Where Sydney property investors should be looking in 2023

Sydney’s ranking for property investment potential has fallen sharply according to a newly released report from Canstar, leaving investors to decide whether lower prices mean it’s time to enter the Sydney market or shop elsewhere in Australia for a real estate bargain.

Holding a respectable fourth position in 2021, the Harbour City is now in 12th place, which may offer a hint of what lies ahead in 2023.

The Canstar findings ranking Australia’s property markets from hottest to coldest are based on sales volumes, price growth and vacancy rates collated in collaboration with research by property expert and Hotspotting founder, Terry Ryder.

It notes suburbs with median house prices above $3 million have dropped which has dragged down the overall Sydney median price, but less expensive markets remain buoyant.

But even in a retreating Sydney, and indeed national, property market, there are myriad suburbs in the New South Wales capital that could be worthy of investor attention in 2023.

Sydney units

Apartments (units) are showing strong buyer demand due to median unit prices being half that of houses, particularly in the Sydney City, Inner West and Parramatta LGAs (local government areas).

Units in Campsie, Liverpool, Marrickville and Westmead are particularly strong.

For example, Campsie apartments are a fraction of the price of nearby houses, with growing buyer demand. The median unit price of $620,000 is less than half the median house price and unit sales outnumber houses four to one.

More than 300 apartments sold in Westmead in the past 12 months at a median price of $560,000. Low vacancies mean rents are rising strongly.

The Inner West is also full of suburbs where typical units cost a fraction of local houses and demand for relatively affordable units is rising. The median house price in Marrickville has recently nudged $2 million but for units is just $840,000, with unit sales outnumbering house sales.

Western Sydney

The remaining six suburbs in the Top 10 (Rising Star) list for Sydney tell an important story about Inner and outer Western Sydney through standouts, Fairfield, Georges Hall, Granville, Jamisontown, Lurnea and Rooty Hill.

LREA Parramatta property mentor Roy Halabi told API Magazine that the entire Western Sydney region is experiencing tremendous growth and upgrades to infrastructure, from Parramatta’s Light Rail network to Liverpool’s Aerotropolis and the new Badgerys Creek Airport. 

“Currently, the Parramatta region’s three best performing suburbs are Parramatta, Rydalmere and Wentworthville.

“Parramatta’s growing infrastructure, employment and attractions enhance its 4.3 per cent-unit rental yield, 5 per cent annual price growth and 9.3 per cent rental price increase,” Mr Halabi said.

“Rydalmere has had a contextually great year with a 7.9 per cent house growth rate, 20.9 per cent-unit growth rate and an average rental yield of 3.5 per cent.

“Wentworthville has also had a considerably successful year, with a rental rate growth of 10.6 per cent, rental yield of 4.4 per cent and an 11.9 per cent rate of capital growth.”

Looking to 2023, he predicts the top Parramatta region suburbs that will offer the highest potential are Parramatta, Westmead, and Granville.

“Parramatta’s continued infrastructure and business development, stable housing market and consistent investment opportunities offer a strong outlook for the incoming year.

“Granville has seen a yearly growth of 19.1 per cent, vacancy rate of 1.4 per cent and its sales activity has doubled over the past year-and-a-half.

“Westmead shows continuing promise resulting from their continually growing hospital and university hubs, offering a 1.4 per cent vacancy rate and high average rental yield of 3.7 per cent,” Mr Halabi said.

Kate Hill, Property Buyer, Adviseable

For Adviseable property buyer’s agent Kate Hill there is also promise in Western Sydney’s Glenmore Park, St Clair and Claremont Meadows.

“The key reasons are their easy access to the biggest infrastructure investment in Australia, Badgery’s Creek Airport.

“There are massive population growth forecasts, improving transport links and the suburbs are still affordable by Sydney standards,” Ms Hill said.

“In Penrith, the City Council and business organisations have seized the moment and are implementing plans to create 12,000 jobs by 2036, while at the same time, the city’s new Local Environment Plan has been approved by the State Government, providing opportunities for property buyers.

“In its vision for Sydney’s West District by 2036, the Greater Sydney Commission says: ‘The dynamic city of Greater Penrith – an economic and service hub for the district and the gateway to the Blue Mountains and the Central West region of NSW – will build on its renowned health and education super precinct’,” she said.

Sutherland Shire waterfront properties

Luke Hayes, Director of Residential Project Sales, Knight Frank

While not featured in Canstar’s report, suburbs in the Sutherland Shire remain strong, according to Knight Frank residential project sales director Luke Hayes.

“The Caringbah peninsula saw increased activity over the past year in suburbs such as Port Hacking, Lilli Pilli, and Dolans Bay, , where the houses are significantly larger with sweeping views of the water and nature,” he said.

