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The Best Investment Property Sydney Guide: How to Navigate the Market for Success

Daniel Chadrawy on June 22, 2022

There has been a lot of activity in Sydney’s property market in May! Our borders have finally reopened, we had our Australian Federal Election, our vacancy rates are low, rental income high, and interest rates are forecasted to rise…

Australians are falling back on real estate as a safe haven in these times of uncertainty. They are hungry for real estate and Sydney’s property market is experiencing a surge in buyer demand (and property prices).

This begs the question – is this a good time to invest?

If you want to learn whether Sydney property investment is hot or not, READ ON.

Sydney – The Capital City

Sydney is Australia’s largest capital city. It is brimmed with beautiful beaches, superb parklands, and an abundance of economic opportunities.

Sydney is attracting people from across the globe and it’s not just because of the spectacular harbour bridge views or the koalas at Taronga Zoo.

Sydney is perfectly located on Australia’s south coast, and enjoys a perfect sunny climate, with mild winters and warm summers, where residents can always make the most of the outdoors. Sydney is also Australia’s safest city, ranked the 5th safest in the world according to The Economist Safe Cities Index. To top it off, Sydney is economically successful, with a dense network of competitive industries, infrastructure developments, and outstanding job opportunities. After the pandemic lockdowns, Sydney rebounded with 1.7% economic growth.

No wonder Sydney is attracting so many property investors!

Why Sydney Investment Properties Are Booming?

When you picture property investors, you probably think of someone in a suit, looking smart and sharp. But ANYONE can invest in property. Sure, it takes time, but in the long run, it pays off, and as your skills and experience grow it definitely gets easier.

First-time investors – listen up! There are SO many reasons why you should invest. And for those who already invest, here’s why you should continue!

Consistent & High Capital Growth

Residential property, especially in a capital city, has a track record of producing high and consistent long-term capital growth. If you’re an investment rookie, capital growth simply refers to an increase in the value of an asset or investment over time.

According to CoreLogic, Sydney’s house prices have more than doubled over the past 10 years, rising 146.4%! Since properties are increasing in value when you sell you will benefit from capital gains.

In short, investment properties are a safe venture that will bring you more dough!

Growing income

The rental income you receive from investment properties allows you to borrow finances and enjoy the benefit of leverage, allowing you to earn a safe, passive income that continues to grow over time. As demand for rental accommodation increases and the percentage of tenants rises, there are plenty of opportunities for investors to make a good income in residential property investment. Make room for ‘Generation Rent!’

Awesome security

Have you ever heard of a house going broke? Nope, neither have we. Residential property is a tangible asset and secure investment that you can insure against most risks. According to CoreLogic head of research, Eliza Owen, in comparison to equities, “property is less volatile and slower to respond to market shocks”. The property doesn’t crash overnight as shares do. So you can sleep tight with the stability of the property market, with its continued growth over the past decade. Phew!

You are in the driver’s seat

Who doesn’t love being in control? When you invest in property, you make all the decisions and have direct control over the returns you make. If your property is not producing good returns, you can simply add value. Adding a lick of paint or organising refurbishments and renovations can make it more desirable to tenants and boost the property’s value. YOU can influence your returns, just by meeting the needs of your tenants (or future tenants).

It’s easy to get into the property market!

Thankfully, you don’t need to be a millionaire to invest. Banks will lend up to 95% against the security of residential property – so most ordinary Aussies with a steady job and a little capital can invest. It’s easy to get into the market – so what’s stopping you?

Sydney Property Market Performance

There’s been HEAPS of activity in the Sydney market!

According to Domain’s latest Rent Report, buyer demand in Sydney has increased by 9.1%! Unit rents have increased by $30 over the year, to a median of $514 in May – the sharpest annual increase in 8 years. Sydney’s rental market is also now the third most expensive for houses, with median weekly rent reaching $804 in May.

HSBC chief economist for Australia and NZ, Paul Bloxham, stated that “The Melbourne and Sydney housing market had stalled since the beginning of the year.”

However, with low vacancy rates, high demand for property, constant price growth, and low rental yield, the past year has been a whirlwind in the Sydney property market. The domestic and international borders have finally reopened, welcoming international students, Australian residents, and travellers into the country and sending rental demand through the roof. With all this, the supply of available properties simply cannot keep up with demand.

