Investors in the market must play the long game. Photo by Gaye Gerard/ Sunday Telegraph
Investor activity – buying, selling and renting – across Sydney is far more complex than normal as the market moves through what’s been a busier winter into the traditional spring selling season.
There are testing times and emerging opportunities.
Asking rents have fallen, and sharply, according to the valuation firm Herron Todd White (HTW), while vacancy rates have climbed. Capital values have however not declined at similar levels thus triggering reduced investor yields.
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A recent rental reduction took place at a Fairlight two-bedroom unit leased for $620 per week after getting $745 in 2019.
Suburbs on the northern beaches that rely on tourism such as Manly have seen a reduction in weekly rents and higher vacancy rates. But when it comes to sales, HTW noted investors are there ranging from local, out of towners and international buyers. Agents have noted stronger activity from expatriates as the uncertainty in the global markets make the Australian property market a relatively safer investment.
The northern beaches is popular with investors. Picture: John Appleyard
Western Sydney has experienced a lower impact from COVID-19 in comparison to other areas of Sydney, such as the inner suburbs, according to the latest HTW update.
In the greater west, a popular investment option comes in the form of a house and granny at which can provide a second rental stream. A three bedroom Colyton home with a detached two bedroom granny flat recently sold for $659,000, with a combined rental potential of $700 per week, calculating a gross rental return of 5.5 per cent.
Government initiatives have helped keep “some calm” in the western suburbs, but HTW noted a lot of speculation from property professionals that the longer the pandemic goes, the more stress there will be on tenants paying their rent and investors paying their mortgages.
“As a result this potentially could see an array of properties hitting the market within a short period of time which could put downward pressure on property price.”
More first homebuyers are entering the market. (Pictures by Julian Andrews).
Agents within Sydney’s inner city and east are reporting investor purchasing appears to have dropped sharply, particularly in high density areas, especially Haymarket, Zetland and Forest Lodge.
SQM Research had vacancy rates for Zetland peak in May at a record high of six per cent and have slightly reduced to 5.6 per cent.
HTW noted a two-bedroom unit on O’Riordan St in Mascot that sold in 2016 for $800,000 resold last month for $790,000.
“This result demonstrates how investment grade properties within certain high-density locations are performing sub-par when compared to owner occupier style properties.”
However, HTW noted more first homebuyers are entering the market which does help increase demand for some of the investment style units, but there is still an oversupply of apartments advertised for sale and lease within these locations.
The report noted the investor market across southwest suburbs, in particular the Liverpool LGA, was very active.
But HTW has seen rentals stagnate and in some areas fall. It noted on realestate.com.au there were 99, modern two-bedroom two-bathroom units available and 160, three-to-four bedroom homes available for rent within the Liverpool LGA.
HTW suggests investors are wondering whether there will be any upside capital growth in the next few years.
They can’t see growth in many resales at the moment.
But they note there are opportunities for investors who can tolerate the reduced rental income and “ride out the storm” until the market starts to recover.
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