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New Townhouses Sydney | Property Investment


What to consider when buying a new Sydney townhouse investment property


Townhouse living has been popular with Sydneysiders who desire a cosmopolitan lifestyle in a central location close to the Sydney CBD, inner city and Sydney’s beaches but cannot afford to purchase a property in their chosen area. Declining housing affordability in Sydney is prompting more people to look at alternatives to buying and consider renting as a more cost effective option. Here are the important factors to consider when buying a new townhouse in Sydney for investment purposes.

Location of Property

Demographic changes in Sydney have increased the popularity for townhouses and the potential for capital growth as more couples, small families and empty nesters prefer to live in townhouses which give them more space than an apartment but are more affordable than a house and require less maintenance. Traditionally, new townhouse 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 townhouse in
  • what is the average rent and yield of similar new townhouses 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.

Potential rental income and yield

Sydney has the highest number of immigrants who choose Sydney as their home and the rising population growth, demand for inner city living and low supply of quality townhouses has pushed vacancy rates to a historical low. Make sure you check rental reports in the Sydney region you wish to buy an investment property and find out how other similar townhouses in the area are performing. Townhouses in Sydney tend to attract a higher yield than houses when the townhouse is bought in a location favourable to tenants such as:

  • within 10kms of the Sydney CBD
  • near Sydney beach side suburbs like Bondi or Coogee
  • 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 Sydney
  • 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 townhouse with in a highly desired location will result in low vacancy rates, higher gross rental yields and strong capital growth.

Capital growth of the area

It’s important to research the capital growth potential of the area that you are planning to buy in. Townhouses generally have a greater potential for capital growth than apartments because of the content of land attached to townhouses, the scarcity of land in Sydney and high demand for quality properties in a highly desired suburb. The advantage of buying a townhouse is also the potential to add value by landscaping the garden, restoring the roof or painting the property.

There is also a bigger resale market for townhouses as they are attractive to both investors and owner occupiers. Capital growth in Sydney for townhouses may be affected by the following factors:

  • If the townhouse 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 townhouses in terms of capital growth have always been within 10km of Sydney.
  • Lack of affordability in Sydney and over supply of townhouses 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 townhouses as investment properties.

Tax advantages

One of the major drawcards for buying a new townhouse 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 townhouses 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.

Expenses

As well as the usual costs of buying an investment property, a townhouse owned for investment purposes is also subject to land tax and it is calculated annually as at midnight on 31 December of the year preceding the year of assessment (i.e. 2009 assessment is based on land holdings at 31 December 2008) in NSW.

A townhouse generally does not have the high maintenance costs of an apartment such as lifts, gyms and large landscaped gardens and attract lower strata fees. Other costs to factor into your budget are:

  • 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.

The scarcity of land in Sydney, the increasing population rate and the demand for quality properties is driving capital growth. Some townhouses in Sydney located in a favourable inner city or beachside suburb have almost doubled or tripled their value over the last ten years. Townhouses are growing in momentum due to their low strata costs, potential for capital growth and more control over your investment property.

Find Investment Property has listings for some of the new townhouse developments currently available so start searching to find your next property deal and add a Sydney off the plan property to your investment portfolio.


Find Investment Property is the best property investment resource online and features the latest new apartments and off the plan investment properties. Whether you are looking to buy investment property or looking for the best property investment research, Find Investment Property has the real estate investment properties you need.