Sydney Waterfront Apartments - Good idea?

[POTM]

Hi All,

I am currently looking to buy a property to rent out in the next few years then move in later down the track. If CG is good later on I will still sell. Can some of you help me out on the below questions. I am very noob so please forgive me for any stupidity here.

1. Waterfront apartment vs house in terms of CG?
2. Which waterfront suburbs? Inner West ? (Drummoyne, Balmain, Balmain East, Chiswick, Abbotsford, etc). Eastern Suburbs? Lower North Shore?
3. Old or newer blocks? Also, smaller block better than larger block in terms of exclusiveness?
4. Waterfront facing Parramatta river vs waterfront facing harbour bridge. How big of a difference in terms of price and long term CG?
5. Rent - I feel Balmain is much easier to rent out comparing to places like Drummoyne. Places like Abbotsford is harder to rent out with lower rent too.
Am I correct? Please comment.
6. Any opinions on strata levy? More expensive ones = more trouble?


Thanks,
POTM

 

[Medine]

Hi POTM,

1. Generally houses have more growth than apartments because they have more land included. This is not the case in the areas you mentioned because of scarcity of land pushing the price of apartments up too.
2. I'm not an expert in Sydney, but I had a little squiz at the residex average growth report for suburbs you mentioned and they're all above average. You might want to order yourself a copy (or RPData or whichever)
3. With an older apartment you may be able to renovate for an immediate capital growth and rental increase
4. I'm a mexican, but I'm guessing a view of the bridge can't be beaten
5. The demographics on rentals are good in all these areas? What makes you say some are better than others?
6. More expensive strata levy = more expensive strata levy = less profit? I guess it depends on the rent?
I hope this helps. Good luck with it!

Cheers, Medine

 

[craigb]

also depend on the cost to get in, and the rental vacancy, would or could you buy two homes in onother area to cover your loses, in case you can't rent it, as one water front would be all your eggs in one basket, in case,

 

[Propertunity]

I am currently looking to buy a property to rent out in the next few years then move in later down the track.
1. Waterfront apartment vs house in terms of CG?

Do you mean waterfront apartment Vs house in the 'burbs somewhere? If so, then you need to say where the house is to be located. Generally speaking the waterfront will give you better long term CG.

2. Which waterfront suburbs?
Inner West ? (Drummoyne, Balmain, Balmain East, Chiswick, Abbotsford, etc).

All good.

Eastern Suburbs? Lower North Shore?

See attached CG chart. Inner West waterfronts have outperformed over the last 15 years. For the future - ask me in 15 years

3.Old or newer blocks?

Older, definitely

Also, smaller block better than larger block in terms of exclusiveness?

Smaller block on larger land in terms of higher land component per unit and exclusivity.

4. Waterfront facing Parramatta river vs waterfront facing harbour bridge. How big of a difference in terms of price and long term CG?

Harbour because harbour is better than river. Provide example suburbs and I can do research back 15-20 years.

5. Rent - I feel Balmain is much easier to rent out comparing to places like Drummoyne. Places like Abbotsford is harder to rent out with lower rent too. Am I correct? Please comment.

Vacancy rate currently in Abbotsford is 1.1% and in Drummoyne is 2.2%, Balmain it is 1.3%. Anything below 3% is very good for a LL.

6. Any opinions on strata levy? More expensive ones = more trouble?

More expensive strata levy can be a function of:
1. Newer buildings or ren'd older with legal / court cases - short / long term
2. Lifts, saunas & spas / pools
3. Older buildings needing maintenance - new roof etc
4. Small number of units in block with maintenance issues
So there is no fixed answer to your Q.

 

[POTM]

Hi Medine,

Thanks for your reply. For question 5, I feel Balmain is better than the others in the Inner West is because it is closer to the CBD. Drummoyne is 10 minutes closer to the CBD then Abbotsford and similarly Balmain is 10 minutes closer than Drummoyne. I am just guessing, no evidence at all.

Cheers,
POTM

 

[POTM]

Hi Craigb,

I am hoping all egg in one basket at a waterfront location will outperform 2 average units (say in Ashfield) added together in the longer term. It is a gamble and it mite seem to be a stupid one. Please comment more.

Thanks,
POTM

 

[POTM]

Hi Propertunity and All,

You guys are all so quick in replying. I am so glad.

1. I am comparing with house somewhere in Ashfield/Croydon/Summer Hill/.....
2. Waterfront suburbs I am frequently looking at are Abbotsford, Drummoyne and Balmain.

Recently, one harbourfront 30 year old apartment in Balmain East for sale 900K+ with 2 bedrooms, 1 bath and 1 car space (not renovated with popcorn ceiling). Strata levy per quarter is about 1600 (holy crap). Internal area is about 100 sqm.

The view is stunning with the bridge in front of you. The block contains 32 units where 16 units are actually facing the harbour. The block doesnt have pool, sauna, lift, gym or even security doors. Undercover car space doesnt even have security doors. The blocks looks very old and little dirty too. Why 1600? I guess mite be some problems with the block fundamentally.

