Sydney Vs Adelaide

Hi There
I am looking at investing in one of the main city of Australia. I have already have exposure in Brisbane, Melbourne and Canberra. I though I would stick with the main cities at this stage just for peace of mind. I want to know what is your opinion in investing in Sydney and Adelaide. I feel if I missing the entry into Sydney market now I am not sure when the next opportunity will arise. Adelaide is another city which I feel could be another city to invest. Where do these two cities stand in the property cycle. My intention is long term hold.
Price range: $600k to $800k
Type of dwelling: House.
Thanks in advance.

 

Long term...Sydney

What price point are you looking at for this investment?

House or strata?

May worth waiting for rental yields to come back up (may be years away before oversupply of brand new properties dries up).

 

I'd choose Perth over Adelaide. Buy at a great price. OO area. Add value potential. I'd probably still go Brisbane over Perth too . If I had to choose between Syd or Melb I'd go Melb.

 

Thanks Sana/Mona. Sorry to have missed that information. I have updated my question with that information. Are you referring to Sydney for waiting to invest?
Thank you

 

Thank you Sackie
You are not expecting the 35 billion dollar submarine building project will boost the economy. Just to give a perspective I think the sydney second airport first phase work is 1.7 billion dollars.

 

I honestly have no idea. I just go with my gut. Also you can't compare Adelaide and Sydney imo.

 

My interest as an investor is capital growth. If I were to put my money in either of these cities what I want to know is which investment will be ahead.

 

"Knowing" is crystal ball stuff, all you can do is make an educated guestimate.
My 2 cents, It's more important to determine which markets and stock types may do well and not necessarily which city will overall be in front. You can invest in a city that comes out overall in front of another city yet your specific investment still under perform. And vice versa.

 

Unless you are having land tax issues I would add another one at Melbourne for that budget. For that budget in Sydney it would be very far for a house or get a 2 bedder apartment closer to city.

If you want to get a house at Adelaide I would get closer to the beach or focus on eastern suburbs with good school zones.

 

These are actually odd cities to be comparing - strange alternatives, though you do explain this in your opening remarks.

Sydney is the best long term real estate play in Australia - a large city with lots of different markets within it. With automotive & manufacturing shutting down in Adelaide, I am just not sure what the large scale economic drivers there are anymore.

 

If your interest is capital growth, then its a no brainer - definitely Sydney.

Over the past decade, Adelaide house prices have done nothing, if anything in some places they have gone down. Corelogic report last quarter, that Adelaide house prices fell 0.84%, while Sydney increased 2.99% (12% annualised). A rate cut next month will send Sydney prices even higher - could be as much as 15 to 20% per annum. Leverage into this market and you will be making considerable dough.

 

With some of the highest electricity prices in the world, a lot of business in Adelaide is shutting down.

High energy prices kills everything.

 

Like others said, long term I would choose Sydney over Adelaide if that's your price range.

Your challenge will be to find something that have dual-income which allows you to hold for long term without costing you a fortune (perhaps something that has a granny flat or a duplex of some sort), or something that you can add value later on (such as cosmetic reno or subdivide) in order to manufacture equity instead of sitting back and pray for growth.

Cheers,
David

 

Thanks peter for your insights

 

Hi David
Yes I was more inclined towards Sydney but was lead to beleive that Adelaide has more potential to grow than Sydney. I would probably bite the bullet and go with Sydney.
Thanks

 

@Just-An-Investor What drivers did you find for Adelaide other than the submarine building project?

 

Ok I'm going to play contrarian and say I'd prefer to invest in Adelaide and in my opinion it's not close, especially wanting a house at that price range. For that sort of price you can get a house with decent land not much more than 5km from the city center. In Sydney you're going a long way out where land is plentiful and likely anything decent and close to transport is out of your budget. Sure house prices in Adelaide will never match Sydney but the house you can buy for $700k in Adelaide would probably cost $2M+ in Sydney at the moment if you go a similar distance from the CBD.

 

The below chart shows a ratio of the Sydney house price median divided by the Adelaide house price median. It is a few years old and I don't have the data to complete it, but I expect current data would show similarly elevated levels today where Sydney looks very overvalued relative to Adelaide in a direct house price comparison (vs historical ratios).

Two ways you might look at this:

1. Since 2009 Sydney has become a much more international city, apartment living is increasing the rarity of land for detached dwellings, so an increase in house price premiums are rational and going forward Sydney house prices will retain a greater premium when compared with Adelaide.
2. Nothing has changed that significantly and we will see historical cycles play out with Adelaide outperforming in the future, narrowing the gap.

I lean more toward 2, I think the ratio will fall (Adelaide outperforms) within the next 5-10 years, though perhaps not back to 2009 levels.

 

That is the main driver. I thought $35 billion dollars is a lot of money

 

Thank you for the information. Based on this chart Adelaide has to catchup a long way. I wonder how this chart would look if we take into account the recent correction in Sydney market. How do we get that information.