Western Sydney granny flat construction boom expected to continue in 2020: HTW residential
When commenting on property price drivers such as infrastructure, the largest of the lot is the Badgerys Creek Airport and surrounding development, according to the latest Herron Todd White (HTW) residential report.
The valuation firm asked their values to give an educated outlook on the residential market in their service areas.
"This area will be transformed from cow paddocks and market gardens into a bustling metropolis aptly named the Aerotropolis," the valuation firm said.
The report suggests one market to keep an eye on is the new unit market in the Parramatta local government area.
A significant amount of new units are expected to be completed in the first half of 2020 and this will continue with up to 21,100 dwellings forecast to be constructed by 2023, most of these being residential units.
"What we do know is that there is a large difference between forecast numbers and actual construction numbers as developers may hold off on construction to ride out lulls in the market, so we will wait and see how things unfold," the valuation firm stated.
Traditionally, a large number of completions leads to more stock entering the resale market.
Given the negative market sentiment surrounding new units over the past year, vendors must be prepared to meet the market in order to facilitate a sale.
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Source: HTW
Western Sydney has seen a boom in granny flat construction over the past decade, with property owners taking advantage of larger allotments to build granny flats to add value and create a second income.
"With interest rates at historic lows and the potential for five percent plus returns, we believe granny flat construction will continue to be a popular choice for investors throughout 2020," the valuation firm said.
A recent example is 24 Duckmallois Avenue, Blacktown (pictured below), an older three-bedroom dwelling with a new two-bedroom granny flat at the rear, which sold for $757,000 in December, returning $800 per week in rent. This equates to a gross yield of approximately 5.5 percent.
"The high growth seen in the last quarter of 2019 is unlikely to continue throughout 2020. Affordability will be a key issue.
"As household incomes are still under significant pressure, buyers will need to look to the outer suburbs in order to find affordable property. This will benefit the western suburbs of Sydney where there is still property at an affordable price point, relatively speaking," the valuation firm stated.
Investors will be prevalent throughout 2020 with yield a big driver.
Prudent purchasers should keep an eye out for any infrastructure being built and get in before prices shift again.