The managing director of a property market researcher and buyers’ agency is claiming Sydney shouldn’t be considered by property investors, and offers six reasons why they should stay clear.
According to Propertyology managing director Simon Pressley, more than 23,000 people moved out of NSW over the last 12 months, with that number expected to rise.
Mr Pressley says there are six reasons for this:
1. Property prices
“One of the main reasons for leaving Sydney is that property prices have reached a ridiculous level,” Mr Pressley said.
“Overstretching your budget to buy a home in a city that must be a lot closer to the end of its growth cycle than the start – and at risk of overheating – might not be all that it’s made out to be. The foundation for all good decisions begins with reviewing 100 per cent of your options.”
The second reason for avoiding Sydney as an investment area is that there is an oversupply, with Mr Pressley stating NSW building commencements reaching 70,000 in the year ending 2016, but population growth has been consistent for the last nine years.
“The argument that there is an undersupply in Sydney is not borne out by the facts,” he said.
“Population growth is the same as it was in 2007, when building commencements were only about 30,000.”
3. Abnormal growth cycle
Sydney is sitting in the fifth year of a growth cycle, which Mr Pressley says is abnormal, with growth cycles typically going for three to four years.
4. Lack of diversification
By putting money into a single asset, there is no diversification of investment capital or ongoing rental cash flow.
5. No dramatic fall
Mr Pressley also believes Sydney will never experience a dramatic fall in its prices.
“Property prices in Australia’s largest city will always be much more expensive than anywhere else, and any bureaucrat who reckons they have a solution for making it ‘affordable’ are delusional,” he said.
“I’m a huge advocate for property ownership so I encourage Sydney residents to be smart about it, think outside the square, and put a few stepping stones in place that will help them get there.”
6. Better areas elsewhere
The final reason Mr Pressley gave is that there are more lucrative locations available elsewhere, with better growth prospects and better yields, providing Hobart, Brisbane and regional cities as alternatives, the latter of which is backed up by CoreLogic data, as published previously –https://www.smartpropertyinvestment.com.au/spi-plus/latest-hotspots/16218-regional-home-values-mostly-on-the-rise .
Examples of affordable locations include Cairns and Townsville with a median price of $400,000 or less, south-east Queensland offering median for less than $500,000, and Hobart with a median price of approximately $375,000.
Various regional areas, which offer better unemployment rates when compared to the national average, and offer median prices of less than $400,000 include Orange, Armidale, Bendigo, Toowoomba and Launceston.
“Propertyology has assisted a number of Australians with crunching their own numbers and weighing up the pros and cons,” he says.
“In a lot of cases, their current savings aren’t sufficient to buy in Sydney, but is more than enough for a deposit on an investment property in a different part of Australia.”