Plus, interest rates have risen for the FIRST time in over a decade, increasing rates of returns for investors. According to Property Update Australia, Sydney property prices remained flat at the beginning of May and are up 14% over the last 12 months. Affordability constraints remain, even though Sydney house prices are expected to drop. Currently, the median house price is $1.8 million with a rental yield of 2.29%, and a current vacancy rate of 2.77%. For units, the median price is $900k, with a 3.38% median rental yield.

Liviti’s Top 5 Suburbs to Invest in Sydney

Liviti has compiled the best Sydney suburbs for investors:

1. Villawood

Villawood is a quiet, safe family friendly suburb situated in the heart of Sydney’s southwest. It has plenty of green space for dogs and kids, with several parks and reserves such as Kincumber Oval Nature Reserve. Investors can expect great returns from Villawood properties, as the rental yield for units in May was 4.6%, and 3% for houses, with a low vacancy rate of 1.3%.

And there’s even more good news – A renewal project to transform Kamira Court into a vibrant, new mixed housing community in Villawood has commenced! The renewal is expected to bring the awesome community and transport infrastructure with trains, buses, roads, and a new 3000 square metre park for residents. This definitely boosts the value of the Villawood!

V1 Villawood

Liviti’s V1 Villawood project has an average rental yield of 4.8% for 2-bedroom apartments, the top yield out of all our projects! With key suburbs and amenities all within an 8km radius, the V1 apartments are perfect for your future tenants. Plus, they are complete and ready to move in!

2. Parramatta

Parramatta has exciting opportunities for investors. There is no wonder why it has been dubbed Sydney’s second CBD, as it has become a central hub for education, entertainment, culture, and art. Its fabulous amenities allow for easy urban living, with commercial shopping strips and dining of almost every cuisine you could think of. The rental yield for units is 4%, and 3.3% for houses.

Construction is thriving in Parramatta, with many recent developments that have been turning heads. The $2.4 billion Parramatta Light Rail between Westmead to Carlingford is expected to open in 2023, bringing heaps of benefits to all. NSW Government will also deliver a five-kilometre walking and bike riding path, urban design, new bridges, and road network upgrades.

Paramount on Parkes Parramatta

Paramount on Parkes offers 1, 2, and 3 bedroom apartments, perfectly positioned to allow close proximity to schools, retail, dining, transport, and parklands. Its top of the line inclusions and great communal amenities allow for enjoyable, convenient living.

3. Kogarah

Kogarah is the beating heart of the St George Region and is said to represent one of the best-value suburbs in inner Sydney. Kogarah has great transport, health, and safety, offering something for everyone. The rental yield is 3.5% for units, 2.7% for houses, and the vacancy rate is 1.8%. It is a hotspot for educational facilities and provides heaps of housing types with relative affordability.

Construction of the M6 Motorway has begun, which will consist of twin tunnels linking the M8 Motorway at Arncliffe to President Avenue at Kogarah, with new shared cycle and pedestrian pathways. This will boost the connectivity of Kogarah and to the surrounding areas of southern Sydney and increase the value of the suburb.

Premiere Kogarah

Premiere Kogarah delivers style, value, and convenience, with modern interiors and close proximity to transport and local amenities. The apartments are minutes away from Rockdale Plaza, St George Hospital, and Kogarah Public School, with lively cafes and shops for all your needs. It even has a communal rooftop entertaining terrace for your Saturday barbecues!

4. Fairfield

Fairfield is one of the best suburbs in Sydney for young professionals who want to enjoy the convenience of public transport to all business hubs in Sydney. Residents in Fairfield enjoy a great variety of public transport, and there are plenty of nice cafes and parks to visit. The median unit yield for apartments is 3.7% and 2.6% for houses, with a vacancy rate of 1.7%.

There have been several redevelopments in Fairfield that your tenants will love. Aquatopia Water Park Wave Pool and Koononna Park are complete, turning up the excitement factor of the inner west.

EVO Fairfield

EVO Fairfield offers luxury studio apartments close to Western Sydney parklands, Westfield Parramatta, and 5 mins to the train station. With prices starting from $375k, EVO brings style and innovation to life, complementing the ongoing transformations of Fairfield.

