The final quarter of 2018 was another testing one for Eastern Suburbs property investors. But today’s slow market is opening new opportunities for investors looking to grow their property portfolios.
There is now no sugar coating it - the property market is not in a good place. In December 2018, Sydney’s property prices recorded their worst performance since the GFC, falling 3.9% over three months. At the same time, rents fell 3% across our city. This means that for the first time in many years Sydney is no longer the most expensive Australian city in which to rent a house, with that mantle passing to Canberra, (but we are still most expensive for units).
These conditions are borne out in what we’re seeing in the marketplace. Things are generally slower than a year ago, with properties spending longer on the market and vacancy rates increasing. Landlords who fail to present their properties in an attractive way or who look to scrimp on marketing costs, are finding it particularly challenging to find tenants. Many are faced with the prospect of having to reduce the asking rent to meet the market or potentially face a prolonged period of no income.
Despite this, there are good signs for investors looking to enter the market or add to their portfolios, particularly in Sydney’s Eastern Suburbs.
The Eastern Suburbs Real Estate Sales Market
According to CoreLogic, Australia’s real estate market fell 4.8% through 2018 - its poorest performance since the GFC. Prices in Sydney dropped 8.9% over that period, including 3.9% over the December quarter. Sydney’s overall auction clearance rate reflected this. On the weekend of 16 December, it stood at just 43.6% - 9.1% lower than the same time last year. In the Eastern Suburbs, the auction clearance rate is higher at 55.5%.
Eastern Suburbs Sales: Breaking It Down By Numbers
- Median Sydney property price as at 16 December 2018: -3.9% qtr ($808,494)
- Median Sydney unit price: -3.4% qtr ($711,501)
- Median Sydney house price: -4.2% qtr ($918,130)
Source: CoreLogic Hedonic Home Value Index December 2018
Eastern Suburbs Rentals: Rents Down But A Good Time To Grow Your Portfolio
While rents may be down, falling property prices actually mean that - for the first time in some time - yields across Sydney are rising. The gap between falling rents (3%) and falling property prices (8.9%) saw Sydney’s average yield lifted 0.2% over the year to 3.3%. That’s good news for investors looking to enter the market and derive income from their investment.
Investors are also finding it easier than they have been to find value in the property market. Less competition for properties hitting the market means there are some genuinely good opportunities coming available, especially for investors looking to the long term. After all, history shows that both prices and rents will eventually rise - even if we don’t forecast any significant lift in either in the short-term.
This comes at a time when APRA has removed its ‘interest only’ lending cap, meaning investors again have access to this popular way of funding an investment purchase.
Aside from this, we’ve noticed a few trends around the Eastern Suburbs market, including:
- While the market is generally slower than a year ago, there is increased activity in the rental market for two-bedroom units. Apartments in a good condition and priced correctly are attracting keen interest are renting quickly. However, overpriced and poorly presented units are tending to stay vacant.
- Investors looking to attract tenants need to be realistic about the rent they’ll achieve and present their properties in the best light. They should also be prepared to spend on marketing to attract more interest.
- Houses and apartments with unique features are in strong demand. Those near development sites or new high rise constructions are struggling.
Finally, we recommend investors looking to sell their property consider holding off for between three and five years until the current market cycle has turned. Alternatively, they will need to adjust their price expectations by around 10-15% from a year ago.
For those looking to buy, however, there are deals to be had. Speak to your agent to find out what’s going on in the marketplace and where the real opportunities lie.
Eastern Suburbs Rentals: Breaking It Down By Numbers
- Median Sydney rental price (units): $508.70 (week ending 12 January 2019)
- Median Sydney rental price (houses): $705.50 (week ending 12 January 2019)
- Vacancy Rate (real estate industry): 3.0% (December 2018)
- Vacancy Rate (Taylors): 2.1% (December 2018)