Join our daily newsletter At The Bell to receive exclusive market insights
- Investors are remaining concentrated in the Sydney market despite it being the most expensive city by some margin, attracted by capital gains and a belief in future growth
- Sydney shines when it comes to capital gains, with house values averaging a 6.6 per cent rise each year and unit values averaging 4.5 per cent per annum over the past decade, CoreLogic data shows
- Grant Foley Property director and buyers’ agent Grant Foley said some buyers were already questioning when prices would start to fall but it was vital to understand Sydney’s recent property market history before making such an assumption
- Foley said the long-term investment fundamentals of Sydney remain sound and noted that investors should aim for the best capital growth prospects
- In the past ten years, investors have accounted for 41.4 per cent of mortgage demand in New South Wales, and in March 2021, New South Wales was the only state where investors accounted for more than 30 per cent of mortgage demand
Investors are remaining concentrated in the Sydney market despite it being the most expensive city by some margin, but capital gains and a belief in future growth is still attractive.
The latest CoreLogic data shows that the median value of a Sydney home has increased 11.2 per cent over the year, sitting at $970,355, reaching a new record high.
It is ahead by a country mile, with ACT and Melbourne the closest on a median of $746,573 and $740,562, respectively.
Sydney has the lowest rental yields across the country at 2.74 per cent, with rents dipping 0.2 per cent for the year, according to CoreLogic data.
However, Sydney shines when it comes to capital gains, with house values averaging a 6.6 per cent rise each year and unit values averaging 4.5 per cent per annum over the past decade, CoreLogic data shows.
Prices are predicted to increase, with a group of 40 experts and economists a part of a Finder survey believing prices in Sydney will rise eight per cent over the next seven months.
Applying this forecast to current year-to-date price hikes means Sydney prices would increase by 19.2 per cent in 2021.
Grant Foley Property director and buyers’ agent Grant Foley said some buyers were already questioning when prices would start to fall but it was vital to understand Sydney’s recent property market history before making such an assumption.
“The previous peak of the Sydney market was about four years ago, in 2017, with dwelling prices only recently increasing above the level achieved back then,” Foley said.
“While many forecasters are suggesting at least another year of solid growth in Sydney, history may yet prove them wrong.”
Foley said the long-term investment fundamentals of Sydney remain sound and noted that investors should aim for the best capital growth prospects.
“Experienced investors also have solid capital growth reserves that they can use to help finance properties which improves yields,” he added.
Investor demand remained focussed in New South Wales, according to ABS loan commitments data, with the majority of activity concentrated in the Sydney region.
In the past ten years, investors have accounted for 41.4 per cent of mortgage demand in New South Wales, and in March 2021, New South Wales was the only state where investors accounted for more than 30 per cent of mortgage demand.
The current levels of investor activity in the Sydney market is below the 10-year average, with Foley saying many investors have been stuck on the sidelines due to lending restrictions enacted in 2017.
“The appetite for property investment was still there but the ability to do so was reduced because of more difficult than necessary lending conditions,” he said.
“I believe investment activity will continue to strengthen and remain robust while interest rates remain low.”
Foley said affordability constraints were reducing the numbers of first home buyers in the market, but investor activity had been conversely rising since the start of this year.
“First home buyer activity was at record levels over the past year due to the various financial grants on the table at the time,” Foley said.
“Savvy investors, on the other hand, are always less motivated by monetary handouts to buy new properties and have now returned to the market to purchase strategically located assets that offer sound cash flow and capital growth prospects.”
“Fewer first home buyers in the market also means less competition for investors keen to buy more affordable property.”
