Sydney price bubble means Vaucluse advised for first home buyers: Herron Todd White

A price bubble at the lower end of the Sydney market means Vaucluse is now the one of the only attractive suburb for first home buyers, according to Herron Todd White’s September review.

It says there is a boom across Sydney at the lower end of the market spurred on by low interest rates and tight supply, pushing prices into unsustainable levels with the rare exception of Vaucluse which has lower demand for the cheapest units.

“There have been some very recent two-bedroom, one-bathroom, car space unit sales in the $550,000 to $600,000 price range,” the report says.

“This is most likely due to the major demand in this suburb being exclusive family homes with unit demand far less. It may represent good buying, as it is inevitable that units in this area will eventually see strong growth due to the general popularity of the suburb.”

One other suburb flagged as not being inflated is Brookvale in Sydney’s Northern Beaches which it says is currently in oversupply following a spate of new construction.

“Although this has helped produce some relatively cheap buying options at the lower end, it does not bode well for future capital growth over the short/medium term.”

Those looking for short term capital growth are advised to look in the local government area of Holroyd, particularly in suburbs such as Pendle Hill and Wentworthville.

“In these suburbs you can still purchase a detached house on a decent sized block of land 28 kilometres from Sydney CBD and 7 kilometres from Parramatta and within close proximity to major arterial roads and train stations,” the report says.

“The larger sized blocks give the owners an option of a large backyard for the kids or provide developers with options to build a granny flat or land bank for future development if permitted by council.”

“The versatility of these dwellings will ensure it appeals to a wider variety of buyers resulting in higher potential for growth.”

Herron Todd White says there may be some relief for first home buyers as more properties come to market.

“The unique combination of historically low interest rates and severe lack of stock have created a real price bubble at this end of the market,” the report says.

“It has really compounded the difficulty to enter the market for this group of people. There may be a let up with increased supply come springtime and after the election, but for now it remains an extremely tight price point in the market.”

"The pinpointing of Vaucluse as an attractive option for first home buyers by the Herron Todd White valuation group was akin to looking outside the gift box a bit.

As the traditional FHB inner city stomping ground kicks along with high auction clearance rates and ensuing price growth, the message from the on-the-ground valuers was sometimes its pays to go to possibly less attractive alternatives before everyone else does.

And that needn't be to the cheaper suburbs, but in this case the virtual blueblood suburb of Vaucluse."

Read Jonathan Chancellor's full insight into how grumpy first home buyers even face investor competition for the Vaucluse crumbs.