It’s easy to assume a high price tag rules out strong returns when it comes to property investment.
But a closer look at the data reveals that investing in a prestige location like Sydney’s Eastern Suburbs can still deliver compelling long-term gains.
Do blue chip suburbs make a good investment?
The short answer is overwhelmingly, yes.
A recent Domain article found that, despite higher entry costs, Sydney still offered some of the best investment prospects nationally. This was for two key reasons: capital value and yield growth.
And, despite Sydney having a range of suburbs to choose from at various pricepoints, some of the blue-chip suburbs here in Sydney’s East were seen as the very best areas in which to invest. For the right investor at the right time, the rewards of buying into Sydney’s east will far outweigh any initial expense.
Clearly, given high sales prices, this isn’t an investment strategy that will suit everyone. However, for those with a healthy budget and a little patience (thinking in say five or 10 year timeframes), the Eastern Suburbs should offer significant benefits.
We look at where to invest in the premium east.
Could the Eastern Beaches offer the best blue chip investment opportunity?
Investors who took the plunge on the Eastern Beaches in recent years would likely be well ahead, thanks to strong rental demand and sky high capital growth. Domain highlighted Bondi, Coogee and Maroubra as the best investment opportunities.
Bondi Beach
A median house in Bondi Beach would now set you back $4.275 million. But, over the past five years, that median has lifted an incredible $1.490 million, or 53.5%. But the downside is yield, which sits at just 2% – Bondi houses aren’t for those investors primarily chasing income.
Instead, they may be better off buying an apartment. Not only do they offer a far more affordable median price of $1.42 million (up 19.9% from $1.184 million in 2020), the yield is almost double that of houses at 3.7%. Vacancies are minimal too, with apartments spending an average of just 17 days on the rental market.
Coogee
In Coogee, the median house price is $4.185 million, up 7.6% in the last 12 months and an impressive 48.9% in the last five years.
Apartments have seen more subdued growth of 20.8% in the last five years. However, rents have risen $225 over the same period, and the yield is now 3.4%. As an area with strong rental demand, the average Coogee apartment rents in around two weeks.
Maroubra
Maroubra is definitely one for investors to watch. It has one of the lowest vacancy rates in the East at 1.4%, and the median house price is significantly lower than other suburbs on the eastern beaches at $3 million.
We don’t expect this will last for long as price rises have been particularly steep here, with the median rising 55.8% (over a million dollars) in the past five years.
Apartment values have also risen by 30% over the last five years to hit a median sales price of $1.145 million. With rents also gaining 33%, apartments in Maroubra currently offer strong rental yields of 4%.
Investing in Sydney’s inner east?
The inner eastern suburbs also offer some great options for investors.
Potts Point provides one of the highest rental yields for apartments, at 4.3%, and an affordable median sales price of $815,500. For investors on a budget, there are also plenty of entry level studios and one-bedders to choose from. Potts Point is a suburb with strong rental demand thanks to its location and lifestyle: according to realestate.com.au, 2,214 renters were seriously interested in the 197 apartments available over the last month.
Elizabeth Bay’s perennial popularity means that it has one of the lowest vacancy rates in the Eastern Suburbs at just 1.96%, and apartments provide a median yield of 3.9%. Like neighbouring Potts Point, these comparatively high rents are driven by strong renter demand, with 1,624 buyers seriously interested in the 105 apartments advertised for rent in the last month. This has led to a median time on the rental market of just 16 days.
Darlinghurst is one to watch for capital growth in houses. Over the last year alone we’ve seen house prices rise 18.4%. Meanwhile, the median weekly rent in Darlinghurst for houses has also risen 40.4% in five years, from $855 in 2020 to $1200 per week today.
There are even blue-chip areas for bargain hunters
Recently, realestate.com.au published a list of suburbs that have seen the biggest price falls in the last year, and several of them were blue-chip areas in Sydney’s East. The top 10 suburbs where properties were selling for less included some of the most expensive suburbs in the city. In Vaucluse, Bellevue Hill and Dover Heights, houses cost around a million dollars less than a year ago, while in Woollahra, prices dropped half a million.
This led realestate.com.au to suggest that major savings could be found by savvy buyers with budgets big enough to “buy the dip” in these suburbs.
realestate.com.au put reduced values down to a variety of factors – from worry over interest rates to softer market conditions resulting in fewer ultra-expensive sales. However, given their blue-chip status, and historical steady price rises, it’s unlikely any falls will be permanent.
Even though prices may have dipped recently, these suburbs have retained their leading spot as the most expensive suburbs in the city, and have experienced strong growth over the past five years.
For example, Vaucluse has risen more than any other suburb (up an impressive $2.855 million), and Bellevue Hill has gained $2.863 million, making them a fairly safe investment.
Want more?
If you’re looking to buy an investment property in Sydney’s East contact my team today.
