As state and local governments prepare to put a number of surplus real estate assets on the market, property developers and investors are set to benefit from what could become a state-wide governmental sell-off
Prime waterfront real estate in the Sydney CBD and the Illawarra could be sold off by NSW state and local governments, along with other ‘surplus properties’ located at Macquarie Park and Ku-ring-gai, both near Sydney.
The predictions have property developers and investors salivating at the thought of such prime NSW real estate coming onto the market.
Spearheading the initiative is a state government move to sell off its multimillion-dollar real estate at Sydney’s Millers Point, currently home to 293 government housing properties, as well as 79 apartments at the Sirius block located at the Rocks.
The properties are some of the area’s most cherished heritage assets, built in the early 1900s as social housing for wharfies, and often referred to as the ‘Hungry Mile’ during the Great Depression due to the lines of unemployed men that would line the street looking for work.
While about 400 government housing tenants will be displaced due to the sell-off, the move could provide a coup for individual developers and cashed-up investors.
Urban Development Institute of Australia CEO Stephen Albin believes it would be difficult to increase density or create major developments due to heritage restrictions, therefore investors likely to be interested in the Millers Point sites would be cashed-up investors willing to adhere to heritage orders.
“We’ve seen some of Millers Point and the Rocks sold off already by government, and it was those individual investors, usually families or couples, buying into the market.”
The Millers Point properties, some with 99-year leases, are already being sold for between $2m and $3m each, and it is expected that more dwellings will be put on the market, this time with freehold titles.
David Servi, director of Spencer & Servi First National, says that while historically sales in the area have been limited, should an additional couple of hundred dwellings come onto the market and be sold, value across the entire area will increase.
“Historically, the biggest challenge in terms of valuation has been finding comparable real estate – valuers have needed to look at areas like Glebe and Potts Point for comparable sales,” he explains. “But this would be a renaissance for the area, and one of the biggest investment opportunities the area has seen in a long time.”
While each government dwelling is different, Servi says his agency has recently sold government-owned properties at price tags reaching $2.3m, excluding any required renovations.
He says some buyers are then spending up to an additional $1m on overhauling the properties, with an expected rental yield of about $2,000 per week on completion.
It has also been reported that 4ha of prime commercial real estate at Waterloo Road, Macquarie Park, located 16km northwest of the Sydney CBD, will also be put on the market by the state government, with development juggernaut Meriton expected to be the frontrunner for the purchase.
While Meriton would not comment on the site specifically, the company did say it “anticipated strong developer interest in these potential land sales”.
Investors could expect Meriton to offer units for sale either as owner-occupier residential or as serviced apartment investments.
Still near Sydney in Ku-ring-gai, local council is also believed to be considering selling its Gordon Golf Course site to make way for new community infrastructure and a housing estate, while south of Sydney a Wollongong councillor has recommended three of the area’s waterfront land parcels be put up for sale by the government. Land at Cliff Road, Port Kembla’s Hill 60 and Bellambi Point would be included in the sale, which is currently home to government housing properties.
So is this the start of a state-wide fire sale, or is it just coincidental timing? Albin is reluctant to call these types of sell-offs the start of a fire sale, indicating land being sold under value, but he does believe the government is reacting to a shortage of land in Sydney.
“These land parcels are dead assets to government and they want to capitalise on that and get the best price possible,” he explains.
Albin says investors also need to be aware of how government is using the money earned from sales. “With these sales a lot of the money is going into the housing acceleration fund which is paying for new infrastructure, which in turn is creating economic growth,” he says.
Some examples of these investments are upgrades to Camden Valley Way and the north and southwest rail corridors.
“The sales are being used to improve infrastructure, but what it’s also done is stimulate the market for housing as well, and by putting the infrastructure in there’s a whole lot of new developments, especially in the southwest and northwest, that are coming on stream because it can be accessed accordingly.”
SUBURB TO WATCH
Rouse Hill
Located 42km northwest of the Sydney CBD, Rouse Hill is in the Riverstone electorate, recently named the fastest-growing electorate in the state. According to NSW Parliamentary Research Centre figures, Riverstone’s population grew by 24.8% between 2006 and 2011, the largest growth in the state for that period.
The report also indicates that the electorate is home to some of the state’s most committed members of the workforce, with 68% of residents in full-time jobs and 22% – the state’s highest percentage of households – earning between $2,000 and $2,999 per week. It also has the highest percentage of children under five years of age at 9.5%, and the second highest aged five to 14 years at 16%.
Rouse Hill is near an epicentre of transport infrastructure including the recently upgraded M2 motorway, bus routesand the highly anticipated North West Rail Link. Real estate is predominantly housing, with minimalapartment-type dwellings. With values in nearbyBaulkham Hills, Castle Hill and NorWest all experiencingexponential growth due to transport infrastructure, RouseHill is an area investors should keep on their radar.
A two-bedroom unit will set you back about $450,000,with a rental yield of around 4%. A four-bedroom homewill cost between $630,000 and $750,000. Average time onthe market is 72 days, and five-year growth is at 30%.
