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New growth cycle in Sydney underway

Discussion in 'Real Estate' started by Jacque, 17th Jul, 2007.

  1. Jacque

    Jacque Team InvestEd

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    According to many property experts, including John Edwards (Residex) and Louis Christopher (Advisor Edge) the new growth cycle is now officially underway in Sydney, with Sydney's median house value growing by nearly 4%in the last 12 mths (end of March quarter 2007). Unit growth has been more modest, but sales of both houses and units in Sydney actually jumped by 15%during the year - indicators that the market has turned.

    The main problem in Sydney continues to be a lack of new land supply, however, and with the land component of Sydney house prices at now well over 60%, the state govt is concentrating its efforts on new housing in medium to high density urban centres located along three new growth corridors:
    Airport- City, Parramatta-City, and Macquarie Park-North Sydney.

    With a new growth market now seemingly upon us, not all suburbs will benefit at the same time- as is usual in the property cycle, the outer areas will be the last to feel the effects of this growth. Nothing new here- property just doing it's thing :D
     
  2. FrankGrimes

    FrankGrimes Well-Known Member

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    Hi Jacque

    Auction clearance rates are back up almost at 70% as well.

    What is your feeling on lower north shore units, in particular Crows Nest, St Leonards, Waverton and Wollstonecraft? Do you think its possible to pickup an ok 2 bedder for < 400k? Have you made any purchases for clients recently?

    Any idea on rental demand and rental vacancies? I've had a look around St Leonards, but seems to be alot available.

    Edit - Looks more like 450k

    Real Estate, Property, Land and Homes for Sale, lease and rent - realestate.com.au

    Looks ok.. Needs a new kitchen and bathroom

    I still don't know if I can take the plunge when I can buy a house in Brisbane for 350k :(
     
  3. Glebe

    Glebe Well-Known Member

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    Frank,

    Regarding demand in St Leonards, Leightons moved out of there 6 months ago, but the cafes are more popular than ever.

    Do you happen to work around there?

    I think Crows Nest is a better long term pick myself, due to the Willoughby Rd vibe.
     
  4. FrankGrimes

    FrankGrimes Well-Known Member

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    Yep I work in St Leonards. The place is a hive of activity! But there's alot of units, so probably Crows Nest (no station, but some parts are close to St Leonards) or Wollstonecraft (more expensive) would be better.

    So that unit above is 469k + costs + 20k renovations = 520k approx
    Rent based on realestate.com.au around $440 p/w

    $38,480 p/a in interest @ 7.4%
    $23,000 p/a in rent minus costs

    Still a huge shortfall. Can't see it growing that much per year. My other IPs in Brisbane and Wollongong have all started yielding 5% + so I still find Sydney very expensive.
     
  5. Jacque

    Jacque Team InvestEd

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    Hi Frank :)

    Yes Sydney yields still have a way to go, considering the slumps of the last five years and the obvious oversupply of rentals. However, the market is turning and my belief is that they will continue to consistently climb to reach 5%+ gross, especially in the sub $500K price bracket.

    I have purchased for clients in Waverton recently, and yields seem to be fairly consistent between 4-5% gy. Most recent buy was $505K and is fetching $415 p/wk. Not fantastic, but I would expect this to improve as well as appreciate over the long term. Waverton and Wollstonecraft are both popular due to the rail line (much like St Leonards and North Syd but without that high rise feel) and closer proximity to the water, as you know. Also look at nearby Artarmon, Greenwich and Lane Cove for some well positioned property.
    When examining some stats lately, I discovered that, of the resales in units in the Waverton area, in between 2003-2007, over 90% had resold for more than what was paid for them. This is pretty impressive, considering what other suburbs of Sydney were (and still are) doing ie:underperforming, with some vendors lucky to get their money back.

    Sub $400K market is difficult, even for a decent one bedder with parking, and, as you know, not all strata schemes are equal. Just one or two special levies can upset your cashflow enormously, so be aware of this, especially in older blocks that have had building issues.

