Where is the Sydney Property Market Heading?

Tim Lawless, the residential research director of RP Data, says the Sydney market as a whole is continuing to show real improvement.

“The number of houses being listed in the market is up by 24 per cent on the same period last year, suggesting that vendor confidence may be returning to the market,” he says.

“Overall, pricing growth for houses and units is now at 7.4 per cent per annum, while this time last year the growth was just 0.4 per cent.”

Underpinning growing investor confidence is the fact rental vacancies in Sydney are at 20-year lows.

According to Real Estate Institute of New South Wales, rental vacancy rates in Sydney fell to 0.9 per cent in October – the lowest level since it began collecting data. Median rents in Sydney are said to have increased by $30 a week in the past year and a 6.5 per cent fall in the number rental bonds lodged with the NSW Rental Bond Board confirms that those with a roof over their heard are sitting tight. It’s all great news for landlords and wannabe landlords.

Source: Australian Property Investor Magazine April 2008

Pros and cons of buying an investment property in Sydney

Pros

- Tight rental vacancy market.
- Rapidly rising rents.
- Improving yields (particularly in the west).
- Bargain buying opportunities (particularly in the west).
- Law of supply and demand means shortage of new housing stock for foreseeable future can only drive prices up.
- Sydney is still the focal point of Southeast Asia.
- Property is less liquid than the stock market so you’re not as easily tempted to spend your money.
- The NSW capital is the centre of migration (50,000 new arrivals each year).
- Sydney is the financial hub of the region and will continue to be so.

Cons

- Relatively high entry level.
- Further interest rate rises could hit the market (particularly in the west).
- Rental yields still not as strong as they used to be.
- Superannuation has become more appealing to some investors.
- Rising petrol prices could hold back the market in outer suburbs.
- Other cities still currently outperforming Sydney market.
- Troubles in US economy could have knock-on effect here.

Source: Australian Property Investor Magazine March 08 + Herron Todd White

Disclaimer: This publication is not investment advice. It is intended only to inform and illustrate.