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Affordable & Liveable Property Guide 2nd Half 2020 - Sydney

Overview

Median property prices in Sydney Metro increased by 7.2% for houses to $1,630,000 from 2019 to 20201 and increased by 3.2% to $795,000 for units during the same period. By comparison, from 2018 to 2019 the median house price in Sydney Metro softened by -4.2%, and the median unit price softened by -3.5%. Sydney Metro’s median price growth is in contrast with COVID-19 predictions, which solidifies its market strength.

There is a unique opportunity in Sydney Metro, as the current market is more affordable than in 2017 when the median house price was $1,700,000 and median unit price was $810,000. Yet at the same time owners can be confident in their asset’s ongoing value.

In the 2nd Half 2020 report, unit rental performance within each suburb was reconsidered.   Suburbs with a unit average rental yield marginally below Sydney Metro could be chosen as an affordable liveable suburb, as the impact of COVID-19 on the property market was most evident in this investment criteria.

In addition, suburbs with declining annual median house or unit price growth no longer had to be considered. This is in contrast with the methodology applied in the 1st Half 2019, 2nd Half 2019¥, and 1st Half 2020 reports. This was an unexpected change as it contrasts with COVID-19 predictions, signalling a Sydney Metro property market turnaround may have already begun.

Table 1 highlights top suburbs in Sydney Metro based on price growth and total estimated value of projects commencing in the 2nd half of 20202.

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Access to Market

The dominant proportion of homes sold in Sydney Metro during 20201 (Figures 1 and 2) were in the lower-middle price bracket of $1,000,000 to $1,500,000 (27.9%). Units also recorded a dominant lower-middle price bracket of $600,000 to $800,000 (32.2%). Despite Sydney Metro being known as a premium market, the current price breakdown suggests there are ample opportunities for first home buyers.

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2H 20 ALPG Sydney - Figure 2.PNG

Affordable & Liveable Suburbs

To identify affordable and liveable suburbs premiums of 99% for houses and 30% for units were added to the New South Wales (NSW) average home loan, which were below those required to reach Sydney Metro’s median prices (169% for houses and 31% for units). Thus, the affordable and liveable suburbs are below Sydney’s median prices, meaning that the suburbs identified within this report are more affordable for buyers.

Considering all methodology criteria (property trends, investment, affordability, development, and liveability), Tables 2 and 3 identify key suburbs that property watchers should be focused on.

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In September 2020, house rental yields in Sydney Metro were 2.4%. In the 12 months to Q3 2020, the median house rents increased slightly to reach $695 per week, while average days on the market declined by -24.1% to 22 days. Overall, the Sydney Metro rental house market has remained surprisingly resilient throughout COVID-19.

In September 2020, Sydney Metro recorded a vacancy rate of 3.5%, below that of Melbourne Metro (3.8%) but above Brisbane Metro (2.0%). Vacancy rates in Sydney Metro sit above the Real Estate Institute of Australia’s healthy benchmark of 3.0%, which was also the case prior to COVID-19. Further, Sydney Metro’s vacancy rate has shown a declining trend since peaking in May 2020 due to COVID-19, which provides investors with confidence in what is a historically strong market.

Methodology

    This affordable and liveable property guide for Sydney Metro analyses all suburbs within a 20km radius of the Sydney CBD. The following criteria were considered:

  • Property trends criteria – all suburbs have a minimum of 20 sales transactions for statistical reliability purposes. Based on market conditions suburbs have either positive, or as close as possible to neutral price growth between 2019 to 20201.
  • Investment criteria – as of September 2020, suburbs considered will have an on-par or higher rental yield than Sydney Metro, and an on-par or lower vacancy rate.
  • Affordability criteria – identified affordable and liveable suburbs have a median price below a set threshold. This was determined by adding percentage premiums to the NSW average home loan, which was $605,0503 as of Q2 2020. Premiums of 99% for houses and 30% for units were added, which were below those required to reach Sydney Metro’s median prices (169% for houses and 31% for units). This places the suburbs below Sydney’s median prices, meaning that the suburbs identified within this report are more affordable for buyers.
  • Development criteria – suburbs identified must have a high total estimated value of future project development for the 2nd half of 20202, as well as a higher proportion of commercial and infrastructure projects. This ensures the suburbs show signs of sustainable economic growth, in turn positively affecting the property market.
  • Liveability criteria – all identified suburbs have low crime rates, availability of amenities within a 5km radius (i.e. schools, green spaces, public transport, shopping centres and health care facilities), and an unemployment rate on-par or lower in comparison to the NSW average (as determined by the Department of Jobs and Small Business, June Quarter 2020 release).

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PRD Affordable and Liveable Property Guide 2nd Half 2020 - Sydney