More expensive than Manhattan
Ask any Sydney resident and they’ll readily tell you how expensive it is to live in the Harbour City. Now Sydney’s property market is stepping it up another notch as innercity houses fetch higher prices per square metre than similar homes in Manhattan, Paris and London
It’s the popular central suburbs fringing the CBD that are driving property prices up, with the likes of Paddington, Darlinghurst and Surry Hills achieving sale prices upwards of $13,000 per square metre – more expensive than trendy, desirable hubs in Manhattan, Paris, Hong Kong and London.
These suburbs are highly soughtafter by a broad cross section of tenants,from CBD workers to young families,to students and artworkers.
Andrew Winter, a former real estateagent in London and now host of Foxtel’s Selling Houses Australia, says Sydney’s property market has transformed over the last decade, with property values reflecting the city’s cosmopolitan residents.
“Years ago, there was no comparing London and Sydney prices,” he says.
“But Sydney has become a lifestyle city, with people coming from all over the world to call it home. Even if they don’t just work in Sydney, it has become a base for many international residents.”
Sydney homes set to increase 10% this year
For those hoping that inflated property prices might come down to more affordable levels, don’t hold your breath. Prices of Sydney properties, particularly those between $500,000 and $1.5m, could rise as much as 10% in the next 12 months, thanks to increased buyer activity prompted by low interest rates and increasing buyer confidence.
And when you consider that a three-bedroom terrace in Sydney’s trendy inner east typically rents for at least $1,000 per week – or $52,000 annually – it’s clear that some real value is on offer for savvy investors who have the budget to buy.
For instance, a property purchased for $800,000 (and mortgaged to a 100% loan-to-value ratio) would cost around $42,000 in mortgage interest repayments, at current rates in the low 5% range.
With a $1,000 weekly return, the home would be positively geared, even once other ownership costs such as council rates and property management fees are factored in. This return amplifi es for investors who have a decent deposit to throw into the deal.
While supply is traditionally low over the winter months before increasing signifi cantly as we move towards spring, George Raptis, director of Metropole Buyers Agency, believes Sydney’s property market will continue to perform for investors, regardless of the season.
“We currently have record low interest rates, our population is growing, our rents are continuing to rise, and we have experienced a large increase in buyers and investors,” he confi rms.
“This has been reported by agents at the coalface every day, who are recording large volumes of potential purchasers attending open for inspections.”
Mining to underpin regional economic growth
Sydney is not NSW’s only star performer, with certain regional areas gearing up for economic growth on the back of evolving mining and resources projects.
“In broad terms, we are moving from the construction phase of many major projects into the more profi table operational phase, where businesses actually earn some income from their investment,” explains Andrew Peterson from www.NextHotSpot.com.au.
Construction often employs around twice the number of personnel required to operate projects, Peterson says, so some jobs will be shed, but there is plenty of scope for further projects to get off the ground.
“Coal provides around 50% of Australia’s energy needs and is a major export earner, and both state and federal governments have fl agged the need for coal seam gas development to support our energy needs within three years,” he says.
“In the big picture, while individual mines and locations may see fl uctuations, capture points for the industry, such as ports, will continue to be important and have the underlying drivers for ongoing growth in their local economies.
“As a result, within NSW, Newcastle’s importance – and therefore its overall economic fortunes – will continue to grow.”
Suburbs To Watch
Newcastle and the Hunter Valley
Buyers agent Judith Taylor from Select Property Finder, who specialises in the Newcastle and Hunter Valley regions, shares her thoughts on growth prospects for Newcastle and the Hunter Valley
Investment drawcards: Economic stability, steady growth, low vacancies, opportunity to add value, a relaxed lifestyle offering, and the largest coal exporting harbour in the world.
Economy: While the economy is underpinned by coal, there is a broad range of industry, including manufacturing, power generation, agriculture, wineries, cattle and equine, tourism, health, medical research and education. The University of Newcastle is one of the few Australian universities experiencing a growth in student population.
Employment: Since the closure of BHP in 1999, Newcastle has gradually changed its image from a steel town to a diverse and desirable place to live. According to the ABS, Newcastle has low unemployment levels of 3.7%, while the Hunter is at 4.9%.
Infrastructure: The $1.7bn Hunter Expressway, due for completion by 2014, will cut travel time from Newcastle to the Hunter by about 28 minutes and provide a more direct route for freight between Upper Hunter and the Port of Newcastle.
Highest-demand properties: Investors are attracted by the low median prices, with good-quality properties ranging from the low $200,000s to around $400,000. Inner-city properties are in short supply and the council encourages the development of smaller blocks, creating opportunities for building one or two dwellings at the rear of an existing house.
Capital growth prospects: Newcastle’s median house price will increase by 17% between 2012 and 2015, according to BIS Shrapnel’s report, Residential Property Prospects 2012–2015.
Value-add: Granny flats are popular for increasing cash flow. Approval of a complying development is possible in 10–14 days.
