IS IT POSSIBLE TO FIND AN AFFORDABLE INVESTMENT IN AUSTRALIA’S MOST EXPENSIVE REGION

  
Recent forecasts by respected property analysts reveal Sydney as having the strongest prospective growth of all capitals over the three years from May 2009 - BIS Shrapnel 19%, and Residex 28%.  (Next best was Melbourne, same for BIS Shrapnel, but only 14% for Residex).

The challenge is that Sydney remains Australia’s most expensive capital, and it can be difficult for investors to enter this market without compromising on quality.

Which Sydney region is the most desirable/expensive

The most expensive/desirable region is Sydney’s Eastern Suburbs (postcode range 2021 to 2036).  This is due to its fabulous location - the pink region in the map below, bounded by Sydney harbour in the north, Sydney City/CBD in the west, Botany Bay in the south, and on the east by some of Sydney’s most famous and popular beaches including Bondi Beach and Coogee Beach.  For the affluent and/or busy traveller, quick and easy access to the airport is also valuable, and Sydney airport is in the far south west corner of the Eastern Suburbs.  No other region has such convenient access to all amenities.

For those who can afford the expensive entry hurdle, residential investment has always done well in the Eastern Suburbs.  Despite the Sydney property market being generally flat since 2004, over the last ten years, Eastern Suburbs residential property has shown total returns (capital growth plus rents) averaging 10%-11% per year, for both houses and units (Residex).  Fundamental economic pressures will support this region as a sound investment location - as population grows, and areas are increasingly filled around Hornsby in the north, Blacktown and Penrith to the west, and Liverpool and Cambelltown to the south-west, the Eastern Suburbs will become even more attractive as easy proximity to the CBD, the harbour, the beaches, and transport, becomes ever more desirable. 

In Sydney, only 12 suburbs had median house prices of over $2.5m as at March 2009 (Residex).  Of these, 8 were in the Eastern Suburbs – there was one in the Neutral Bay/Spit region, one in the North West, and two on the far Northern Beaches (see table below).

As would be expected, the demographics of the Eastern Suburbs are very favourable.  For example, as at March 2009, the Eastern Suburbs unemployment rate was only 2.9%.  The 2006 Census shows the median family income is 59% higher than the Australian average.

Are there realistically priced investment properties in a desirable area of Sydney’s Eastern Suburbs

Many property investors (as well as owner occupiers) understandably desire a quality Eastern Suburbs dwelling. 

However, finding an acceptable balance between quality, rental return, and affordable price, can be a challenge in Australia’s most expensive region.

We have secured an opportunity in an excellent Eastern Suburbs location.  To the east, it is only three minutes (or less) to cosmopolitan Coogee Beach and its associated cafes and restaurants.  To the west it is similar time to the huge employment hubs of the University of NSW and Royal Prince Alfred Hospital, and it is only 9km (15 minutes) to the Sydney CBD.  Its suburb, and the surrounding suburbs have median house prices of $1.3-$1.4m, and median unit prices of $0.5-$0.6m (Residex).

It is located in a rare (for the eastern suburbs), quiet, cul de sac location, surrounded by quality houses, all at well over $1m value.

The project is a high quality, prestige, boutique development of two luxury apartment blocks:  one with only 20 apartments over four floors; one with only 9 apartments over three floors.  Finishes are high quality – stone, stainless steel, air conditioning, etc.

Apartments are of 1, 2 and 3 bedrooms (some 1 and 2 beds have studies).  All have secure parking.
Prices are at a level that allows access to a premium, prestige area at affordable rates (see table below).

Any apartment below $700k (and possibly more expensive apartments) will achieve gross rental returns of at least 5% pa.

The quality and financial backing of the development/construction teams are such that construction has commenced without the usual need for pre-sales.  As we have been engaged at the earliest stage, this means that excellent apartments remain available.

Further information

We believe this is an excellent opportunity to acquire a beautiful apartment, in a great location in Australia’s most expensive region, achieve strong rental returns exceeding 5%, buy at the bottom of the cycle in the capital city forecast to show the strongest price growth, and not have to settle until 2010 or 2011.

For a limited time, various NSW government grants and stamp duty savings are available for new properties up to $600k.  For investors, the saving amounts to $11,545 for an apartment of $480k and $14,245 for an apartment of $600k.  For first home buyers, the saving will be $46,490 for a property of $480k, and $35,245 for a property of $600k when federal grants are also included.