Increased unit demand in Sydney good for investors
February 27, 2014 / Written by Rich Harvey
Demand for units is high in the New South Wales capital - something you should keep in mind if you're looking to buy investment property in Sydney.
Urban Taskforce recently reported figures from the Sydney Metropolitan Program showing "three quarters of the high level of housing approvals are for apartments".
"The December housing approval figures show that 76 per cent were for multi-unit apartment projects which continues the trend at this level," Urban Taskforce CEO Chris Johnson said.
"For the last three months of 2013, apartments were 73.2 per cent of all housing approvals and 71.1 per cent of all housing completions."
Mr Johnson said this data made it clear that Sydney was moving toward more urban units in inner city areas.
"With interest rates at a low level and an increasing number of investors and owner occupiers interested, they are becoming very attractive projects," he said.
Mr Johnson also pointed out that urban living provides people with a wider array of amenities, one reason why this housing type is apparently in such high demand.
The Urban Taskforce report is supported by one from Bankwest. The organisation's Housing Density Report showed that NSW was leading the nation in building approvals for medium density housing, which includes units.
Nearly one in three homes in NSW are medium density housing. When compared to the national average (24.7 per cent), it's easy to see why purchasing units in Sydney could be such a great avenue for property investment in Australia.
NSW accounted for 34 per cent of all medium density dwelling approvals across the country over the past year, overtaking Victoria for the top spot.
"There is a long-term trend of increasing housing density in NSW which over the past 20 years has risen steadily to this year's record high," said Bankwest Executive General Manager of Retail Mark Reid.
"The trend is pronounced in Sydney with the capital contributing an incredible 90.7 per cent of NSW's total medium density housing approvals for units, townhouses and similar dwellings in the last 12 months."
Choosing units for positive cashflow property
Deciding between investment in detached houses or units has always been a spirited debate. Each choice comes with its own unique advantages and disadvantages, but it's hard to argue that units can make owning positive cashflow property easier.
For one thing, units tend to be more affordable than traditional houses. This means those considering Australian property investment may be able to afford multiple properties instead of one. This would mean bringing in more rental income, therefore increasing how much cash is coming in on a monthly basis.
In short, multi-family investment means more liquidity than single-family.
Also, while detached houses typically bring in more capital growth, units generally provide a better yield.
Additionally, as the trends regarding where people want to live change, units are poised to be more desirable than houses.
At one point the Australian property dream may have been a large suburban house with a huge front lawn, and for some that may still be the case. However, more people are being drawn to the amenities that can only be offered by large urban centres, be it proximity to public transport, job opportunities, culture, nightlife or a combination of these and many other factors.
Finally, unlike traditional houses, units typically mean less work in the way of maintenance. Smaller spaces mean reduced need for upkeep and repairs. Unlike a house that may need a new roof or major landscaping work, a unit is part of a whole where common areas are taken care of and investors need only worry about their specific piece of the property.