Coastal apartments could be the next big thing when it comes to investment opportunities in Sydney, as vacancy rates drop and housing supply tightens across the city.
A buyers agency network has named the best unit markets for finding a tenant, with several suburbs from the northern beaches and eastern suburbs making the list.
Dee Why, Manly Vale, Brookvale, Maroubra, Kensington and Kingsford all featured as strong opportunities in terms of good tenant demand and low vacancy rates.
All of the suburbs experienced high capital growth over the 12 months to February. Values in Dee Why and Manly Vale had grown by 35 per cent over the year, with median apartment values just north of $1.1m. The median apartment price in Brookvale was slightly higher at $1.18m following 30 per cent growth, while Maroubra, Kensington and Kingsford straddled the $1m mark after a 23-29 per cent climb.
While the reopening of international borders would create an influx of new people seeking rental accommodation, the opportunities for investors extended far beyond the inner-city locales traditionally favoured by international students and new arrivals.
This had much to do with falling vacancy rates and a tighter level of housing supply in several Sydney regions said BuyersBuyers co-founder and chief operating officer Pete Wargent.
The northern beaches were a case in point. With limited new apartments being built, the area experienced low vacancies throughout the pandemic despite other Sydney markets feeling the brunt of a significant drop in renter demand.
“In the northern beaches, the stock has been falling and falling,” Mr Wargent said.
“It’s creating a pressure cooker environment where, if that continues, we will only see prices and rents spiking higher.”
He said he expected rents to increase by 10-20 per cent nationally as new overseas arrivals put pressure on the already tightening domestic rental market.
Vacancy rates had fallen from 8 per cent to 2 per cent in the university suburb of Kensington, with open borders expected to fuel further competition among renters. He said vacancies in inner city Sydney were “filling up at a rate of knots” and that the rental market would be “extremely tight” over the next two years as supply failed to keep pace with increased demand.
This demand was also coming from young domestic renters leaving home after lockdown.
“We already had vacancies at 16-year lows nationally last month and that’s even before the borders opened fully,” Mr Wargent said.
“The borders reopening is just a final factor in a confluence of things that have come together to reduce the amount of rentals available.”
He said it was important to look beyond transitory trends caused by the pandemic and focus on the long-term fundamentals.
“In the unit market, there are solid opportunities in many of the coastal markets on the eastern seaboard, as well as in Sydney’s northern beaches and eastern suburbs.”
“Our analysis shows that there are some strong opportunities for investors with a budget ranging from $800,000 up to $1.2 million, and requiring a rental yield of at least 3 per cent.”
He said good quality apartments favoured by owner-occupiers in areas where supply was capped offered the best opportunities.