Every apartment sells for a profit in these 12 Sydney suburbs

Apartments in Sydney’s affluent waterfront suburbs such as Manly, Dee Why, Bondi Beach and Mosman are among the country’s most profitable investments, with every unit sold in these areas in the September quarter delivering hefty profits for landlords, CoreLogic’s Pain and Gain report says.

Every rental unit that was sold across Freshwater, Cronulla, Darlinghurst, Maroubra, Wollstonecraft, Narrabeen, Ashfield and Marrickville also made a profit for investors during the same period. Apartments were held for 8.27 years on average.

Many apartment markets across the country are still expected to deliver profit for buyers in October-December, reflecting the 2.5 per cent rise in unit prices during the same period.

However, property gains are on course to drop this year as interest rate rises loom and affordability worsens.

“Profitability in the apartment market may be boosted by the gradual return of overseas migration, although the timings remain uncertain”, said Eliza Owen, CoreLogic’s head of research.

“It is also possible that in the short term, more buyers may turn to the apartment market where house values have become out of reach, adding to apartment demand.

“But as with the detached house market, the biggest factor in changing the current growth trajectory would probably be interest rates. Any upward adjustment in interest rates is likely to see downward pressure on both house and unit prices, which would ultimately impact the profitability of resales, particularly for recent purchasers.”

The sector is poised to see some price adjustments this year after strong price gains in the past 12 months, said Sydney-based developer Mark Bainey, chief executive of Capio Property Group.

“Interest rates are the greatest concern at this point,” he said. “It’s inevitable that Australia has to raise interest rates and that’s going to lead to some pain for the property market.

“I think home prices will slow, if not drop this year. It’s already slowing and that’s not because of omicron, but worries about higher interest rates.”

Landlords who sold their rental apartments in Manly during the three months ended September 30 made a total of $59.23 million in profits, with each unit selling more than the purchase price.

Investors in Dee Why raked in a total of $47.19 million gains, while those in Bondi Beach and Mosman reaped $33.92 million and $28.34 million profits respectively.

“There’s a much greater demand for apartments in those locations due to the restricted supply as a result of very severe planning restrictions,” said Mr Bainey.

“So that protects the value of the existing stock, so it’s not surprising to see apartments in premium suburbs are selling for big profits because there is a lack of competition for those sellers.

“They’re not competing with new developments. They’re only competing against the existing stock in the market.”

Ms Owen said the apartments that were sold for a profit were mostly from older buildings where there were fewer units.

“It’s worth noting the kind of apartment markets in Sydney that have done particularly well are not the high-rises associated with heavier losses across the country such as in pockets of Melbourne and Brisbane,” she said.

“The apartment markets with the highest level of profits across Manly, Dee Why and Randwick are often considered more aspirational, ‘lifestyle’ markets.

“The apartment buildings are often older and boutique, meaning they do not carry the same negative associations with poorer quality new builds.”

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