Sydney investors look afield for more bang for their buck
While the phenomenon of the Sydney market has held the fascination of investors for several years, some of its neighbouring regional centres have been quietly strengthening their position as property hotspots
In terms of annualised growth, there’s no denying the list of high achievers is dominated by greater Sydney suburbs. Long-term top performers, according to CoreLogic RP Data statistics, include inner-city suburb Ultimo
at 12.3% annual growth – 114% over three years – and Eastern Creek in Blacktown
, with 13.4% annual growth.
But the list is full of surprises, as regional centres pop up among the highest-growth suburbs with surprising frequency. For example, Myocum and Mullumbimby in NSW’s far north region of Byron have seen robust growth over the past five years, and Kiama Heights in Kiama and Primbee in Wollongong
have shown steady annual growth of almost 8%.
Popular regional hubs offer affordability
Trendy port city Newcastle
, the second-most populous metropolitan hub in NSW, has transformed from a coal export harbour to a desirable beachside destination which is increasingly attracting investors. General manager of Robinson Property Matthew Waddell says access to the entertainment and lifestyle of Newcastle is key to tenant demand.
“The most popular areas are the beachside suburbs like Merewether, Bar Beach and Cooks Hill, with growth subsequently being experienced as buyers are pushed out due to affordability,” he says. “This has been the cause of recent growth in suburbs like Adamstown, Hamilton and Lambton.”
Historically, Waddell says Newcastle is a more stable market than Sydney, with less erratic swings in prices. CoreLogic RP Data’s historical data shows positive growth for all suburbs in the Greater
Newcastle area, with few declines in value, reflecting the region’s rising popularity.
“Our market has matured, so we’re not as influenced by what’s happening in Sydney,” says Waddell. “We do expect a lot more Sydney investors to purchase in Newcastle due to the affordability and
Believing that buyers who can’t afford the city’s $1m median will look to the more affordable outer ring, Waddell says “suburbs such as Kotara, Charlestown, Kahibah and Elermore Vale will see more buyer activity and price growth”.
On the other side of Sydney, 85km southof the CBD, regional centre Wollongong is benefiting from the overflow of Sydney’s 2015 growth, with stellar property value hikes in the year to March. Warrawong and Magerton experienced 12-month growth above 20%, while coveted beachside suburb Wombarra recorded growth of 46%, CoreLogic RP Data reports.
Nick Viner, principal at Buyers Domain Buyer’s Agents, reasons that while Wollongong has strong growth prospects, “this is based upon its close proximity to Sydney and yet huge price differentials with the Sydney suburbs”, and he believes investors chasing capital growth should look closer to the capital.
Positives and pitfalls for Sydney
In the Sydney sector, Viner says concerns about a housing bubble have so far been unfounded, and auction clearance rates have recovered to over 70% after a collapse in December to 50%.
Advising investors to look within 5–7km of the CBD for best results, Viner also suggests looking for areas that offer value for money compared to neighbouring suburbs.
“The Inner West is still a good bet based upon its proximity to the CBD, universities, hospitals, schools and shops,” says Viner. “Rental demand in these areas is always strong, whilst capital growth in the Inner West increased even during the GFC.”
CoreLogic data shows Sydney dwelling prices grew by 1.01% in February, further confirming that its growth is increasing at the slowest rate in three years.
However, Sydney did up the ante on its rental returns, with a 1.1% annual increase in house rents, and 2.8% for units – but it wasn’t enough to move it out of second-to-last place for capital city yields.
Although Sydney’s global status and high demand will likely keep it in its place as Australia’s growth frontrunner, Viner warns there are still some marketplace traps to avoid. With rezoning high on government agendas, investors should take extra care to do their research before purchasing.
“If property owners are lucky, this can lead to windfall gains if their property is rezoned for high-rise apartments and becomes instantly attractive to developers,” says Viner. “However, owners can lose out if their property is not rezoned but others are, and their property then becomes surrounded by ugly high-rise apartment blocks.”
SUBURB TO WATCH
Cooks Hill: Newcastle’s ‘cheap’ neighbour ready to grow
Renowned for its diverse character, Victorian terraced housing and quaint tree-lined streets, the inner-city suburb of Cooks Hill in Newcastle has managed to maintain a median price of just under $798,000, regardless of its popularity and proximity to the Newcastle CBD’s trendy lifestyle.
By comparison, neighbouring suburb The Hill’s median is much higher at $1.13m, while Bar Beach’s price tag is close to $1.5m.
Home to Darby Street, an alfresco cafe and restaurant boulevard, and famous for its corner pub scene, Cooks Hill is a walk away from Newcastle’s famed beaches and the CBD.
The face of Cooks Hill continues to improve as boutique stores pop up throughout its streets, and older-style housing is revitalised. Narrow lanes mean dwellings with private parking are highly sought after.
Cooks Hill is home to a young demographic – the median age being 32, ABS figures report – and a large pool of renters, who account for 53% of households, so two- and three-bedroom detached homes are the properties most in demand.
The diversity of buildings in Cooks Hill allows excellent scope for capital gain via renovation, and this, along with its location and proximity to the lifestyle Newcastle has become famous for, has experts pegging the suburb as a shoo-in for strong future growth.
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