate values hit new peaks in the first half of 2020.

 

So…is it too late to get into the Sydney property market?

Like most things in real estate, the answer is – it depends.

While some areas still have strong growth ahead, certain submarkets should be avoided like the plague.

The recovery is most concentrated across the premium end of the housing market where values were previously falling more rapidly.

Here are some stats from Corelogic showing the cyclical nature of the Sydney real estate market

Sydney property prices

 

You see Sydney is not one property market…

It is divided by geography price points and type of property into many submarkets – this means you can’t just buy any property and count on the general Sydney property market to do the heavy lifting over the next few years, so careful property selection will be critical.

Want to take advantage

For all the talk of a tremendous upturn, the recovery trend is most concentrated across the premium end of the housing market where values were previously falling more rapidly.

The top quartile of the market is up 6.9% over the past three months and 10% higher over the year, while values across the lower quartile were 3.2% higher over the quarter and are only 3.4% higher over the past year.

Well located “A Grade” homes and “investment grade” properties are selling well but secondary properties are not selling unless vendors drop their prices to meet the market.

Domain reported that Sydney’s inner west recorded the strongest annual rise, up 15.4 per cent in the last quarter of 2019– adding $225,000 to its median house price, now $1.69 million.

Property values in the north-west great by 13.6 per cent and properties in the lower north shore jumped in value by 13 per cent in the last quarter of 2019.

Houses had regained almost two-thirds of the value lost during the 18-month downturn in only two quarters, according to Domain’s senior research analyst Dr Nicola Powell with house prices now only 4.6 per cent below the mid-2017-high and unit prices 6.2 per cent lower.

So to help give you a better understanding of what’s really going on I’m going to explore the nitty-gritty behind Sydney’s market trends, the areas where long-term growth is still likely, and the impact of shifting demographics on the city’s future performance.

This blog is a little longer than normal, so if you’re looking for a particular element of the Sydney property market, use these links to skip down the page.

Fast Facts about the Sydney Property MarketMelbourne’s Many Markets
What’s special about Sydney?Melbourne’s Many Markets
Which Sydney areas are worth investing in?Melbourne’s Many Markets
What advice do you have for new Sydney property investors?Melbourne’s Many Markets
How can I stay on top of current information?Melbourne’s Many Markets

Fast facts about the Sydney Property Market

1. Sydney Property Market Prices

Let’s start with a reality check…
In July 2015, Sydney broke its own records when the median house price hit $1 million, securing its place as one of the most expensive locations in the world to buy.

But new data from Domain reveals a whopping 78 suburbs now boast a median house price of $2 million or more.

Five years ago the list was limited to just six suburbs. That’s the cost of living in an international city on the water offering unparalleled lifestyle

And in 2020 the Sydney property market continues to see a dramatic turnaround in conditions with a sharp acceleration taking annual price growth from a 10% contraction in mid–2019 to a 10% gain currently.

Prices have yet to regain their 2017 peak but will do so by mid–year if they continue at their current pace.

Early signs suggest the strong momentum has carried into 2020 with Sydney auction results robust and buyer sentiment still positive.

Sydney Auction 2020 02 01

Most importantly, the number of properties for sale in Sydney, which remained low in the early stages of the upturn, surged strongly in the last few months

The price detail continues to show broad–based gains led by houses and properties in upper and middle tiers.

The bottom tier of housing is a notable under performer with prices up just 1.4% in the year.

While future capital growth will be a little slower than in the last few years, Sydney property prices will continue to be underpinned by its strong population growth and a strong influx of overseas migrants.

In November 2019 SQM Research forecasts that both Sydney house and apartment prices will increase by double digit growth in 2020.

Report

To help you understand what’s ahead for Sydney property I’m going to provide you with a lot of detail but the bottom line is Sydney is a world class city, which is land locked with limited room to grow to accomodate all those moving to Sydney looking for somewhere to live.

2. Sydney’s Property Market Trends

Historically, the city’s property market has gone from strength to strength.Metropole Sydney

Over the last 40 years Sydney’s average capital growth was 7.4% meaning many properties doubled in value every decade.

But as you can see from the chart below, the Sydney property market is very cyclical (like all property markets.)

And changing demographics is playing a big role in driving shifting market trends.

The big house on a big block is no longer a sure-fire strategy for success, as single-person homes and households without children are increasingly favouring living in medium density inner city and waterfront apartment properties.

