The auction of two established boarding houses in Sydney will test the market’s demand for an asset class that has delivered promising results since the onset of the pandemic.
Colliers has listed the 17-room Apsley House in Randwick, and an eight-room boarding house in Newtown, with the former tipped to fetch close to $4 million and the latter between $2 million and $2.5 million.
The latest listings follow the $3.79 million sale of a Stanmore boarding house in March, just 13 months after it was bought for $3,325,000, representing an impressive capital growth just shy of 14 per cent.
Colliers director of investment services James Cowan said boarding houses were appealing investments because they were close to public transport and amenities and typically offered redevelopment potential.
“However, most importantly, they generate sturdy income streams and attract generous land tax exemptions if average rents are maintained below $389 per week for single accommodation for full board and lodging.”
Mr Cowan said there was a distinct lack of affordable boarding options in metropolitan Sydney, particularly as newer developments put pressure on prices.
“When new boarding house developments are complete, naturally the rents are set to reflect the market and in many circumstances will exceed $450 per room,” he said.
“This is the case in a 38-room recently completed development in Wolli Creek where new rents have been set at circa $400-$450 per week as opposed to the previous rents of only $200 prior to the redevelopment.”
Built in the 1970s, Apsley House in Randwick generates $220,000 in passing income at a weekly rate of $245 per room.
Mr Cowan said the sub-$5 million range was the “sweet spot” for boarding house sales, with a wide range of buyers including mum and dad investors, overseas investors, accommodation specialists and developers tipped to throw their hat into the ring.
“Given the aspect of the property and positioning on one of Randwick’s best streets, it’s likely that 5 Bishops Avenue will attract interest from home buyers and renovators for owner occupation,” he said, adding its R3 medium density zoning paved the way for a possible duplex or townhouse development, subject to council approval.
The smaller boarding house at 481 King Street covers two floors on the busy Newtown shopping strip, generating a passing income in excess of $140,000 per annum.
Fellow listing agent Miron Solomons said Randwick and Newtown were “premium locations” underpinned by significant infrastructure growth. “With the University of Sydney and RPA Hospitals on the doorstep of the Newtown asset, and world-class education and medical facilities currently under construction in Randwick, each of these properties are expected to experience significant future growth.”
While the recent lockdowns delayed the rollout of the sales campaign, Mr Cowan said market sentiment had not changed.
“If anything, the lack of available purchasing opportunities has improved the market, and we’re experiencing a generous uptick in overall enquiry levels.”
Both properties are scheduled to go to auction on September 9.