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Investor interest in unit blocks on the rise

Despite some weakness in property markets, unit blocks continue to see a strong level of competition from investors on the hunt for assets that can weather market conditions.

Ray White Commercial Head of Research Vanessa Rader said investors had actively sought out unit blocks across NSW.

“Over the past 10 months, there has been outstanding activity across this market and interest levels remain high in the current environment,” Ms Rader said.

“We are seeing more savvy investors and self-managed super funds (SMSFs) continue to compete for assets during a time of low residential vacancy rates across the country despite these interest rate movements.”

Ms Rader said one of the reasons for the resurgence was tight vacancy rates country-wide, along with the increased price of houses.

“It has become increasingly difficult to find affordable housing stock, let alone rental accommodation,” she said.

“While build-to-rent continues to emerge in the Australian landscape, demand for rental properties throughout the region is not expected to dissipate as demand at reasonable price points is set to continue.”

Ms Rader said interest in unit blocks had been growing over the past few years as these generational assets entered the market looking to capitalise on strong market gains. 

“High net worth buyers as well as opportunistic investors and developers looking to upgrade, strata and resell for profit have aggressively competed to purchase this stock,” she said.

“The appeal remains high despite recent gains in value given the opportunity to landbank or enjoy a regular and somewhat secure income stream into the future.”

Across NSW there was more than $110 million in sales during the first four months of the year with yields remaining at historically low rates, according to Ms Rader.

“In metropolitan Sydney yields have consistently sat in the three per cent to 4.2 per cent range while regional assets have averaged five per cent,” she said.

“With the average NSW unit block costing approximately $3.4 million, it remains an affordable investment option, particularly for cash rich investors during a time of uncertainty in the share market and broader property market. 

“Potential to increase rents given the low vacancy environment, add value, redevelop and strata on-sell all good exit strategies which will see competition remain for these assets throughout the remainder of the year.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.