Sydney apartments 'back in vogue' for investors

Investors are rushing to buy Sydney apartments ahead of an anticipated influx of offshore buyers and student tenants, with lockdown restrictions now eased and international flights having resumed.

The resumption of international arrivals is expected to have a big positive impact on property prices, with three in five panelists recently surveyed by Finder saying the reopening of borders would contribute to value uplifts.

In Sydney, Finder’s research showed apartment prices were likely to rise by 4 per cent in 2022, pushing the median price up by $31,000 to $806,000.

Real Estate Institute of NSW chief executive Tim McKibbin said those growth prospects were attracting strong interest, with apartments appearing to be “back in vogue”.

“Recent Urbis figures indicate off-the-plan apartment sales in Sydney rose sharply in the September quarter at a rate double that of the June quarter and about four times that of the March quarter,” Mr McKibbin said.

“With this shift in appetite for apartments comes some interesting demand factors which could influence both sales and rents.”

Mr McKibbin said the first wave of international students would arrive back in Sydney next year, which would relieve some of the vacancy issues in certain sectors of the rental market.

“At the same time, the new wave of apartment completions is set to decline, creating an environment which should enable newly-completed stock to be absorbed, especially if investors react in numbers to the changing demand picture,” he said.

“With greater choice and the potential for increased demand, the more affordable apartment market will be one to watch.”

One developer enjoying some stunning sales success in recent months is Sydney-based Crown Group, which sold more than $28 million worth of apartments in October, with a further $48 million in sales expected to be secured by the end of this month.

Director of sales Prisca Edwards said around 75 per cent of those apartments were sold to investors, who had driven the biggest surge in investor activity in at least three years.

All of the apartments sold to investors in October were two-bedroom, two-bathroom properties,  intended for the rental market.

Ms Edwards said in addition to the elevated demand that would come from international buyers, a lack of future supply would provide a foundation for capital growth.

“The most important thing that we think is going to affect the apartment market is the fact that a number of developers have pulled out of the market, especially the foreign ones,” Ms Edwards told Australian Property Investor Magazine.

“They are selling their sites or they are changing their tack and they are not building residential projects any more. 

“Because of that, the immediate result will be there will not be enough supply of apartments in the next couple of years. 

“That’s the most important reason why we think apartment values are going to rise; the undersupply issue is going to be the major factor going forward.”

Ms Edwards said she believed the sudden uplift of interest in apartment investing was a natural phenomenon, following the major gains recorded for detached house values in 2021.

“No one expected the housing market to be as hot as it has been, it was just crazy,” she said.

“Some buyers are now turning their interest from housing to apartments because they can’t afford houses. 

“We think that a correction is definitely something that is expected, because the gap between house prices and apartment prices is so large, it peaked at around 66 per cent.”

In the rental market, Ms Edwards said weekly rents were starting to rise, a factor also piquing the interest of many investors.

“Many young professionals, and even families, are being forced to rent as current house prices are just too expensive,” Ms Edwards said. 

“We are still in a low interest rate environment which is attracting investors, and bank regulators don’t appear to be calming the ever-booming housing market in the foreseeable future.”  

“We see this as an opportune time for investors to buy property, especially in the apartment and off-the-plan sector.”

Looking forward, Ms Edwards said Crown Group would be increasingly acquisitive to place itself in a position to cater for the rising demand, while also bringing forward the development timeline for several of its upcoming projects.

"In the next two months we’ll acquire two more sites, and we’re actively looking for new sites across Sydney," she said. 

"Our Mastery project was intended to be built in two stages, and now we are building it in one stage next year.

"And for Eastlakes we are in the middle of planning to build the south side of the development, which is three times bigger than the north side, and we’ll build that ahead of schedule as well.

"We are not just looking at our existing plans, we are also buying new projects across the state."