Meanwhile, families are trending towards locations that offer effective transport infrastructure, with access to amenities and quality education.

Upgrades to major highways and new rail links may close the gap between suburbs that were previously closed off by poor infrastructure.

Sydney dwelling prices

Currently investors and home buyers are abandoning the off the plan apartment sector for many reasons including concerns about construction standards, and many of those who purchased off the plan a few years ago are now having trouble settling with valuations coming in on completion at well below contract price at a time when banks are more reluctant to lend on these properties.

In the background strong economic growth and jobs creation is leading to population growth and ongoing demand for property in Sydney.

At the same time international interest from migrants continues.

The beginning of this new cycle is a great time to look at buying an investment grade property in Sydney which is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west at a slight discount to what they would have paid a number of years ago.

The following chart from Dr Andrew Wilson of My Housing Market shows the rebound of the Sydney auction market over the last year.

This market strength is likely to continue well into 2020 and beyond.

Sydney auction trends feb

The Sydney Apartment Market

Underpinned by continued overseas and interstate migration, metropolitan Sydney requires about 41,000 additional dwellings per annum to accommodate its current level of growth.

To meet this demand the delivery of new apartment projects is vital, particularly as affordability pressures, demographic trends, changing household types  and lifestyle preferences drives the need for more diverse housing options.

Investor purchases of “off the plan apartments” reach peak levels in 2015 and 16, but this was followed by a collapse in the investor apartment market as the welcome mat was pulled out from under the many foreign investors purchasing these properties and at the same time local investors found it more difficult due to the introduction of more stringent lending practices, new APRA rules and directives and more recently fears about building standards given all the media publicity about a number of high-profile buildings with significant structural problems.

Syndey Apartment Market Stats

 

Over the last few years, an apartment over supply and other regulatory and non-regulatory factors have resulted in the collapse of investor demand for Sydney “off the plan” apartments.

The reduced sales volumes have made it more difficult for developers to achieve the pre-sale hurdles required by the banks to finance developments, and a few new projects are on the drawing board.

This means that undersupply of apartments is looming.

Only 25,500 apartments were completed in metropolitan Sydney in 2019.

This represents a 17% in decrease from the record 30,900 apartments completed in 2018 and suggests that the oversupply of the better quality apartments on the market will soon disappear.

But be careful –many of the new Legoland apartment high-rise towers will always remain secondary quality and become the slums of the future – steer clear of these.

The looming undersupply of new projects will lead to lower vacancy rates, rental growth and eventually property price growth of these new apartments and in turn will help fuel increase price growth of well located establish a purpose in Sydney.

Sydney Apartment Market

 

3. Sydney’s Rental Market

While over the long term rentals have grown in line with property values, more recently rental growth has slumped, in part due to the oversupply of new apartments.

As a consequence, overall yields have declined over the past few years as can be seen from the following chart from SQM Research.

Rents Sydney

Sydney Yields

Traditionally in Sydney, vacancy rates have been tight; hovering well below the level of 2.5% vacancies, which traditionally represents a balanced rental market.

However currently the overall vacancy rate in Sydney has crept up to 3.3%, but this varies in different locations.

At Metropole Property Management our vacancy rate is less than half this rate, in part because our clients have chosen investment grade properties, but we’d like to think it also has a bit to do with our proactive property management policies.

 

Vacancy Rates Sydney

4. Sydney’s Average Capital Growth

In 1993, the average house price in Sydney was $188,000.

However, dwelling price growth in Sydney has been very fragmented.

While some suburbs has just chugged along others are strongly outperforming.

You see…Sydney is comprised of dozens of smaller markets, each of which has their own drivers and supply/demand issues.

Sydney’s more affluent inner eastern, Lower North Shore and inner western suburbs have well outperformed these averages.

Houses: In September 2019, only 5% of Sydney suburbs had a median house value lower than $500,000, compared with 22% five years ago.

The proportion of suburbs with a median house value of $1 million or higher was 47% in September 2019, up from 34% five years ago.

Units: 29% of Sydney suburbs recorded a median unit value of $500,000 or less in September 2019, down from 49% five years ago.

The proportion of suburbs with a median value of $1 million or higher jumped from 2.9% five years ago to 14.4% in September 2019.

Overall Sydney is a city in gentrification, with the fingerprints of a younger demographic upping the desirability of the city lifestyle.

