Property

The Bright Side

The Bright SideAll due respect to New York and, arguably, Dubai, Sydney has one of the most recognisable skylines in the world. The nearly iconic image of the city and the renowned Opera House from across Sydney Harbour is as easily identified as any on the globe. Home to nearly five million so-called Sydneysiders, the city demands little in the way of introduction, and its place as a regional and global innovator — socially, environmentally and culturally — demands little in the way of explanation. Melbourne may be more artsy and Brisbane may be the up-and-comer, but when it comes to Australia, the New South Wales capital remains the preferred location for those who are relocating as well as investing. Regardless of the strengths of any other location in the country, Colliers International Executive Director for International Properties Ashley Osborne states, “Sydney is perceived to be Australia’s only global city and the first option for business and tourism.”

The reasons Sydney ranks near the top for investment options reads like a laundry list of ideal living. Consistently ranked among the world’s most liveable cities, it’s culturally and ethnically diverse, home to many of the state and the country’s elite educational institutions, and tourism has been strong since the city hosted one of the most successful Olympic Games ever in 2000 — so successful that when it looked as if South Africa may not be ready for the FIFA World Cup in 2010, rumours flew that Sydney had been tapped as a possible emergency replacement. And it’s the birthplace of X-Man Wolverine. Case closed.

Finally, the city sits at the heart of the Australian economy. “Sydney’s economy represents approximately 25 to 30 percent of Australia’s total economic activity and is the nation’s economic leader,” notes Osborne. “According to the City of Sydney approximately 65 percent of Australia’s financial activity occurs in Sydney.” Among the international banking behemoths based in Sydney are HSBC, Deutsche Bank, UBS and Citigroup. Osborne continues, pointing out, “[Sydney] has a high presence of global firms and is the regional headquarters to more than 500 global corporations operating in the Asia-Pacific region ensuring ample employment and business opportunities.” Add to that a desirable work-life balance (you will not catch an Australian in the office after 6:00), physical beauty, scads of beaches (though it should be noted Bondi is best avoided by those of delicate ego) and, perhaps most crucially, strong appreciation and rental potential and Sydney is a no-brainer: the city’s population is growing at an average of 1.7 percent per year according to the Australian Bureau of Statistics. “Sydney is physically constrained due to national parks to the north and south, Blue Mountains to the west and hence land supply levels are restricted ensuring demand will outstrip supply,” Osborne finishes.

So Sydney is a smart move for investors, but that also begs the question of how the suddenly powerhouse Aussie dollar is influencing the residential investment market. It’s been many years since the Australian and US dollars were nearly at par. With an already relatively high cost of living — HK$500 worth of groceries is enough to warrant delivery, the equivalent in Australia can fit in one (cloth) grocery bag — property is suddenly more expensive too. Is the market feeling the effects of a strong currency? Yes, but in light of the health of the overall economy, investments are balancing out as Osborne sees it. “The serious investors aren’t perturbed by the Australian dollar rate, rather they look at all factors that contribute such as long term historical capital growth, rental returns, depreciation/outgoings and predicted future capital growth based on supported increasing populations and infrastructure,” he says.

And how is that affecting the luxury sector? “Of the markets that have been affected … this sector has been the most significant,” Osborne begins. A great deal of that has to do with priorities though. “Typically because purchasers such as expats who were able to previously leverage their income and the exchange rate to their benefit when investing back into Australia have now turned their interest to other more profitable markets.”

Despite a bit of a supply crunch, there are new projects to consider in Sydney. Osborne notes the mixed-use, master planned developments and “in-filled” sites in an existing environment are receiving the most attention from purchasers. Of those purchasers, the strongest buyer groups are emerging entry-level owner-occupiers and investors — offshore, financial planners, speculators, local Asian investors and the local baby-boomers. Osborne explains it best when he cites one of property investment’s most unshakeable tenets. “Developments that can offer strong surrounding infrastructure, shops and parkland see the highest take-up and as such strongest sales results as they generate interest.”