Where should you invest in Sydney’s property market in 2021?
With property prices on a clear upward trajectory, the market is running red hot and has reached record levels with Sydney house prices up +8.5% in the recent March quarter. This presents investors with a clear opportunity to invest and achieve capital growth over the medium/long term, but affordability is a potential hurdle for others. With a median dwelling value of $970,355, you need to pick your Sydney investment property suburb very carefully to maximise your ROI.
Let’s first understand why prices are rising so fast right now.
What’s behind the surge in Sydney property prices?
There is no single reason why house prices are rising so fast right now, rather there are a complex range of factors, specifically:
- Record low interest rates
With current interest rates of 0.1 per cent, the lowest in history – borrowing is cheap which has driven buyers to make the most of it.
- Low stock levels
Buyers are competing for a relatively small pool of properties, which coupled with robust demand has driven prices up.
- Government stimulus measures
Incentives like first home owner grants, the First Home Loan Deposit Scheme, stamp duty incentives and other concessions have all stimulated demand.
- An improving economy
Economic performance has rebounded after last year’s short-lived recession, driven by strong domestic demand, an improving job market and a declining unemployment rate.
Before we look at individual suburbs with solid investment potential, the recent performance of the Sydney market is worth summarising.
Sydney property market performance 2021
All dwellings (YTD): +12.5%
Units: + 6.5%
According to property data company CoreLogic, as of June 2021 Sydney property prices rose +3.0% over May which brings the market to +9.3% growth over the recent quarter and 12.5% for the year to date (YTD). The median house price of $1,186,518 and unit median of $781,708 also raises the discrepancy in house vs unit performance, something Domain most recent House Price Report identified. With ‘…units continuing to underperform compared to houses, unit prices increased 2.2% over the March quarter to $751,038’.
This is just +0.2+ higher than the same time last year. This is also reflected in the growth rates of each dwelling type over the YTD, with Sydney houses advancing +15.1%, while units have only risen + 6.5%. Some analysts expect this trend to reverse in 2021 as investors return to purchasing units due to their relative softer pricing.
Top 5 suburbs to invest in Sydney 2021
Now let’s look at five Sydney suburbs worth investing in 2021, each with very different drivers and dynamics.
1. Blacktown, 2148
Median house: $769,750
Median unit: $500,000
Blacktown is a multicultural hub that is rapidly developing its own local economy distinct from the CBD, with Western Sydney now Australia’s third-largest economy. Central to this is the $2 billion Sydney Business Park, which is set to generate a wide range of employment opportunities, including a business park, commercial offices, large format retail, general/light industrial – as well as warehousing, retail, hotels and a hospital. There is also the Australian Catholic University campus at Blacktown under development, which will cater for 5,000 students.
The main attraction for investors here is the price, with median house prices ranging from $769,750 for houses to $500,000 for units. According to realestate.com.au:
- Houses in Blacktown rent out for $410 p/w with an annual rental yield of 2.8%
- Units rent for $375 p/w with a rental yield of 3.9%
2. Maroubra, 2035
Median house: $2,300,000
Median unit: $905,000
Maroubra doesn’t have the same reputation as it’s eastern suburbs neighbours, but is relatively more affordable than all of them. Boasting a stunning beachside location, with easy access to the CBD via public transport, freestanding homes dominate with a smattering of apartments. Maroubra also has a decent selection of public, private and religious schools serving the local community.
In Maroubra expect to pay a median of $2,300,000 for a house, and $905,000 for a unit. According to realestate.com.au:
- Houses in Maroubra rent out for $900 p/w, with an annual rental yield of 2.0%
- Units rent for $550 p/w with an annual rental yield of 3.2%
3. Baulkham Hills, 2153
Median house: $1,330,000
Median unit: $799,500
Baulkham Hills, in the Hills District of Western Sydney, is a family-friendly suburb that is gentrifying and on the up. In terms of transport, you are well serviced by bus and the M2 motorway, and the new North West Rail Link makes the area even more accessible. Major employers in the area include the Norwest Business Park, and the move to remote working is likely to see demand continue to grow for this suburb. Realestate.com.au notes that, ‘Baulkham Hills has an annual growth of almost three times the Sydney average, so properties here are seriously in demand’.
Current median property prices for this suburb range from $1,330,000 for houses to $799,500 for units with data collected by Domain indicating that this location was one of Sydney’s fastest growing suburbs, advancing + 11.9% over the first quarter of 2021.
According to realestate.com.au:
- Houses in Baulkham Hills rent out for $585 p/w with an annual rental yield of 2.3%
- Units rent for $500 p/w with a rental yield of 3.3%
4. Ashfield, 2131
Median house: $1,590,000
Median unit: $710,000
Ashfield is in Sydney’s inner west, a suburb that meets property investor and commentator Michael Yardney 20-minute neighbourhood test. His theory is that if you can access everything you need – ‘shopping, business services, education, community facilities, recreational and sporting resources, and some jobs, within a 20 minutes from home you have found a gem. Ashfield, and many inner city suburbs of Sydney meet this criteria. Expect to find a mix of low-rise apartments and federation-era detached houses here, and the suburb also has a train station and is well serviced by buses.
According to realestate.com.au:
- Houses in Ashfield rent out for $650 p/w with an annual rental yield of 2.1%
- Units rent for $420 p/w with a rental yield of 3.1%
5. Bexley, 2207
Median house: $1,335,000
Median unit: $710,000
Bexley in southern Sydney is just 14km from the CBD and has freestanding house which are ripe for renovation – so the area is gentrifying. Public transport offers easy access to the CBD, Inner West and Eastern suburbs, and with a high percentage of renters should offer a steady supply of tenants.
According to Domain, Bexley recorded annual growth of +32.0% over 2020, defying the COVID recession – and making it one of the top 5 suburbs for price increases for last year. According to realestate.com.au:
- Houses in Bexley rent out for $640 p/w with an annual rental yield of 2.5%
- Units rent for $400 p/w with a rental yield of 2.9%
Most analysts expect that property prices will continue to rise in 2021 and into 2022, though the rate of growth is likely to slow primarily due to affordability constraints.
Thinking of selling to take advantage of current house price growth? Then get in touch with Ash Frenken (CEO & Principal) at propper on 0409 397 173 or email@example.com for a no obligation appraisal and expert advice about your circumstances.