Will you choose Parramatta for property investment?

[freya0325]

It's my first time to think about property investment.

Currently I am really interested in an off the plan in Parramatta:

• 500 metres from train station,
• will be the highest apartment in Parramatta (40 levels)
• besides Deloitte,
• near NSW Police Force,
• will be settled in the end of 2017 which can release my financial burden somehow,

The one I've already paid $5000 deposit is 80 sqm (unit area).
It's 2 bedrooms+2 bathrooms+1 carpark in level 9, cost is 747k.

It's for investment only.
My budget is up to 750k and I am only looking for off the plan as the first payment would be only 10% and I will pay another 10% when the apartment settled, which is more suitable for my financial situation.


The council has invested a lot in the develpment of Parramatta and surrounding area but 750k is still not a small number.

Anyone can give me suggestions (on price, location, expected growth etc)?

 

[Propertunity]

Anyone can give me suggestions?

Yes, in no particular order:
1. See a solicitor to see if you can get out of the contract.
2. Read some of the stories on the forum here about the pitfalls of buying OTP.

 

[pickle pickle]

Why do you want off the plan? You are paying for a new building. Yes there are tax deductions on depreciation (but you are paying for it in the purchase price). On the off the plan it is hard to know the quality you are buying.

I prefer to buy older buildings with a great shell. Reason why is with older buildings it is easier to ascertain the quality of the build (just look at condition) and you are not paying a premium for the building. Further it is a lot easier to add value to the building. Do a $10k reno and you could add 30K to the value of the property on an old building. On a new building, well that is a lot harder to do.

From what I understand and my experience there is a lot more maintenace costs on a new building than a good old building. I know this is hard to believe but hear me out. People who rent out a good old building are not as fussy as to the condition of the property as someone who is renting a newish building, so you don't get so much repair crap requests.

The body corp on a top floor apartment of 40 levels would be extremly high. I'm not against apartments (in many areas I prefer apartments, but older ones, than to investing in houses with lots of land as I'm not a builder), but especially for investments, buying new is so dangerous. You are more likely to loose money on the purchase.

The other issue with buying off the plan is that you are competing against non Australian residence (buying established building, non Australian residence cannot buy). There are stories of non residents that are not really considering the investment potential of the property, buy rather just getting money out of there country.

 

[freya0325]

Yes, in no particular order:
1. See a solicitor to see if you can get out of the contract.
2. Read some of the stories on the forum here about the pitfalls of buying OTP.

I didn't sign any contract, just paid the $5000 for EOI which allows me to choose the unit. If I decide not to buy, I can get my money back.
Forget about OTP, any suggestions about investing in Parramatta?

 

[freya0325]

Why do you want off the plan?

My financial situation only allows me to pay up to 10% for the first payment which is exactly the amount I need to pay for an off the plan. I don't think I can afford older building

 

[Rixter]

First off welcome to Somersoft.

You dont know it yet but by stumbling to find your way onto somersoft tonight you've won the lottery by not losing your hard earned money.

I concur with Propertunity.

OTP is high risk alone in the best of times. Couple that with Sydney's current position in the property cycle and you've turbo the risk off the scale.

I would strongly suggest you get your EOI money back and spend some time here on SS reading to build your knowledge level up.

Getting around & networking with other like minded investors is the best move you can make in starting out down your property investment road.

Once again welcome to SS.

 

[windyzz]

Hi Freya,

I live around the area and I myself have been looking previously mainly around Parramatta, as I believe the CG and yield will be strong in the next decade or so due to coming infrastructure, job creation (CBA is planning to move all their employees from Olympic park to Parramatta in the coming future), strong population growth, new schools (multi storey schools), new UWS Campus, etc.

However looking at what you're going to purchase - is this in the new Altitude apartment by Meriton? I wouldn't recommended it.

Why ? Simple!

1. The older established units are priced roughly in the high 500s or low 600ks
2. You can find an established one with lower body corporate fees
3. Being a high rise means that there is no scarcity factor therefore CG will be limited and competition for tenants will be very high - causing rental yields to drop.
4. As much as I like Parramatta, the council is allowing the construction of lots of skyscrapers and this can cause oversupply in the future.

So my suggestion would be to look for either an established 2 bed unit in Parramatta with low body corporate or look in surrounding suburbs (e.g. Westmead).

Westmead is more affordable and more family oriented, yet still has a train station. The suburb has height restrictions and very low vacancy rate (1.5-1.8%). The Hospital is also currently being upgraded. There are private schools, public schools, and parks in Westmead. In my opinion, it would be a great alternative to Parramatta for an investment property.

You could also consider LMI if you don't have a 20% deposit.

PS: I ended up buying an established unit (4 - 5 years old) in Westmead for low 500k (2 bed 2 bath and 1 car space) with strata approximately $650/quarter.

