Smaller scale unit developments in Sydney CBD fringe have stronger capital growth: HTW residential

Investors within the inner and middle ring suburbs of Sydney have generally been focused on capital growth, particularly within the recent years of 2015 to 2017 where most properties saw double-digit growth year on year, according to the latest Herron Todd White (HTW) residential report. 

The valuation firm took a look at the rental yields across the country to dissect where to find the best returns in residential markets.

"However, since mid to late 2017, we have seen values decline in most property types and locations across Sydney with certain property types and locations hit harder than others," the valuation firm said. 

"In addition to this we are at record low interest rates and in an environment where capital growth or decent yields are difficult to find."

The report notes investment grade home unit style properties within inner Sydney can generally return gross annual yields in the order of 3% to 5%, however this is dependent on many of the usual factors that affect property such as location, property type, condition, quality, views and parking.

It also said it's important to remember that these yields are gross and therefore have not been adjusted for outgoings, in particular strata levies which can be substantial, particularly if the unit is located within a high density apartment building with common facilities such as pools, gyms and lifts.

A dual key apartment is commonly defined as having a self-contained studio accessed by a door, inside the main apartment.

There is a shared common hallway, but separate lockable doors to each home.

A dual key unit in Central Park at 1203/18 Park Lane Chippendale (pictured above) sold in May for $1.2 million.

The property was a two-bedroom dual key apartment with each area comprising one-bedroom, bathroom, kitchen, laundry, lounge/dining and balcony.

The unit also enjoys extensive common facilities such as pools, gym, spa, rooftop garden and concierge.

The advertised rental was $1,330 per week combined which reflects a gross yield of 5.76%.

"Depending on the specific needs of each investor, it could be more beneficial to focus on units within smaller scale developments or entry level Torrens title properties such as terraces or free-standing dwellings.

"These options would be beneficial in terms of not having to pay high fees for common facilities and there is opportunity to add value via renovations. Smaller scale unit developments and Torrens title properties also tend to have stronger capital growth over a long term period," the valuation firm concluded.