New Apartments Sydney | Property Investment
What to consider when buying a new apartment in Sydney as an investment
Buying a new apartment off the plan or as an investment is no longer the poor cousin to buying a house in Sydney with some apartments outperforming houses in terms of capital growth. Apartment living has been embraced by Sydneysiders who want to live a short distance away from Sydney’s beaches, close to the CBD, inner city or harbour foreshores but can’t afford the hefty price tag that goes along with it. Here are the important questions to ask when buying a
new apartment in Sydney for investment purposes.
Where is the property located?
Demographic changes in Sydney have increased the popularity for apartments and the potential for capital growth as more 20 and 30-somethings, empty nesters and students choose to live in apartments located closer to the city. Traditionally, new apartment developments are located in areas that have a high rental demand. It is important to research your desired Sydney location and check:
- whether there are any major developments or infrastructure planned for your desired location such as a new shopping complex, highway or school
- what is the capital growth of the region you wish to buy a new apartment in
- what is the average rent and yield of similar new apartments in the area and
- the projected rate of population growth and demographics of the region.
Remember
investing in property is a long term strategy and the property market is a cyclical market so make sure you check previous reports, current reports and projected planning reports for the area.
What is the potential rental income and yield for your new apartment?
Make sure you check rental reports in the Sydney region you wish to
buy an investment property in and find out how other similar apartments in the area are performing. Apartments in Sydney tend to attract a higher yield than houses when the apartment is bought in a location favourable to tenants such as:
- within 10kms of the Sydney CBD
- near a Sydney beach side suburbs like Maroubra
- close to one of Sydney’s main shopping centre
- access to nearby schools or one of Sydney’s many universities such as the University of NSW
- near to public transport and highways such as the M2, M4, M5 or M7
- a short distance from restaurants and cafes such as Leichhardt or Newtown and
- located in a region with a diverse industry and employer base.
Investing in a new apartment with in a highly desired location will result in low vacancy rates, higher gross rental yields and strong capital growth.
What is the capital growth of the area?
Some new apartments in Sydney are outperforming houses in terms of capital growth due to an increased population rate, high demand and under supply of properties in desired locations. Capital growth can be affected by the following factors:
- If the apartment is bought off the plan and there is a long settlement period, there may be potential for capital growth when the property is finally completed.
- The location of the property. Historically, the best performing apartments in terms of capital growth have always been within 10km of Sydney.
- Lack of affordability in Sydney and over supply of apartments may affect potential capital growth.
- Demographic changes to the region increasing a demand for certain types of property.
- Whether there are any major developments or infrastructure planned for your Sydney location such as a shopping complex or a new highway.
It’s important to research the capital growth potential of the area that you are planning to buy in as capital growth is the one of the main reasons why people purchase new apartments as investment properties.
What are the tax advantages of buying a new apartment?
One of the major drawcards for buying a new apartment off the plan in Sydney is that there are considerable tax benefits and savings such as no stamp duty. Any legitimate expense incurred in running your investment property should also be tax deductible against your overall income. These can include:
- loan interest and related bank fees;
- repairs and maintenance of fixture and fittings;
- insurances;
- property management fees;
- any legitimate expense incurred in running your investment property;
- depreciation – the ability to claim the cost of replacing fixtures and fittings such as carpets, curtains and so forth in advance of actual replacement; new apartments usually provide a higher rate of depreciation than houses or existing buildings.
Consult your accountant before buying an investment property to find out all the possible tax deductions you may receive.
What are the costs of buying a new apartment off the plan?
When buying a new apartment as an investment property expenses may include:
- conveyancing
- loan application and valuation fees
- mortgage insurance (if applicable)
- body corporate fees
- a tax depreciation report and
- contents insurance as only the building will be insured under the strata plan.
Other ongoing expenses include council and water rates, property management fees and landlord’s insurance.
While the attractive tax benefits of buying new apartments as investment properties remains a strong incentive to buy, financial independence is usually achieved through capital gains growth, that is increases in the value of the property, and not normally just through tax savings. Buying an investment property should always be a long term strategy and if you do your research and buy a property in the right location at a good price, the capital gains growth almost always follow.
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