 

[monalisa]

I didn't sign any contract, just paid the $5000 for EOI which allows me to choose the unit. If I decide not to buy, I can get my money back.
Forget about OTP, any suggestions about investing in Parramatta?

Please do yourself a favour, and take your money back ASAP.

Doesn't sound like a great investment. Imagine the strata you will be paying!!!! You will be paying for your tenants life style! Sure you will have some tax deductions - but what's the point if the value doesn't go anywhere as you paid a premium to begin with.

As already mentioned, read up on OTP.

 

[monalisa]

4. As much as I like Parramatta, council is planning to build lots of skyscraper and can caused over supply in the future.

Very good points windyzz. I would like to add that as there is no unique factor, if there is a fire sale in your large complex, it will impact the value of your investment.

I haven't read through the whole thread, but wondering if Finance would be an issue with LMI as this is a high density complex and you will be doing a 10% deposit.

 

[freya0325]

Hi Freya,

I live around the area and I myself have been looking previously mainly around Parramatta, as I believe the CG and yield will be strong in the next decade or so due to coming infrastructure, job creation (CBA is planning to move all their employees from Olympic park to Parramatta in the coming future), strong population growth, new schools (multi storey schools), new UWS Campus, etc.

However looking at what you're going to purchase - is this in the new Altitude apartment by Meriton? I wouldn't recommended it.

Why ? Simple!

1. The older established units are priced roughly in the high 500s or low 600ks
2. You can find an established one with lower body corporate fees
3. Being a high rise means that there is no scarcity factor therefore CG will be limited and competition for tenants will be very high - causing rental yields to drop.
4. As much as I like Parramatta, the council is allowing the construction of lots of skyscrapers and this can cause oversupply in the future.

So my suggestion would be to look for either an established 2 bed unit in Parramatta with low body corporate or look in surrounding suburbs (e.g. Westmead).

Westmead is more affordable and more family oriented, yet still has a train station. The suburb has height restrictions and very low vacancy rate (1.5-1.8%). The Hospital is also currently being upgraded. There are private schools, public schools, and parks in Westmead. In my opinion, it would be a great alternative to Parramatta for an investment property.

You could also consider LMI if you don't have a 20% deposit.

PS: I ended up buying an established unit (4 - 5 years old) in Westmead for low 500k (2 bed 2 bath and 1 car space) with strata approximately $650/quarter.

It's not the Meriton one, that one is near parramatta river and it takes 15 mins to walk to train station(2 bedrooms unit sells for above 820k).
The one I am thinking is just besides the train station.
Guess how much for a 3 bedrooms+2 bathrooms unit in this apartment? Above 1m! Crazy!
90% of the buyers are Chinese. There are around 200 units in the building but over 300 people are waiting for the EOI!
I am Chinese as well ,but those guys are just TOO RICH!

PS buying OTP is the most popular way of investment among Chinese people, especially people like me who has just graduated and worked for two years, because they (oh no should I say 'we'....) have already made the price so high...

 

[Nem]

First off welcome to Somersoft.

You dont know it yet but by stumbling to find your way onto somersoft tonight you've won the lottery by not losing your hard earned money.

Well said Rixter I totally agree


I think Parramatta is great place for long term run, maybe not purchases at the moment, but OTP for 750K definitely NO
And why, above posts are summarizing it nicely, I hope you take all points into consideration
2 years will go pass very quickly and settlement might be bigger problem then you think

 

[spludgey]

• will be the highest apartment in Parramatta (40 levels)

Not for long though!

 

[windyzz]

It's not the Meriton one, that one is near parramatta river and it takes 15 mins to walk to train station(2 bedrooms unit sells for above 820k).
The one I am thinking is just besides the train station.
Guess how much for a 3 bedrooms+2 bathrooms unit in this apartment? Above 1m! Crazy!
90% of the buyers are Chinese. There are around 200 units in the building but over 300 people are waiting for the EOI!
I am Chinese as well ,but those guys are just TOO RICH!

PS buying OTP is the most popular way of investment among Chinese people, especially people like me who has just graduated and worked for two years, because they (oh no should I say 'we'....) have already made the price so high...

Be mindful that on settlement/completion, the bank valuation might be 50-100k lower than the actual purchase price.

P.S Just to give you a comparison on how expensive the Paramatta unit is. I too bought an OTP back in Mid 2013 (before having much knowledge on investment property) and it is still under construction (Completion in Early 2016).
It is in Wolli-Creek 500m from station with 2 bed, 2 bath + 1 Media room (can be used as 3rd Bedroom) and a car-space. The internal area alone is 94sqm, balcony is 23sqm, and car-space (Total of 135 sqm) and I have purchased this property for under 650k.