Sydney House Price Growth

 

Imgpsh Mobile Save

What’s so special about Sydney?

5. Sydney’s demographics

Sydney is Australia’s most populous city and is also the most populous city in Oceania.

ABS statistics showed the population of Greater Sydney, which includes the Blue Mountains and Central Coast, reached 5,005,400 at the end June 2016 after adding a million people in just 16 years.

That was an increase of almost 83,000 on the previous year, and the city’s fifth largest annual population increase in absolute terms since 1901 with Sydney absorbing 78 per cent of NSW’s total population increase in 2015-16.

Sydney’s population grew by 1.7 per cent last financial year while the rest of NSW grew by 0.8 per cent giving the State an overall annual population growth of 1.6%

Sydney population growth

It took the harbour city almost 30 years, from 1971 to 2000, to grow from 3 million to 4 million people but only half that time to pile on its next million.

This makes Sydney Australia’s only global city and a key city within the Asia-Pacific region.

Today Greater Sydney’s population is estimated to be 5.57 million people.

Population Growth Rate (year Ended 30 June 2018)

 

Interestingly around half of its population were born overseas, making Sydney the world’s most multicultural and ethnically diverse city, with over 250 spoken languages.

In fact more than 70 percent of the state’s population growth comes from overseas migration.

In fact New South Wales represents around 32% of Australia’s total population.

The median age of Sydney residents was 35 years, and households comprised an average of 2.7 members.

But drilling down deeper, within the CBD, the majority of dwellings are occupied by two adults without children, with the average age of residents reducing to 32.

With distinct areas of trendy, modern districts, Sydney has undergone incredible change since its early days as a settlement city.

Formerly gritty housing zones, originally built for labourers, are being revived and modernised, increasing their allure for those after a modern city lifestyle.

The Rocks is an excellent example of an area going through gentrification, with prime waterfront government housing transitioning to private dwellings.

These types of renewal projects are sure to bring new life – and growth.  sydney property market

Similarly gentrification if changing the face of Sydney’s Inner West.

Looking back European settlement in Sydney began in 1788, and in 1800 Sydney had around 3,000 inhabitants.

It took time for its population to grow – in 1851 its population was only 39,000, compared with 77,000 in Melbourne.

Sydney overtook Melbourne as Australia’s most populous city in the early twentieth century, and reached the million inhabitants milestone around 1925.

The opening of the Sydney Harbour Bridge helped pave the way for further urban development north of Sydney Harbour.

Post-war immigration and a baby boom helped the population reach two million by 1962.

6. Sydney’s layout

One of the largest cities in the world, the metropolitan area has about 650 suburbs that sprawl about 70 km to the west, 40 km to the north, and 60 to the south.

Greater Sydney extends from the coast at the east back to the foothills of the Blue Mountains, with a relatively compact CBD located around ibondi beach sydneyts famous harbour.

South of the harbour are the desirable inner suburbs and densely populated beaches, including Bondi Beach.

North Sydney, connected to the CBD by the Sydney Harbour Bridge and tunnel, is home to a thriving business district and some of Sydney’s most affluent suburbs, including the Upper and Lower North Shores.

Plans are underway to build a motorway link to open up access between the pricey eastern suburbs and the western district, which makes up the majority of metropolitan Sydney.

Changes in positioning of major companies to outlying ‘mini-cities’ like Parramatta may see a shift in buyers heading to these cheaper housing areas and employment opportunities.

Developers have anticipated this, but as is often the case, they’ve gone overboard and there is now a significant oversupply of new and off the plan apartments in Parramatta

7. Sydney’s infrastructure

With leading universities, premier shopping districts, iconic landmarks and lively urban flavour, it’s clear why Sydney is considered one of Australia’s most desirable cities to live in.

Built around the world’s largest natural harbour, Sydney offers three efficient modes of transport in, around, and out of the city: road, rail and ferry.Sydney’s infrastructure

Anyone who lives in Sydney knows all too well that driving more than an hour each way to and from work is the norm.

But this is likely to change with light rail playing an important part in the future of transport in Sydney providing quick transportation around the CBD.

Further construction is underway to connect outlying suburbs to existing rail lines, with plans to extend the light rail system to the Eastern suburbs.

Sydney Airport, the busiest in Australia, handles over 35 million passengers a year, is located only 8km from the city and connects directly to 100 destinations around the world.

