The Sydney Morning Herald explains that $1million dollars does not buy you much in Sydney anymore.
So what does that mean for real estate investors? Is it too late to get into the Sydney property market?
First let’s see what they said, and then I’ll share some thoughts with you at the end:
A million dollars doesn’t cover a lot of ground if you are buying a house in Sydney. Based on land value, it would get you an eighth of a house in Point Piper, a double garage in Vaucluse, the lower floor of a grand Paddington terrace and a super small semi in Mosman.A city that once embraced the quarter-acre dream is fast becoming the home of the million-dollar shoebox.Paddington, Surry Hills and Darlinghurst are now some of the priciest slices of Sydney.
An analysis of 2013 sales data reveals just how many square metres you get for $1 million in Sydney’s million-dollar suburbs.
It shows that for many buyers, ‘‘bang for your buck’’ is no longer defined by land size.
Research by Australian Property Monitors and Domain indicates that buyers are paying a premium for proximity, even if it means they end up in tiny houses.
Paddington, Darlinghurst and Surry Hills are now some of the priciest slices of Sydney for price per square metre, just behind the preferred postcode of the mega-rich, Point Piper.
‘‘There are clearly other factors at play other than how much dirt you are buying,’’ APM’s senior economist, Dr Andrew Wilson, said.
‘‘The growing desire to live in a cosmopolitan environment means that land values come at a premium, that is why we see inner-city suburbs with land values similar to areas where properties sell for stratospheric amounts.’’[sam id=43 codes=’true’]
The Sydney University economist and housing authority Stephen Whelan said while land values typically move in concentric circles away from the centre, certain factors had underpinned the gentrification and rapid price growth of some inner-city enclaves.
‘‘There is certainly no doubt that the issue of transport would be an important determinant of the price of these suburbs,’’ he said.
‘‘As [we] become more time-poor, people who are working longer want to spend less time travelling, which places a higher premium on short commute times.’’
Demand for inner-city suburbs increasingly include well-to-do families.
‘In general families are smaller than they use to be . . .that has provided opportunities for people who might have shied away from smaller blocks in inner-city areas in the past,’’ said Dr Whelan.
There is little doubt that the cost of houses in the inner suburbs of Sydney are expensive, but that’s not surprising.
That’s the way it is in all large coastal capital cities around the world.
But times are changing and how we live is changing and although demand for houses will continue strongly in the future, there is definitely a shift towards apartment living in Sydney.
If you think about it, the number of people living in each household is shrinking, we’re working longer, starting families later in life and we’re increasingly time poor.
This means proximity to cafes, shops transport and lifestyle amenities is becoming more important than owning a piece of land with a front and back yard.
At the same time, Baby Boomers who were previously content with living in their family home after the kids had moved out, are increasingly seeking to sell their big, high maintenance four-bedroom homes so they can live in smaller, lower maintenance, lock and leave abodes again near to amenities, shops and café strips.
And the good news is that there are still plenty of well located, established apartments with spacious floor plans for sale at a price point many home buyers and investors can afford.
Sure some people will remain motivated to move to the outer suburbs in order to buy a house, but more and more are choosing to live close to work and that means living in an apartment.
This solid and increasing demand means apartments make great investments with stronger capital and rental growth than houses out in the sticks.
And this trend is only likely to accelerate in the future.
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
NEED HELP LISTENING TO MICHAEL YARDNEY'S PODCAST FROM YOUR PHONE OR TABLET?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.