If you look at the latest Residex property figures you will have seen that residential units in Sydney have risen around 14% in the last 12 months to July 2014.
That means a typical $750k – $1m, 2 bed unit is $100-140k more expensive than it was last year.
That’s great news if you did buy an extra investment unit, but if you didn’t, it means property is getting further and further out of reach.
Not everyone can afford the high price tag of Sydney’s blue chip suburbs and not everyone can cash flow the negative gearing. But do you really want to miss out on a years worth of growth? Even if it continues to rise at half the rate of last year, that could be another $50-70k that you’ve missed out on.
As my colleague Kel always used to tell me when he was selling property ‘Inner city, median priced, blue chip property rarely goes down, if anything, it just slows down.’ That means property is not often cheaper tomorrow than it is today. And so if you have a choice would you rather buy today or …?
What are the alternatives if your budget is around the $500k level? Can you still get in?
Option 1) Second Hand Interstate
Sydney is the most expensive state in Australia and so by going interstate you can still afford to get into the inner city suburbs where there’s a limited supply of property (due to height restrictions) and an increasing demand (from high income professionals that want to be close to work and leisure facilities).
- More affordable entry price
- Higher rental yield
- Less negative cash flow
Option 2) Brand new / Off the plan Interstate
One of the main advantages of brand new property is the depreciation that you get from it. Depreciation and tax benefits could turn a $500-$1,000/mth loss into a $50-100/mth more affordable investment. There’s also a number of tenants that prefer living in a brand new property
- More affordable entry price
- Depreciation benefits
- Low initial maintenance
Buying interstate and/or off the plan does come with risks though and not every property will fit the same strict criteria that I have when buying a local investment.
And if you go direct to a sales agent or developer, they can only sell you what they have and so they have no incentive to send you down the street if a competitor has a better property that will make you more money in the future.
As a single buyer you unfortunately have no bulk buying power and so it’s very hard to leverage your position to get access to the better, more boutique blocks. They’re reserved for their loyal and bigger clients.
So if you’re interested in getting something more affordable maybe you should drop us a line.
We’ll let you know your options and then suggest who is the best expert in that particular area to look after you. Because they buy a lot in that area, they get access to better deals than an outsider.
By law we cannot accept commissions from developers or sales agents so you can be assured you’ll be getting our truly independent ideas on what we think is best for you.
Send us an email to firstname.lastname@example.org or give us a call on 02 9994 8944