Proximity to major highways and rail systems can either boost capital growth or hinder it, and all aspects must be taken into account when considering any property purchase.

8. Sydney’s economy

Largely a manufacturing city in its heyday, Sydney has evolved into a metropolis of high-end, knowledge-based jobs in the business and financial services sector, earning itself the title of Asia-Pacific’s economic hub.

Tourism and hospitality are its next leading employment industry.

Sydney Property Market

job employment australia

Of course jobs creation and rising confidence also leads to population growth, which further fuels the property market.

Inner-city employees earn an average individual wage of $888 per week, compared with $619 for those working in the Greater Sydney area.

Sydney’s eastern and northern suburbs reported an unemployment rate of between 2 and 2.4%, with Parramatta and Blacktown topping 8%.

With the recent boom in property prices, many buyers are finding themselves locked out of the property market, which may signal an increase in long-term rentals.

More than 55% of dwellings in the city are rentals, where occupants – primarily single professionals and couples without children – are willing to pay a premium to live in the heart of the city near to their work and all the action.

9. Sydney’s growth

Since the 1970’s, Sydney and Melbourne have been locked in a head-to-head race for highest population growth, with both cities adding 1.7 million new residents over 40 years.

Overall, Australia’s growth rate is amongst the highest in the world, with the Australian Bureau of Statistics estimating that 66% of residents live in our capital cities.

With an estimated population of 8,046,070 persons, the population has increased by 123,813 persons or 1.6% over the past year, which is in-line with the national rate of growth.

The 123,813 person increase was the greatest since September 2017 and was made-up of natural increase of 53,711 persons, net overseas migration of 91,999 persons and a loss of 21,897 persons due to net interstate migration.

Natural increase of 53,711 persons was the greatest on record while the 91,999 persons increase due to net overseas migration was the largest increase in 12 months.

The loss of 21,897 residents due to net interstate migration was slightly lower than the previous quarter but up from 19,299 persons a year earlier.

 

Property Investment In Sydney - 20 Market Insights

The NSW government is planning extensive additions to its transport infrastructure to support future growth, with new motorway extensions providing an uninterrupted connection from Sydney’s south to the north, and major road expansions on the plans to ease city congestions.

Outlying suburbs such as Parramatta and Liverpool are developing into regional cities, and with improved infrastructure in the works, there is likelihood we will see significant population growth in these areas further from the CBD.

10. Sydney’s culture

 Sydney’s cultureSydney is truly a global city, welcoming a broad range of ethnicities from all over the globe.

In fact, nearly half of the people who call Sydney home were born overseas, creating the most dynamic and culturally diverse metropolis in the world.

Each year Sydney celebrates its famous multiculturalism with the month-long Living in Harmony festival, which brings its residents together to celebrate and promote cross-cultural understanding.

Housing in the inner city is attractive to those who love the city life, with tenants looking for properties that include the following features:

  1. Location – above all.
  2. Security.
  3. Storage space.
  4. Amenity including balconies.
  5. With street noise generally a given in city living, smart tenants are looking for added features – like double-glazed windows – to minimise the city sounds.
  6. Cooling – especially over summer
  7. Technology
    1. Healthy mobile phone signals
    2. Great WiFi connectivity.
    3. Multiple power points

Which Sydney areas are worth investing in?

11. Upper North Shore

Statistically one of Sydney’s safest areas, with beautiful parks, large land sizes and an easy train commute to the city, the prestigious suburbs of the Upper North Shore have seen a stable increase in pricing over the years.

Incorporating Pymble, Turramurra, Wahroonga, Warrawee, Killara, Lindfield and Roseville, the Upper North sees a ‘generational’ cycle, with wealthy families moving in to gain access to esteemed private education and excellent public schools. The family moves on once children are out of school, thus allowing the next generations of young families to begin the cycle again.

This trend has maintained steady supply and demand, making the Upper North Shore area one to consider for stable growth, particularly as it sits in the middle ring of the CBD.

In August 2015, the Upper North topped the auction leaderboard with a median dwelling price of $1.4 million.

12. Lower North Shore

Located just over the Sydney Harbour Bridge and featuring a boon of waterfront properties overlooking the Sydney Harbour, Middle Harbour and Lane Cove River, the Lower North Shore is considered one of Sydney’s most desirable places to live.

australia's leading buyers agent

While the Upper North Shore attracts families due to the larger land lots and houses, the Lower North has a higher population density with a greater proportion of apartments and units, making it appealing to young professionals who work in the CBD.

