The Solid Investment Proposition of New South Wales Real Estate: Fact or Fiction?

As a slight drop in interest rates spurs heated competition amongst buyers in the residential market boasting the nation’s highest capital gains, JamesKellie Buyers Agency cautions that it takes more than just purchasing in one of New South Wales’ hot spots for first investment property buyers to achieve optimal returns. 

Witnessing a plethora of buyer mistakes, incurring diminished returns and loss of life savings, acted as the catalyst for Co-Founder and Director Kellie Adamson’s career transition from two decades of real estate, construction and property development to buyers agent.

“Purchasing an investment property is more complex than most presume, incorporating decisions on location based on long or short term strategies, securing ideal pricing off-market in accordance with objective valuations and assessing construction and development quality, to name a few factors.” Ms Adamson said.

Co-Founder and Director James Brown, known for his book ‘The Rookie Investor – A Newcomer’s Guide to Building Wealth Through Real Estate,’ advocates a blue chip Eastern Suburbs unit is the holy grail for long term rental yields and capital gains, ideal for young investors.

“Although a blue chip Eastern Suburbs unit comes with a price tag of $1-1.5 million, it has the potential to double in value every 7-10 years.” Mr Brown said.

“My first investment property at age 20, a 50 metres squared one bedroom unit with one bathroom and lock-up garage in Vaucluse, which was purchased in August 2020 for $750K, is now worth approximately $1.05 million.

“In addition to a rental yield of 4.1%, it comes with a projected sale value of approximately $2 million by 2035.”

The Lower North Shore boasts similar growth dynamics to the Eastern Suburbs, but for a slightly lower entry price and associated rental yield. A one bedroom unit typically ranges from $750K – $1 million, and reaps a rental yield of 3-4%.

“Although the rental yield is slightly lower in areas such as Neutral Bay, Cremorne, Cammeray and Kirribilli, tenants in these areas are often stable working professional couples who require less maintenance compared to the transient tourist market who are drawn to the Eastern Suburbs.” Mr Brown said. First investment property buyers are also turning a lens to Western Sydney, amid hype surrounding burgeoning infrastructure development and the Transport Oriented Development Program aimed at boosting housing supply in proximity to transport corridors. However, purchasing in this region is fraught with significantly more risk.

“Although, the newer Western Sydney developments are often sold for a premium, due diligence must be undertaken regarding construction and development quality to determine whether they will increase in value at a faster rate than some of the older properties.” Ms Adamson said.

In Kellyvile, where the medium price of a house is $1.5 – $2 million, JamesKellie assisted a family with two young children to purchase a four bedroom home with two bathrooms and two carparks on around 700 square metres of land for $1.6 million. The property which was built circa 1995 has increased in value since acquisition in 2023, earning $200K equity. Meanwhile, the market price of some newly built homes in the same suburb has not budged, and has even depreciated by as much as 10% in some instances.

For those seeking short-term capital growth, Newcastle presents a desirable option. Homes range from $800 – $1 million and value add can be achieved via renovations or potential addition of a granny flat. Heritage and conservation regulations also prevent a rapid increase of supply and protect price growth in certain areas.

“If you want your money to work harder in the short term, buy a house in Newcastle and renovate to fast-track growth initially, however, you may compromise on long-term capital gains compared to Sydney.” Mr Brown said.

A JamesKellie client, a male in his thirties, recruited the agency in November 2024 to assist with purchasing another property in Newcastle, to repeat the lucrative process Mr Brown and Ms Adamson facilitated previously. After spending approximately $150K on renovations on a three bedroom house with one bathroom on 300 square metres of land in Mayfield East, a tightly held area of Newcastle, a property which was purchased in February 2024 for $830K sold for $1.125 million in August the same year.

“While the New South Wales residential market continues to offer the best returns, only savy buyers will benefit in a market stacked in favour of vendors.” Mr Brown said.

“It is astounding how many entrust their life savings and future wealth creation to market hype and a grossly insufficient level of research, while struggling to balance emotions and rationality for such a major asset purchase.”