Investor activity shrinks on the Sydney Northern Beaches: HTW residential
Investor activity has certainly reduced on the Northern Beaches as many local suburbs have a strong reliance on the Tourism and Retail sectors, according to a recent Herron Todd White (HTW) residential report.
The report notes the unit markets in Manly, Fairlight and Balgowlah have seen the biggest reduction in activity, having the largest drop in weekly rents and higher vacancy rates.
It noted SQM Research indicated weekly asking rents for units in Fairlight have been slashed from $895 in February 2020 to $690 as of July 2020.
"Capital values have not declined at similar levels thus reducing potential yields," the valuation firm said.
A recent example of this reduction would be 1/40 Rosedale Avenue, Fairlight (pictured above), the report noted.
This two-bedroom, one-bathroom unit was recently leased for $600 to $620 per week after being previously leased for $745 per week in 2019.
Investors range from local, out of towners and international buyers.
Australia has performed quite admirably against COVID-19, particularly when benchmarking against other countries.
"A number of agents have noted stronger activity, particularly for housing, from international buyers and expats," the valuation firm said.
As the uncertainty in the global markets make the Australian property market a relatively safer investment, and many expats are looking to re- enter the market as an investment that they can turn into their family home should they need to return home.
A recent example of this would be 139 Woodland Street, Balgowlah (pictured below) sold for $2.88 million in July through Cunninghams Real Estate with an original asking guide of $2.75 million, the report noted.
The report suggests investors have traditionally been attracted to new units as their investment vehicle thanks to their lower entry price point than houses, location to essential services and low maintenance compared to a detached house in the suburbs.
However investors must proceed with caution with many cases of settlement valuations not meeting the original price paid off the plan. This can occur years after the initial purchase has been agreed upon.
"If you have concerns, our advice is to engage an independent valuer to provide a valuation on the property," the valuation firm said.
An example from Sydney’s central west is 114/9 Paddock Street, Lidcombe (pictured below), a 2 bedroom 2 bathroom unit which sold off the plan in March 2017 for $810,000 however has now relisted with an asking price of $700,000 to $750,000.
Given the amount of proposed units to be built in the local area and the current market conditions this trend will no doubt continue in the short term, the report noted.
In comparing rental returns of one and two-bedroom units, one-bedroom units in Parramatta have shown a higher annual return than their two-bedroom counterparts, as shown in the table below.
In the south, units in Mortdale and Oatley are still providing reasonable rental returns whilst vacancy rates in these suburbs have remained reasonably low compared to neighbouring suburbs along the railway line, which have had a greater supply of new units into the market.
According to SQM Research, the vacancy rate in June for the Mortdale/Oatley postcode was 1.7 per cent, compared to 4.9 per cent in the Penshurst postcode and 4.7 per cent in the Hurstville postcode.
A two-bedroom, one-bathroom, unit with one-car garage, recently sold in Rosa Street, Oatley for $700,000.
The 1960’s ground floor unit, with a dated but well maintained fit out, positioned within short walking distance to Oatley village shopping, cafes and railway station.
The unit was leased to a long term tenant for $520 per week, providing a rental yield of 3.9%.