Best suburbs to invest in Sydney 2019

As we look back at the last year, the inevitable question is what 2019 holds for the Sydney property market.

If there is one underlying theme to the last 12 months it has been a softening of the Sydney housing market, after a decade of largely uninterrupted growth. Most property market analysts predict that 2019 will be more of the same, particularly for Sydney and Melbourne.

Property investor, author and columnist Michael Yardney calls this our post-property-boom era, which is characterised by:  

  • Tighter availability of credit, specifically the cap on interest only loans
  • Weakening foreign investor activity
  • Rising bank funding costs
  • Relative unaffordability of housing
  • An oversupply of units in some areas

Read on to find out what specialist forecasters and leading real estate agents think is going to happen in the year ahead. But first let’s take a look at what 2018 looked like.

Sydney housing market

Read: Plot twist! Which areas are thriving in Australia's cooling market and how are they doing it?

What did the property market in Sydney look like in 2018?

QBE’s Australian Housing Outlook 2018-2021 reports that the Sydney median house price at June 2018 was $1,103,500. This is a 7.6 per cent drop on the same time last year. They go onto break this down for the inner and middle ring suburbs which fell 8.1 per cent and 10.6 per cent respectively over 2017/18.

Western and outer suburbs performed slightly better, dropping 2.8 per cent over the same period. The Sydney rental market was also in retreat as vacancy rates rose in 2018. They were up to 2.5 per cent at the June 2018 quarter, when comparatively they were at 1.8 per cent a year earlier.

Corelogic recorded a -7.4 per cent drop for all Sydney dwellings in the 12 months to 31 October '18.

Ercan Ersan Ray White 

Real estate agent Ercan Ersan, Senior Sales Executive at Ray White Surry Hills & Alexandria, looks back at 2018 as a mixed year with some cause for optimism.

“Despite the 5 per cent to 15 per cent drop from 2017, the 2018 property market still had a lot of strength in it”.

By this he means that in-demand homes still commanded a premium in 2018. He cites the example of a house in Newtown where the owners were hoping for $2m, but ended up selling it for $2.3m.

John McManus, Principal and Licensee of LJ Hooker Willoughby/Artarmon is more realistic about the downturn stating, “The start of 2018 was okay, but it wasn’t great. I’d say we haven’t hit rock bottom yet.”

He also points out that buyer mentality is currently very much influenced by what they read in the press, “...with the press saying there’s more sliding to be had, a lot of buyers are waiting.”

"Corelogic recorded a -7.4 per cent drop for all Sydney dwellings in the 12 months to 31 October '18"

Sydney property market forecast 2019

Property analysts SQM Research do not expect a general housing price crash to occur in 2018/19. They point to a healthy national economy, relatively low unemployment and robust population growth to back this up. They also believe that the oversupply of units is a localised phenomenon.

Markets, particularly those in Sydney and Melbourne, are still expected to continue to soften in 2019, and possibly into 2020.

QBE’s Australian Housing Outlook expects house prices to bottom out over 2019/20, to around 11 per cent below the market peak of 2016/17; with Sydney to experience an overall decline in median house price of -5.4 per cent to 2020.

"Markets, particularly those in Sydney and Melbourne, are expected to soften in 2019, and possibly into 2020"

How are Sydney property prices expected to change in 2019?

Sydney median property forecast

Louis Christopher's Housing Boom and Bust report forecasts continued price falls for Sydney (and Melbourne) of -5 per cent to -9 per cent in 2019.

Corelogic lays out a number of scenarios in its forecast for 2019, with Sydney property prices predicted to:

  • Drop -9 per cent to -6 per cent assuming an unchanged cash rate, a slowing economy and a Labor government in May 2019.

  • Drop -11 per cent to -6 per cent assuming a 0.20 per cent interest rate rise and a Labor government.

  • Drop -6 per cent to -3 per cent assuming an unchanged cash rate, a slowing economy and the Liberals holding onto government in the next election.

As you will note, Corelogic, along with many other analysts, believe Labor’s proposed policy of a repeal of negative gearing and changes to capital gains tax is expected to have an impact on property prices - assuming they win a Federal election next year.

NAB’s Hedonic House Price Forecast predicts Sydney houses to drop -1.6 per cent over 2019, with units forecast to fall -5.5 per cent.

Read: Best places to live around Australia - top areas in every capital city

Best suburbs to invest in Sydney in 2019

Looking for the best suburbs to buy in Sydney?

In terms of the best growth suburbs to invest in Sydney, real estate agent Ercan Ersan maintains that despite the downturn, the Inner West, CBD and the Eastern Suburbs are safe long term investments in terms of a real estate commodity.

He also tips South Sydney for, “...some really great growth due to its close proximity to the airport and development of the WestConnex motorway scheme”.

John McManus LJ Hooker

LJ Hooker’s John McManus on the other hand likes the Lower North Shore and Inner West, and believes these markets still have robust growth potential.

“They’re within close proximities to Sydney CBD and are nice family areas with great schools, shopping centres and space to get around.”

He also believes Crows Nest is a sleeping giant, with rail connections to Barangaroo and Sydenham in the works - and new infrastructure is always a good indicator of an investment hotspot.

Should I invest in a Sydney off-the-plan property?

All the available data says to be very wary of an off-the-plan property in Sydney.

Why?

Almost all capital cities are suffering from potential unit oversupply, with an excess of 315,000 units approved for construction across Australia over the next two years. This has prompted banks such as NAB and Macquarie Bank to issue a ‘blacklist’ of postcodes to be wary of.

"Almost all capital cities are suffering from potential unit oversupply, with an excess of 315,000 units approved for construction across Australia over the next two years"

In Sydney these include off-the-plan developments in Zetland/Waterloo, Epping, Holroyd and Schofields. The risk here is that, in the current softening market, you invest in a property that falls in value very quickly. You may also not be able to find a tenant or have to drop your rent to compete with an oversupply of accomodation in an area.

Use the resources on this site to help you make your Australian property investment decisions. Read our online property reports and tips to help you find the right real estate agent.

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