Sydney is falling out of favour with property investors. It’s becoming too expensive – even for them, say experts, and Queensland is benefitting from their investment dollars instead.
A survey of 1000 property investors carried out by the Property Investment Professionals of Australia (PIPA) found that the years of booming prices have taken their toll and now just 1 in 10 investors would make Sydney their first choice.
This doesn’t mean that they are shying away from property altogether, though – 71% of those surveyed still believe now is a good time to invest in property.
Brisbane is now topping investors’ lists, with 50% ranking it as the best place to buy. Second is Melbourne with 20% of the support, while just 9% would go for Adelaide and 4% for Perth as their first choice.
Recent changes in lending policies have had an impact on around a third of investors, but the appetite for property is still strong with 58% of respondents saying they planned to buy in the next year, reported PIPA chairman Ben Kingsley.
Investors will always seek affordable locations, and it seems that Sydney has started to push things too far for them.
“Property investors are becoming more savvy. Many of them continue to look outside of our biggest property markets – Sydney and Melbourne – which are coming close to the peak of their cycles,” Mr Kingsley said.
“The two key reasons that Brisbane still attracts investors, in spite of concerns around oversupply, are affordability and the potential for attractive yields,” he said. Infrastructure investments are also making it a more appealing location for investors.
Buyside property investment specialist Josh Masters commented that perhaps Sydney has simply become too expensive for investors.
“Affordability will always be a key factor for investors and right now Sydney is hitting price points that are unprecedented,” Mr Masters said.
“It’s difficult to justify the cost when weighed against the rental return.”
The latest data from Domain Group puts the median Sydney house price at $1,021,968, so you can see why investors are becoming more reluctant to splash their cash there.
Even looking to the apartment market, the average unit in Sydney, at $669,830, will set you back more than the median Brisbane house price of $521,915.
Mr Masters said he had noticed the “smart money” widening their search to places like Brisbane, the Gold Coast, Newcastle and Canberra to find better growth prospects.
But he’s not ruling Sydney out completely. High-demand suburbs such as Redfern, Surry Hills and Randwick still offer good long-term growth prospects, if you can afford them in the first place.
WBP Property Group executive chairman Greville Pabst says it’s not that investors don’t want to buy in Sydney; it’s just that the soaring prices are pushing more and more people out of the market.
“I don’t see Sydney’s popularity wavering, there’s just an affordability issue. The Sydney property market has grown approximately at a rate of 9.4% annually, which is making it difficult for some people to enter the market,” he said.
Advocate Property Services director Jo Vadillo said she has received a lot of buyer inquiries about Brisbane over the past few months, even from people who are currently based in Sydney.
“Affordability, opportunity and fear they have missed the Sydney boom is often the feedback we hear for the South East Queensland interest,” she said.
“Brisbane is a rising market, properties are selling fast. We are seeing a very similar pattern to the way Sydney took off.
“Many Sydney investors are using the equity in their homes to now invest.”
And AMP Capital chief economist Shane Oliver said it was just “common sense” that, after four years of solid growth for Sydney, people would start looking elsewhere.
“Investor rule number one is to buy low and sell high,” Dr Oliver said. And you do have to wonder how much higher Sydney can get.
His top tip for investors hoping to get in at the bottom of the cycle is to keep an eye on Darwin and Perth, where “prices are back to where they were last decade”.