Declining property prices and shrinking investor demand over the last 24 months has seen the Sydney lose its mantle as the country’s Blue-Chip investment. Volatility has left Sydneysiders with a number of property related questions hanging over their heads. Doubts about finance and lending, and the general direction of the market have left locals marred with confusion about their next steps in the market.
One of the most common questions we are hearing is whether locals should be diving in headfirst and buying their primary residence or, adopting the new age theme of rentvesting (renting where you want to live and buying elsewhere). While the old school notion is to buy a house and pay off your mortgage, market conditions currently represent that the latter is proving to be more financially viable for those located in the Harbor City.
The fact is that there has been no better time in the last decade to be a rentvestor in Sydney than right now. There are a number of factors in the current fiscal environment working in favour of the investor, which are simultaneously benefitting the life of our average Sydney renter. These factors are providing more opportunity and access to the market while operating with historically low holding costs.
Rental Opportunities. After a reign of seemingly endless growth, natural market cycles have seen Sydney property values head through a natural phase of correction. The result of which has been spikes in supply, combined with lower levels of rental demand – an environment giving tenants more options and room to barter with vendors.
Data from SQM research indicates that vacancy rates in the harbor city have hit a decade high of 3.5%, while asking rentals are down to level last seen in 2014.
Interest rates. Interest rates and loan payments are one of the most important costs that a Rentvestors must account for in their investment strategy. Recent movements from the RBA saw the cash rate drop to a low of 1% – reacting in historically low interest rates for current investors. The recent movements permit buyers to hold quality assets cheaply while sitting in an advantageous cash flow position.
Interstate Affordability. While buyers in Sydney still face significant deposits to gain access to the market, buying power compared to interstate markets remains strong. According to the Australian Bureau of Statistics, Brisbane and Melbourne remain 37% and 22% more affordable respectively when compared to the Sydney market. This means investors can invest in more sought-after markets, with an equal or smaller deposit today.
The everyday investor is changing along with the face of Australia. Property buyers don’t want to be tied down by the old idea of a long-term mortgage anymore. They now want to live fluidly with access to flexibility and opportunity – a concept that Rentvesting is allowing.
Ultimately, there lies opportunity for buyers to invest well, hold cheaply, and not become tied up in an expensive mortgage. Right now, Sydney remains a Rentvestor’s dream. At Blue Wealth it’s our goal to expose these opportunities for clients now, and in the future.