Top 5 Considerations when Investing in Sydney
Today I want to talk about Sydney as a place to invest, particularly from the perspective of someone who doesn’t live in New South Wales and is considering becoming a borderless investor and buying in Australia’s largest city.
Being a Perth boy, the contrast between Perth and Sydney is SO great. The density, the population and the lifestyle is very, very different in a whole range of components.
For me, the first thing to consider when investing in Sydney is to understand the enormity as a focal point of the harbour and the beaches.
They are just so incredibly unique. If you think about that harbour — there’s nothing quite like it anywhere else in Australia, and it’s a huge activity zone for a lot of people.
There’s New Year’s Eve fireworks; there’s pleasure boats on the weekend; there’s the Sydney to Hobart Yacht Race; there’s cruise ships coming in and out … it is definitely a focal point.
So for a lot of people, the focus on it — the view and proximity to the harbour — is incredibly unique.
If you can get real estate that has a view or within proximity of the harbour, it’s definitely going to “up the lifestyle component” of these particular properties, and hence increase their value.
The harbour also acts as a geographical limitation. If you think about people who live on the North Side, it’s very difficult for them to get on the South Side because of the congestion. Likewise on the South Side, getting to the North. So communities tend to stay together in these particular regions, separated by the harbour.
The other thing that’s so unique about Sydney, is the beaches.
If you think about Western Australia or Queensland, there’s these long sandy beaches — these don’t happen in Sydney because there’s heaps of rock cliff faces all the way up the coast.
You’re there at Bondi; and you get to Tamarama; and then you get to Bronte; then you’re down to Maroubra in the South … but in in-between there’s all these cliff faces. So it’s not as if it’s just endless sandy beaches all the way along the coast.
You’ve got this huge population base and this highly desirable lifestyle — “a weekend thing to do”. So if you can get near the beach, have the proximity or be near the view, again, this ticks the lifestyle factor. It also increases the demand and, therefore, increases the value of these properties.
So for me the number one consideration if you’re investing in Sydney is to try and get as close as you possibly can to the harbour and the beaches.
The second thing to consider is: it’s a highly desirable international city.
If you think of New York, Hong Kong, London — you just think they’re really buzzing cities, but Sydney is very much in that category. If you also think about these other international cities, housing affordability is a huge issue, and this’s also the case in Sydney. It has this affordability challenge.
But the one thing about Sydney that’s quite unique compared to every other city in Australia, even more so than Melbourne, is one in three people live in an apartment.
They embrace this medium and high density, largely for affordability, but also to be able to accommodate the sheer number of people living there. The locals do embrace this density.
So the challenge is: if you live in a city where “a house with some land” is normal, don’t be afraid to buy apartments in Sydney because that is, in fact, normal to them.
This is an important consideration. So when you’re looking to invest in Sydney, investment grade is can quite often be an apartment for a lot of people.
The third thing to consider is: there’s 6 million people living in Sydney, and in the next 20 years there will be another 1.5 million. It will grow by 25%.
Congestion is normal. In fact, it’s the Congestion Capital of Australasia — the road network and getting around is actually slower than New York, where the average is 72.5 kilometres an hour, including the M2 and the M7.
That is a lot of congestion.
If you’re going to invest in an international city with lots of people and has geographical limitations with the mountains, the ocean and the harbour, it’s absolutely critical that you have proximity to the train.
Having a train to get you around this city is so important, and people will place a value on this.
So if you’re investing, make sure you follow these trains, because this is going to give you the best chance of getting wonderful growth in this city.
The fourth thing to consider is it’s an outdoor lifestyle.
It’s a very temperate climate — they don’t have the extreme highs, they don’t have the extreme lows — so it’s really friendly all year round.
If you think about what the drivers are — economic activity, human interest and human behaviour — Sydney has the CBD, which is largely an international workplace attracting internationally high salaries, but it also has these human interests and human behaviour elements largely centred on the outdoors.
We talked about the beach, we talked about the harbour; but think about the parks, think about all of the lifestyle drivers: where are the walkways for people to get out and enjoy this wonderful climate?
So if you’re thinking of buying a house, clearly some outdoor space is great — but if you’re thinking of buying a unit, terraces and balconies are absolutely critical. And the bigger you can get, the absolute better! Because people who use them, they’ll embrace them to form part of their lifestyle.
For me, the final consideration is the idea of buying real estate in Sydney. You’re probably typically going to go to an auction, right?
So you have to understand the auction process —but you’ve also got to understand gazumping. Because in this city you have this exchange system. If I’m in Western Australia, South Australia, or Queensland, I offer an acceptance, I get it in writing and often I can do my due diligence afterwards. But in Sydney you’ve got this exchange system where the vendor signs, the buyer signs and then once the contract is exchanged, only then we’ve got a deal.
Quite often people will have a verbal agreement that they’ll get the deal done. But if someone else comes along and exchanges before they do, that’s what’s called gazumping — you miss out on the property; you think you’ve got the deal done.
So what happens is you’ve got to get a lot of due diligence done in advance.
For you to have the best chance of getting a deal done in the city, you’ve effectively got to give them an unconditional contract with the due diligence all done prior to that point.
Now, the challenge with this is, you can spend a lot of money getting this due diligence done with no guarantee of actually getting the property. So it’s important you understand: it’s a very auction centric city also, but the fact that you can get gazumped is really, really important.
So you need to be on your game and if you don’t know how to buy real estate in the city, you need to get some help from professionals who’ll help you do this.
I think Sydney’s a wonderful city to consider if you are in Australia and want to build a property portfolio with a number of properties. It just makes sense to, at some stage, have Sydney real estate in your portfolio. But there are certainly some things to consider. Hopefully, these five things I’ve talked about will help you when you’re looking to buy in the Sydney market!
If you liked this, you might also like The Top 5 Considerations when Investing in Melbourne