5. Granville

Granville is a lively and multicultural suburb with great dining options and amenities. It is home mostly to 20-39 year-olds and has a vacancy rate of 1.7%, with rental yields of 4.3% for units and 2.8% for houses. Granville offers an abundance of Lebanese food and is close to Scram Escape Rooms and the Rosehill Gardens Racecourse for those who crave a bit of entertainment.

Construction is bound to commence on the Merrylands Town Centre Infrastructure Upgrade. Stormwater drainage infrastructure replacements, new roads, and other utility upgrades across Merrylands CBD are set to revitalise the region, boosting activity in Granville.

Granville Place

Granville Place apartments are complete and ready to move in, offering 1,2, and 3-bedroom apartment options with premium appliances. The apartments have a ground floor shopping centre and are extremely close to Parramatta CBD and a new public park.

Become an investor today!

If we’ve piqued your interest to invest in property in Sydney, New South Wales, Contact Liviti Today and let us guide you on your property journey.

Sydney’s Highest Rental Yield Suburbs in 2024: Most Lucrative Picks

Daniel Chadrawy on June 7, 2022

Rental yield is an important concept that property investors and first-home buyers looking to invest should understand. We are here to explain the ins and outs of rental yield, to help you get awesome returns from your investments (or future investments).

READ ON if you’re looking to invest in Sydney and want to learn more about rental yield!

What is Rental Yield?

Simply put, gross rental yield is your rental income expressed as a percentage of your property’s value.

It can be calculated like this:

Gross Rental Yield = (Annual Rental Income/Property Value) x 100

If maths is not your strong suit, don’t worry! We are here to make your property journey simpler.

Rental yield is an important factor that investors consider before purchasing a property, as it helps reveal the best investment opportunity.

Imagine you have a property valued at $800,000 in a suburb with a 5% rental yield. Your annual income will be $40k! So, the more rental income you receive, the the higher your rental yield.

For property investors, you can identify areas with high and/or increasing rental yield to ensure you get the best returns on investment to enjoy a positive cash flow.

It can help you to assess your investment property and see how it compares to others in the area. If we’ve piqued your interest, you can learn more about the rental market by clicking here.

Sydney’s Rental Yield

Sydney is a bright and bustling city in New South Wales, Australia, with a population of 51,84,896 in 2024 (According to World Population Overview), projected to grow to 58,75,309 by 2035.

There is definitely a reason for the phrase ‘Generation Rent’, with about 31% of Sydney’s population living in rental accommodation.

Sydneysiders are LOVING apartment life, opting to rent in places with good access to jobs, transport and facilities, rather than buying a house in locations that are further away.

The median listing price for houses in Sydney is $1,442,000 with a $730 per week median rent and a 2.7% rental yield . For units, the median price is much lower at $780k, with $660 rent per week and a 4.4% rental yield. (Source: Savings.com)

Depending on your goals, this could mean that you may be better off investing in apartments, as they have a higher yield compared to houses.

Supply & Demand in Sydney’s Rental Market

A lot has been going on in Sydney’s rental property market. The demand for renting is slowly easing compared to 12 months ago. According to Domain, buyer demand in Greater Sydney has decreased by 19.6%, and by 20.4% across all capital cities.

Dr Nicola Powell, Domain’s Chief of Research and Economics, claims that this change “should logically feed into a higher vacancy rate, but that will take time. This could be an early indicator of an increase in vacancy rates sometime this year.”

However, it’s important to note that even with this easing in demand, the rental market remains competitive in many areas. Factors such as interest rates, economic conditions, and housing supply constraints can still play a significant role in shaping the market.

Currently, the vacancy rate is sitting at 1.7% (July 2024) in Sydney, with rental supply plummeting over the past year in every capital city (Source: SQM Research).

This means that there are a lot more people looking to rent compared to the supply of properties available, leading to rising rent prices, higher yields and happy investors!

The Trend in Sydney’s Rental Yield

Simon Pressley, head of research at Propertyology, states “We are seeing rental prices all over Australia go through the roof.”

