NSW Excerpt from the 2014 May Market report

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A million dollars doesn’t buy what it used to

There was a time when imagining a million-dollar property conjured up images of grandeur, but these days a million dollars buys nothing of the sort

Sydney now has 163 suburbs, or 20% of the market, with a median price of $1m. Last year alone, an additional 43 suburbs earned their stripes in terms of value and were given membership of the million-dollar club.

Areas like Point Piper were always  going to be on the million-dollar list, along with Vaucluse and Mosman – no big surprises there, but what may come as a shock are some of the other areas graduating towards a million-dollar price tag.

Former trouble-plagued Redfern is just a step away with a current median price of $921,500, while Inner West suburbs like Burwood and Matraville have already hit the mark.
 
Twenty years ago these suburbs were not even a blip on a millionaire’s diamond-studded radar, and yet today the Inner West is leading the charge down millionaire’s row, with 12 new suburbs hitting a million-dollar median price in 2013.

Even surrounding suburbs like Strathfield and Concord West have exceeded the million-dollar median. So while a million-dollar property once evoked visions of Vivien Leigh draped over a grand bannister, these days a single-fronted terrace with a lovely concrete vista, located between two ethnic restaurants in Burwood, is a more realistic dream.

But the upside of so many new suburbs progressively emerging as million-dollar areas is the exponential drive it is providing the Sydney market. It is no surprise that with this many suburbs boasting price tags over $1m, Sydney is predicted to be the best performer in the country for the year ahead.

The shape of things to come

What does all this mean for investors? After all, many of us cannot afford investments with a million-dollar price tag.

As values rise in these areas, the value of property across the broader Sydney area is pulled up along with it.

According to National Australia Bank’s Quarterly Residential Property Survey released in February, there are a host of Sydney suburbs, some fairly unexpected, that are tipped to outperform in the year to come.

With a 6% increase expected for Sydney as a whole, new predicted growth suburbs include Marrickville and Dulwich Hill, both located in the Inner West, as well as Surry Hills, Rosebery and even some western suburbs including Penrith, Liverpool and Blacktown.

These western, and even outerwestern suburbs, are low priced and easy for the beginner investor to break their teeth on. For example, at Blacktown you can buy a unit for around $390,000 with a rental yield of 6%.
 
While these areas are a decent trek from the CBD, keep in mind just how much things can change. There was a time, not decades ago, when Redfern was considered not for the faint of heart, but it is now considered a vibrant cultural area pushing the $1m mark.

Investor’s paradise south of Sydney

For investors keen on finding a good return outside of Sydney, there are many bargains to be had, and some of these can be found in the Illawarra region, according to experts.
 
A recent report by Herron Todd White revealed an expectation that the area will continue performing after already hitting the ground running this year on the back of a strong 2013.

Last year the area enjoyed increased home values, up by 3.2%, and unit value increases of 4.6%, with the median price of a three-bedroom home $370,000 and a two-bedroom unit $308,000.

The report states that major infrastructure such as GPT’s new Wollongong CBD shopping centre in West Keira and the Shellharbour Marina will be beneficial to employment prospects in the area and keep investors in the market.

“This will be felt principally in off-the-plan sales of new units in and around the CBD, and vacant land in Shell Cove and Flinders,” it says.

The report also states that government rebates offered for purchasing vacant blocks and building or buying new homes will also see large subdivisions, such as Brooks Reach Horsley, continue to grow and keep developers playing a positive role in the market.
 
A growing population has also been identified as a driver, and the Illawarra region shows an average population growth of 0.7% per year, which is translating to property sales.

According to a report by RP Data, statistics show a 13.8% increase in home sales last year, with 9,479 sales throughout the period.

Sales volumes have not been this high since the start of 2010, and annual sales volumes have been increasing since April 2013,” the report states.

Rental yields are also on the rise in Illawarra, with houses showing a 3% increase over 2013 and unit rental yields remaining stable at 5.1%.

Meanwhile, a unit in Wollongong’s CBD will cost an investor about $390,000 and offer a rental yield of 5%, while outside the city the median price of homes around the beach suburb of Shellharbour is $513,000, offering a rental yield of 5%.

SUBURB TO WATCH
Croydon


The boom in Sydney’s Inner West makes it difficult for investors to get into the market unless they have existing equity or very deep pockets. Strathfield and Concord have already jumped the gate, but if you look hard enough there are some suburbs still priced under a million.
 
Croydon is just 11km from the CBD and shares a fence with Burwood, Strathfield and Haberfield – all of which have already exceeded a million median.

The median unit price, according to RP Data, is $568,250, still a pinch under seven figures, and the suburb has some lovely amenities, as home to some of the area’s most sought-after addresses, with leafy streets, large blocks and grand old homes.

Many of the area’s homes date back to development in the 1920s, in either Federation or California style, and the suburb itself has a village feel to it.

You will never have to walk far for your morning coffee in Croydon, with 177 restaurants, bars and coffee shops open for business, most spaced no more than five minutes’ walk apart. If you need to go further afield, the suburb has a train station with direct services to the city.

The rental yield in Croydon is 3% for a unit, while RP Data reports 12-month growth of 17%.


 

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