Sydney-based property developer, Iwan Sunito says there are several reasons why smart owner-occupiers and investors alike should take the plunge and purchase off-the-plan apartments in 2023. Despite today’s latest rate increase, underlying conditions in the Australian property market are sound, and green shoots of recovery will soon appear, he says.
Sunito explains, “Growing numbers of Australians are choosing to live in units or apartments, to the point that they now account for 47 per cent of total dwelling commencements in the five years to 2018, up from 42 per cent in the 10 years to 2018. People want the convenience of living close to amenities like cafes, shopping centres and transport links. ‘Empty nester downsizers’ are certainly among those seeing the practical, lifestyle benefits, helped by capital gains they have made, so apartment living is increasingly common and the preferred option.
“Recent reforms to stamp duty in New South Wales also mean eligible first home buyers can now opt-out of paying the upfront burden of stamp duty and instead pay a smaller annual property tax. The State Government scheme is enabling young couples and individuals looking to spend up to $1.5 million on property for the first time to cut up to two years off the cost of saving for a deposit.”
Still on the subject of consumer borrowing, record low interest rates are now disappearing in the rear-view mirror but these costs appear to have plateaued and remain historically affordable, Sunito contends. The big four banks have forecast the RBA will set cash rates between February and May ranging from 3.35% (CBA) to 3.85% (ANZ & Westpac). They then see this rate either dropping or remaining steady (NAB) into 2024.
Sunito goes on to say, “Waiting until the market reaches the bottom of the current price cycle as nervous or stretched investors decide (or are forced) to flip their properties might sound like a good idea as it’s true such corrections do happen every few years. However, even individuals who have done their homework can’t hope to reliably identify what expert observers can miss. The supply side continues to play catch-up in all our major cities, he says.
“We know that with borders reopening, demand for apartments is rebounding in the rental market which is forcing rents to increase, making returns more attractive to investors. International students, overseas and interstate workers are returning. For example, China announced in late January that its citizens studying with foreign universities must return to in-person classes. This alone spells the return of around 40,000 people to Australia. The Commonwealth Government’s migrant policy also aims to deliver 200,000 skilled people annually over the next five years.”
Pent-up demand is ensuring rental yields are healthy across Australian capital cities, he says. Gross rental yields from units in Australia’s three largest cities late last year were reportedly 3.89% (Sydney), 4.18% (Melbourne) and 5.17% (Brisbane) [Source: CoreLogic, December 2022]. Given the return of tertiary students, people moving interstate and forecast new arrivals, it is hard to see this upward trajectory changing over the next few years at least.
Sunito adds, “The overheads faced by developers of land acquisition, planning and design, new infrastructure, debt servicing, construction and environmental compliance increase each year. It therefore makes dollars and sense for people to purchase property as early as possible as these cost increases, also tied to inflation, labour and materials, are inevitably added to the price of each new dwelling. Thankfully the value proposition of apartments has also grown.”
Iwan Sunito has recently launched a new property venture, One Global Capital while he also remains CEO of property development company, Crown Group. One Global Capital has been established to form up synergy with the capital partners.
For further information, please visit oneglobalcapital.com.au
