Sydney Housing Market

There are different ways to invest in a Sydney property market. One of the most important things is to make sure that you are investing in top quality rental properties in Sydney that will make you some money. So, before you invest, make sure that you know what your goals are and that you have a plan to achieve them.

Capital Gains From The Property Market in Sydney

Importance of Market Research in Sydney

The first priority is to know how to research the Sydney property market with objective data and no emotions.

There’s a lot of noise in the market from the plethora of opinions from the current affairs program all the way to your neighbor and not every opinion is the right one. You need to have the ability to look at property market data and know which data points are essential for predicting the most likely outcome for the exit strategy you have in mind.

thought leadership

There are three ways to begin researching and understanding the Sydney property market using The Triangulation Method


You can approach this from the point of view of location.


You could approach it from the point of view of your current financial circumstances and what you can or cannot afford.


Thirdly, you can approach this from the point of view of the desired outcome – it is X% capital gains over Y period of time or is it a long term buy and hold strategy to generate cash-flow income from rental properties in Sydney?

These are important questions for you to consider before you even begin your market research.

Market research needs to be outcome driven. Majority of property investors in Sydney end up losing money on investment properties because they miscalculated the real value of the investment and its future potential.

The number one reason why this happens is because of a mismatch between what you want to achieve vs. what you end up buying. Sydney is a volatile market with a wide spread between property prices and the performance of properties over a long period of time.

Then you have issues such as infrastructure spend from the state government, access to capital, your credit ability with the bank, your commitment to learning when and where to invest and also having the right mindset – one that’s driven by objectivity as opposed to the fear of missing out or some other emotional stressors.

Where to buy investment property in Sydney?

Where to buy depends on the outcome you wish to achieve. Many would say that it also depends on how much you can borrow, but we feel, outcomes must come before affordability.

If instead of focusing on the right outcome, you focus on affordability, you will find enough reasons to convince yourself to buy something just to suit your budget instead of focusing on buying something that makes good investment sense.

Take a look at the advanced housing market analysis tool we use to identify upcoming suburbs that are closely aligned with either of the following investment objectives:

  • Sydney Properties with High Capital Gains Potential
  • Sydney properties with high cash flow returns
  • Sydney properties likely to come at a bargain
  • Sydney properties where you could use a Property Option to do the deal

Things to consider about Location

Check the infrastructure roadmap from the local council for current as well as future projects around the area.

Local school zones and dociles as per the city/town councils school zoning map is also an important factor to consider.

Proximity to or direct access to transportation hubs and major highways.

Proximity to local amenities such as malls, cafes, eateries, lifestyle venues such as clubs etc.

Historical performance of the suburb in terms of compounded average growth rates over 1, 3, 5 and 10 years.

Current market volatility in terms of active listings vs. sold in past 12 months.

how much can you afford to pay for properties in Sydney

It is no secret that Sydney is an expensive market with demand often outstripping supply in the major city suburbs.

When considering buying investment properties in Sydney, or anywhere else in Australia, the most important question you have to ask yourself is this:

What will it cost me and whether or not it is the RIGHT decision for me and my family.

While interest is low, borrowing is cheap, it won’t be like this forever. This is all the more important to consider given that you’ll likely be locking yourself into a 25 year long mortgage with the bank.

Consider the impact on your finances when interest rates go up. Remember, 1% increase in interest rates means $10,000 extra in interest repayments on a million dollar portfolio. And for Sydney, $1 million isn’t a lot of money.

Do not come under pressure of any kind. There’s absolutely no rush and there’s plenty of investment properties out there and you won’t miss out.

Talk to a good financial advisor or a well connected mortgage broker to discuss your finances and see what you can afford. Remember to keep a buffer of at least 50% to cater for any unforeseen events.

Things to consider about Budget

You don’t need to break your back trying to buy an investment property. Do not take on more than you can handle at any given time.

Avoid engaging in buying property or making any property related decisions when you’re under stress. Either at work or at home – stress causes mistakes.

Prepare a personal balance sheet to get a high level view of where you stand financially and your current net worth.

Be open to discussing credit with both first tier as well as second tier banks. Sometimes you can get a better deal bouncing one off the other – be shrude; its your money.

Know your financial bandwidth – how far can you stretch yourself before things begin to crack. Know your money affairs inside out.

Be prepared to shelve the idea of buying an investment property in Sydney if the numbers don’t stack up – don’t push yourself to the point of forcing a decision or losing sleep.

Is it cashflow or capital gains?

Now this is the most important question to ask yourself when considering an investment rental property in Sydney. What is your ideal outcome? The ideal exit?

