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Investors Hungry for Apartment Blocks

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Investor appetite for apartments blocks in Sydney has returned as a new $100 million portfolio hits the market.

Residential building approvals hit a six-year low in the 2018-19 financial year, but have since rebounded with multiple listings and the market set to make a full recovery.

Eight apartments in Sydney’s inner-west and eastern suburbs were listed by CBRE Metropolitan Investments team led by Nicholas Heaton and Matthew Fenn.

Five were sites earmarked for boutique residential developments in Cronulla, Drummoyne, Newtown, Randwick and Surry Hills.

A further three apartment blocks were listed in Coogee, Drummoyne and Randwick.

Heaton said private developers were searching for boutique projects where they could meet the demand from downsizers and investors in strong socio-economic areas.

“After an eight-year residential boom, a lot of our clients disappeared to Europe for two years to wait for the development market to return,” Heaton said.

“Banks stopped lending, rents dropped and overseas investors fell away when it became more expensive to buy in Australia, on top of the increase in construction costs. ”

▲ Development application approved for 4 Stuart Crescent, Drummoyne.
▲ Development application approved for 4 Stuart Crescent, Drummoyne.

Property portfolio

- Cronulla: DA approval for nine, three-bedroom luxury apartments with water views .

- Drummoyne: DA approval for 17 large apartments with water views .

- Newtown: DA approval for four residential terraces .

- Randwick: Suitable for five luxury apartments .

- Surry Hills: DA approval for 12 apartments with ground-floor retail .

- Coogee: 28 self-contained studios in-one-line .

- Drummoyne: 22 apartments in-one-line .

- Randwick: 24 apartments in-one-line .


Fenn said CBRE’s Metropolitan Investments team recorded a 40 per cent rise in enquiries for existing apartment blocks during summer.

“There’s currently unprecedented demand for apartment blocks within Sydney’s inner-west and eastern suburbs,” Fenn said.

“Sydney investment stock levels are so low that investors are seeking different asset classes to achieve a positive initial return.

In late 2019 CBRE took an apartment block portfolio with six addresses totalling 83 apartments traded on gross yields at 2.45 per cent.

The asset class typically returns gross initial yields between 3.5 per cent and 4.5 per cent, with average annual capital growth of 6.5 per cent offering investors a total return of 10 per cent per annum according to CBRE.

“Analysts are suggesting growth in the residential market in 2020 could exceed the average 10- year capital growth rate of 6.5 per cent,” Heaton said.

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Article originally posted at: https://theurbandeveloper.com/articles/investors-hungry-for-apartment-blocks