Will you choose Parramatta for property investment?

Freya,
Are you able to buy an older property? Or are you a foreign buyer? If you are a foreign buyer, OTP Parramatta isnt so bad - you are restricted to new builds only. If you are local then i'd buy something older because its less risky, higher uniqueness factor and you can make improvements (eg. Kitchen and bathroom updates) to improve its value.

btw I was looking to buy in Parramatta second half of last year I was keen on buying a ~1980's style on the quiet north side of the River but these properties rarely come onto the market, and I considered 450k for 2br a lot to pay for Parramatta (a year or so earlier they'd be selling for mid 3's so I got a rude shock as to the price!) The market had moved so much now they were selling high 4's when I was looking which is a far cry from mid 3's. They'd probably be somewhere low 5's now. As an alternative I ended up buying a 1br apartment late 1990's near the city... I was less conscious of any recent price jumps previously for near the city and for me the price difference between the locations seemed to point to the city one (a bit over 2km from the city centre) represented much better value. Happy with my decision. Somehow the Parramatta market seemed hotter than the near city which is weird in my mind!

They are building lots of apartments in Parramatta and I like the area (I work there). I still think older small block apartments are better to buy though. If you've ever had to pay a special levy due to a lift replacement (127k was the bill we got for replacement of 1 lift) or if your building suffers from a bee infestation half way up the outside of the building... fixing things so many floors off the ground comes with additional expense.
 
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Freya,
Are you able to buy an older property? Or are you a foreign buyer? If you are a foreign buyer, OTP Parramatta isnt so bad - you are restricted to new builds only. If you are local then i'd buy something older because its less risky, higher uniqueness factor and you can make improvements (eg. Kitchen and bathroom updates) to improve its value.

btw I was looking to buy in Parramatta second half of last year I was keen on buying a ~1980's style on the quiet north side of the River but these properties rarely come onto the market, and I considered 450k for 2br expensive and now they were selling high 4's (a year or so earlier they'd be selling for mid 3's so I got a rude shock as to the price!). Therefore I ended up buying a 1br apartment late 1990's near the city... happy with that.

They are building lots of apartments in Parramatta and I like the area (I work there). I still think older small block apartments are better to buy though. If you've ever had to pay a special levy due to a lift replacement (127k was the bill we got for replacement of 1 lift) or if your building suffers from a bee infestation half way up the outside of the building... fixing things so many floors off the ground comes with additional expense.

I'm Australia resident but my financial situation didn't allow me to buy an older apt which I need to pay 20% first. This is the main reason I only think about buying OTP.
750k is all I can afford for an OPT.
The major concern for me is the potential rise in the market price in parramatta, now it's 750-820k for a 2bed OPT, what's the chance this price will rise to 950k? Will it eventually comes to over one million for a 2bed OPT in parramatta CBD which sounds unrealistic?
I've done some research last night and found Bankstown which has higher growth rate and rental yield than parramatta. The 2bed OPT in Bankstown was 350k in 2013, 480k in 2014 and now is 580k which is still affordable for me. however i don't really know about Bankstown.
Do you think it's worth to try?
 
Hi Freya,

Do you know that you don't need 20% deposit to buy a property? There's is this thing called Lenders mortgage insurance, which can be included in your mortgage if you don't have 20% deposit some people I know purchased a property with 5% deposit.

I don't think the way you measure growth is correct. I tend to used median value of the area, or use the existing established unit or house data to measure it.

Parramatta have stronger growth in term of existing unit growth , as I have been closely looking at the area for the past year. Old 2 bed unit around early , bobart st south if Parramatta Westfield was selling at mid 400 last year . Now they are more close to high 500 now or mid 500.

Where bankstown has been around low 400 last year and now it's iaround mid 400. The development around Parramatta has triggered a lot of interest to the investor.

I was at an open house last year in one of Parramatta old 2 bed unit. The queue to get into the unit itself takes around 15 minutes..... That's one of main reason I gave up on buying in Parramatta because you'll ended up buying something overpriced.

For Bankstown Otp I think it's not too bad imo anyway. I was looking at the OTP at bankstown last year for 520-550 where the established one is roughly 50-100k cheaper.
If the established similar property ( I.e. say 2 bed 2 bath around 5-8 years old building ) priced closed to the OTP, then it's ok to buy the OTP development. That's my strategy anyways.

hope that's help
 
I think it would be best Freya if you did nothing

Markets work in cycles

Buying a 2 bedroom apartment in banks town that's gone from 350 to 580 in a couple of years is madness

Just because something grew 20% two years in a row doesn't mean it will keep doing it
 
I think it would be best Freya if you did nothing

Markets work in cycles

Buying a 2 bedroom apartment in banks town that's gone from 350 to 580 in a couple of years is madness

Just because something grew 20% two years in a row doesn't mean it will keep doing it

I wouldn't say do nothing, but I'd say read the forums, do heaps of research. Consider the interstate option as Shahin said, right now everything is Sydney could be considered overvalued, the whole market is too hot. Values may drop in a few months, I could be wrong but it feels like all of Sydney is becoming very unaffordable. And I will second that you don't need a 20% deposit. That's nonsense.
Finally, if you buy, find something you can add value too.
But take action, and don't sit on the sideline forever!
 