However, Mr. Pressley warned investors against chasing the highest rental yield in Sydney, noting they should consider potential capital growth which could deliver greater returns and holding costs.

Property investment strategist Lloyd Edge states, “if you don’t get a good yield, then you won’t have good cash flow and you’ll get maxed out on negative gearing.” So don’t forget to check your rental yield!

In recent years, Sydney’s gross rental yields have been mostly steady, sticking around 5.5% for units and 2.5% for all houses, according to SQM Research.

Sydney’s Best Rental Yields

As an investor, you’ll want to know about the best Sydney rental yield by suburb.

In Sydney NSW, some of the suburbs with high rental yield for units include (Source: SQM Research)

Granville: 6.3%
Auburn: 6.2%
Lakemba: 6.1%
Fairfield: 6.1%
Wiley Park: 6.1%
Harris Park: 6.1%
Parramatta: 6%
Schofields: 5.9%
Warwick Farm: 5.9%
RockDale: 5.8%

Lakemba, nestled in Sydney’s Inner South West, tops the list for high rental yield investments amidst the city’s soaring property market. the appeal lies in their accessibility to essential amenities like schools and transport hubs, combined with relatively affordable property prices compared to other Sydney locales.

The rental market in these areas flourishes with a diverse range of property types, catering to varied tenant demographics, from families to young professionals. This diversity, alongside a steady demand for rental properties, contributes to the stability and growth potential of rental yields.

Investors eyeing these suburbs can capitalise on the promise of solid returns, backed by both rental income and the prospect of long-term capital appreciation, making Lakemba undisputed leaders in Sydney’s competitive rental landscape.

Liviti’s Top Rental Yield Sydney

Here’s the rundown on Liviti’s Top 3 Projects in Sydney:

The Crescent, Fairfield: 6.1%
Fox Lane Rockdale: 5.8%
Jasmine Schofield Gardens: 5.9%

The Crescent, Fairfield – Top Rental Yield Sydney

The Crescent, Fairfield has an average rental yield of 6.1%, offering luxurious 2 & 3-bedroom apartments. Crescent is centrally located with great proximity to public transport, Parramatta CBD, and open spaces such as Western Sydney Parklands.

Fairfield has an amazing global dining scene, as well as fantastic entertainment options for families.

Crescent Fairfield – Bedroom

Fox Lane , Rockdale – Top Rental Yield Sydney

Fox Lane, Rockdale has an average rental yield of 5.8%, so investors can expect great returns from these premium apartments.

Fox Lane offers exceptional lifestyle benefits with immediate access to a wide range of amenities, making it the perfect choice for both owner-occupiers and investors.

Fox Lane in Rockdale offers a combination of studio, one, two and three-bedroom apartments, providing the perfect option for all lifestyles, from first home buyers to investors, families and downsizers. It also features spacious interiors, with open-plan layouts, generous balconies and quality finishes that tenants can’t help but love.

Fox Lane, Rockdale

Jasmine Schofield Gardens – Top Rental Yield Sydney

Jasmine Schofield Gardens stands out as a premier choice, offering an impressive 5.9% rental yield and an ideal blend of quality, value, and prime location. Situated just minutes from Sydney’s North West business hub, this latest addition to the master-planned Schofield Gardens community is surrounded by green open spaces, creating a fresh and eco-friendly environment.

The Jasmine Apartments are designed with eco-conscious features such as LED lighting, energy-efficient appliances, natural airflow, and thermal windows that mitigate UV impacts. Residents can indulge in a rich lifestyle with convenience and comfort, making Jasmine Schofield Gardens the perfect spot for ultimate relaxation and entertainment.

We hope with all this talk about the rental market, yields and investment properties, you now have a better understanding of how to get the best return on investment and secure the right opportunity.

Looking for some guidance? Contact Liviti Today to kick-start your investment journey and book a consultation!

Frequently Asked Questions (FAQs)

Q: How to calculate rental yield?
A: To calculate rental yield, divide the annual rental income by the property’s value and multiply by 100. For example, if your Sydney rental yield is $30,000 annually on a $600,000 property, the rental yield would be 5%.

Q: What is a good rental yield?
A: A good rental yield varies by location and your goals for that property. In Sydney, a good rental yield is typically around 4-5% for units, which is higher than the average rental yield for houses.

