Time to buy Sydney city apartments?

The prices went down so much that the yield starts looking attractive, which may surely lead to some capital growth in the medium term? Frieds recently bought several 2-bedders at just over $300K each. Are any forumates buying city apartments in Sydney these days?
 
Hi, Lotana. What yields are your friends buying at? Remember a 5% yield on a suburban house and a inner city unit are very different, because body corp fees (might be a killer in the future if you have to repair lifts or pools), council rates and so on are very different. You need to run the cashflow calc to see if it´s a good deal.
Alex
 
There are definately signs that the property cycle is moving on:

Property boom -> over inflated prices -> lack of affordibility -> property slump -> decreasing prices -> eventually decreasing vacancies -> increasing rentals -> increasing yields -> increasing investor interest

And off we go again (but very slowly at first)
 
House_Keeper said:
Which area are you referring to?

"Sydney Apartments" is more than one market.

I actually mean "City". The area between Darling Harbour in the West, Hyde Park in the East, The Sydney Harbour in the North and Central Station in the South.
 
alexlee said:
Hi, Lotana. What yields are your friends buying at? Remember a 5% yield on a suburban house and a inner city unit are very different, because body corp fees (might be a killer in the future if you have to repair lifts or pools), council rates and so on are very different. You need to run the cashflow calc to see if it´s a good deal.
Alex

Hi Alex,

I agree about extra costs in apartment buildings. My friends are actually buying in buildings where most of the units are rented furnished (this increases the yield) and the buildings have a receptionist/building manager (this increases the holding cost). I am not sure what return are they getting, but it looks closer to 10% than to 5%.

So far we have not heard from anyone here who would say I am now buying, or considering to buy, a Sydne city apartment. :confused:

Lotana
 
I do keep an eye on City of Sydney apartments. having bought and sold at 33.5% profit over 16 months.. It was a big end of Town type apartment but was back in 2002. I think possibly the purchasers of the average level apartments being made ATM might be negatively gearing buyers-- say high income earners -- who are just happy to hold and see the recent slump as a buying opportunity. The current Bulletin magazine has a 'whither property" article which is suggesting that for Sydney the place and style you should be buying are small inner city Edwardian/ Victorian cottages-- close to city, and have amenities, charm etc- e.g Balmain, Glebe. These have come down a bit too and I would say have a better chance of capital accrument than Apartments-- if that is the way you are looking-- . Apartment wise - those that have some unique point of distinction say view or waterfront-- will be the ones to give best return in the long run of course- but natch come with premium on price.
 
Traditionally units have been a little bit more risky due to capital gains having been a bit slower than normal housing , this of course do to the fact that no land is actually owned just the floor space itself (also evident by the banks unwillingness to highly gear units) .
However units in particular in capital cities are become more and more popular due to a number of reasons the main of which is the rising costs of houses but other factors include :
- Over the past 10 years the number of people living by themselfeves has gone up dramatically.
- Babyboomer generation retiring and empty nesters demand smaller housing.

Perosnally I think in the next 5 - 10 years units will do fairly well.


One of the main things that makes investing in cheaper units like your friends 300 k 2 bedroom unit unactrative for investors is the strata fees. In cheaper units these can be detremental to you. Alot of the off the off plan units ( never buy off the plan as you will be overpaying and their will be an oversupply ) and newer units in capital cities try to design and market them like hotels with fancy concierges and facilities all of which makes your strata fees high. But you may find if you spend a bit more and buy a bigger unit the rent to strata ratio will be improved as the strata fees are often the same regardless of the units size.
 
I've been looking a little in Sydney city because I live so close there... Haven't found anything great so far. Sure the yiels are good but the strata fees are generally enormous. I'm new to the property investing game but from what I read in books and this forum it appears city apartments are prob. the worst for capital growth in the long term due:

1) oversupply they will always build in the city
2) lack of land compared to a house.
3) there is no unique features about city properties (i.e. its usually boutique apartments that have high capital growth as there aren't many of them). generally in a tall high rise there are about 4/5 identical units for sale at the same time thus pushing the price down.

having said that i'm considering investing there if i find a good yielding unit. i'm more of a cashflow investor as this age because i want to travel and can't take on board highly negatively geared properties. i mainly look around potts point/darlinghurst area at studios for the low entry into the market if anyone is familiar with this area feel free to msg me we can maybe meet up and swap some ideas...

tim
 
You'll find some strata levies in inner city apartments up to $1500 a quarter. I pay that a year on one of my properties. Plus I'm willing to bet my portfolio if its a Meriton apartment, you'll have to cough up a special levy to fix their mess within 5 years of you purchasing one. Did look into though. I work in town and some have double garages which I could use during the day but the numbers still didn't stack up though. Better off gettng more land value with the inner city terraces but they still ain't cheap. And watch out for the flightpaths over there too. Apartments on the fringes will always keep propping up. Theres still plenty of land around the inner west to build complexes.

Heres something to think about - was at a few inspections over the weekend looking with a friend for a PPOR unit in lower nth shore and drove past an area where there was some 40 to 50 people congregating outside a courtyard. Finished an inspection down the road and drove past again, this time seeing a trail of people streaming out of a building. Being a nosk parker, sneaked a quick look, obviously didnt want to be disappointed if they were giving out free u2 tix! Walked upstairs and realised it was an apartment up for lease! Wow, perhaps it was lack of stock being the New Year but I may have to bring forward my predictions on when the Syd market will start to move again. But net yields are still pretty ordinary. The apartment would probably have been worth $420-$440K and was asking $370p/wk rent. Stratas in those places are about $500-$700 p/qtr plus council of $700 a year and maybe utilities of $300. Then you may have the specials..etc.. Sales still soft but gap between price and rent is narrowing....
 
asdf said:
You'll find some strata levies in inner city apartments up to $1500 a quarter. I pay that a year on one of my properties. Plus I'm willing to bet my portfolio if its a Meriton apartment, you'll have to cough up a special levy to fix their mess within 5 years of you purchasing one. Did look into though

having said that though my parents bought a dual key access meriton apartment last year mortagee sale. cost $580,000 next to the city rsl on george street and its rent for $950 (as it contains a studio apt + 1 bedroom + parking space) fully furnished. high tenant turnover 6-12 months but no problems leasing out ever. there are still a couple around but not at that price (my parents got it cheap coz of a mortagee sale)

strata is $1200 a quarter so the numbers worked out OK. don't think it would grow much but the rental is great.
 
I'm willing to bet my portfolio if its a Meriton apartment, you'll have to cough up a special levy to fix their mess within 5 years of you purchasing one.
I was recently talking to a bank valuer who was valuing my ppor.
He specialises in City & Eastern burbs valuing. He metioned that he presently thought the value in the city was quite good ie: a good buying opportunity. He also mentioned that prices had fallen dramatically on some of the newer apartments from their "off the plan" purchase prices. In one instance it was indeed a Meriton apartment a couple of years old where they were already having to replace the lifts! Not a small expense I would imagine!

The prices he says have dropped by up to $200K and he also commented that he thought the yields were quite good ( although no figure quoted ) and might be a good time to invest.I made a passing remark that I would never buy an inner city apartment (as IMO they can be risky, Poorly built and high turnover of tenants - tends to damage common areas more with all the moving constantly happening) He said he would never invest there either.

Why not look in the nearby suburbs Elizabeth bay, Potts Point etc.? You can pick up reasonably priced apartments with smaller overheads that will probably rent just as quickly as anywhere else.

Greg
 
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