Two Woollahra apartment blocks hit the market as yield-hungry investors look to swoop
Two neighbouring blocks of units in the eastern Sydney suburb of Woollahra are for sale for the first time in 50 years, as the market for apartment blocks shows signs of increased demand.
Inquiries for apartment blocks in Sydney have increased 48 per cent in the past year, according to data from CBRE, with these assets receiving 20 per cent more interest than offices, development sites or retail buildings. CBRE fielded 26,000 inquiries for apartment blocks in the past year, including 3500 in the last month.
The Woollahra blocks are being sold by three brothers “who have inherited a portfolio of assets through their family, which has been in ownership for over 50 years,” said listing agent Gemma Isgro, CBRE’s associate director capital markets and metropolitan investments.
“The owners have decided to sell now because of strong marketing conditions,” said Ms Isgro, who is selling it with colleagues Paul Grasso, negotiator capital markets and metropolitan investments, and Nicholas Heaton, head of NSW private clients capital markets and metropolitan investments.
Both blocks, which sit on a combined parcel of 1100 square metres and are zoned R3 medium density residential, are being sold in one line.
The properties, at 113 and 115 Edgecliff Road, consist of 24 one-bedroom units, each with a study, with 12 units in each building. CBRE reports they were built between 1920 and 1930.
Buyers sizing up the Woollahra investment won’t be able to develop the block – a common motivation behind recent apartment block sales – but there are other opportunities to add value, according to Ms Isgro, including selling each apartment individually.
“The planning controls do not encourage new construction, however, [it] may appeal to unit-block traders who buy whole titles, refurbish and sell down individually,” Ms Isgro said.
Two of the 24 units are currently vacant, and the annual rent for the apartments ranges from $22,682 to $25,029. Only two tenants are on a fixed rental agreement to 2020, with the remainder paying month to month.
The median price for a one-bedroom unit in Woollahra in the 12 months to June 2019 was $1.3 million, according to Domain Group data.
The blocks are about 200 metres from Westfield Bondi Junction.
Increasing demand
The listing follows the sale of some high-profile apartment blocks in the eastern suburbs, including the Eynesbury apartment block in Edgecliff, which sold in 2017.
“The Eynesbury, which CBRE sold a couple of years ago, holds the record for the largest unit block sale in the eastern suburbs, achieving above $30 million. We recently sold a block of 27 in Waverley for circa $20 million,” Ms Isgro said.
The two Woollahra blocks are likely to sell for less than $20 million.
“This will be at a price point below both of these sales [in Edgecliff and Waverley],” Ms Isgro said.
Other apartment blocks on the market right now include two unit blocks at 50-52 Warren Street, Marrickville and a block of five apartments at 21 Cooper Street Paddington, both marketed by CBRE.
According to CBRE’s Nicholas Heaton, these blocks are becoming popular with investors looking for higher returns in a low cash-rate environment.
“Apartment block investments offer buyers a far greater yield than the return offered by banks or bonds. The icing on the cake is the ability to strata and sell down or totally redevelop in the future, driving higher returns over the life of the investment,” Mr Heaton said.
Long term capital gains can also sweeten the pot.
“Apartment block buyers are looking to purchase an investment vehicle with an initial return of around 3 to 4 per cent. These investments also provide a land bank for future redevelopment [where planning laws allow], potentially seeing strong total returns of around 10 per cent.”
113 & 115 Edgecliff Road, Woollahra will be sold via public auction on Tuesday, October 29.
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