Hotspots: From fibros to McMansions, western Sydney attracting investor attention
Despite having unfashionable reputations due to swathes of unattractive McMansions and fibro cottages, western Sydney suburbs like Liverpool, Blacktown and Penrith are making appearances on hotspot lists primarily because of investments in infrastructure, job creation initiatives, new residential developments and more affordable properties. The most recent list of the 50 suburbs with the greatest capital growth potential featured in Smart Property Investment magazine included four western Sydney suburbs. Rental yields of between 5% and 6% are also encouraging investors to consider these outlying parts of greater Sydney.
Location:
Western Sydney comprises 14 local government areas extending from Auburn (19 kilometres west of Sydney) all the way to the Blue Mountains (50 kilometres away). Prominent residential suburbs include Blacktown, Liverpool, Bankstown, Parramatta, Campbelltown and Penrith.
Key demographics:
Western Sydney is one of Australia’s largest urban areas and home to just over one in 11 Australians. It has a population of about 2 million people and is growing at a rate of about 36,000 people per year (1.8%), slightly higher than the average growth rate of 1.7% for the Sydney metropolitan region. Western Sydney’s population is forecast to reach 2.9 million by 2036.
It is an extremely diverse, migrant-rich part of Australia, with half of the world’s nations represented among its residents. In the Fairfield municipality alone, more than 70 different languages are spoken, while Auburn is home to people from more than 100 nations.
It is popular with young families and has a younger population than Sydney. More a third of residents (37.3%) in western Sydney are 24 or younger.
Western Sydney spans the social spectrum and includes areas of prosperity, enterprise and innovation and some areas of disadvantage.
Infrastructure, jobs and residential developments:
The NSW government aims to improve already strong transport links between western Sydney and the Sydney CBD. In its 2011-12 budget it allocated $314 million to develop the train line between Epping and Rouse Hill, while the south-west rail link is already under construction and due for completion by 2016. It will provide train services operating to Liverpool, the Sydney CBD, and Parramatta.
Two areas within western Sydney (the north west and the south west) have been earmarked as major residential growth centres over the next 25 to 30 years with plans for 181,000 dwellings. The north-west growth centre is approximately 10,000 hectares and includes the suburbs of Baulkham Hills, Blacktown and Hawkesbury with plans for 70,000 new dwellings at Rouse Hill.
The south-west growth centre is within the boundaries of Liverpool, Camden and Campbelltown and is made up of about 17,000 hectares with capacity for about 110,000 new dwellings.
As part of its Sydney metropolitan plan, the NSW government is looking to increase employment in western Sydney with the development of the Western Sydney Employment Area located near the intersection of the M4 and M7 motorways. The zone is expected to eventually accommodate approximately 40,000 workers and is located close to western Sydney’s north-west and south-west growth centres.
The property numbers you need to know:
| Population | Median house price | Gross rental yield | Median unit price/yield | Gross rental yield | Distance from Sydney |
Blacktown | 39,000 | $376,000 | 5% | $285,000 | 6% | 34 kms |
Liverpool | 21,000 | $400,000 | 5% | $250,000 | 6% | 32 kms |
Penrith | 11,300 | $335,000 | 5% | $247,000 | 6% | 50 kms |
Rosemeadow | 7,400 | $312,000 | 6% | n/a | n/a | 56 kms |
Sydney | 4.5 million | $550,000 | 4.5% | $453,000 | 5.2% |
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Current state of the market
SQM Research director Louis Christopher describes Blacktown as having a good ratio of income to house prices with income growth rising quickly due to changes in demographics. Vacancy rates are just 1.1%. Furthermore Blacktown has good transport connections to Sydney via rail and motorways.
Similarly, the vacancy rate in Liverpool is just 1.4%, with prices of houses and units still affordable compared to Sydney and the ratio of income to house prices is good. Liverpool is on four Sydney railway lines.
Vacancy rates in Penrith are just 0.6%, the suburb has very good income-to-house price ratios and has excellent rail and motorway links to Sydney. Christopher describes Penrith as “a good safe option for investors”.
Douglas Driscoll, CEO of Starr Partners, expects the western Sydney market to get stronger with new suburbs and shopping districts appearing, businesses establishing and settling in the area, transport connections improving and large master-planned residential developments are appearing. “No other area in Sydney is seeing that amount of change so quickly,” he says.
A further indication of the strong appeal of western Sydney, the regional hub of Liverpool recorded the highest number of buyers applying for stamp duty exemptions during December 2011, ahead of the NSW government limiting concessions to those buying newly constructed houses and units. Second on the list was Blacktown, followed by Westmead, Campbelltown and Parramatta.
Reasons to consider buying/investing:
- Growing population, new residential developments and businesses coming into the area
- Popular with middle-income earners and young families
- Multiple rail and motorway connections to Sydney CBD and being expanded.
- More affordable houses than in Sydney
- Rental yields of between 5% and 6% generally higher returns than available in Sydney
Reasons to consider not buying or investing:
- Not fashionable suburbs
- Still fairly significant commuting distances from Sydney
- More vulnerable to declines in the economy and rises in unemployment – it maintains its reputation as Australia’s mortgage repossession belt with a higher proportion of lender repossessions in Western Sydney compared to rest of NSW
- Crime is still an issue in some parts highlighted by a recent spate of drive-by shootings in Parramatta, Holroyd, Auburn and Bankstown areas
- Still overrun with McMansions
What property analysts are saying about Western Sydney:
Louis Christopher: ''The western suburbs will likely outperform the rest of Sydney and Sydney out perform all capital cities [in 2012].''
''Increasingly investors are seeing that Sydney's west might offer just as much capital growth as Sydney's inner ring but at the same time they're going to get higher yields and fairly high rental growth as well,''
Douglas Driscoll: “There will continue to be infrastructure growth, new developments and rental yields of 5% to 6% in greater western Sydney. Investors will continue to head west, lured by affordable property with high returns and higher stock levels.”
Hotspotting.com.au director Terry Ryder: “The Blacktown area grew in popularity throughout 2009 and 2010, with lower-end buyers targeting it as an affordable area with good transport links, making it Sydney's most popular area for home sales. The upgrade to parking infrastructure at several train stations in the Blacktown area adds to its appeal.”
Two potential investment properties up for sale:
Homeland Real Estate Liverpool is selling this 385-square-metre, four-bedroom townhouse on Memorial Avenue close to the Liverpool CBD with an asking price of $469,000. The townhouse is currently returning weekly rent, of $485 equating to a yield of around 5.4%
Roy Halabi from Guardian Property Specialists is selling a four-bedroom penthouse apartment across from Auburn train station with distant city views (pictured below) with an asking price of $450,000. Halabi says the property has the potential to charge weekly rent of $550, equating to a yield of about 6.4%
