Property investors urged to turn to Western Sydney for bigger returns

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The past year has seen regional home values grow twice as fast as capital cities, as more and more Australians sought for a sea or tree change, according to CoreLogic. But new figures suggest there may be affordable pockets of Sydney that are even more promising for property investors

According to property developer ALAND, the Greater Western Sydney market could be very profitable for investors, with rental gross yields potentially as high as 4.7% at its Schofield Gardens development in Schofields. 

For context, rental gross yield refers to your annual rent income divided by the purchase price, so it’s a way to figure out how likely the property will generate a positive cashflow. 

ALAND said investor returns were lower in popular regional hotspots such as Wollongong, Newcastle and Central Coast. Here are their estimates of rental gross yields in these areas, drawing on data from My Housing Market:

AreaMedian asking property price (May)Median asking rent priceMedian gross rental yield
Wollongong$750,000$530 per week3.7%
Newcastle$650,000$460 per week3.7%
Central Coast$546,500$470 per week 4.5%

“What Sydney property investors don’t realise is that they can make much more money in their own backyard than they can in regional areas, while taking advantage of what will probably be much higher capital gains,” ALAND’s sales director, Mark Bernberg said.

And it seems that investors are catching on, with ALAND saying that it has witnessed a surge in sales in its Schofields and Liverpool developments amid the current property boom.

In fact, according to UNSW research published last year, over 80% of investors who bought in western Sydney said they were attracted by the market’s “perceived potential for capital gain”.

Meanwhile, first-time investors were more likely to be motivated by the “affordability” factor:  more than two-thirds said their decision to purchase a western Sydney property was primarily based on the notion that it’s cheaper than the rest of the city. 

However, not everyone is convinced that Western Sydney is the best place to invest. 

Earlier this year, Domain reported that Sydney’s worst-performing areas over the past five years are largely units in the western suburbs. Median unit prices fell by 19.3% in Harris Park, 13.6% in Merrylands and 13.4% in Granville between December 2015 and December 2020. 

This is partly due to the sheer number of developments being constructed. For instance, the Department of Planning forecasted that while the inner city and eastern suburbs are expected to build less than 10,000 homes in total by 2025, the City of Parramatta alone is set to have another 15,450 new homes, the City of Blacktown another 16,950 and the City of Cumberland another 10,200.

Need more help with deciding whether to buy a house or a unit? Check out our guide about the pros and cons of apartment living

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