Sydney CBD Strata the quiet achiever

The Savills Blog

Sydney CBD Strata the quiet achiever

With much of the ‘water cooler’ talk currently being centred on Labor’s shock loss in the Federal election, the immediate reaction for those closely associated to the property industry seems to be a sense of relief. 

The positive impact the result will have on the property market will be immediate, with positive sentiment likely to create ‘positive spending’, though the life span of this positivity may be short lived. And with the RBA now cutting rates to record lows, we expect buyer interest to further increase now buyers have the opportunity to access more funds.

As it sits, the market is currently buoyant. For the right assets, buyers are continuing to strike aggressively to secure well located property, especially in the Sydney CBD. Strata titled CBD assets have continued to run against the grain, with many properties transacting at strong rates. With much interest of the market glued at the falling residential sector and the slowdown in development sites sales, the asset class that has continued to see a ‘shrinking’ of supply is strata office and retail. 

With many strata titled buildings being purchased as development opportunities, or acquired under the new 75% laws,  the natural supply of strata titled retail and office space in the Sydney CBD has significantly diminished, all occurring during a time when interest rates are at their historical lowest – the key fundamental to driving acquisition within the strata space. 

Coupling the above with the real concern of rental affordability in the Sydney CBD, traditional renters are seeking advice on the benefits of purchasing whilst debt is cheap. 

The lower cost of entry for strata-titled properties and with the distraction of the election now behind us, there is a good opportunity for strata titled property owners across Sydney to take full advantage of the undersupply in the market, along with using the current ‘wave of positivity’ to their advantage while it lasts.

This market has always traditionally been dominated by owner occupiers, small to medium business owners looking to pay down their own asset rather than paying off someone else’s. 

With the cash rate being at record lows (1.5%), investors have also re-entered the strata office market – chasing value in the return. Having both owner occupiers and investors now competing, sales rates have escalated and yields have compressed creating the ‘perfect storm’ for owners of strata assets to take advantage of strong pricing we are seeing achieved.  

For strata owners, we’re in a unique time where supply is low, debt is cheap, rent in the Sydney CBD is extremely expensive and finance approved buyers (generally small to medium business owners) are looking to buy.

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