Sydney homes under $500k that can pay for themselves

Property investors can still get Sydney homes for less than $500k and rely on the rent to cover most of their mortgage costs in a range of suburbs that are set to boom.

Aidan Devine

3 min read

December 3, 2023 - 5:00AM

News Corp Australia Network

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Home prices have been soaring again over the past year but property investors can still score Sydney homes for less than $500,000 and rely on the rent to cover most of their mortgage costs.

Some of the areas with an abundance of cheaper homes with high rents were also expected to get rapid home value rises in coming years, allowing investors to get ample equity, new research showed.

Among the properties offering higher returns for investor seeking a bargain were units in Regents Park and Granville, with analysis of PropTrack figures showing the average rent exceeded the average repayments at current prices and interest rates.

Regents Park rents were an average of $73 a month higher than typical repayments, while in Granville the difference was $40. Units in both areas were usually priced between $400,000 and $500,000.

Home prices have been soaring again over the past year but property investors can still score Sydney homes for less than $500,000 and rely on the rent to cover most of their mortgage costs.

Other areas offering higher rental returns – where investors could rely on rent to cover the cost of all but $40-$100 of their repayment costs – were Lakemba, Wiley Park, Punchbowl and Mays Hill.

Merrylands, Prospect and Harris Park also offered higher returns, with a $140-$200 a month difference between rents and repayments.

A variety of suburbs in the Parramatta and Canterbury-Bankstown regions, along with the inner west, were further deemed strong future growth areas in an exclusive report by research group Hotspotting.

The study revealed that home values in these cheaper areas were primed to rise because of coming infrastructure, popularity with other investors and general affordability.

It comes as PropTrack figures released Friday showed Sydney’s median home price climbed nearly 9 per cent – or about $80,000 – over the last year.

PropTrack attributed the rise to a mix of housing shortages, rampant demand due to rapid population growth and a high incidence of upgraders using the mega profits from the sale of their previous homes to fund their next purchases.

The recent growth meant Sydney home prices were a total of 32 per cent higher than they were at the start of the Covid pandemic in March 2020.

Sydney home prices are almost a third higher than they were at the start of the pandemic.

Hotspotting analyst Terry Ryder said the investment research showed there were still plenty of “affordable” pockets for property investors, despite the home prices rises across the Sydney as a whole.

“It’s important for investors to look at locations with good future infrastructure spending and job opportunities, which will lead to further demand for property and future price growth,” he said.

Mr Ryder pointed to the inner west as a market that ticked many boxes for investors.

“The inner west precinct has been one of Sydney’s most resilient markets, boosted by the relative affordability of apartments throughout the precinct,” he said.

“It is well positioned to benefit from the massive WestConnex and Sydney Metro West transport projects.”

Strathfield was a standout market in the inner west, Mr Ryder added. Units were available for around $680,000 – less than a quarter the cost of houses in the area – and rental yields were about 4.9 per cent.

“Strathfield has the highest rental yield for units in the inner west which allows landlords, on an affordable budget, to attract tenants looking to live in a high-demand suburb,” he said.

Buyers agent’s and investor with 30 properties Bharat Patel said targeting cheaper properties in the current climate made a lot more sense than buying pricier properties, even if the capital growth prospects weren’t as good, because it would make it easier to get new loans.

“The problem is you could buy one expensive property and then you’re stuck,” he said, adding that cheaper areas were more popular in the current climate because interest rate rises had priced many home seekers out of other markets. That increased competition was driving up home values.