The Lower North Shore consists of the suburbs of Mosman, Castle Cove, Cremorne, Neutral Bay, Kirribilli, Milsons Point, McMahons Point, Wollstonecraft, Greenwich, Longueville, Riverview, Linley Point, Lane Cove West, and Chatswood.

According to Domain Group data, the median auction price for a dwelling in the Lower North in August 2015 was $1.3 million, coming in third place behind the Upper North Shore and Northern Beaches.

13. City and East

Recently positioning itself at 6th on Sydney’s best-performing auction rankings, with a median dwelling value of just over $1 million, the suburbs in East Sydney and the city centre are home to Australia’s highest property earners, including Edgecliff, Rushcutters Bay, Darling Point and Point Piper. Urban Building

Densely populated and with land at a premium, most properties are small terraced housing or units/apartments, with a higher proportion of renters in the Eastern suburbs than elsewhere in the city.

Suburbs in the city’s inner ring such as Darlington, Chippendale and Darlinghurst have shown interesting changes in their demographic make-up recently, revealing a very high proportion of young, single residents who have populated the area for the social scene and city lifestyle.

Eastern Sydney is also highly desirable, as the home of the famous beachside suburbs of Bondi, Tamarama and Coogee.

While there is no train access to these coastal neighbourhoods, there are strong bus networks.

14. Inner West

There is no end of demand from home buyers and investors who want to live in Sydney’s gentrifying inner Western suburbs.

In suburbs like Annandale, Croydon Park, Dulwich Hill, Enmore, Lewisham, Lilyfield, Marrkickville, and Newtown.

The suburbs within the region are characterised by medium to high-density housing and while they’ve been subject to gentrification, this process will continue for decades as the older workers and migrants make room for upwardly mobile high income earners.

What advice do you have for new Sydney investors?

15. Look for Sydney’s best properties in the inner and middle ring suburbs

A review by the Australian Housing and Urban Research Institute has found that suburbs located within 5 to 15 km of the CBD consistently see a level of capital growth that outperforms suburbs.

These inner and middle ring suburbs continue to see long-term increases in value because: harbour-bridge-343310_1920

Gentrification has changed the look and stigma of ‘ugly duckling’ areas into increasingly attractive places to live.

Sometimes, changes to an area, such as improved road and rail access or a change in demographic, can spur on the gentrification process in a neighbourhood, transforming it into an area that enjoys a steady increase in desirability.

While a rising tide lifts all ships and house prices have risen throughout Sydney, in general the outer and western suburbs have not had the same level of capital growth as Sydney’s inner and middle ring suburbs.

16. Steer clear of the new high rise Sydney apartment towers

We’ve seen an oversupply of newly built apartments happen Sydney.

The problem is not all apartments are the same.

Building Boom Melbourne

Some will make great investments increasing substantially in value over the long term, but many of the high-rise towers built in the last fifteen years will continue to underperform with poor, if any, capital growth in the foreseeable future.

Of course these Lego Land apartment blocks never made good investments.

They offered little scarcity and had no owner occupier appeal having been built with investors in mind, and often overseas investors who didn’t fully understand the needs of the local market.

Worse still… because of the high developer margins and marketing costs, many investors paid too much to start with and have since found that on completion their properties were worth considerably less than their contract price.

The sad reality for these investors is that today, in light of the many media reports of structural problems in some of these high rise towers, there is a crisis of confidence with apartment owners concerned about what unknown issues and liabilities may lie ahead for them and potential purchasers are holding back not wanting to buy themselves futures problems.

This sector of the property market has lost the trust of the buying public and confidence will take quite some time to restore as various stakeholders including state and local governments as well as the construction industry including building surveyors and certifiers scramble to shore up building sector.

