Inner Sydney market is booming, but we're still waiting for top end to kick off

The demand for properties in inner city Sydney is at an all-time high. Properties are selling at record prices upon first inspection, and the huge influx of investors returning to the inner city property market, means there is a shortage of quality stock available – particularly for properties priced up to $1.2 million.

Many vendors are holding on tight; refusing to part with investments they bought years ago that are now yielding rental returns as high as $800 per week, on a property they purchased for just $400,000 10 years ago.

There was a time during the early 2000s that investors shied away from purchasing properties in the inner city. Banks tightening their lending requirements and only financing between 60-80% of property values meant that many investors were cut out of the market and properties under 50 square metres were very hard to finance at all.

This was a tough period for investing in inner Sydney. Hundreds of new apartments were released to the market each year, but heavy finance restrictions fuelled lots of bad press about investing in city apartments. At the time, many experienced city agents were managing 30-40 listings simultaneously, and the time-frames to sell these apartments would span up to 12 months.

How times have changed! If anything, the financial crisis has helped the city market by giving buyers the confidence to invest in property again, as opposed to other high risk investments and shares and stocks which can be volatile.

New developments have been selling out in just hours upon release, and command exuberant prices – including Barangaroo, which completely sold out in hours despite prices starting at $1 million for one-bedroom apartments, and most recently York & George, another inner city development which sold almost 90% of its apartments on the first day of release.

Self-managed super funds have also gained momentum, buying up investments in the inner city market; yields are so good with the guaranteed reward of long-term capital growth.

We’ve also seen a growing number of tenants who have chosen to buy into the market so as not to pay the ever increasing rental prices. It’s all part of the shift toward more and more local and international residents embracing our fabulous inner city lifestyle, and just wanting to be in it to enjoy it. It’s no wonder why the city of Sydney is one of the most in demand property markets in the world.

While it is encouraging to see our once tough inner city market experience such a boom, properties at the higher end of the market are still harder to move. This is particularly true for those who bought off-the-plan for properties priced over $1.8 million in the past four to five years.

These properties are still averaging 12 months on the market and there is a much smaller pocket of people who can afford to spend $2-$6 million on apartments in the city. The higher end is predominantly owner occupied and over time we look forward to this end of the market picking up.

As we say goodbye to 2013 we are excited for the year ahead and once again look forward to a buoyant inner city market place.