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3 Reasons For Property Investments In Sydney

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The Sydney real estate market may have scared off some buyers in the past 24 months, however, smart buyers and property investors know that now is the time for a property investment in Sydney -- and a particularly good time  snap up a Sydney apartment.

In fact, the 2019 Property Investor Sentiment Survey found that a whopping 82 per cent of property investors said that “now was a good time to invest in residential property.”

With all this talk about investor sentiment, we sat down with Peter Kerras and Mark MacKenzie to discover why it’s a good time to invest in Sydney property.
 

1. Supply & Demand
 
According to CoreLogic data, Australian dwelling values fell 4.8 per cent through 2018, marking the weakest housing market conditions since 2008.

In some parts of Sydney, we are seeing prices down as much as 20 per cent from their peak. With prices lower and stabilising buyers should get in now before prices go up next year due to supply shortage.

“We are now at the tail end of the construction boom and most projects areas such as Green Square, Canterbury, Bankstown, Randwick and Macquarie Park are completed or nearing completion,” said Peter Kerras, Director Project Marketing.

The Commonwealth Bank forecasts an apartment shortage by 2020. Therefore, rents will inevitably rise due to current stock in the market being absorbed over the next couple of years with continued immigration, which will mean prices will increase. Smart investors are aware of this timing and acting now before prices rise again.  

“Most of these projects have been absorbed by the local rental markets and there is very little in the pipeline for at least the next 2-3 years. Some councils like Ryde Council have even put a freeze on new development approvals,’ added Kerras.

“Prices are still very attractive on the tail end of completed projects which means now is a better time than ever to buy,” concluded Kerras.

Scoring a top-quality investment will pay off big dividends in the long run.

2.  Lower interest rates

“We are now in a position where interest rates are lower than rent returns – we have never been in this position before,” says Kerras.

Finance figures also indicate this improved investor sentiment. In August figures published by the ABS show that investor home loans grew faster than almost any other time in the past three years. New investment loans jumped 5.7% from July to $4.9 billion in seasonally adjusted terms.

If you believe you can achieve an investment return greater than the mortgage rate, then you are better off to use borrowings to invest in property or shares, not your own cash.

Some banks will allow property investors to take out interest-only loans with smaller deposits. Westpac announced it is raising the maximum loan-to-valuation ratio (LVR) for interest-only loans to property investors to 90 per cent, from 80 per cent.

“We are in a fortunate position where rent returns are either in line or higher than mortgage repayments, “ adds Kerras.

This is a unique advantage for investors who can buy cash flow positive property but also benefit from negative gearing.

3. Negative Gearing

In the past 2 years investors have been discouraged to buy through tighter lending policy, reduction of depreciation and fear that the government will take away negative gearing.

More recently banks have relaxed strict lending policy for investors, and there have only been slight changes to depreciation. Negative gearing has been maintained, which remains the biggest incentive for investors.

“I'm always amazed at the amount of people that don't know how to negative gear or that an investor can claim a depreciation on new or old properties to assist with their tax advantages,” says Mark MacKenzie, Sales Director Residential.

“People need to speak to a tax expert to understand the value of purchasing a new property over an old one and the depreciation that can be obtained from it to benefit the investment,” advises MacKenzie.

A history lesson
 
You only have to cast your mind back a decade to see the wisdom of buying now. When the GFC hit, it was the savvy cashed-up investors who were buying while others were selling or running scared.

Those who bought then are certainly laughing now. The market will inevitably rebound and those who have capitalised on the short-term downturn will be amply rewarded in the long-term.

In its Residential Property Prospects 2018 to 2021 report, economic forecaster BIS Oxford Economics predicts that Sydney’s median house price will bottom out at 8 per cent below its June 2017 peak before turning up again.


Related Experts

Peter Kerras

Sales Director | Project Marketing

Residential

Sydney CBD

With over 35 years' experience in Real Estate, I have become an expert in prestige project marketing and auctions, bringing a wealth of experience, knowledge and integrity to the Colliers International residential team.

I work alongside my fellow Directors to manage and lead the NSW Residential team, overseeing the marketing and sales teams to ensure a high level of service is provided to our vendors and purchasers alike, and that they achieve success through their parnership with Colliers International.

Prior to my current tenure at Colliers, I owned and operated a successful franchise in Neutral Bay for 8 years focusing on auctions and high-end Residential before joining Colliers International for the first time in 1998. In 2007 I joined CBRE Residential Projects and was earmarked to grow the resale business and focus on high-end residential projects before then returning to Colliers International.

During my years in Residential Real Estate, I have been instrumental in some record breaking sales at Milsons Point, Neutral Bay, Potts Point, Abbotsford and most notably set a record in Sydney with the sale of the Hyde Penthouse for $12.5m. I take great pride in providing solid and honest advice to all my clients and building strong relationships with vendors and purchasers, ensuring that I become their main point of contact for all their residential needs.

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Mark MacKenzie

Director, Project Marketing

Residential

Sydney CBD

My 20 year background in the service and sales industry has provided me with a strong platform in knowing how to service a client. This experience has given me the ability to quickly identify a client's needs and goals and to provide a proven strategy to acheive desired outcomes. My people skills have allowed me to easily develop strong relationships with my clients, whether vendor or purchaser. Working alongside a successful sales team, I am highly focused and goal oriented to ensure my clients achieve the best results in the quickest timeframe.

As  Director in the Residential team, I also work closely with other Directors managing projects and leading by example with regard to the sales team. I have been the lead agent on many of Colliers International's Residential projects and have worked to successfully achieve significant presales in all our off-the-plan developments.

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