So be mindful.... 750k for 2 bed units in Parramatta can be classified as VERY expensive.

 

[freya0325]

Thanks for all your help.

I am Chinese and my agent is Chinese and all my friends who are talking about buying an OTP apt in Parramatta with 750k is so cheap are Chinese, however I think it is good that I found here so I can listen to different voice or maybe the voice from local people.
I think I will take my money back.

Here is another question, what do you think of Bankstown?

 

[spludgey]

Here is another question, what do you think of Bankstown?

OTP again? No!

 

[windyzz]

Thanks for all your help.

I am Chinese and my agent is Chinese and all my friends who are talking about buying an OTP apt in Parramatta with 750k is so cheap are Chinese, however I think it is good that I found here so I can listen to different voice or maybe the voice from local people.
I think I will take my money back.

Here is another question, what do you think of Bankstown?

Don't get me wrong, OTP can be good if you purchase them in the rising market. But we're in the peak of the market right now, so wouldn't recommend buying OTP.

For Investment Bankstown is good though - Bankstown might ended up getting the new automated train like in North West line (not confirmed yet though).

Also consider these suburbs on your budget for 2 bed established unit:
Inner West: Marrickville, Dulwich Hills, Hurston Park

South: Kogarah, Bexley, Hurstville, Rockdale

Mid: Campsie, Belmore

North: Artarmon, Roseville, Lane cove, Epping, Eastwood

 

[strongy1986]

Thanks for all your help.

I am Chinese and my agent is Chinese and all my friends who are talking about buying an OTP apt in Parramatta with 750k is so cheap are Chinese, however I think it is good that I found here so I can listen to different voice or maybe the voice from local people.
I think I will take my money back.


You really have to think who will be buying this in the future when you sell

This is where you make your return

Would a Chinese person spend top dollar on a second hand apartment?
I don't think local buyers would

To me it's almost like buying a car from the showroom

 

[gach2]

Thanks for all your help.

I am Chinese and my agent is Chinese and all my friends who are talking about buying an OTP apt in Parramatta with 750k is so cheap are Chinese, however I think it is good that I found here so I can listen to different voice or maybe the voice from local people.
I think I will take my money back.

Here is another question, what do you think of Bankstown?

based on this
YOU SHOULD BUY THIS BECAUSE YOUR CHINESE!!! It would be against your heritage not to buy it (thats more of an issue isnt it?)

On a more serious note im guessing you have many restrictions with your purchase (both personally and reality)

OTP in Parramatta isnt the worst choice. Parramatta itself has high demand and a huge amount of infrastructure and over the long terms i see good for things for it.

Im personally happy to invest in parramatta but I do not touch apartments (my personal restriction )

 

[freya0325]

based on this
YOU SHOULD BUY THIS BECAUSE YOUR CHINESE!!! It would be against your heritage not to buy it (thats more of an issue isnt it?)

On a more serious note im guessing you have many restrictions with your purchase (both personally and reality)

OTP in Parramatta isnt the worst choice. Parramatta itself has high demand and a huge amount of infrastructure and over the long terms i see good for things for it.

Im personally happy to invest in parramatta but I do not touch apartments (my personal restriction )

haha now I am about to think change to other suburbs, like bankstown, st marys. It's for investment so I would never live in there, the thing I'm concern is growth rate and rental yield. Bankstown has better rental yield&growth rate than Parramatta, it's on my list now.

 

[see_change]

My understanding is there are some companies which are effectively two teir marketing blocks to Chinese buyers .

My accountant owns part of a commercial block which is being bought by developers to build units . He was telling be about some of the sales he was seeing nearby which he had concerns about , in particular with regards to the marketing .

My main concern is the number of units being built . In Melbourne , there are concerns about the number of inner city units . Parramatta is in the middle of Sydney's west .

It is changing , but I think there is a big element of risk buying there at the current time of the cycle .

I recall someone coming here for help in the last cycle . Bought OTP IN PARRAMATTA aNd by the time it came to settle the market was dropping and they had problems with finance due to decreasing value .

If there is a problem with over supply , and decreasing values , the resale market might turn quite nasty .

I have it on the radar to look at during the next slump.

OTP can be ok . We have first hand knowledge . One went very well . The other went too well . Big increases in prices , developer applied to increase height of the building which has been currently rejected and the appears to be using that to trigger a sunset clause to stop the development . Prices in that have gone up over 30% ..... I expect the block to be remarketted in around six months . The irony would be if a slump comes around and triggers the project to collapse ...

IMHO it's potentially to late for OTP in Sydney in this cycle and parramatta has potential oversupply problems , but who knows , it could be ok .

If you're intent on looking in Sydney , I'd look closer to the center of Sydney , there are places you could buy under 750 and not OTP

Cliff