Sydney is still an important market, but with units facing correction, land and houses are stronger performers
The land and housing markets outside of Sydney may be where you want to be, according to Caifu Property’s head of acquisitions, Damien Lee.
“We’re still seeing good opportunities and good growth in the ripple-effect markets that are coming off the capital city – to the south, Wollongong; to the north, the Central Coast and Newcastle. It’s more structured towards the land market,” he says.
In fact, it’s the unit market that buyers should be steering clear of.
“We’re starting to see the slowdown and correction coming from high-density apartments based on supply and price point,” Lee says.
Building approvals have slowed in the Central Coast, but this may not necessarily be a cause for concern as the low stock has put pressure on the market and given rise to greater demand.
“Councils down there have been a bit slow on delivering new land approvals for new estates, which is cross-correlating and slowing down building approvals,” Lee explains.
Sydney remains a valuable housing market
Within the capital city, renovation and development may be the key to riding out the correction period.
“We’re seeing a lot of good-value buying in a strategy of construction, where you can add value to a marketplace or a property in a flat market,” Lee says. “The Sydney market is starting to go through its correction for the second quarter in a row, but based on the fact that they had doubledigit growth over the last six years, only having 0.04% fall-off or a flat fall-off is no reason to freak out.”
It comes down to investing wisely and selecting a property that can adequately be sustained by the demand that Sydney’s strong economy generates. For instance, the apartment market has been inundated with an influx of completed developments, causing rental rates to drop.
“We have seen a steady and relatively consistent rise in vacancy rates across Sydney as a string of developments reach completion, creating an oversupply in the marketplace,” reports Leanne Pilkington, president of the Real Estate Institute of NSW (REINSW).
According to the August 2018 Vacancy Rate Survey released by REINSW, the average vacancy rate in Sydney hit 3%.
“Rents are falling and properties are staying longer on the market than usual,” Pilkington says.
SUBURB TO WATCH
ERMINGTON: Market weakens in high-priced suburb
Located 19km west of the Sydney CBD, the premium suburb of Ermington is seeing growth slow down after several strong years.
Prices increased by only 1.7% and 0.3% for houses and units, respectively, in the year to August 2018 – very low figures compared to peak growth of 96.8% for houses and 50.8% for units in 2013. Nonetheless, median values remain quite high at over $1.3m for houses and nearly $850,000 for units. Among renters, units are causing quite a stir, as the median weekly rent surpassed that of houses in June 2018, following a 3.9% increase.
Ermington’s commercial centre is situated along Betty Cuthbert Avenue, which is home to a strip of shops.
Rent: Units are in demand among tenants and renting at higher rates than houses
Location: Ermington is less than 20km from the CBD and has many amenities