As the most sought after and populated capital city in Australia, it’s no surprise that people get excited about the prospect of investing in Sydney.
Over 70,000 people make the move to Sydney every year! With our world-class landmarks like the Opera House, Sydney Harbour Bridge and incredible beaches, it’s really not surprising that so many people want to call Sydney home.
While our beautiful city and culturally diverse suburbs have many drawcards for people choosing somewhere to live, is investing in Sydney really the best option currently?
Considering investing in Sydney? Read this first.
As leading data and research professionals for property in Sydney and beyond, at Providence we spend much of our time analysing the performance and cycles of Australia’s property market in various regions. Our role as Buyer’s Agent, Selling Agent and more means we combine our extensive knowledge with on-the-ground expertise to be able to provide you with valuable property market insights. Here’s what you need to know before investing in Sydney:
- High premiums
In the past seven years since 2011, the Sydney property market has gained over 76% in capital growth (averaging 10.85% per annum). As a result, Sydney buyers are now paying the highest premiums in Australia. Compared to other states, as much as 50% more than Brisbane and 30% more than Melbourne.
- Weak yield
You are also receiving the lowest rental yields. Which means the cash flow return on your money invested is the lowest in Australia at around 2.8%. Not so attractive when compared to Perth at 3.7%, Brisbane at 4.1% even Hobart at 5%. As a result of Sydney’s weak yield, ability to service their loan is now becoming out of reach for most investors.
- Market currently cooling
Did you know, between 2001 & 2011 the city of Sydney was the worst performing capital city throughout the whole of Australia with an average yearly growth rate of only 4.4%? How did this compare to other cities? During this time Hobart had a higher average yearly growth rate of 4.6%, Melbourne 7.1% and Brisbane 7.68%. Our research suggests that the Sydney Market will cool over the next twelve months and capital growth numbers will probably normalise to similar levels we saw between 2001 and 2011.
The good news is that the investment dollar is transferable. This leads investors to explore opportunities in other major capital cities where historically during this phase of the property cycle they have benefited from above average increases in capital growth.