Sydney property – How long until you see profit?

Victor Kumar, director at Right Property Group, told Smart Property Investment that Sydney operates differently to other capital cities in terms of infrastructure.

“Sydney is one of the places where we’re not building... or funding infrastructure to create momentum in the economy; we’re funding infrastructure because of the actual need,” Mr Kumar said.

“It’s no longer ‘build and they’ll come’; it’s ‘they’ve come, so we have to build’.”

Along with the infrastructure being built around people, more employment nodes are cropping up outside the core CBD, widening the areas in Sydney that can be viable for investment.

“Combine that with the greater Sydney plan, which the NSW and the federal government has in place, where we are creating the subcities, your Paramatta, which is going to be a sub-CBD, or the main CBD, and North Sydney would be another, Campbelltown would be another, Penrith would be another. We are starting to create these employment nodes so that we can get people out of traffic and further diversify the employment opportunities,” Mr Kumar said.

“While we do have this up and down from the overall property cycle, regardless of the cycle, you can still make money in Sydney. The main question then becomes: if you’re investing here, can you afford to hold on, because of the negative cash flow?

“You need to be able to hold long terms of 15 years [in the long road], so within 15 years, definitely they’ll be a kick-up, and the key is it could be the potential where you buy. It’s at $600,000, it drops to $550,000 and stays there for, say, five years, right? So, you can’t really sell unless you want to crystalise your losses.”

During that time of value loss, the property is experiencing negative cash flow and costs money to hold onto, which can then drain money from other aspects of an investor’s life just to keep this property afloat.

“[This] is why I advocate you need to have enough data to say that the property market is upwardly mobile again before you jump in,” Mr Kumar said.

He recommended watching out for high-growth pockets where property prices always seem to go up despite the overall market sentiment, to be able to viably sell the property within the first 18 months if things went wrong.

“Most things go wrong within the first 18 months — whether it’s a bad property selection, things happening in life, divorce, all that sort of stuff, you lose your job. So, you need to be able to sell within the 18 months and not lose your capital,” the director explained.

“You lose time, but you don’t lose capital. or if... you’ve really got your heart set on Sydney, you buy something that you can add value to straight away and use a portion of the equity to help you hold.”