Does rental income even matter anymore in NSW?
Imagine investing in a business where the first three years of gross income merely covered the initial taxes paid to the state government to purchase the investment? Welcome to the Strathfield housing market.
As property prices and leverage ratios required to buy a house across Sydney have reached nonsensical levels, the NSW government is raking in the cash in the form of stamp duty. So much so, that the time it takes for a property investor in gross rental terms to recoup the stamp duty payment alone made at time of purchase means that there is very little evidence suggesting that investors are in it for the rental income. But every suggestion property investors are in it for the capital gain.
Sydney suburbs like Blacktown, Bankstown and Liverpool in their own right illustrate the abnormally prolonged time required to recoup stamp duty costs from gross rents (more than 100% of a years’ gross rental income). The chart topping Strathfield, located 30 minutes drive west of Sydney’s central business district and 45 minutes drive west of the coastline leave us at LF Economics wondering whether this locale is the epicentre of the Sydney housing bubble? Because purchasing an investment property that will take 2.97 years of gross rents to merely recoup the initial stamp duty paid makes no sense unless one is speculating that house prices will only go higher.