The Sydney CBD fringe suburbs of Pyrmont and Ultimo are fast gaining a reputation as Sydney's best residential performers, with strong rental growth bringing the average return above $880 per week.
Rents in Pyrmont jumped substantially in the year to June, rising by 6.8%, according to Portfolio Realty's Pyrmont Ultimo Spring 2008 report.
Barry Goldman, director Portfolio Realty, believes this is largely due to shrinking vacancy rates which, he says, currently stand at a 10-year low of 0.9% in this suburb right next door to Darling Harbour.
"The rental market in Pyrmont continues to grow at a rapid pace, and we expect a further increase of at least another 8% over the next year as the supply problem becomes more acute," he stated.
"The average rental property in Pyrmont is now close to $887 per week, while annual sale price growth has averaged 7.6% over the last six years."
The average gross rental yield in Pyrmont is 5.75% - significantly higher than the average gross yield of 4.4% across the greater Sydney area - which, Goldman believes, is a reflection of "both the increasing levels of high-quality housing now prevalent throughout Pyrmont, and a continued level of heightened demand for rental properties there".
"Pyrmont is growing vertically rather than horizontally, with the close proximity to the city a major attraction for renters, as it keeps transport costs down," he said.
Meanwhile, in the neighbouring suburb of Ultimo, rental properties produced average growth of 11% over the 12 months to June, while apartment prices posted capital growth of 4.2%. Demand for one-bedroom apartments is "very strong" - particularly from young professionals and students - as supply has dried up, Goldman added.
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