your thoughts on sydney's north shore

[my03]

Hey guys, I'm looking at buying my first property in the next 6 months. The idea is to try and buy a property in Sydney's north shore that I will be living in initially, but would like to have the option of converting it to a IP at a later date if i decide to move elsewhere or upgrade.

I know properties in the north shore are generally usually geared negativley (rental return is low compared to capital values) but would like to get something that would give decent capital growth (who wouldnt want good CG right?).

I will be looking at the 450k price for a 2br appartment. I just wanted to hear your thoughts on the following:

- what are your preferred suburbs in the market, i've herd to stay away from hornsby and waitara due to oversupply, these areas dont grow much. On the flip side i noticed land cove has a lot of stock on the market but i hear people still raving about lane cove. How does lane cove rate in the next few years of the cycle? How about the northsydney to pymble stetch? seems to have strong retal market yet high demand from overseas buyers and fhb.

- do you think its better to go a one bedroom or two bedroom appartment in this market? would a two br appartment have better potential for capital growth? I herd people say stay away from studios, but my friend has had good growth from a old studio in kiribilli?

- what are your thoughts on what the sydney north shore market is doing in the near furture? is now a good time to buy? i heard everyone say the market is "slowing" or "correcting"? this might be evident in other capital cities, but less so in sydney and even less so in north shore appartment market. Is my observation correct? it seems like the north shore appartment market is going sideways at the worst of times. is this true? or are we due for further bargin oppotunities?

Thanks guys, any help would be greatly appareciated, just want to do all my research before committing.

Cheers

 

[DaveM]

Its really hard to get a decent return on the nth shore due to the demand from owner occupiers. If its purely for investment then there are plenty of better returning areas to look at.

For areas, look from turramurra down through to artarmon. For 450k, you will have a bit of a challenge getting anything thats not pacific hwy frontage.

 

[my03]

thanks Dave, may i ask why owner occupiers keep the values stagnant? what demographic or target market should i be looking for with capital growth in mind?

if i was to buy in the north shore, is it safe to assume the market is relativley safe in the appartment market? i know that the north shore houses are at risk of taking hits, but mostly due to thier premium cost?

 

[jacbmw]

A higher proportion of OO, means less demand generally in the suburb for renters. Less rental demand means less rent, so rental return is low and rents stagnate (compared to higher demand areas). This is what Dave was touching on, however it is not usually this black and white i dont think.

More OO, means less IP's. Less IP's in a suburb, means less available stock to rent and therefore the argument could also be made that this would push up returns.

I would look at more the suburb aspects. Are certain areas of a suburb going to attract renters as opposed to OO? Do certain spots have higher returns or more/less demand.

I recently purchased a 2 bedder in Lane Cove. My purchase decision was primarly amenity to transport, shops, and proximity to other more expensive houses with larger blocks (more OO) and less density. The real crux for me though wasnt the rental returns, but the potential to add a 3rd bedroom as it is v large 107sqm.

On the point of taking a hit, you are talking $450k. The upper part of the NS market, i would suspect, would be the first to take the hit. And it would have to be serious to trickle down to the run of the mill two bedder. You are also talking about the Inner NS, where land is a finite, and the proximity to the city/beaches etc mean it will bounce back quickly should it actually take a hit.

 

[DaveM]

A challenge with IP's in the north shore is the rental per week is getting pretty close to the cost of a mortgage on an equivalent property.

I bought an apartment in Killara in 2004 and after living in it for a few years, turned it into an IP. It was returning $450pw market rent, for a 2br renovated with new kitchen and 2 car spaces.

The rental cost was only slightly less than a mortgage on a similar property - so it became a revolving door of 6-9 month tenants who then buy somewhere and move out. Every vacancy was due to the tenant buying their own property.

I sold it ($495k, so even 450pw was a poor return on those figures) and used the cash to invest elsewhere that is a much better return.

That being said, the property did get good CG but it was a fairly big negative cash flow, cost a fair bit to hold.

 

[Aaron_C]

A higher proportion of OO, means less demand generally in the suburb for renters. Less rental demand means less rent, so rental return is low and rents stagnate (compared to higher demand areas). This is what Dave was touching on, however it is not usually this black and white i dont think.

How is that true? If there's a high demand from OOs, that means that the area is in high demand by renters too who want to live there but can't afford to purchase...the yields are only low because the prices are very high compared to current rents

 

[travelbug]

A challenge with IP's in the north shore is the rental per week is getting pretty close to the cost of a mortgage on an equivalent property.

I bought an apartment in Killara in 2004 and after living in it for a few years, turned it into an IP. It was returning $450pw market rent, for a 2br renovated with new kitchen and 2 car spaces.

