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Money & market

Rising interest in apartment investments trumps Sydney houses


Investors are increasingly turning their attention to units over houses in the Sydney property market, driven by more affordable options and better cash flow prospects. CoreLogic data revealed that at the end of January, the median price difference between Sydney houses and units was a substantial $566,000, with houses priced at $1.395 million compared to $829,000 for units. This considerable price gap has shifted consumer behaviour, with units becoming a more viable investment choice.

George Cherchian of James Chase Buyer’s Advocacy highlighted that “Sydney is a popular choice for investors, because it’s Australia’s economic engine, but all that buyer interest translates into higher prices and larger barriers to entry.” He went on to note that “while a lot of mum-and-dad investors may have favoured houses in the past, more and more are now choosing units.” The key for many is accessibility; units offer a lower entry point into Sydney’s competitive market. “Someone on an average Sydney salary can realistically aspire to invest in a unit… because the deposit hurdle is much lower, which means you can enter the market years ahead of schedule,” Cherchian added.

The pivot towards unit investment is also fuelled by yield considerations. “Yield was the other big reason investor sentiment was shifting from houses to units,” said Cherchian, referencing the December quarter figures from Domain, which showed median yields in Sydney at 3.00% for houses and a higher 4.57% for units. With interest rates remaining a focal point for investors, the stronger cash flow from units presents an enticing proposition. Cherchian pointed out that “units tend to outperform houses when it comes to yield.”

The shift in demand is not exclusive to investors. Renters are also increasingly drawn to units, with unit rents rising at a faster pace than those for houses—17.2% year-on-year versus 12.3%, as per Domain. This trend amplifies the yield differential, further solidifying the rationale for investors to opt for units. Cherchian concluded, “that’s strengthening the case to choose a unit over a house.” The symbiotic growth of both investment and rental demand for units is a salient indicator of changing market dynamics in Sydney’s property landscape.

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