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NSW investors urged to be cautious

26 February 2014 Vivienne Kelly

Property investors who are considering buying in New South Wales have been warned that it may be difficult to find value in the years ahead.

Rod Fehring, Australand’s executive general manager, residential, said at the Property Council of Australia Residential Outlook 2014 last week that with the escalation of land prices in New South Wales, investors – particularly developers – had to ensure they were buying in an area where the price growth was sustainable.

“I think it’s fairly safe to say that Sydney is a destination for investment, but how all that is going to sustain itself in the future is a good question,” he said.

Mr Fehring said it’s important for investors to remember that Sydney property prices are largely playing ‘catch-up’ on the back of “a long period in the doldrums" – but nothing, including ongoing price growth, is guaranteed.

"The real question for Sydney is, can it continue?" he said.

Louis Christopher, managing director for SQM Research, said with so much focus on Sydney ‘taking off’, it can be easy for investors to get carried away.

“We’re all aware that the market right now is being driven by investors,” he said. “I’m concerned that investors may not be looking at the fundamentals there.”

Mr Christopher said even though vacancy rates have been rising in and around some capital cities’ CBDs, he doesn’t anticipate Sydney is heading towards an oversupply situation.

“My point being that there are pockets out there of potential oversupply in Sydney and I know that there is a lot of stock coming into the CBD over this year and next. I don’t think we’re going to see a major oversupply situation, but I think you need to be a little bit cautious,” he said.

Iwan Sunito, CEO of Crown Group said he expects Sydney, and indeed greater New South Wales, to continue to heat up on the back of the country’s lower currency, the influx of foreign buyers and ongoing infrastructure investment, including the Barangaroo Casino complex and the redevelopment of Sydney’s exhibition and convention centre.

NSW investors urged to be cautious
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