A 21-square-metre Paddington studio sells for more than $500,000

A small Paddington studio on one of Sydney’s busiest shopping strips sold for $506,000 under the hammer last weekend – or $24,000 per square metre.

That’s a 183 per cent increase since it last traded in 2004 for $178,750.

While the sales agents are celebrating the new benchmark for 339 Oxford Street, property advisor Pete Wargent from AllenWargent Property Buyers said it was important to be cautious on the future values of expensive square meterage rates with small places like studios.

“In this current cycle, properties in the lowest price bracket are being bid up. So properties that used to be very cheap, entry level prices have gone up, more than doubled in some cases and have had extraordinary price growth and it’s unstainable one would think,” Mr Wargent said.

“Down the track if Sydney has a downturn you don’t want to overpay for a property that won’t be worth much in the end,” he said.

The gentrification of Paddington has helped increase the demand and allure of buying into the area, according Mr Wargent, and it’s something that is not unique to pockets of Sydney.

“Places like Kensington and Chelsea in London, people are paying remarkable amounts of money for studios or what they call bedsitters.

“It’s a niche type of property and it comes with its own type of risks. If you’re buying this property at auction you have to be careful you can finance it because banks want bigger deposits for smaller properties,” Mr Wargent said.

Sales agents of McGrath Nicholas Wise and Angus Gorrie of the Paddington property were impressed with the sale after more than 100 buyers went through the property in the lead up to auction day.

Mr Wise said while those who inspected the studio were a mixture of mainly investors and first-home buyers it ultimately traded from one investor to another.

There were eight registered bidders and six actives ones that pushed the final price to $506,000, well over the reserve of $445,000.

Mr Gorrie said despite its size the property’s value was all in the location of being in the heart of the harbour city.

“It’s prime real estate, there’s not many studios in Paddington and we’re talking about being a 10-minute walk from everything in the city,” Mr Gorrie said.

“It’s the lifestyle and the convenience that will make sure you’ll always be able to rent that unit out and never be without a tenant,” he said.

Auctioneer at The Agency, Thomas McGlynn, said the studio is a sound investment and good value for money despite looking expensive on paper.

“When you’re looking to invest you can’t look at properties like this on an even keel. Paddington is one of those markets where the demand for its location and lifestyle is high across the board,” Mr McGlynn said.

“It shows the desirability of buying into inner city of Sydney is still strong and this purchase gives you an affordable opportunity to buy into the area,” he said.

The same didn’t apply to different part of the city though, according to Mr Glynn, who believed the new apartment market is not making the same gains per metre in suburbs including Zetland or Green Square.