How far out of Sydney is still a good investment?
The maximum travel time in Sydney has changed, and this has created a big difference to what makes a good property investment.
How I used to view investment was that you needed to buy one within an hour’s travel time from the main CBD and within 10 minutes from a sub-CBD, such as Campbelltown or Liverpool.
However, with the population increase in Sydney and better infrastructure that has made travelling greater distances more palatable, I believe that maximum travelling time is now about one-and-a-half hour.
Combine that with the price of property closer to the city and the fact that you can only get sub-$350,000 houses when you go about 150 kilometres out of Sydney’s CBD, that’s another reason why the maximum commuting time has changed.
A city of sub-cities
For the Sydney market, because it is the largest population in Australia and still increasing, it makes sense to realign that thinking, especially when you consider the Greater Sydney plan.
That plan, of course, includes Parramatta as the second CBD, and then Campbelltown and Penrith as major cities as well. There will also be centres of influence, such as Wollongong and Gosford.
With that in mind, in Sydney, the not-too-distant future will feature cities within a city.
As long as there is major infrastructure to support commuting to and from these locations, it makes sense to be forward-thinking because in 10 years’ time these sub-cities will be considered “close” to the CBD.
Something else to consider – even though it may not happen in our working lives – is the proposed fast train to Goulburn and Melbourne, which will bring everything much closer again.
While we will continue to buy investment properties within that 90-minute travel time window, we may start looking at other properties further out because of affordability reasons – but that won’t be for many years into the future.
How commuting has changed
I’ve been investing in the Sydney market for 20 years now, and have witnessed first-hand the change in commuting times.
Back then, I was buying in Campbelltown and people would ask why I was buying in the sticks.
Fast forward two decades and Campbelltown is considered metropolitan.
In fact, when I was applying for loans in the Campbelltown area, in the late ‘90s some lenders were classifying it as regional, and areas like Picton were considered rural!
So we’ve got urban sprawl happening, which is something we need to be mindful of because Sydney has three or perhaps four distinct markets.
The first is the Sydney CBD market within an hour’s travel distance, which brings in Campbelltown and Penrith and out to The Entrance. These locations, of course, make worthwhile investments.
Then you have separate markets such as the base of the Blue Mountains and Wollongong. Wollongong, in particular, has its own CBD and surrounding suburbs as well as being located on the coast and within about one hour and 20 minutes travel time from the Sydney CBD.
Then, there is the Central Coast such as Newcastle, which has its own infrastructure and its own growth spurt. In fact, markets on the Central Coast and South Coast are firing later than Sydney, which makes sense to invest there at this stage of the cycle.
How far is too far?
Commuting times have increased significantly over the past 20 years, but that doesn’t mean it will continue to do that in the future.
Firstly, while there are a lot of greenfield sites on the outskirts of Sydney, there is a tipping point to how long people are prepared to travel to work each day.
In my opinion, you don’t want to invest in locations that will only be of benefit for the third generation after you. You just can’t forecast what will happen that far in the future.
The areas that we look at in any state still need to have enough infrastructure and have demand in those areas for jobs and properties, even in a bad market.
When it comes to the Sydney market, therefore, properties within 90 minutes’ travel time from the CBD can make solid investments. The exception to that is Newcastle because it has a number of its own economic attributes as well as being within two hours of Sydney.
In Brisbane and Melbourne, conversely, the maximum travel time is one hour and in Adelaide it’s 20 minutes because of its much lower population.
The thing is, as far as I see it, I don’t anticipate maximum travel times doubling to three hours in Sydney, for example.
There are many reasons for this, including basic human psychology, but one of the main ones is that our roads are becoming much more congested, so travel times are already taking longer than ever before. That’s why road transport should remain a vital consideration in your property investment strategy.
Finally, don’t bet on a location because of a piece of infrastructure that is really just a pipe dream. You are just throwing your money away.
The project needs to be funded and to have actually started for you to have certainty that it will become a reality and for you to include it in your investment fundamentals.
Otherwise, it’s the easiest way to lose money – regardless of how long the travel time is from the CBD.