Hi All
I am also thinking of an off the plan in Parramatta. I am considering the Altitude apartments (I am not sure which ones you are referring to 500m from the station - is it the Crown apartments on Macquarie street?)

Yes, the prices are high - they are around 850 to 900k for a 2 bedroom apartment on approx. level 15 or so. They have river views and are nicely laid out apartments.

Lots of pros as I see them
- Parramatta has a lot of development planned and approved
- This will be (one of) the highest buildings in Parramatta - so will be sought after by young people who want to have that prestige/show-off
- Very close to station/shopping/parra cbd
- on the river, and on church street

The cons are ofcourse valid - that at the time of settlement the value could have dropped.

My case is a bit special - By the time of settlement, I will not be in trouble if the bank doesn't lend me enough (due to value dropping). So I don't care so much if value drops in 12 months. What I care about is
- Capital growth in the LONG term - so in 10 years or 15 years when I want to sell, I would hope the value would be significantly more than what I pay today
- Rental income - they say rental income of 650 to 850. I would hope that being new apartments with all the 'pros' above, somewhere in the middle of that range would be achievable

Reason for OTP is for tax advantages obviously.

I don't want the hassle of buying an older place and then 'doing it up'.

So in the position I am above, what do people think?

People are saying "who would pay 900k in Parramatta". I think that's a silly argument, as we KNOW that 10 years ago people would never think certain areas of Sydney would sell for what they do sell today.
 
- Parramatta has a lot of development planned and approved
- This will be (one of) the highest buildings in Parramatta - so will be sought after by young people who want to have that prestige/show-off

Are you one of them?
 
Hi All
I am also thinking of an off the plan in Parramatta. I am considering the Altitude apartments (I am not sure which ones you are referring to 500m from the station - is it the Crown apartments on Macquarie street?)

Yes, the prices are high - they are around 850 to 900k for a 2 bedroom apartment on approx. level 15 or so. They have river views and are nicely laid out apartments.

Lots of pros as I see them
- Parramatta has a lot of development planned and approved
- This will be (one of) the highest buildings in Parramatta - so will be sought after by young people who want to have that prestige/show-off

- Very close to station/shopping/parra cbd
- on the river, and on church street

The cons are ofcourse valid - that at the time of settlement the value could have dropped.

My case is a bit special - By the time of settlement, I will not be in trouble if the bank doesn't lend me enough (due to value dropping). So I don't care so much if value drops in 12 months. What I care about is
- Capital growth in the LONG term - so in 10 years or 15 years when I want to sell, I would hope the value would be significantly more than what I pay today
- Rental income - they say rental income of 650 to 850. I would hope that being new apartments with all the 'pros' above, somewhere in the middle of that range would be achievable

Reason for OTP is for tax advantages obviously.


I don't want the hassle of buying an older place and then 'doing it up'.

So in the position I am above, what do people think?

People are saying "who would pay 900k in Parramatta". I think that's a silly argument, as we KNOW that 10 years ago people would never think certain areas of Sydney would sell for what they do sell today.

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And no, MsAli, I am not. It would be an investment - I wont live there, how would I use it to show off?

I am after proper advice - and if this is the kind of response i'll get, then I don't know why I bother using this forum.

If you have something useful to add then please do - I am expressing my thoughts - whether they be wrong to you or not.. that's why I am posting - to get your and others' opinions.
 
Parra

Hi Zubs

It does sound like you've done the homework so do what you need to do.
I've been receiving brochures from the MP Geoff Lee about future developments and it's going to be exciting living in or near Parramatta. So you may be right that in the long term, you would get good returns. Time will tell.

From my reading in this forum, buying OTP now is right at the peak of the cycle so I guess it's a value thing and whether you wish to take the punt.

I live near Parramatta but units aren't my thing at the moment.
 
- This will be (one of) the highest buildings in Parramatta - so will be sought after by young people who want to have that prestige/show-off

I don't see this as a pro. High elevation = more lifts = high strata. The strata would most likely be 2k+ minimum per quarter.

The cons are ofcourse valid - that at the time of settlement the value could have dropped.

My case is a bit special - By the time of settlement, I will not be in trouble if the bank doesn't lend me enough (due to value dropping).

There is a difference between market value and valuation. I think you're referring to market value.

Valuation is what banks use to assess how much they will lend you. For off the plan often lean towards the conservative side (ie: lower than what you bought for).

Furthermore, valuations tend to skew towards the median value rather than away from it. The risk of being shortchanged during valuation increases the more you move away from it. The median for Parramatta units is ~520k according to rpdata. You'll get away with, say, a 600k purchase in a booming market. But when you buy ~70% above median for something incomplete the risk is considerably higher.