You see…there tend to be three major types of building issues faces by apartment owners:

  1. Structural defects – These are the ones that grab the headlines but, in reality, major structural issues only relate to a small number of buildings.
  2. Fire issues – These often relate to inferior cladding used during construction. Cladding audits are ongoing, but so far 629 affected buildings have been identified in Victoria alone.
    And now it’s been revealed that there’s a list of  list of nearly 450 buildings across the state of NSW with potentially flammable cladding that the State Government is keeping it secret due to security concerns.The list, developed by the cladding taskforce and provided to State Parliament, was given public interest immunity, which restricts public access.NSW Police Counter Terrorism Command advised the addresses should not be published due to safety concerns.The unit said the information risked prejudicing the interests of building and apartment owners.
  3. Water issues – These are very common and occur to some extent in almost every new building – things like leaking balconies, showers and roofs. While these are a nuisance and can be expensive, they can usually be rectified.

Fact is, the buildings with major problems requiring mass evacuation are the outliers, but for those involved their losses will be significant as they will have hefty repair bills and have no real market for the sale of their apartment in buildings that could well become the slums of the future.

Two tiers of apartments in the future

Be mindful of a Sydney property oversupply

These issues will lead to a flight to quality, meaning well constructed, medium density apartments and townhouses will continue to be strongly sought after and will keep increasing in value, making them great investments.

At the same time tighter future construction standards will lead to increased building costs and therefore higher eventual asking prices for the next round of apartments to be built, underpinning the future value of soundly built established apartments.

Similarly, the solidly build older established two and three story walk up apartments built in the 60’s and 70’s that used to be called “flats” have stood the test of time and will continue to make good investments.

On the other hand, owners of poorly constructed high rise apartments in the many “me too” buildings built in the last decade or two will find the value of their properties will languish.

While some of these owners may be keen to cut their losses, they will find their properties difficult to sell and many will not be prepared to or financially able to crystalize their losses, just like many of the unfortunate investors who bought in mining towns during the mining boom are still finding they are stuck with underperforming properties which are worth considerably less today  than they paid for them many years ago.

17. Consider making the most of investing in Sydney properties

Sydney properties have exhibited strong capital growth over the long term and are likely to do so in the future.  Negative Gearing

But with their current low yields comes the challenge of negative gearing.

While this understandably concerns many first-time investors, I see it as a cost of doing business.

Here’s a quick explanation of negative gearing:

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and depreciation – exceed the income it produces.

Since the costs of producing an income are generally deductible against the taxpayer’s other income, property investors can effectively offset some of the interest expense against their wages.

This has made some argue that other, less fortunate, taxpayers help these property investors meet their costs.

Why would you buy a property that makes a loss?

Generally it’s because property investors hope that their income losses will be more than offset by their capital gains when they eventually refinance or sell their property.Sydney property market

And in Australia capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favours wealthy landlords.

The truth is that negative gearing is more favourable for taxpayers who earn high incomes.

Imagine an investor had excess interest expenses of $10,000.

If they were on a marginal tax rate of 15 cents in the dollar they could use their loss and reduce their tax by $1,500.

But to a taxpayer in a higher tax bracket, one who pays 30 cents in the dollar tax, they could reduce their tax by $3,000.

So the benefits of negative gearing are greater the more you earn and the higher your tax rate.

While negative gearing has its critics, in my mind property investment is about capital growth of your assets rather than cash flow.

Cash flow will keep you in the game, but capital growth will get you out of the rat race.

In the long term well located properties in the inner and middle ring suburbs of Sydney will continue to be highly sought after and keep increasing in value creating wealth for their owners, be they home owenrs of real estate investor.

18. How I choose a strong investment property in Sydney.

If I accept that in the short term I’ll be negatively geared, then I must ensure I buy an investment grade property that will outperform the market averages with regards to capital growth and to do this I use my 6 Stranded Strategic Approach.  

  1. I would only buy a property that would appeal to a wide range of owner occupiers. Not that I plan to sell my property, but because owner occupiers will buy similar properties pushing up local real estate values. This will be particularly important in the next few years as the percentage of investors in the market is likely to diminish. SydneyTerraces
  2. I would buy a property below its intrinsic valuethat’s why I avoid new and off the plan properties which come at a premium price.
  3. In an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area. This will be an area where more owner occupiers will want to live because of lifestyle choices and one where the locals will be prepared to, and can afford to, pay a premium price to live because they have higher disposable incomes. In general these are the more affluent inner and middle ring suburbs of our big capital cities
  4. I would buy a property with a high land to asset ratio.
  5. I would look for a property with a twist  – something unique, or special, different or scarce about the property, and finally
  6. I would buy a property where I can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to deliver me capital growth.

How can I stay on top of current information?