Q: What is rental yield?
A: Rental yield is the annual rental income expressed as a percentage of the property’s value. It’s a key metric to identify the best rental yield suburbs and high yield property investments.

How Does Capital Gains Tax Work When Buying Or Selling Off-The-Plan

Daniel Chadrawy on May 13, 2022

Ugh. Taxes. They’re not everyone’s best friend.

They are, however, a part of life. Ben Franklin once noted that in this world, nothing can be said to be certain, except death and taxes. Ben Franklin died in 1790. Over 200 years later, we’re still dealing with taxes. He was certainly on the money (pardon the pun).

We digress, the real reason we’re here today is not, in fact, to whinge about taxes behind their back, but to inform you of the ins and outs of capital gains tax (CGT) when it comes time for the purchase or sale of an off-the-plan property. Understanding how CGT works now will help you later on when it comes time to complete your tax return after you sell.

Keep reading this article to learn about capital gain, capital losses and how off-the-plan investment properties offer a range of benefits, even when CGT is taken into account.

What Is ‘Off-The-Plan’?

Essentially, buying off-the-plan means you’re buying a property while it is still in the planning, development or construction stages. As the purchaser, before you sign the contract, you will generally be able to see a floorplan and the location of the property, as well as having some input into appliances, colour schemes and fittings, but not too much else until you settle.

How Does ‘Off-The-Plan’ Work?

Off-the-plan investors will generally be up for a deposit of around 10%-15%, but in some circumstances, it can be as low as 5%.

The balance is then paid only once the property has been fully constructed, which poses quite a few advantages to buyers.

Considering it can take 12-18 months for an off-the-plan property to be ready for settlement, this allows the purchaser more time to save before payments like stamp duty buying fees is required. On top of this, the far-off due date allows an extended period to act if you’re attempting to find a buyer for a property you currently own to fund the purchase of your new investment.

As a prospective off-the-plan buyer, it’s generally not too hard to find more information about the contract the deposit and everything in between, if you know where to look. (the Liviti website is a great place to start).

What Does It Mean To Pay Capital Gains Tax?

Alright, we’re back to the nitty-gritty tax talk. Bear with us here. It may be boring, but it’s important to know this stuff before entering into an off-the-plan contract you plan to sell in future.

Capital gains tax is managed by the ATO, calculated as part of your income tax and is applicable to all properties (with one or two exceptions, but more on those later in this article).

CGT applies to properties acquired post-1985, as this is when CGT was introduced.

For taxpayers, CGT is applied to any capital gains you’ve made within the financial year. A capital gain refers to a profit made on the sale of any assets.

Sale Price – (Purchase Price + Costs) = Profit.

For example, if you purchase a home for $500,000, sell it for $800,000 and incur $50,000 worth of costs in the process of buying, owning and selling it, your profit would work out to be $800,000 – ($500,000 + $50,000) = $250,000. That $250,000 is what you would pay CGT on.

What Is The Ideal Amount Of Capital Gain Tax?

It’s important to realise that there really is no specific capital gains tax amount that is ideal, on the whole. It truly does depend on individual circumstances.

As your capital gain increases, your capital gain tax will also increase and will depend on factors like the amount of time you’ve owned the property, your marginal tax rate, and more.

How To Calculate Capital Gain Tax

We’re going to try and simplify this as much as we can because nobody wants to spend time reading tax info. Here goes…

By law, you pay CGT as part of your annual income tax. Essentially, there’s no specific CGT tax rate applied, but the tax rate is subject to your total income which will include any applicable capital gains (or capital losses).

Here are a few examples of different ways one might complete their CGT calculations…

1. Discount Method

This method allows you to reduce your capital gains if you sell the asset after a period of more than 12 months of holding it. A discount of 50% may be applied in this case.

So, if you make $205, 000 profit, you would only pay CGT tax on the $102, 500 gained.

Follow this formula…

Asset Sale Price – Cost Base = Capital Proceeds
Capital Proceeds x 50% = Capital Gain

2. Indexation Method

This allows you to increase the cost base by applying an indexation based on the Consumer Price Index (CPI), up to September 1999.

