Sydney buyers continue to wrestle with affordability

Sydney shows no signs of being dethroned as one of Australia’s most sought-after cities to live in. However, its high status is slowly working to its detriment.

“If you’re looking at detached housing, nearly every suburb in Sydney is out of the reach of typical first-time buyers,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics.

“You’ve had prices rise, so low interest rates mean that these people can borrow more. But at the end of the day, banks still typically require some sort of deposit, so the more prices rise, the more difficult it will be to actually save an appropriate deposit for the house and apartment prices being achieved.”

Population growth and underbuilding in NSW are contributors to this ongoing issue, as supply is currently lagging behind demand. Moreover, investors are facing their own struggles with surging prices, because these lead to the tightening of lending conditions by banks.

“Banks are independently increasing their investor lending rates, and some investors are slowly removing themselves from the market,” says Charles Tarbey, chairman and owner of Century 21 Australasia.

“Those looking to finance any property investments would be wise to adhere to a predetermined budget to ensure they can keep up with mortgage commitments should any further changes occur.”

Investors need to strategise

From the perspective of Rich Harvey, CEO of, investment activity in Sydney is stalling at present.

“Investment activity is driven by a range of factors; it’s driven by sentiment, by people looking at the market and wondering where prices are going,” Harvey explains.

“Some people in Sydney and Melbourne realise that prices won’t keep rising forever. Property markets do go through cycles, and even investors can still do well buying in Sydney and Melbourne if they know what to buy and where to buy for value.” The key to investing in a market that is peaking or topping out is strategy, he adds.

“Investors need to pick areas where there’s going to be continuing, ongoing demand and limited supply,” Harvey says.

To help address affordability problems experienced by first home buyers, unit developer Mirvac has implemented a plan to earmark some off-the-plan apartments for only a 5% deposit. While AMP Capital chief economist Shane Oliver applauds this initiative, he believes more can be done.

“We need structural change to improve the balance for first home buyers,” Oliver says.

“We need an increase in supply and to tilt the system back for owneroccupiers over investors, taking out the distortion that the capital gains tax discount gives.”

FOMO driving demand

Fears of a property bubble in Sydney have abounded for well over a year. However, if there is one thing that ensures that the Sydney property market is unlikely to crash any time soon, it’s FOMO, or the fear of missing out.

This capital city continues to be supported by significant economic growth and the government’s spending on major infrastructure projects.

Given the considerable employment opportunities, people flock to Sydney, which in turn fuels investor activity to capitalise on the rental market. With the slow rate at which new properties enter the market, there is sure to be stiff competition all around.

“The inner- and middle-ring suburbs will outperform the rest of the city, due to strong demand driven by affluent owner-occupiers who want to live close to where their jobs and all the action is,” says Michael Yardney, CEO of Metropole Property Strategists.



Bankstown: Buyers can bank on this metro suburb

The suburb of Bankstown, which has long been a popular prospect for Sydney buyers, has seen its value skyrocket in the past 12 months alone.

It recorded a whopping 15.9% increase in house prices, whereas units saw 5.2% growth.

While the unit market is not growing at the same rate as the house market, it has been rising steadily. Rental yields for apartments are also reasonably strong at an average of 4.4%.

Bankstown’s key appeal is its proximity to the CBD. The Bankstown Airport is also just 10 minutes away, and it is also the site of a large business park.

There are several schools in the suburb, including a university and a hospital school, as well as various shopping hubs, and for public transport there is a train station.