Who is investing in Upper North Shore property?

Property investment is a hugely popular way for Australians to grow their wealth and create an income stream.

In fact, according to the ATO’s latest data, close to one in five people – or over two million Australians – now own an investment property.

In October 2021, Australian Bureau of Statistics data showed that investor borrowing had hit its highest level ever and, by May 2022, investors accounted for more than 33% of all loans nationally.

As data from the 2021 Census reveals, our area is growing in popularity with property investors, as can be seen in the increasing number of properties rented out. In 2016, 17.5% of Ku-ring-gai homes were rented. By 2021, that had grown to 19.8%. It’s a similar story in Hornsby, where the percentage of homes rented rose from 21.2% in 2016 to 23.1% in 2021.

A profile of Upper North Shore investors

From what we’ve seen recently, investors come from six key groups:

1. Upper North Shore family investors

While our landlords come from many locations, local families are the core of our landlord market. They understand first-hand the appeal of the area and are motivated by creating an income stream and financial security. This type of investor wants to invest with heart and head in a blue-chip area they know and understand. According to realestateinvestar.com.authey’re onto a good thing, with Ku-ring-gai vacancy rates at 1.18% and Hornsby at 0.98% – indicative of a competitive ‘landlord’s’ rental market.

2. Future downsizer investors

We all know that generous properties that suit downsizers are hard to come by. When they do come onto the market, there’s often significant buyer competition, and we often find people purchasing them before they’re ready to move in, just so they don’t miss out in the future.

These investors are interested in future-proofing their retirement and securing a property for tomorrow at today’s prices. After all, not only will the property likely experience capital growth, but they’ll also enjoy rental income until they’re actually ready to move in once the kids leave home. Popular with this demographic are large off-the-plan apartments that offer a lock-up-and-leave lifestyle, alongside spacious villas, townhouses and smaller houses in uber-convenient village locations like St Ives, Gordon, Roseville or Lindfield.

Many future downsizers aren’t afraid to buy a property in need of renovation. They’ll often rent it out as is and deal with the upgrades when it’s time to move in themselves.

3. The bank of mum and dad investor

Increasingly, the bank of mum and dad is the way many first home buyers get onto the property ladder. In fact, according to some research almost half (49%) of buyers under 35 years old have had assistance from their parents to buy property. This assistance comes in many forms, and we’re increasingly seeing “bank of mum and dad” investors choosing to buy an investment property to either gift to their kids down the track, or to sell or rent to them in the future.

These investors are motivated by the rising cost of housing, combined with the cost of living. They’re happy to spend now to help their kids save and get on the property ladder in the longer term. Sometimes their kids are quite young or still studying, and they’re happy to rent it out until the family needs it.

The good news for these investors is that rental income in our area has been increasing. In Ku-ring-gai, the median rent for houses rose 17.5% over the past 12 months, while the median apartment rent increased 5.4%. In the Hornsby area, the median house rent has increased 7.69% over the same period, while apartment rents rose 2.27%.

4. Expat investors and those living overseas

Covid precipitated a flood of expats returning to our shores. In 2020 alone, around one in five of Australia’s expats returned home. That’s over 400,000 people. This, alongside record low interest rates, was a contributing factor to our 2020-2021 property boom.

Over the past two years, we’ve also seen many expat Australians still living and working overseas buying an investment property on the Upper North Shore. These investors tend to buy for one of two key reasons: they want to get into the market back home and are choosing an investment property as the vehicle to do this; or,they’re buying a “temporary” investment property that they plan to live in one day to live in when they eventually return to Australia.

Many of these expat buyers will use a buyer’s agent or friends and family to help them choose a lifestyle property or family home, as they can’t be here in person. And they tend to place great value on choosing an experienced property manager to look after the day-to-day running of their investment property.

5. Female investors

Women have typically owned property in lower numbers than men – particularly when it comes to investment properties. But this is gradually changing.

ABS data shows that 47% of property investors are now female – up from just 20% over the past decade. Other research reveals that women make less risky and more cautious decisions, which could explain why their property investments tend to outperform men’s. According to ATO statistics from 2016, female property investors outperformed males by 40 basis points.

6. SMSFs investing in residential property

In 2021, there were nearly 600,000 SMSFs in Australia and ATO data shows that, in Q1 2021, 5.6% of all SMSF assets were invested in residential property.

We see many investors using their self-managed super funds (SMSFs) to buy residential property. Because these investors can’t live in the property, they tend to make diligently-researched decisions.

Right now, yields for units in Ku-ring-gai (3.35%) are higher than those for houses (2.1%), and the same pattern is reflected in the Hornsby area, where units (3.51%) outstrip houses (2.14%). Meanwhile, earlier this year, East Lindfield ($1,378) and East Killara ($1,323) both featured in the top 30 suburbs with the highest weekly rent.

Want more?

If you’d like to find out more about investing, renting, buying or selling on the Upper North Shore or Hornsby, get in touch with our team today.