In a softening property market with an over-abundance of new apartment buildings, there’s good reason for investors to be wary of buying new apartments in Sydney.
Overseas investment, record-low interest rates and the unprecedented property boom have seen the number of new multi-residential dwellings in
Sydney, many constructed poorly – in terms of both quality and taste.
Some property experts believe these buildings will become the slums of the future.
At the same time, community leaders are suggesting that the hasty construction of these apartment complexes poses some safety risks.
And consumer advocates say that if this rapid development was supposed to combat the housing crisis, it hasn’t worked.
In fact if anything, it has achieved the opposite.
Add to that the strata system, which can be a nightmare to deal with in very big complexes, and you’ve got yourself a potential red-hot mess for the average property investor.
Just to make things clear…
I still think Sydney apartments make great investments, as long as you but the right apartment in the right location at the right price
Succeeding in Sydney’s apartment market
So, how does a savvy investor go about entering the apartment market in Sydney in 2018 – and profiting?
For a start, avoid all off-the-plan developments.
Chances are, they might not be worth what you’ve paid for them by the time they are constructed.
Instead look for what used to be called “flats” – an established apartment in a solid building in a quality street in a gentrifying location.
Next, consider what Sydney tenants are actually looking for in a rental property.
Security, storage space and an accessible outdoor area top the list.
Air conditioning, strong mobile phone signals and double-glazing to block out street noise come in closely behind.
In terms of location, look to areas where low supply and high demand is continuing to push prices upward, remembering that the Sydney median isn’t necessarily reflective of all areas.
There are several different markets within the city, based on price points, geography and demographics, and not all of these are feeling the effects of the market slump.
Finally, look for properties that will appeal to owner-occupiers as well as renters
This way, if and when you sell, you’ll have both investors and owner-occupiers interested in the property.
The investing game in Australia is likely to change considerably over the next few years, especially given APRA macro prudential measures and the royal commission, so limiting your resale potential to investors only is a risky move.
This goes for suburb choice, too.
Last year, we saw a number of Sydney suburbs blacklisted by the big banks, making it harder for investors to sell their properties – think areas such as Homebush, Parramatta and The Rocks.
This was a sure sign that the market is overheated and running out of steam in these locations.
My tip is to consider properties with unique, quirky features that will appeal to tenant’s individuality, rather than cookie-cutter high rises that fail to inspire.
Lifestyle factors are important too – not just commuting time, but also proximity to cafes, restaurants and green spaces.
- Medium-density apartments with character and charm, in suburbs going through rapid gentrification in the inner west;
- Larger family apartments in areas with good transport links, schools and amenities;
- ‘Safe as houses’ established apartments in old-money areas on the North Shore, which never fall out of favour.
- High rises devoid of personality in outlying ‘mini-cities’ like Parramatta;
- Buying properties off-the-plan in the uncertain conditions of today’s market, in new areas such as Green Square;
- Established apartments close to new developments, which could take a price hit thanks to oversupply.
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