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Many property investors have done very well with Sydney real estate over the years, so if you’re thinking about buying a Sydney investment property, it makes sense.
Consider the numbers: Sydney’s median house price has surged from $27,400 in 1973 (according to a Department of Parliamentary Services report) to $1.403 million as of March 2022 (according to CoreLogic). That’s an increase of more than 5,000%.
But while those are impressive numbers, there are two important caveats:
For example, SQM Research found that in the decade to April 2022:
In other words, there’s no one ‘Sydney property market’. There are actually more than 600 suburbs in Sydney, all of which have different demographics and market dynamics.
So if you’ve decided to buy an investment property in Sydney, it’s important to be selective. Rather than choosing a suburb at random, you should aim to find the best suburb to invest in Sydney.
The ‘best’ suburb to invest in Sydney will mean different things to different people. That’s because it depends on whether you’re looking for the:
If you’re the kind of property investor who prefers capital growth to rental yield, you’d probably want to focus on houses, as these tend to produce better long-term capital growth than units. That means you’d need a large budget, given that Sydney’s median house price was $1.403 million as of March 2022. If you can’t afford to spend more than $1 million, it might be best to look outside Sydney.
If your preference is to invest in properties with strong rental yield and cashflow, a unit might be a better option. Sydney’s median unit price was $833,815 as of March 2022, according to CoreLogic, so it’s much easier to buy a Sydney unit than a Sydney house.
With that in mind, Suburb Help has identified what it believes are some of the best capital growth suburbs in Sydney and some of the best rental yield suburbs in Sydney, as of April 2022.
Property investment generally produces the best results over the long-term, as opposed to buying with the intention to sell shortly afterwards. That’s because there are significant entry costs (stamp duty, conveyancing, building and pest reports, home loan application fees) and exit costs (capital gains tax, real estate agent fees, conveyancing) when you invest in Australian residential real estate.
But investing with the intention to hold for the long-term poses a problem – because while you might be able to figure out the best suburb to invest in Sydney for the next few years, how can you possibly know the best suburb to invest in Sydney for the next few decades?
The short answer is nobody can know for sure, because nobody has a crystal ball. However, you can make some educated guesses about the future by understanding how markets have moved in the past and researching a wide range of present-day data.
When Suburb Help compiles its property investment lists, we research a wide range of data, at both Statistical Area 3 level and suburb level. That includes data on:
The idea is to get an understanding of levels of supply and levels of demand, for both the present and the future.
The reason we look at both supply and demand is because all markets – whether for property or oil or any other asset – are based on the interaction of these two forces. It’s a mistake to focus on just one dynamic (i.e. demand). After all, if demand increases strongly but supply increases even more, ‘real’ demand has actually gone backwards.
The reason we look at both the present and the future is because even though we believe property investment is a long-term game, the starting point is also important. A market that is likely to enjoy strong capital growth over the long-term but is currently overpriced would be a worse investment than one that’s likely to enjoy strong growth and is fairly priced.
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