19. Get news, updates and advice by email house-computer-search

The easiest way to stay current with all the changes happening in our real estate markets is to receive the latest news to your inbox.

Currently over 115,000 Australians subscribe to my weekly newsletter, which delivers in-depth analysis, articles and commentary by a team of expert writers with a varied knowledge base in real estate, investment and finances – all essentials for successful property investing.

But if you have a voracious appetite, I recomend you subscribe to my daily market commentaries by clicking here.

Every day at least 8 commentaries, blogs and articles are published featuring leading experts in field of property investment, property investment finance, tax, economics aand personal finance.

It’s a great way to keep up to day – subscribe now by clicking here.

And why not subscribe to the Michael Yardney Podcast  where you’ll learn something new about property, success and money in around 20 minutes each week.

20. Take advantage of independent, unbiased investment advice

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.

Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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Michael Yardney

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Property Investment In Sydney – 20 Market Insights' have 18 comments

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    March 1, 2019 Abraham

    Great article Michael. I’m a relatively new property investor, and starting my journey in this strange state of the market.

    What would you recommend is a better investment (from both capital growth and yields perspective) in the current property cycle – a 2br older style brick unit in the Inner West (e.g. Dulwich Hill, Summer Hill) or a 1 br unit in inner East (e.g. Surry Hills, Darlinghurs, Paddington, Rushcutters Bay, Randwick, Coogee, Maroubra etc). They tend to be in similar price range.

    If you had to pick 1 property type/area in the 650-700k price range in Sydney, what/where would that be?

    Thanks,
    Abraham

    Reply

      Michael Yardney

      March 1, 2019 Michael Yardney

      Abraham – you’ll find I never give those type of recommendations here because it is really such an important decision and while our team is buying similar properties to those you describe, we have found that currently less than 5% of properties on the market are what we would call investment-grade. You really can’t afford to get it wrong!
      While you can do your research and get information on the Internet, what you can’t do is get experience or perspective and that’s what we can help you with. Why don’t you contact us at Metropole in Sydney and allow us to help advise you. Wouldn’t it be nice to have a crystal clear understanding of what to do? You can try and do it on your own, but why would you even do that Click here and leave your details and we will be in contact

      Reply

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    February 22, 2019 Luke

    Great summary Michael!
    Your consistent advice on not buying off the plan high rise units has once again been proven spot on in the face of the Opal Tower debacle in Sydney. If you’re ever looking for a case study in future books this is a perfect one. I feel sorry for the people who have large sums of money tied up in this complex probably never to see a return on their money.
    I’ve applied your advice to acquire 3 investment properties in older style low rise blocks in the inner west over the course of this property cycle. I am looking forward to the next boom where these properties are primed for solid growth. All the while retaining their negative gearing benefits in the face of future changes proposed by Labor.

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    January 19, 2019 Jack Barlow

    Hi Michael,

    Thanks for sharing your article. Like most others, It was thoroughly helpful in its insights on buying, particularly for a first-time buyer like myself.
    I’ve recently gotten pre-approval for a mortgage as a single buyer. I was wondering what your thoughts were on buying in the City in a large block of flats. I’m looking for a 2-bed but I just wonder whether the price would just move sideways, maintaining its price but not growing due to its location. Do you think I would be wiser to buy in the suburbs where price growth might be easier to achieve. My research has led me to Maroubra as being a potentially good investment.
    Thanks for your time and insights once again.

    Reply

      Michael Yardney

      January 20, 2019 Michael Yardney

      Jack – congratulations on taking the step into property investment.
      Steer clear of the CBD – you’ll get little or no growth for quite some time.
      Where you buy and what you buy will depend a lot on your budget and your strategy – please read this blog to better understand what makes an investment grade property https://propertyupdate.com.au/what-makes-an-investment-grade-property-2/
      And why try and do it on your own – why not get my team at Metropole in Sydney to guide you and help formulate a strategic property plan for you.
      Why not leave your details here and have an obligation free chat with them

      Reply

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    November 6, 2018 Tania

    Hi Michael. Great article – very informative. In the current market, what is a good rental return for houses and units in Sydney? Would you steer clear of company title small block of units near train station, even though rental return looks good (but long term sale not as good). Would you recommend waiting a bit, as market in Sydney will probably drop a bit further – we are not selling, buy looking at buying second investment.