The rental cost was only slightly less than a mortgage on a similar property - so it became a revolving door of 6-9 month tenants who then buy somewhere and move out. Every vacancy was due to the tenant buying their own property.

I sold it ($495k, so even 450pw was a poor return on those figures) and used the cash to invest elsewhere that is a much better return.

That being said, the property did get good CG but it was a fairly big negative cash flow, cost a fair bit to hold.

This is very contradictory.

If the cost to rent is only slightly less than the mortgage that would mean it had a high yield, yet you say the yield is low (thus costing a lot to hold)?

Eg if you paid $450K for a unit the interest would be $600pw. If you paid 20% deposit it would be $480pw. But you have forgone the lost opportunity to get return from the $90K invested.

So to rent on the North Shore would be a lot less than purchasing. Which is why a lot of people choose to invest where yields are higher and rent in their desired location.

 

[BuildingBlocks]

thanks Dave, may i ask why owner occupiers keep the values stagnant? what demographic or target market should i be looking for with capital growth in mind?

if i was to buy in the north shore, is it safe to assume the market is relativley safe in the appartment market? i know that the north shore houses are at risk of taking hits, but mostly due to thier premium cost?

Loads of new apartments along the highway, with many still unsold. This is mainly within Kuringgai council from Roseville to Wahroongs. Heaps up at St Ives too.

I wouldn't expect much CG for the next couple of years, as there has been some pretty big discounting going on with the new blocks.

Lane Cove is a bit of a different market as it is off the highway for the most part. There is no station but with the bus station going straight onto the freeway to the city it is still linked to the city and north Ryde very well. In my mind it is an excellent lifestyle choice and the prices are a good entry to the north shore without suffering from the highway.

I would look elsewhere for stronger rental returns though.

 

[Jacque]

Hi My

I've bought for a few people on the NS both upper and lower so might be able to provide some info here

Firstly $450K is a very skinny budget for a 2 bedder in a good position (ie: no busy rds like Pac Highway, Epping, Mowbray etc) on the NS. No chance on the LNS really unless you're willing to consider 1 bedders or "problem" units (think main roads, tiny hi rise shoeboxes, railway shakers, serviced apts etc) but I believe a larger decent 1 bedder can be just as good cg wise as a squashy 2 bedder. Square footage is important. Always check sizes when comparing properties against one another. Easy enough to do by checking the SP on the contract.

I like Lane Cove too for many reasons, including those already mentioned. Lots of stock but that's always the story as this suburb has many of them compared to suburbs up the rail line with less medium to high density dwellings (about to change in years to come - check out the council sites for more info here). If it had a rail line it would have Wollstonecraft and Waverton prices so keep that in mind. Also check out Greenwich for 1 bedders as some streets are walking distance to St Leonards station.

Hornsby may be a good second choice- sure there's been an oversupply in the past with Waitara units in particular but if you stick to older blocks (I'd look for something to add value to) in quiet streets walk to the station you'll fare better. Also consider other suburbs well within your price bracket- Sydney is a big place after all! Best of luck with your search

 

[jech]

bumping -
Thoughts on St Leonards units? High rental but unsure of CG, and also high strata (which is deductable?)

 

[Ideo]

I don't rate St Leonards. I prefer the Crows Nest end of Wollstonecraft.

 

[Propertunity]

Thoughts on St Leonards units? High rental but unsure of CG,

CG of St Leonards units - see chart for last 15 yrs. The median price has more than tripled over that time.

and also high strata (which is deductable?)

High strata fees are a function of lifts and in some the pools & gyms etc.
Yes they are deductible for an IP, but just watch your cash flows.

 

[Ideo]

CG of St Leonards units - see chart for last 15 yrs. The median price has more than tripled over that time.



High strata fees are a function of lifts and in some the pools & gyms etc.
Yes they are deductible for an IP, but just watch your cash flows.

To clarify what I said, there is a lot of new development happening in St Leonards, and to my mind there is a bit too much.

Bearing in mind that most new development has occured in the last 15 years, it is no wonder that prices have tripled.

 

[Propertunity]

To clarify what I said, there is a lot of new development happening in St Leonards, and to my mind there is a bit too much.

I agree, I don't like to buy near new developments. However, I was just answering the questions asked by the poster.

Bearing in mind that most new development has occured in the last 15 years, it is no wonder that prices have tripled.

Also correct. That plus organic CG that would have happened anyway.

 

[Ideo]

I agree, I don't like to buy near new developments. However, I was just answering the questions asked by the poster.

Also correct. That plus organic CG that would have happened anyway.

fair enough. And it was a correct answer and all that.

Can you tell I don't like St Leonards

 

[Propertunity]

Can you tell I don't like St Leonards

I think you made that point clear