Why Sydney stacks up for savvy property investors

The prospect of higher interest rates, and the distraction of a Federal Election, did not deter savvy property investors it seems.

Enquiries into our office have been ramping up over recent weeks from investors keen to purchase somewhere that may surprise some people (but really shouldn’t) – and that place is Sydney.

Rather than believing the plethora of doom and gloom reporting that appears to be dominating mainstream media, educated investors are recognising opportunity while the majority are seeing threat.

And it is the Harbour City where they want to invest, because the metrics remain positive, regardless of some of the more alarmist headlines out there at present.

Overseas migration set to soar

Consider this: prior to the pandemic, New South Wales welcomed the lion’s share of overseas migrants, with the majority often landing in Sydney and never leaving.

According to the Australian Bureau of Statistics (ABS), net overseas migration into New South Wales was about 80,000 to 100,000 people annually for the best part of the past decade.

Of course, in the months and years ahead, it is possible that these numbers will be even higher with fewer people deciding to emigrate away from Australia because of the past two years that we have all experienced.

This will mean that we may see net migration in-flows of 100,000 people and more each year into New South Wales.

Australia’s population growth has been driven by overseas migration for decades which will be a policy that continues – and probably increases – in coming years because of our urgent need for skilled workers and employees.

All of these new residents need somewhere to live and that is becoming increasingly difficult.

After a temporary spike due to the popular HomeBuilder scheme, the volume of building approvals has reduced to more recent historical averages, and are likely to fall even further given the continued pressures in the construction sector, including material and labour shortages.

This means that new supply is set to track below buyer demand, which will add further pressure to prices.

Sydney metrics

On top of the fact that we are simply not building enough dwellings to house our future population, the market metrics for Sydney remain overwhelmingly positive.

According to SQM Research, total property listings in Sydney in April were the same level as they were in October and November last year – and remain nearly 40 per cent below what they were in November 2018, which was a period of soft market conditions in the Harbour City. So, we still have a historically low supply of properties for sale.

Greater Sydney

The Sydney vacancy rate also hit 1.6 per cent in April – the lowest percentage since way back in November 2017, which was about the peak of the Sydney market back then.

Times are different now of course, with the volume of investor lending much lower than it was back then, too.

With such a low vacancy rate, it stands to reason that asking rents are strengthening month after month because of this signification supply and demand imbalance.

Indeed, the asking rent for houses in Sydney has risen by 19.4 per cent and by 12.9 per cent for units over the past year, according to SQM Research data.

As you can see, all of these market metrics are a barometer of strong market conditions for investors who are keen to make the most of their own financial capabilities.

Sydney property owners have benefited from extraordinary capital growth over the past decade, with plenty of equity available to be re-invested in real estate assets – if they accept that buying counter-cyclically is always a smart move.