Larnook NSW Property Investment

## 1. Investment Verdict We rate Larnook, NSW as a "Hold" with an investment scorecard of 51.0/100. The single most important number justifying this verdict is the 5-year compound annual growth rate (CAGR) of -0.8%/yr, indicating a stagnant market that has not seen significant long-term growth.

## 2. Market Overview Larnook's median house price is $833,224, and the median unit price is $457,028. The market has experienced a 1-year price growth of 0.2%, which is relatively flat. The gross rental yield is 3.7%, which is moderate. With a population of 394 and an owner-occupier rate of 70%, the market is skewed towards owner-occupiers. The 3-year growth forecast of 7.2% suggests potential for recovery, but the current market cycle is in recovery, indicating that the suburb is coming out of a downturn. The lack of days on market data makes it difficult to assess the current demand-supply balance, but the moderate rental demand and stable vacancy trend suggest a relatively balanced market.

## 3. Rental Market The vacancy rate in Larnook is 3.0%, which is relatively stable. The median weekly rent is $600/wk, resulting in a gross rental yield of 3.7%. The rental demand is moderate, which is consistent with the stable vacancy trend. With an unemployment rate of 5.2%, the local economy is relatively stable, but not robust. For investors, the moderate rental demand and stable vacancy rate suggest a relatively low-risk rental market, but the yield is not exceptionally high.

## 4. Short-Term Rental Opportunity The median nightly rate for short-term rentals in Larnook is $513/night, with an occupancy rate of 40%. Assuming a 40% occupancy rate, the estimated annual revenue for a short-term rental property would be around $75,000 (based on 365 nights * $513/night * 0.4 occupancy). Compared to the long-term rental yield of 3.7%, the short-term rental opportunity may offer higher returns, but it also comes with higher management costs and risks. However, with a relatively low occupancy rate, the short-term rental market may not be the most attractive option in Larnook.

## 5. Infrastructure & Growth Drivers There are no major projects on file for Larnook, which may limit its growth potential. The transport infrastructure is standard suburban transport access, which is adequate but not exceptional. The lack of major projects and limited development pipeline, with price growth outpacing new supply, suggests that the suburb may experience some growth due to limited supply. However, the distance from the CBD may limit long-term capital growth potential, as it may not be an attractive option for buyers who value proximity to the city centre.

## 6. Bull Case If the market conditions hold or improve, the 3-year growth forecast of 7.2% suggests a potential upside scenario. With a low supply pipeline and price growth outpacing new supply, Larnook may experience some capital growth. If the local economy improves, with a lower unemployment rate, the rental demand may increase, leading to higher yields and capital growth. In this scenario, the median house price could potentially increase to around $900,000 (based on a 7.2% CAGR over 3 years), resulting in a significant return on investment.

## 7. Risks The key risks in Larnook include the distance from the CBD, which may limit long-term capital growth potential. The low population of 394 and limited development pipeline may also limit the suburb's growth potential. The unemployment rate of 5.2% is relatively high, which may impact rental demand and yields. The supply pipeline is low, but if new developments are approved, it may increase the supply of properties and put downward pressure on prices. With a moderate rental demand and stable vacancy trend, the vacancy risk is relatively low, but investors should still be cautious of potential vacancies.

## 8. The Play For investors looking to enter the Larnook market, the entry range for houses is around $800,000 to $900,000, and for units, it is around $400,000 to $500,000. The minimum yield to target is around 3.5% to 4.0%, considering the moderate rental demand and stable vacancy trend. Investors should watch for signs of improving local economic conditions, such as a decreasing unemployment rate, and increasing rental demand. The recommended strategy is to hold existing properties and monitor the market for potential buying opportunities, as the market is currently in recovery. Investors should also consider the potential for short-term rental opportunities, but be cautious of the higher management costs and risks.

This analysis is for informational purposes only and does not constitute financial, legal, or investment advice. Seek professional advice before making investment decisions.