Affordable & Liveable Property Guide 1st Half 2020 - Sydney

Overview

Median property prices in Sydney Metro increased by 1.3% for houses to $1,355,000 from 2018 to 2019/20(1) and remained steady for units at $796,500. By comparison, from 2017 to 2018 the median house price in Sydney Metro softened by -4.5%, and the median unit price softened by -2.6%. Thus, the market has recovered from the significant price drop seen in mid-2019.

There is a unique opportunity in Sydney Metro, as the current market is more affordable than in 2017 (median house price of $1,401,000 and median unit price of $819,500), yet at the same time owners can be confident in their asset’s ongoing value.

A key finding in this report was that in order to identify affordable and liveable areas, rental performance of suburbs was reconsidered to allow suburbs that have a vacancy rate marginally above Sydney Metro. This methodology was applied as at the time of the report’s creation, the impact of COVID-19 on the property market was most evident in this investment criteria.

In addition, suburbs with declining annual median house or unit price growth had to be considered. This is the same methodology applied in the 1st Half 2019(^€) and 2nd Half 2019(^µ) reports. Despite this change, suburbs identified remain quite strong overall, due to the wide consideration of many factors in both affordability and liveability aspects.

Table 1 highlights top suburbs in Sydney Metro based on price growth and total estimated value of projects commencing in the 1st half of 2020(2).

Access to Market

The Sydney Metro market has shifted to return towards its previous trend of an increasingly premium property market. This is especially evident at the extremities of the price point analysis, with 0.0% of suburbs falling below $500,000, and suburbs above $2,000,000 accounting for a record 27.6% of available suburbs. An increase in affordability was a feature of the 2nd Half 2019(^µ) report, however the 1^st half of 2020 signals a return to the trend previously seen in the 2nd Half 2018(^¥) and 1st Half 2019(^€) reports, with declining affordable options.

Table 2 provides the percentage of suburbs in Sydney Metro that are available for house buyers. 

Affordable & Liveable Suburbs

A premium of 95% for houses and 11% for units was added to the New South Wales (NSW) average home loan, to ensure suburbs chosen met all criteria. This is well below the 2nd Half 2019(^µ) report premium and below the percentage premium needed to reach Sydney Metro’s median house and unit price (128% for houses and 34% for units). There is improved access to liveable suburbs for buyers.

Considering all methodology criteria (property trends, investment, affordability, development, and liveability), Tables 3 and 4 identify key suburbs that property watchers should be on the lookout for.

Over Q1 2020, the Sydney Metro rental market recorded a median rental price of $500 per week for houses and $530 per week for units, representing quarterly median price growth of 1.0% for houses and 1.9% for units. This occurred despite an annual increase in vacancy rate, which was at 3.9% in April 2020. Sydney Metro recorded average yields of 2.5% for houses and 3.5% for units, which saw a slight softening in the 12 months to April 2020. Despite this however, Sydney Metro still offers investors long-term historical strength and stability in its rental market.

The 1st half of 2020 is set to see an estimated $17.4B(2) of development across Greater Sydney, with a well-balanced focus on mixed-use, infrastructure, and residential projects, and some spending on commercial and industrial projects also. Project highlights for the period include the $1.0B Stage One M6 Extension infrastructure project, the $636.7M Park Sydney Mixed Use Development (creating 1,400 units), and the $200.0M Westfield Parramatta Stage One extension. Together, these projects highlight the strength of the development pipeline for the 1st half of 2020.

Methodology

This affordable and liveable property guide for Sydney analyses all suburbs in the Greater Sydney area, within a 20km radius of the Sydney CBD. The following criteria were considered:

• Property trends criteria – all suburbs have a minimum of 20 sales transactions for statistical reliability purposes. Based on market conditions suburbs have either positive, or as close as possible to neutral price growth from 2018 to 2019/20(1).
• Investment criteria – as of April 2020, all suburbs considered will have an on-par or higher rental yield than Sydney Metro, and a similar or lower vacancy rate.
• Affordability criteria – identified suburbs have a median price below a set threshold. This was determined by adding percentage premiums to the NSW average home loan, which was $595,315(3) as of Q1 2020. Premiums of 95% for houses and 11% for units were added, which were below those required to reach Sydney Metro’s median prices (128% for houses and 34% for units). This places the suburbs below Sydney Metro’s median prices, meaning that the suburbs identified within this report are more affordable for buyers.
• Development criteria – suburbs identified within this report have a high total estimated value of future project development for the 1st half of 2020(2), as well as a higher proportion of commercial and infrastructure projects. This ensures the suburbs show signs of sustainable economic growth, in turn having a positive effect on the property market.
• Liveability criteria – this included ensuring all suburbs assessed have low crime rates, availability of amenities within a 5km radius (i.e. schools, green spaces, public transport, shopping centres and health care facilities), and an unemployment rate on-par or lower in comparison to the state average (as determined by the Department of Jobs and Small Business, December Quarter 2019 release).