Similarly priced 3 bedroom waterfront apartment with 2 baths and 1 garage in a old but smaller block size. Internal area is about 150 sqm. The view is the Parramatta river (180 degree panaromic). Strata is about 1400 pq (still expensive).

The rent in the earlier I've been told is about 700 max per week and the second is more than 700 per week.

Which property is more worthwhile in the long term? Any hint on what type of waterfront apartment to pick?

Thanks All,
POTM

 

[wobbycarly]

Hi Craigb,

I am hoping all egg in one basket at a waterfront location will outperform 2 average units (say in Ashfield) added together in the longer term. It is a gamble and it mite seem to be a stupid one. Please comment more.

Thanks,
POTM

I'm not Craig, but generally you take on more risk when you look for more gain.

One risk in this scenario is that if you have 2 properties, the likelihood of them both being empty simultaneously is probably fairly low, but if you have one property, if it's empty, it's empty. The question you need to ask yourself is how will you handle the lack of rental income if the property is empty for a week, a month, 3 months?

I think that's what Craig was alluding to.

 

[craigb]

yes i was. thanks wobly..but i would like to point out that cheaper properties rent for more thats ie yeild,

 

[wobbycarly]

yes i was. thanks wobly..but i would like to point out that cheaper properties rent for more thats ie yeild,

Good point. And we could probably continue to discuss all day the other risks and differences b/w "cheaper" suburban vs. waterfront!

 

[POTM]

I agree totally and I understand cheaper suburbs gets much better rental yield.

Please dont hold back to discuss some of the major risks and limitations of waterfront apartments.

Thanks,
POTM

 

[wobbycarly]

I agree totally and I understand cheaper suburbs gets much better rental yield.

Please dont hold back to discuss some of the major risks and limitations of waterfront apartments.

Thanks,
POTM

Probably not so much waterfront, as such (unless you have a fear that global warming will raise the sea levels to the point where you can tie up your gondola outside your 5th floor apartment ) IMO, waterfront = good. I was unclear in my previous post.

More the risks associated with a single (typically) low-yield, "expensive" property cf. high(er) yield, "cheaper" properties.

A simple table of pros and cons would do it (don't have one to hand). You also mentioned in your original post that you would look to move into this place in the future. That changes things considerably, because you would be purchasing based on your personal requirements, and just happen to be renting it out until you move in.

That makes a big difference from simply purchasing something as an investment; the purchase criteria would be quite different.

 

[mattnz]

I think if you are looking for capital growth, high $900ks isn't a good move. $1M is always a significant ceiling price to get over.

 

[Trogdor]

I think if you are looking for capital growth, high $900ks isn't a good move. $1M is always a significant ceiling price to get over.

$1m isnt that much anymore, particularly in Sydney.

Arent there like 40 suburbs there with a $1m+ median?

 

[Propertunity]

1. I am comparing with house somewhere in Ashfield/Croydon/Summer Hill/.....

A very very ordinary house in Ashfield will set you back about $850K. Summer Hill be will much more.

Recently, one harbourfront 30 year old apartment in Balmain East for sale 900K+ with 2 bedrooms, 1 bath and 1 car space (not renovated with popcorn ceiling). Strata levy per quarter is about 1600 (holy crap). Internal area is about 100 sqm....... Why 1600? I guess mite be some problems with the block fundamentally.

Most 2brm units in older blocks without issues are $550-600 per Qtr. So any more than this and you have to do a strata search to find out why

Which property is more worthwhile in the long term?

From a purley CG perspective you can't go past water.

Any hint on what type of waterfront apartment to pick?

Double brick, top floor, security everything, with no 'issues' and low strata

 

[POTM]

If there are no nasty issues from the strata report then the high QTRly cannot be explained.

One important question. Now is a good time to buy? I feel the price has ease a little bit based on the auctions I have attended around Ashfield area. So I am thinking maybe let those waterfronts I've seen slip away and wait for ones with more desirable characteristics to come (e.g. security, garage, low strata, etc). What you think?

Thanks,
POTM

 

[Propertunity]

One important question. Now is a good time to buy?

Buy when you are ready and can afford to. I do not try to 'time' the market. Very few people (including many so-called experts) can do so accurately.

I feel the price has ease a little bit based on the auctions I have attended around Ashfield area.

You must be going to a different set of autions that me then.
I just went to one for a 2brm red brick unit in Summer Hill on the week-end that sold for $558K and was probably value, in my opinion, at $515-525K.
The underbidder was asked by the auctioneer if he would like to increase his bid, to which the reply was "No, I can buy a house for that!". That comment brought a round of applause from the crowd who were incredulous at the price being reached.

So I am thinking maybe let those waterfronts I've seen slip away and wait for ones with more desirable characteristics to come (e.g. security, garage, low strata, etc). What you think?

I think you should wait for the right property to come up (or make it come up by your own activities) and then pounce.

All the best with your purchase.

 

[POTM]

Thanks for your advice. I will be more patient and wait for the right one to come. But during my waiting time the price is very likely to increase much more. Well.....nothing much I can do.....Cheers....POTM

 

[wobbycarly]

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