Do you want this to become a cashflow asset or an asset that provides capital gain after a period of time. The answer to this will determine where you look and how you present the deal to the bank.

Cashflow positive properties are easier to fund because servicing the mortgage is never an issue as long as you have a tenant.

Properties that are priced higher, in higher profile suburbs, with higher capital gain potential are of course harder to service. It is so because at the top end of the market, rent is unlikely to ever cover the cost of mortgage.

This is where some pundits have sold the idea of negative gearing quite heavily in sydney. Property Magnets is vehemently against the idea of negative gearing for a simple fact.

Negative gearing is nothing more than using your losses to reduce your taxes.

Tax, being a function of income, should never be the driver to determine whether or not you deliberately make a loss – that’s just DOWNRIGHT STUPID

Things to consider about The Desired Outcome

Check the infrastructure roadmap from the local council for current as well as future projects around the area.

Local school zones and dociles as per the city/town councils school zoning map is also an important factor to consider.

Proximity to or direct access to transportation hubs and major highways.

Proximity to local amenities such as malls, cafes, eateries, lifestyle venues such as clubs etc.

Historical performance of the suburb in terms of compounded average growth rates over 1, 3, 5 and 10 years.

Current market volatility in terms of active listings vs. sold in past 12 months.

sydney property market research sample

Below is an example of the steps we took to identify a suburb where there’s a higher probability of achieving
higher capital gains than the average across the state of New South Wales.

The results were generated using the Australian Housing Market Data Analysis Tool

Macro Insights Search

You will notice that we are looking for properties with high capital gain potential near Sydney as well as in greater New South Wales.

However, we are looking for properties that are showing a decline in compounded average growth rate over an annualised period (A/CAGR).

This should give you a hint as to whether you should trust the sensationalism of the “top 25 suburbs to buy in Sydney” reports that you see on the current affairs programs or other popular websites.

If you’re looking to buy in suburbs where growth in the last 12 months has already been in the double digits then you’re sure to end up buying at the top end of the market.

Hence, it is important to know how to understand property market data for Sydney and NSW.

Example Suburb

Now this is just an example of a suburb where market conditions appear to be just right for coming in at the bottom of the curve, right when prices are likely to start moving closer to the averages for the state.

The Market Cycles phenomena that exists in the Sydney property market is important to understand. Market Cycles are great for understanding how to make money from the property market when its crashing.

Just at a glance, you can see that the three CAGR (compounded average growth rate) values for the suburb show that it has been on a steady decline for quite some time.

Further analysis is required to ascertain whether or not it is the right time buy in this location.

Affordability Calculator

This section shows how much you can afford based on data input from your end. The system provides you an indication of the maximum lending you could secure with a bank, what your potential repayments might be (based on current interest rates) and also what your debt servicing will look like to the bank.

These are important things to consider before you pitch the deal to a lender.

Renting Vs. Buying

Sometimes it is better for you to rent for a while before diving head long into buying a property in Sydney (or anywhere else in Australia for that matter).

Buying a property comes with a number of additional headaches such as maintenance, insurance, taxes, property management fees etc.

So if you’re not financially fully equipped to hold an investment property, a town like Sydney could prove to cost you more than what you’ll make from the property in the end.

Consider taking up some property investment courses to understand some of the basics of property market analysis. It is the single most important investment you’ll make before investing in a property.

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Quick word about property maintenance

It is very important that you or your tenants maintain the house so that its future value will be upheld and grow according to your market research.

Having proper maintenance will ensure that your rental properties in Sydney will bring forth the capital gains that you deserve.

It is also worth considering whether you wish to have a long-term tenant or run the property on an Air B’nb type arrangement.

Again, it comes down to the desired outcome you wish to achieve. In the case of Sydney, if you’ve got an inner-city apartment, then going with an Air bnb option is definitely worth considering.

Apartments generally do not grow in capital value in the same way a landed property with a yard would.

It is so because when you think about it, inner-city apartments in Sydney, or apartments in general have very little land value associated with the property.

So the only reason apartment values in Sydney go up is because of the speculative value of the apartment. Other factors that add to this are:

  • its Air bnb income potential,
  • student appeal
  • Proximity to major venues etc.

Be cautious when considering buying apartments – its a highly speculative play and the fundamentals of the property market research may not always apply as simply as they would to suburban properties.

One of the best ways to make capital gains is to take advantage of the prime locations of Sydney and Melbourne and buy a property in the suburbs that are located close to these prime areas.

By doing this, you can also have access to other things that the prime areas have to offer like attractions, malls, and clubs.