In New York, particularly in Manhattan, it’s almost impossible for the average wage-earner to step onto the property ladder. Without a high-paying job or a wealthy family to help out, most New Yorkers are resigned to the fact that they will likely be renters for their entire lives – and it looks like Sydney-siders could follow suit.
New York City has the lowest rate of home ownership in the United States.According to a recent study, only 31 per cent of residents in the Big Apple are owner-occupiers – that’s less than half the nationwide rate, making NYC one of the most unaffordable housing markets in the world.
With property prices in Sydney rising 50 per cent faster than other capital cities last year, it certainly seems like the Harbour city is set to be Australia’s answer to NYC.
In 2016, the median house price in Sydney rose to a staggering $991,000 – an increase of 16.7 per cent! Even units rose almost 10 per cent in value, up to $722,600 (For more property trends and data, read our latest State of the Market Report).
A perfect storm of low interest rates, foreign investment and a housing shortfall have meant that property price growth in Sydney has outstripped the rest of the country by a mile, with Sydney homes now worth 75 per cent more than homes in Brisbane, according to the latest CoreLogic data. Even Melbourne hasn’t caught up, with homes there valued at one-third less than the Sydney median.
So, what does this mean for investors?
Big cities aren’t just made up of white-collar workers in office blocks. There is a myriad of other professions – from hairdressers to baristas, to retail workers, to school teachers, nurses and childcare workers – who service the CBD. Not to mention, the university students who study at city campuses.
While buying a property may be out of reach for many of these workers, they are still going to need somewhere to live, within reasonable travelling distance to their workplace or school. For these Sydneysiders, moving further out to an area where they can afford to buy simply isn’t practical, when they factor in the additional expenses that come with owning a property, such as council rates and maintenance, plus transport costs.
Because yields are so low in Sydney, it makes much more sense for them to rent in their desired suburb and invest elsewhere.
This is where investors stand to benefit hugely from the post-GFC property boom.Even if price growth slows somewhat, as many in the industry predict that it will, the limited supply of accommodation close to the CBD means rental accommodation will remain in high demand, and Sydney landlords will reap the rewards. Higher demand means higher rents and lower vacancy rates, as there should be several tenants vying for your property.
What if you’re a first homebuyer?
For first time homeowner, Sydney may be out of your price range, but there are still many great regional towns in NSW where property is more affordable. Can you relocate and work elsewhere, or would you be able to accommodate a longer commute? There’s also the option of moving interstate – in Brisbane you can enjoy inner-city lifestyle and ambience for a fraction of the price!
And let’s not forget the ever-popular strategy of rent-vesting: renting where you live, and buying where you can afford.
Don’t forget, that first rung on the property ladder is the hardest, as you’re saving for a deposit while also paying rent. Buying elsewhere and continuing to save could be the best option for some young Sydneysiders, with the goal in mind to trade up to a home in Sydney in the future.
Are you confused about what action to take to get your foot on the property ladder? Whether you’re looking for an investment property or a home, feel free to contact us at Multifocus Properties and Finance for an obligation-free chat on 1300 266 350.