“We saw many of our clients take advantage of the considerable annual growth in the value of their family home of up to 30 per cent and downsizing to low-maintenance luxury apartment living, while still enjoying their Sutherland Shire lifestyle.

“Although 2023 is unlikely to outperform capital growth achieved in recent years, the waterfront suburbs of Cronulla, Burraneer and Bundeena are likely to hold the best value.

“Despite an extensive coastline, there remains only a limited number of prestige homes located on the absolute waterfront that transact each year,” Mr Hayes said.

Knight Frank Research has reported that prime waterfront properties across Sydney have achieved 121 per cent price premium on average more than their inland equivalent in mid-2022, increasing from 115 per cent one year ago.”

Northern Sydney, CBD investor targets

In suburbs north of the CBD, Shore Financial’s CEO Theo Chambers identified Northbridge, Balgowlah and Lane Cove as 2022’s top performers.

“Northbridge and surrounding suburbs are situated just a stone’s throw from the CBD, while also providing sought after lifestyles for owners,” he said.

“Balgowlah is a great investment opportunity as the rental yields are quite high, and with the planned tunnel, investors should keep their eyes open in this area.

“Lane Cove saw 37 per cent annual growth in the 12 months to April 2022.

“The top of our list for forecast house price growth - all with predicted growth of 8 per cent - are Narellan Vale, Mount Annan, Glenhaven, and Kellyville.”

James Pratt, CEO, James Pratt Auction Group

James Pratt, CEO, Auction Group, said in recent times the highest sales prices have been in Bellevue Hill, Vaucluse, and Bondi Beach.

“The buyers most affected by interest rates are in the price range up to about $1.5 million.

“The top-end buyers aren’t as affected by interest rate rises, so we’re still seeing lots of activity in the premium suburbs,” Mr Pratt he told API Magazine.

“I believe the best suburbs are blue-ribbon suburbs that will always be attractive to owner-occupier buyers.

“The first suburb to look for next year is Bondi Beach.

“From an investor’s perspective, you always have the option to Airbnb your property and get a strong return, no matter the season.

“The second is McMahon’s Point because there are so few listings that even in a down market, every property in that suburb will have no trouble finding a buyer,” he said.

“The third suburb I would watch in 2023 is Mosman because it is very popular with families getting out of apartments and into a house on the North Shore, as well as with overseas buyers.

“Prices in Mosman never seem to fall as far as the rest of the markets and it’s one of the fastest to rebound.”

Peter Li, General Manager of Sydney and Shanghai real estate firm Plus Agency, said they recently sold a Rouse Hill two-bedroom at $985,000 and a three-bedroom at $1.135 million.

Peter Li, General Manager, Plus Agency

“These are record prices in this market that prove that some areas are doing better than what some media are saying.

“Meadowbank is making a comeback because affordable pricing and waterside living combine with easy transportation and good apartment layouts.

“So, Rouse Hill and Meadowbank are two suburbs that are performing well in 2022.

“Finally, there is the Central Coast, where house and land packages are popular due to the demand for holiday homes, especially with the summer holiday season coming up.”

Looking to 2023 and beyond, Mr Li said the Sydney CBD is the one to watch in 2024 because prices have been falling even as inspection numbers are climbing.

“You have to watch Chatswood in 2023 because so many new projects will be released, they are on the whole extremely well designed, and people love living in Chatswood, so there is always demand there.

“Some new price records are being set in eastern suburbs Rose Bay, with many off-the-plan projects nearing construction completion.

“That removes the uncertainty that had kept some buyers from purchasing.”

The CBD has also been enhanced by the weekend opening of Sydney Modern Project, the most ambitious art project since the Opera House.

Caution advised as rates rise

Real Estate Institute of NSW (REINSW) CEO Tim McKibbon welcomes news of strength and market positivity but does warns investors that 2023 may not be pain free.

“At the end of the day, there’s two things that really drive the market, which is supply and people’s ability to access and service debt.

“I think with the increase in interest rates, you’re going to see a subdued market,” Mr McKibbon told API Magazine.

“I think we’re going to see a market where there will be downward pressure on prices.

“Sadly, I think we’re going to see some distressed sales around about June of next year when people are coming off their fixed rates.

“It’s safe to say there will be more interest rate rises, and in addition to that, the costs of non-discretionary spends like food and fuel are also rising. That’s putting a lot of pressure on the family budget and the market is going to have to deal with that.

“Having said that though, we are seeing buyers coming back in and vendors accepting the market for what it is.

“We recently had an auction clearance rate that went through 60 per cent to 64 per cent, and that’s the first time for quite a while it’s gone through 60 per cent; it’s like there’s been a psychological barrier in the market, so there’s still transactions happening.”