Hypothetically say you buy off the plan for 900k. You pay 90k for the initial deposit, thinking you'll need another 90k to settle. Fast forward 2yrs and the market has stagnated. Your place still has a market value of 900k but the valuation comes back as 800k. The bank will lend you 640k (assuming 80% LVR). You now have to come up with 170k instead of the expected 90k. Can you still settle now?

Reason for OTP is for tax advantages obviously.

Let's assume you're not one of those that deliberately make a loss to claim a bit back on tax. (For example, you would want as much rent as possible even though it diminishes your position from a tax point of view).

My understanding is you want to gain tax advantage using depreciation. That is fair enough. But is OTP really better than a place that's say 5yrs old for tax purposes?

You might of heard that new properties have greater depreciation than old ones. This is because the "Plant and Equipment" depreciate at a quicker rate compared to the building itself. But the truth is the difference is not that significant. For a brand new property bought for 500k, the difference in depreciation between year 1 and year 5 is around ~4k (this comes off your taxable income). In real terms that's worth <2k depending on your tax rate. I've based these numbers off an apartment i bought off the plan a few years ago.

Assuming the off the plan purchase will complete in roughly 2 yrs, you are losing out on 2yrs of depreciation while you wait for the place to complete. That could easily amount to 20k in real terms lost compared to buying existing which you can do now.

So where's the tax benefit for buying OTP?
 
I definitely would go with existing 2 Bedders 2 bath 1 Garage apartment in Parramatta area for a yield.

or if you cannot afoord it yet, just get Off The Plan house in Marsden Park which is another sure guarantee for a successful investment journey for the next 5-10 years.

Northwest is certainly growing and you can't go wrong buying in that area like Marsden Park and Riverstone.

Reason:

1. Ripple effect from the already expensive suburbs Schofields, Kellyville RIdge and the Ponds.

2. lots of shops and new train station will be build there.

3. Northwest business park
 
Hi All
I am also thinking of an off the plan in Parramatta. I am considering the Altitude apartments (I am not sure which ones you are referring to 500m from the station - is it the Crown apartments on Macquarie street?)

Yes, the prices are high - they are around 850 to 900k for a 2 bedroom apartment on approx. level 15 or so. They have river views and are nicely laid out apartments.

Lots of pros as I see them
- Parramatta has a lot of development planned and approved
- This will be (one of) the highest buildings in Parramatta - so will be sought after by young people who want to have that prestige/show-off
- Very close to station/shopping/parra cbd
- on the river, and on church street

The cons are ofcourse valid - that at the time of settlement the value could have dropped.

My case is a bit special - By the time of settlement, I will not be in trouble if the bank doesn't lend me enough (due to value dropping). So I don't care so much if value drops in 12 months. What I care about is
- Capital growth in the LONG term - so in 10 years or 15 years when I want to sell, I would hope the value would be significantly more than what I pay today
- Rental income - they say rental income of 650 to 850. I would hope that being new apartments with all the 'pros' above, somewhere in the middle of that range would be achievable

Reason for OTP is for tax advantages obviously.

I don't want the hassle of buying an older place and then 'doing it up'.

So in the position I am above, what do people think?

People are saying "who would pay 900k in Parramatta". I think that's a silly argument, as we KNOW that 10 years ago people would never think certain areas of Sydney would sell for what they do sell today.
Being a long term reader, learned a lot form SS. You might want to check out the Southbank in Melb ... that's the result of over-supply you'll see in future. you'll fight to get the property tenanted by droping your rents, meantime, you are paying all the life-style with a HUGE strata ... almost like 2nd mortgage
 
I've got about $450k to spend on a first IP and considering Parra and surrounds and Westmead as well. I can't afford OTP and wouldn't touch them with a 50 ft pole regardless. Within Sydney I see those areas along with Bankstown as places with some potential, does anyone have any thoughts on the area?
 
I've got about $450k to spend on a first IP and considering Parra and surrounds and Westmead as well. I can't afford OTP and wouldn't touch them with a 50 ft pole regardless. Within Sydney I see those areas along with Bankstown as places with some potential, does anyone have any thoughts on the area?


Hi Tom, I'd be very careful buying in Sydney.... going by recent sales, that sort of budget is unlikely to work in areas close to parramatta including wentworthville, pendle hill, girraween and toongabbie.

Have you considered other cities?
 
if you must go for OTP, then I would target smaller developments such as townhouses , with lower BC fees, and less risk of developer overbuilding in the area. That will protect your capital more, give you some land for CG potential, and the lower BC will be better for your CF. Need to make sure that its well located, especially near transport options. That will be a driver for easier rentals as well as higher $ rental.
 
Hi Cliff,
Out of interest, is the development you mentioned that applied for the increase in height but was rejected on the northern beaches?

Cheers
 
I've got about $450k to spend on a first IP and considering Parra and surrounds and Westmead as well. I can't afford OTP and wouldn't touch them with a 50 ft pole regardless. Within Sydney I see those areas along with Bankstown as places with some potential, does anyone have any thoughts on the area?

I would say Liverpool CBD is the next best place to look for that price and below.
 
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