    Reply

      Michael Yardney

      November 6, 2018 Michael Yardney

      Tania – please steer clear of company title – the banks don’t like them and don’t lend as much against them, meaning there is a smaller secondary market – always cheaper as they’re hard to sell.
      If you read my blogs you’ll learn that you don’t buy Sydney property for rental return – even thought he cash flow is important to pay the mortgage.
      What is you budget ? Is this an investment or your own home? that will make a difference to some of my answers

      Reply

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    April 7, 2018 David

    Hi Michael.
    Great information and lots to absorb.
    I’m looking to slowly retire to Australia and am looking for great water views, or water front with a jetty for boat access.
    I dont need schools, railways or easy access to Sydney but don’t want to buy in a property graveyard either?

    It’s a life style driven investment so nice cafe culture, beaches, sailing etc.

    I’m looking for the magic, far enough out of Sydney to avoid crazy prices but in the zone that an aging population will be drawn to, so demand stays hot over the next 20 years.

    I’ve looked at Newport and Elvina Bay Area area but wondered if this is safer than looking for more firepower towards Umina and Gosford on the north of the hawks bury river ?

    All the best

    David

    Reply

      Michael Yardney

      April 7, 2018 Michael Yardney

      David -all nice areas for your criteria – a lot depends on your budget – the Central Coast hs a lot going for it

      Reply

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    June 20, 2016 Andrew

    Hi Michael,
    Another insightful article, thank you.

    Just wanted to add some news articles related to point #9.

    http://www.dailytelegraph.com.au/newslocal/south-west/old-paper-mill-site-on-georges-river-will-be-developed-into-residential/news-story/e5b2e75b0df973bb2298f4b48eda4825 – Liverpool’s biggest residential development at the old Liverpool Paper Mill. Over 1000 apartments in the hub of Western Sydney.

    Not far down the road is going to be the new 7000 student University of Wollongong campus in Liverpool – http://www.smh.com.au/national/education/university-of-wollongong-to-open-liverpool-campus-20160502-gojypv.html

    According to you, would developments of this size have a tangible effect on the Western Sydney market?

    Reply

      Michael Yardney

      June 20, 2016 Michael Yardney

      Andrew – this type of oversupply will only make smatters worse for western Sydney – steer clear

      Reply

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    October 29, 2015 Prashant Jain

    What a comprehensive coverage of Sydney. Great work Micheal. Very very informative and useful.
    I have been a follower of your newsletter for quite some years. This article certainly stands out. Congratulations.

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    October 28, 2015 Lynton

    Hi Michael another great article!
    The five stranded approach could also perhaps include the most important driver of capital growth over the cycle- a location with demand far exceeding supply. What is often left out is that growth boils down to the micro supply and demand data analysis at a suburb level, or stock on market (supply) versus the historical number of sales (demand). Categorically knowing the statistical ratio to supply/demand at the micro level at a point in time could determine the answers to the why?, when? and where you buy? – then comes the equally important what?
    It begs the question, are long term purchasers & investors buying at a new record price in Sydney and Melbourne over paying?
    Ultimately demand cannot exceed supply by “too much”. If it did, we’d have a concept called, “too much capital growth” or “too much profit (or equity)”.
    Older housing in established well located areas is elastic in its pricing despite low wage and GDP growth because equity has been rising, its an emotive decision (for non-investors), retirees and o/s investors don’t need finance, people are ahead on their repayments, and we are not making any more of it (scarcity) so its attractive to investors and owners alike.
    Ultimately to outperform the market the smart buyers that know how to select investment grade assets (the 5 strands) are confident of long term rising prices because they have also cannily bought primarily where demand exceeds supply – no easy thing!

    Reply

      Michael Yardney

      October 28, 2015 Michael Yardney

      Lynton
      You’re correct – we avoid areas that don’t have the correct supply and demand ratio

      Reply

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    October 28, 2015 Bruce

    Hi Michael,
    What an excellent report! One of the most comprehensive free publications I’ve seen!
    Are you intending to publish a similar report for other capital cities particularly Melbourne.
    Would love to see the latest stats & insights into where the Melbourne property market is going for both house & apartments within the 10-15km radius of the CBD

    Regards
    Bruce

    Reply

      Michael Yardney

      October 28, 2015 Michael Yardney

      Thanks for the kind words Bruce – I’ve already published one for the Melbourne market here Brisbane will be next

      Reply


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