The best investment property suburbs in Sydney

Sydney has certainly been our nation’s benchmark market – and it’s obvious why.

Around 60 per cent of all transactions occur in and around the capital.

Sydney 1980This gives it substantial weight in any national analysis.

We’ve also noticed that some observers who proffer their opinion about the ‘Australian property market’ are often simply describing Sydney’s market.

Of course, Sydney is not only our biggest market by volume… it’s also provided the most drama over the past decade.

Post-GFC property in general was a tough sell and this lingered until around 2010/11 when the economy started getting back on a level footing.

In addition, Sydney’s diverse economic base and position as the financial services capital of the nation meant it was more immune to the post-mining-boom doldrums.

Corelogic figures show from 2012 to 2017, Sydney’s dwelling values rose 57 per cent.

This outcome is even more impressive when expressed in dollar term in Australia’s most expensive market. For every $1,000,000 in equity held by an investor, they made almost $600,000 in five years.

The CoreLogic figures show this hot run corrected in 2018, with a fall of 8.1 per cent.

While the reasons were broad – including diminishing affordability – the primary driver was around a tightening of lending criteria due to the Royal Commission into banking, regulatory intervention from APRA and company and some reticence during the federal election.

In 2019 banks eased their lending requirements as the regulators took their foot of the restrictive bias they had been implementing over the previous 2 to 3 years and to boot, interest rates softened further. 3 interest rate cuts of 0.25% (even if the banks didn’t pass on all the cuts) made a huge difference to consumer sentimentality as well as affordability.

Reports by on-the-ground contacts were that listings in October through to December were drying up and buyers came back out to bid.

While 2019 saw the market again improve by 1.6 per cent, much of that gain was during the final quarter of the year.

Will 2020 boom?

The big question is will we see an extraordinary run of capital gains ratchet up once more in 2020.

Well, the smart money is conservative.

Build Yes, we expect strength to return to the market and, come year’s end, properties will have experienced some excellent value gains.

But to temper that opinion, some of the late-2019 activity will have been driven by an element of FOMO (Fear Of Missing Out).

As this settles down, the expectation is that a return to a more ‘normal’ market is on the cards.

This seems to play out in CoreLogic’s comments suggesting slower population growth, a weakening labor market and the likelihood of higher advertised stock levels in Sydney will temper activity as we travel further into the year.

Options remain

The key to successfully investing in Sydney this year will be to cater your property selections to your own criteria.

It may sound remedial, but the ability to access finance without over-extending is essential.

Location

Securing loans is still reasonably tough as compared to four years ago, so those who have funding locked in will be well positioned to take advantage.

Our other tip is to ensure you apply excellent due diligence, or employ the services of a professional who can seek and secure property on your behalf.

Opportunities will present, but avoid the temptation to overpay.

As for locations worth watching, one of the key indicators is infrastructure and the biggest project out there at present is the Badgerys Creek Airport.

Its construction and operation will fuel demand for property in the west, with Parramatta and its surrounds sure to benefit.

The North Connex Tunnel is another big venture.

It’s certain to help boost value growth in the northern suburbs.

Projects like this help reduce the commute and make living a bit further from the CBD more palatable.

Mt Ku Ring Gai ParkKeep an eye on locations like Mount Colah and Mt Ku Ring Gai.

Also of note, the biggest gains at the end of 2019 were in blue-chip addresses close to the CBD where listing numbers tightened.

In fact, values in the prestige market outperformed most other price sectors.

The good news is that, as a result, you can expect prices for houses at the more affordable end to be ‘dragged up from the top’ this year.

It would be worth looking at well-located second-hand units in iconic near city or beachside addresses if your budget allows.

Pymont is one suggestion for 2020 as it didn’t perform as well as its better known neighboring addresses in 2019 – so there’s room for prices to rise in a relative sense.

Bondi and Coogee, with their beautiful beaches, and now access to the city via the newly completed light rail will always be popular destinations due to the lifestyle they provide.

Of course, don’t forget the Sutherland Shire with its waterside livability.

Established housing in suburbs such as Loftus and Jannali are well worth considering.

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Andrew Mirams

About

Andrew is a leading finance strategist who holds a Diploma of Financial Planning (Financial Services). With over 27 years of experience in finance, Andrew has been acknowledged by the mortgage industry with multiple awards. Visit IntuitiveFinance.Com.Au


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