Sydney is becoming increasingly attractive to Chinese investors, and, in turn, demand is rising for new inner-city apartments. So what suburbs are set to boom and how will this affect the market over the next few years?
China is the primary leader in foreign investment in Australia, and Sydney is proving to be the city of choice.
The latest Herron Todd White report identifies a number of areas in Sydney that are set to boom over the next five years – thanks in part to Chinese investors – with an abundance of multistorey unit developments hitting the market. These include the fringe CBD locations of Haymarket and Chippendale, former inner-city industrial areas such as Zetland and Waterloo, and regional centres such as the Parramatta CBD.
Furthermore, about 5,800 apartments are currently under construction in inner Sydney, with additional projects expected to result in 11,500 new apartments being completed over the next three years, BIS Shrapnel predicts.
They estimate the demand from overseas buyers to remain strong in the present climate. In particular, Chinese investors are attracted to the stable economic and political environment of Australia, not to mention the transparent property market, says BIS Shrapnel’s Angie Zigomanis.
There are also strict measures that have been put in place to cool the property market in China, which in turn are enticing Chinese investors to consider looking at Sydney.
There were suggestions that Chinese buyers could be hit with extra stamp duties or fees in an effort to address general housing affordability.
However, the Herron Todd White report warns that if the government incentives for international (or local) purchasers were to be changed, prices of new housing could be affected.
This could result in weaker demand for new property (especially units in Sydney), and even produce a potential oversupply.
Strong off-the-plan sales set to continue
Despite the risks associated with buying off the plan, they don’t seem to be deterring buyers. In the latest Inner Sydney Apartments 2014 to 2021 report, BIS Shrapnel says the high levels of off-the-plan sales in the next year or two will continue, and drive further rises in new inner Sydney apartment completions to a historic peak by 2017.
“To some extent, the inner Sydney apartment market is playing ‘catch up’ after almost a decade of weak demand for new apartments and limited price growth,” says Zigomanis.
“However, the current surge in off-the-plan demand is likely to see the market get ahead of itself again as pre-sold new apartment projects commence and progressively work their way through to completion.”
Investors looking at Sydney should seek independent advice before buying off the plan, according to the latest Herron Todd White report.
“Historical market evidence would suggest that if the market is flooded with stock over a short period of time then premiums paid on new units can quickly be washed away.
“This could potentially leave owners sitting on a property for many years to recover their initial expenditure or selling for a loss,” says the report.
SUBURB TO WATCH
Barrack Heights: Rare high-yield hotspot
People living in Barrack Heights love bragging about the good value of this suburb. For starters, it boasts a low crime rate and is close to beautiful beaches, major shopping centres, the Shell harbour public and private hospitals and the countryside. And it’s just 10 minutes south of the thriving Wollongong CBD.
Investors may need to buy and hold for a while, but with many houses having gross rental yields of 6% or more, that should help make the process a lot easier. Additionally, neighbouring suburbs such as Windang and Warilla have recently achieved significant increases in value, and it should only be a matter of time before Barrack Heights follows suit. Houses there spend just 46 days on the market, an outstanding statistic for both the Shellharbour and broader Illawarra areas.
Houses are a good mix of old and new, with plenty of opportunities for renovation. Some of the best properties available are on Stephen Crescent, Flinders Close and Greenwood Place. It’s best to avoid streets such as Denison Avenue, Lendine Street and Glipps Crescent, where there isn’t a strong demand for what’s on offer.
The area attracts a good mix of families and retirees, and it’s these demographics that are attracted to Flinders Close, a quiet cul-de-sac on the eastern side of the highway. Three-bedroom houses there may be more expensive than the suburb’s median price, but the constant high demand for properties on this street should ensure it’s well worth it.
