Sydney Property Investment Update 2022

Here, we break down the key aspects to understand before investing in Sydney and what makes this an opportunity beneficial for all investors.

Sydney Housing Market

When investing in property, an understanding of a location's housing market in relation to current and previous trends can be beneficial. Sydney’s property market is widely known as being the most expensive city in Australia.

As shown below the median house and unit prices in Sydney have historically seen impressive amounts of long term growth. From December 2003 to 2020 the median house and unit prices in Sydney have increased from $520,000 and $387,000 to $1,000,000 and $735,000, respectively.³ Historically Sydney has shown it’s housing market can provide great capital growth when looking to purchase a property as a long term investment.

Source: Median price (unstratified) and number of transfers (capital city and rest of state)

Throughout the uncertainty of 2020, Sydney’s property market saw a slight decline throughout the year. However, the resilience of this property market resulted in a quick recovery towards the end of 2020, as the housing prices in December 2020 were up 1% compared to December 2019 and Unit prices stayed flat year on year. 2021 has seen an even greater recovery in Sydney’s market with a 2.39% increase in April alone.⁴

Following on from the already impressive performance Sydney’s property market has experienced so far in 2021, ANZ is forecasting property values to increase by 19% this year, followed by a 6% increase in 2022.⁵

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Sydney Economy and Infrastructure

Being the capital city of Australia’s largest state economy, there’s no surprise that Sydney has the biggest city economy of the nation. In FY19-20, The Greater Sydney region of NSW accounted for 22.81% of Australia's Gross Regional Product (GRP).⁶ Although the impacts of COVID-19 caused Sydney’s GRP to decline in FY19-20 by 0.4% - the first decrease recorded for the area since collecting this data in 2001⁷ - the economy has shown positive signs of recovery.

A promising sign for Sydney’s economic recovery is NSW’s overall unemployment rate. After recording a 10-year high unemployment rate of 7.2% in July 2020, the state’s unemployment has improved consistently since and has recorded an unemployment rate of 6% as of January 2021.⁸

A significant aspect of the city’s COVID-19 economic recovery plan includes it’s infrastructure pipeline as many projects have been assigned funding in order to drive employment growth in Sydney.

Sydney’s key upcoming infrastructure projects include⁹:

Western Sydney City Development

$20 billion to develop the Airport, Aerotropolis and surrounding precinct in Western Sydney.
Parramatta CBD

$2 billion Parramatta Square development to bring new building, construction, cultural centre and retail opportunities.
Sydney Metro City, Southwest and Northwest

$12 billion investing in new public transport infrastructure.

Property investor guide

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Sydney Rental Yields

Despite Sydney’s housing market consistently seeing high levels of growth, the city’s average rental yield has not experienced the same growth. Despite not experiencing high levels of rental yield, Sydney has historically seen stable rental yields with no major variations in the expected figures. Unlike the housing market in 2020, the gross rental yield in Sydney for both units and houses, stayed relatively flat with units recording between 3.5-3.6% and houses 2.4-2.7%.¹⁰ As of April 2021, the average gross rental yield for Sydney currently sits at 3.5% for units and 2.3% for houses.¹¹

These figures highlight the resilience of Sydney’s rental market as the expected average rental yield has remained stable whilst other areas of the city's housing market and economy have fallen due to the pandemic.

Best Suburbs in Sydney to Invest:

There are of course many suburbs in Sydney that are great locations to begin or grow your investment portfolio. Through our analysis of the Sydney property market, we have identified suburbs in the high, medium and low end that may be a great opportunity to begin your investment journey with. These 3 suburbs were chosen due to their proximity to the CBD, historical property growth and potential rental yields and may serve as a guide that we believe can provide strong results if you’re looking to invest in property.

Fairlight, 2094

Key Stats	House	Unit
Median buying price	$2,590,000	$1,545,000
Median rent (per week)	$1,030	$700
Rental Yield	2.1%	2.4%
Distance to CBD	14.1km

Source: https://www.realestate.com.au/neighbourhoods/fairlight-2094-nsw

Fairlight, located in the Northern Beaches area of Sydney, is a quiet suburb that offers a great seaside lifestyle while still remaining in close proximity to Sydney’s CBD. With house and unit prices well exceeding the median prices of Sydney, Fairlight is one of the more expensive suburbs to invest in. Although despite the already high prices, the trend of this suburb indicates that properties are still experiencing strong growth, with a compound growth rate of 6.4% and 7.1% over the past 5 years for houses and units, respectively.

Therefore if you can afford to invest in Fairlight, now is a great time as the suburb sees continued growth and high demand.

Parramatta, 2150

Key Stats	House	Unit
Median buying price	$1,255,000	$565,000
Median rent (per week)	$470	$430
Rental Yield	1.9%	4.0%
Distance to CBD	23.9km

Source: https://www.realestate.com.au/neighbourhoods/parramatta-2150-nsw

Known as Sydney’s second CBD and with major infrastructure investments to improve the already busy business district, Parramatta is becoming a popular destination for investors. Although Parramatta is building its own CBD, it is still within close proximity to Sydney’s CBD making it an appealing destination.

If you’re looking to invest for capital growth, Parramatta’s housing market has recorded a 5.3% compound growth rate over the past 5 years, and while the suburbs units have seen a 2.5% decrease in the same period, the high rental yields for units still makes Parramatta a great investment location depending on your situation.

Richmond, 2753

Key Stats	House	Unit
Median buying price	$732,500	$450,000
Median rent (per week)	$450	$360
Rental Yield	3.2%	4.2%
Distance to CBD	63.7km

Source: https://www.realestate.com.au/neighbourhoods/richmond-2753-nsw

Located further from Sydney’s CBD, Richmond is an affordable location to invest in Sydney providing a quieter lifestyle. With lower median prices, Richmond is able to offer rental yields above the city’s average in both the housing and unit markets.

How to invest in the Sydney property market

If you’re ready to start investing in Sydney, the next step in your journey is to speak with a broker to apply for an investment loan.

For your first investment property, we have created a beginner's guide outlining the main factors you need to consider and the costs involved here.

When applying for an investment home loan, it is best to understand what type of loan is right for you and the associated rates. You can compare investment loans across multiple lenders from our panel here or speak to a Mortgage Choice Broker who can go through your situation, compare the loans available and find the loan that’s right for you.

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Of course, this is only a starting point, as there are many areas in Sydney that can offer similar or greater investment opportunities. If you’re interested in investing in Sydney and are ready to get the process started, it is best to speak with your local Mortgage Choice broker to get expert advice on your property investing journey.