The top Sydney suburbs to watch

Sydney may be on track for a bullish housing recovery, but it will be the properties in the middle and outer rings of the capital city that will outperform, according to SQM Research’s Louis Christopher.  

Speaking yesterday at the SQM Research’s annual Afternoon of Property seminar, Christopher said the recovery has been “fairly broad based”, but has not yet taken place in the top end of the market.  

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Photos: Taken at the event held in Sydney

“There seems to be a bit of a threshold there that once you get over $2 million, buyer demand falls away rather quickly,” he said.  

“The outperformance is going to be those properties under that threshold and most likely be in the middle and outer rings of Sydney.”  

The demographics of these areas are also expected to change on the back of a shortage of new housing in Sydney’s eastern suburbs.  

“We’re going to see the wealthy people start to move out to middle ring because the very rich are staying in Sydney’s east and the lower north shore,” Christopher said.  

“I think [middle-income earners] are going to be pushed further out into the west - into the outer ring - and I think that’s already been happening.”  

While the same types of bullish growth rates are not expected for the prestige market next year, Christopher believes it will pick up slightly.  

“We still think Sydney’s east is going to perform, but I think it’s going to be all the stocks under the $2 million mark in east Sydney where you’re going to see strong performance,” he said.  

Rental yield was identified as another consideration for investors who are weighing up where to park their money.  

Christopher warned that investors would be buying into a low yield environment, especially at the top end of the market.  

“The higher up you go, the lower the yield, and as an investor, the lesson from that is to consider maybe buying at the mid-level,” he said.  

“It just seems to be more cost effective if you buy properties roughly around the $500,000 mark than $1.5 million.”  

Interestingly, Christopher also pointed out that properties in Sydney’s east and Sydney’s west have been performing in line in the last few years, despite the significant gap in price difference.

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