Follow this formula…

CPI for Quarter of CGT Event ÷ CPI for Quarter when Expenditure Occurred = Indexation Factor
Capital Proceeds x Indexation Factor = Capital Gain

No matter how you plan on calculating CGT, it’s super important to consult with a tax specialist so you don’t end up with the tax department hot on your heels.

Capital Gains Tax For Foreign Residents

If you are a foreign resident and an investor in off-the-plan property in Australia, your CGT calculations will slightly differ.

You will be required to pay GCT on taxable Australian properties that you sell, worth more than $750,000.

Unfortunately, some CGT exemptions and discounts will not be applied. For example, when being taxed you will likely not be eligible for the 50% CGT discount when you make a capital gain after holding the property for more than 12 months (unless you purchased the property before 8th May 2012).

The good news is that any assets signed over to you in an acquisition before CGT started on 20 September 1985 are not subject to it when re-sold.

Tax Planning For Off-The-Plan Apartment Purchasing

When it comes to tax for off-the-plan apartments, it’s important to know how CGT might affect the property before settlement and eventually when the property is sold.

Having a plan for the method of CGT you or your tax agent is likely to use when the time comes is good to know from the get-go.

Certain items can be used to make tax deductions and work to lower CGT including rental advertising, interest on the loan, strata fees, stamp duty, depreciation and repairs/maintenance, so keep these in mind.

Again, it is so important to contact a tax specialist to make sure you’re able to take advantage of these tax benefits before purchasing off-the-plan property in Australia.

How Can You Avoid Paying Capital Gains Tax?

Often, by making the property a principal place of residence (PPOR), investors can get away with not being taxed for GCT.

Here’s the deal…

The property must have a dwelling on it and it must be your PPOR, meaning it is where you live, where your personal belongings are, where your mail is delivered, etc.

An exemption is available if PPORs eventually become a rental property, as long as it sells within 6 years of becoming a rental AND no other property is listed as your PPOR. If you reoccupy the property as a PPOR before the 6 years is up, the exemption resets.

As for discounts, investors who have held an asset for more than a year-long period may be eligible for a 50% discount on capital gains tax once its sale is completed. There’s also the possibility of tax discounts if the property is purchased by a self-managed super fund.

Again, all of this is dependent on circumstances. Please seek expert advice before agreeing to a contract, paying a deposit or planning a sale.

Selling An Off-The-Plan Property Before Settlement

Can You Sell Off-The-Plan Properties Before Settlement?

Yep! Off-the-plan properties often provide the opportunity within the contract to re-sell in the time period before settlement which is an awesome advantage to buyers.

If circumstances change prior to settlement, you may be able to sell up and hand the signed agreement over to a new buyer (kind of like when you have a gym membership and you literally never go so you find someone else to take over the contract instead…yeah, we’ve all been there).

Making a tidy profit from pre-settlement sales is possible if you’re clever about it.

How To Sell Off-The-Plan Property Before Settlement?

Firstly, consider whether the developer will allow a re-sale on an unconditional contract prior to settlement. Always check the fine print in the contract and have a legal expert confirm whether a re-sale is possible.

Once the legal stuff has been a-okayed, here are a few tips…

Timing is key! Try and allow at least 6 months from the expected completion date to give the property a good chance at selling before it’s due to settle.
Hire an agent to market the property for you. They can promote through their website, sales agents or online platforms!

Things Consider When Selling An Off-The-Plan Investment Property Before Settlement

If re-selling prior to settlement, it’s important for investors to consider the need to pay stamp duty when the property is re-sold, cover any additional legal fees for solicitor services and marketing fees if you use an agency, plus, our old friend CGT will rear its ugly head in the same tax period.

Most importantly, remember that you do remain bound to the developer after signing if no other buyer will take on the title.

Where To Find Information On Capital Gains Tax Selling Off-The-Plan?

As always, a qualified tax agent or solicitor is your best bet for feedback on the nitty-gritty stuff, but if you’re still confused about any aspects of CGT and buying/selling an off-the-plan property, don’t hesitate to get in touch with our team here at Liviti.

You can get in contact with us or view our available properties.

Remember, CGT might suck but it doesn’t have to be hard to manage if you work with the right people.