There are many reasons that the Sydney property market makes good, strong investment sense and while long-term capital growth is a given, right now, rental yields are also going from strength to strength.
With tenant demand increasing for apartment living, especially closer to the CBD in established areas, Australian Property Monitors posted a 4.4 % increase for unit rents in the June quarter. Add to this that there are not enough new dwellings being built to keep up with local demand and that created by immigration and there’s no reason that this trend won’t continue.
Statistics can be skewed any which way but while some rental areas are experiencing a natural winter slow-down, it’s a very small proportion of the whole market. As is often the case in uncertain economic times, the top end of the rental market can be unpredictable however the low to median price brackets are in hot demand especially in traditionally desirable suburbs such as the Eastern Beaches or the Lower North Shore.
Larry Schlesinger of the Property Observer (propertyobserver.com.au) wrote in July that, “the overall Sydney vacancy rate has hovered around the 1.8% mark since the start of 2012, up from 1.5% in the second half of 2011. Despite the small improvement in the inner and middle suburbs Sydney remains an extremely tight rental market favouring landlords – according to the Real Estate Institute of Australia (REIA) a vacancy rate of 3% indicates a balanced market”.
Add to this the fact that the stock market hasn’t done anything exciting in the last 18-months and putting our hard earned money into bricks and mortar makes more and more sense. With 40% of all new home loans going to investors in NSW, a lot of people obviously agree with me and are jumping in – with a good strategy people can make great money through a well researched investment property.
Two of the main reasons why a Sydney investment property makes strong financial sense:
It wasn’t that long ago that a 3-4% yield was common but only a few short years on, many yields are nearer a healthy 5-6%. Not only are yields heading north but with interest rates heading south, creating a positively or neutrally geared investment property is becoming more achievable. What this means is that a larger chunk of your monthly outgoings, such as mortgage and strata fees, will be covered by your rent, creating better cash flow.
Also, with many attractive fixed rate loans on offer, why not lock in for the first few years so that you know exactly where you stand?
While yields are on the rise, to move towards real wealth you should still focus on strong, long-term capital growth.
Often when a property is negatively geared it means that the capital growth is more than the cash you’re putting in. Not a bad problem to have!
To ensure strong capital growth and to maximise your future wealth, research the area you’re buying in down to the street and the actual property. There are many experts who will help you with this and here are just a few suggestions:
- Property Valuers
- Real Estate Professionals (Property Buyers)
- Property Reports such as Residex
While negative gearing is probably the most obvious tax advantage for property investors, there is also depreciation. Many people believe that depreciation only applies to new dwellings however keep in mind that anything from a renovation through to a cosmetic enhancement such as carpet and paint can be claimed. Also, any building constructed after 1985 offers depreciation benefits.
First Home Owners Government Grants
Many of the current Government Grants are geared towards new properties but the existing $7,000 First Home Owner Grant for established properties is still in place until 30 September 2012. For more information go to: http://www.osr.nsw.gov.au/benefits/first_home/