“If we focus on the apartment market, the central western suburbs of Auburn and Parramatta offer the strongest yields, typically between 5.4% and 5.7%."
High-yielding investment opportunities for under $500,000 in NSW include western Sydney and regional areas: HTW
There are many residential investment opportunities in NSW under the magical $500,000 mark, according to the Westpac Property Report, a quarterly snapshot compiled by valuation firm Herron Todd White (HTW).
Herron Todd White CEO Brendon Hulcombe says the report “challenges the notion that owner-occupiers and investors have limited choice on a tight budget when it comes to purchasing property”.
“Quality properties that a few years ago would have been well beyond this price bracket can now be secured for $500,000, in some cases with change to spare.”
HTW’s NSW state-based team has identified opportunities under $500,000 in western Sydney, in the Newcastle and the Hunter region, on the central coast and on the mid-north coast where yields can be as high as 8% – well above the savings rates being offered by banks.
In the capital city, a budget of $500,000 limits investor options to units or lower-quality houses in the city’s western suburbs, according to HTW.
Unless investors have an underlying need to own a house in this region, HTW valuers suggest considering the apartment market, which will “generally deliver a wider choice of locations, stronger rent returns and more stable capital growth.
“If we focus on the apartment market, the central western suburbs of Auburn and Parramatta offer the strongest yields, typically between 5.4% and 5.7%. The area’s median price of $370,000 will fund a reasonably modern 2-bedroom apartment.
“For investors seeking longer term capital growth, inner ring suburbs like Neutral Bay, Leichardt and Randwick have historically recorded stable price gains, and this is expected to continue over the coming years,” HTW says.
Hunter region and Newcastle
According to HTW, there are good investment opportunities under $500,000 across the Hunter region.
“Rental vacancies are very low at 1.5% and rental growth is strong, taking many properties close to being cashflow positive.
“It is worth focusing on areas with proximity to major employers, as these offer year-round tenant demand. Waratah, Jesmond and Shortland for instance are all close to either major Newcastle hospitals or the University of Newcastle,” says HTW.
HTW picks the Hunter Valley towns of Singleton, Rutherford and Aberglassyn as good investment opportunities, with all benefiting from the strong mining sector with “very healthy” rental growth.
“Plenty of new housing stock is becoming available, and these properties offer more generous depreciation allowances than older dwellings,” HTW says.
The median house prices for Gosford and Wyong is currently $400,000 and $325,000 respectively, which gives investors with a $500,000 budget a multitude of options on the NSW central coast, notes HTW.
The investment opportunities vary widely, from a house in Woy Woy or a unit at Umina to a holiday letting in Avoca.
NSW valuers from HTW say there has been a noticeable escalation of investor interest in San Remo, Blue Haven, Narara, Umina Beach and Woy Woy, with yields ranging from 4.5% to 6%.
HTW advises investors consider the option of purchasing two or more properties at the lower end of the market, where “rental vacancies are very tight, yields are high and there is greater potential for capital growth”.
“As a guide, in Port Macquarie and Forster it is possible to buy an older-style two-bedroom unit close to the beach for less than $250,000.
“Alternately, pre-1975 houses close to the town centre or modern villas suitable for retirement can be purchased for under $350,000,” says HTW.
In the small country towns of Taree and Kempsey, HTW says investors can afford to purchase three dwellings and recommend targeting prime locations – “notably older houses on large lot sizes”.
“The older part of Taree West, which was developed pre-1985, offers excellent value for money with a good selection of houses currently listed for sale for less than $250,000.”
Some former Department of Housing properties can be purchased for less than $125,000. These properties are returning rental yields in the order of 7% to 8%.
HTW valuers also note that in the current weak market both investors and owner-occupiers stand to benefit from a growing number of forced sales.
“This is being exacerbated by an oversupply of modern high-rise units in Forster, and weakened demand in the $450,000-plus price range throughout the greater Taree area.”