    I bought for a client earlier in the year in Nth Syd- a small one bedder with parking for under $300K- it was a great buy for the area, and the gy would be closer to 5%. You just need to be prepared to look at a lot of stock, keep your eye on the market and select something that will appeal across the board to tenants. Access to transport (rail and buses) is essential as well.

    I like Crows Nest as well, especially the lovely little streets like Hayberry and Devonshire. Lots of character semis and cottages that are charming and will hold their own. Popular part of the NS which has done well, even despite the doom and gloom of recent times.
     
    Last edited: 6th Nov, 2007
  6. DaveA

    DaveA Well-Known Member

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    Just wondering Jacque, do you specialise in the northan beaches, or is that where you just see the best value at the moment?

    Be interested in hearing an 'experts' opinon on this.
     
  7. Jacque

    Jacque Team InvestEd

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    Hi Dave

    I hardly consider myself an expert - but I can provide you with my humble opinion instead :)
    Just to clarify: though I specialize in all the Northern suburbs in my agency, I haven't had a client further than Frenchs Forest yet, as most of my clients have purchased either in the North Shore or here in the beautiful Hills.

    The Northern Beaches are a lovely part of Sydney- clean beaches, quieter lifestyle than the East, gorgeous views, charming picnic and park spots. I love it- but then again I am biased, as I do intend settling there in my twilight years (eons away!)

    As far as value goes, there are many suburbs of Sydney that I consider will appreciate over the long term and continue to be popular for all sorts of reasons, appealing to owners and renters alike. Those near the water (mainly ocean) continue to perform well because so many Sydneysiders simply want to live there. The problem, however, lies with the high entry price and the large holding costs of such assets- a half decent house even in the "less desirable" suburbs in the NB, such as Cromer/Wheeler Heights will set you back min high $600K's and these are usually on busy roads or require renovation. Skip a suburb closer to the sea to Collaroy or Narrabeen and you're looking at min high $800K's (when I last looked which was about 6mths ago) for a house, even a rundown one. Rents are strong, from what I've heard and read, however, so the gross yield may be better than other Sydney suburbs at the moment.

    I'm sure Michael can provide a learned opinion here, as he's a true local and knows what's going on ;)

    Sydney is such a big city, with so many possibilities- it's difficult to say what constitutes "good value" right now. In the end, it comes down to doing your homework on areas within your budget, working out your cashflow scenarios and buying well in the areas that possess the usual fundamentals for an IP.

    As for the NB, the lack of a railway line certainly hasn't dampened enthusiasm for lovers of the beach- it's just too big and "typically Sydney" an attraction that will always exist.
     
  8. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Stop it, you'll make me blush! :eek:

    In reality, I'm no expert either, just an investor with an ear to the ground in the Northern Beaches. I can say that I'd group North Narrabeen in that "cheaper" bracket of northern beaches suburbs too. And it is right on the beach and on the northern edge of Narrabeen lake so is very picturesque. You can still buy a house in Nth Narra for $650K or maybe a touch less. It will be an old shack with work required but you'll get a nice bit of dirt under it. There's some that sold not so long back in my street (Nareen Parade) for around the $650K mark and they've just knocked one down and put a brand new double storey mansion on it, and the other has been lifted and a second storey built underneath. Its certainly moving ahead nicely. :D

    The down side of the northern beaches (which some residents would argue is an upside) is that it has poor transport options to the CBD. There's only STA buses (the famous L90) and this can take an hour from Nth Narra in peak hour. Its a good thing my wife is "retired" now so doesn't have to suffer the commute any more.

    I wasn't born on the beaches, I moved from Castle Hill in my 20's, but I, like Jacque, love it here. It is perfect in Summer to stroll with my border collie Gerry over to the ocean pool at North Narrabeen along the Pelican Walk and have a dip and a play on the beach. Aden runs around on the sand and plays with the little waves where the river that joins the lagoon to the beach comes in. It truly is absolutely idealic. But hey I'm biased!

    Cheers,
    Michael.

    PS Obviously, take this with a grain of salt as I'm a fully declared "holder" of this stock.