07.06.2022 Local News

Investors Active In Eastern Suburbs Property Market

Investors Active In Eastern Suburbs Property Market

Investors are returning in greater numbers to the eastern suburbs property market.

But who exactly are they and what are they buying?

Sydney’s property market may have been charging ahead during the pandemic but the role investors were playing in it was rarely discussed. Instead, most media attention focused on owner-occupiers driving up the price of lifestyle properties and family homes. But, in the background, investors were reasonably active too.

In fact, the ABS revealed that in October 2021, investor borrowing reached its highest level ever. And, now, as owner-occupier activity begins to slow, investors are making up a larger part of the market than ever – accounting for more than one-third of all loans across Australia in May 2022.

So who are the people buying investment properties in Sydney’s East right now? What do they see in the market at the moment? And how do we expect they’ll influence the market over the coming year?

Who’s buying investment properties?

Of course, a lot of property investors are who you might expect – people investing for their future or looking for a source of income. However, we’ve noticed a few less traditional investor groups hitting the property market recently too. Here’s how we see them.

1. Renovators

Who are they? These are investors undertaking a significant renovation project on their own family home who need somewhere to stay in the interim. They then intend to rent it out when the work on their own home is complete.

What’s driving them? The relative value in buying vs renting.

What are they buying? Spacious three-bedroom apartments (large enough to house the family) and smaller houses.

2. Future downsizers

Who are they? Usually in their 50s with teenage kids, this demographic has an eye to the future. They’re not ready to downsize yet but want to secure something now for when they decide the time is right to make the move.

What’s driving them? The lack of stock in the downsizer market often means they fear missing out when the time comes to leave the family home. They also want to beat any further price rises and lock in capital growth.

What are they buying? Quality single-level apartments, terraces and houses with lifts in lifestyle areas such as Potts Point, Woollahra, Double Bay and the eastern beaches.

3. Rentvestors

Who are they? Usually first home buyers, who buy somewhere to rent out, while continuing to rent elsewhere themselves.

What’s driving them? High property prices mean they’re prepared to purchase a place they have no intention of ever living in, just to get their feet on the property ladder.

What are they buying? Often priced out of established stock in the Eastern Suburbs, they make the most of buying in brand new off-the-plan developments or existing units a little further afield. They may live in them for a time to maximise government grants but eventually return to rent in Sydney’s east, using the purchase as an investment.

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4. Expats

Who are they? Australians living overseas, especially in centres such as Singapore, Hong Kong, New York, Los Angeles and London.

What’s driving them? Many want to secure a place where they will one day return to Australia to live. The relatively weak Australian Dollar, which is buying around US$0.68 and €0.65 at the time of writing, makes this a more affordable proposition.

What are they buying? Lifestyle properties and family homes in good areas. Properties near the harbour or beach that offer a quintessential Sydney lifestyle are in particularly strong demand.

5. Parents buying for kids

Who are they? Parents of teenage kids who are buying somewhere for the kids to eventually move into in the longer term, and renting it out in the meantime.

What’s driving them? Fear of their children being locked out of the property market.

What are they buying? Smaller apartments close to amenities. Properties close to UNSW or with transport links to other education institutions are in highest demand.

The figures that favour investors right now

For each of these buyer groups, there are some real pieces of good news in today’s property market.

The first is that, while property prices may not be growing, this is actually a good time to earn an income through property. The Sydney-wide vacancy rate is down to 1.5% from 4.0% in May 2020. This competition is driving up rents in many market segments and also pushing up yields.

At the start of this year, the median yield on a Sydney house was just 2.2%, while the median apartment yield was 3.0%. That has started to turn around so that, by June 2022, CoreLogic reported the median yield on a house had risen to 2.4% and apartments to 3.3%.

This is helping make buying cost-effective compared with renting, even with rising interest rates. There is more stock to choose from than there has been in quite a while – so investors have more chance of finding the perfect property than they did at the height of the property boom.

We expect investors to remain a force in the market over the remainder of 2022 and on into 2023.

Want more?

If you’d like to find out more about buying or selling in Sydney’s eastern suburbs, get in touch with our team today.