A Guide to Buying Investment Property in Sydney
The Opera House. Bondi Beach. Sydney Harbour Bridge. With so many iconic and distinctive landmarks, it’s little wonder why Sydney has staked its claim as one of the most sought-after cities in Australia to live in. Having been consistently ranked in the top 5 most liveable cities in the world, buying an investment property in Sydney could offer you an incredible return on investment. That said, renting and buying property in Sydney means that the competition is incredibly tough. But not impossible.
Equip yourself with all the information you need before buying an investment property in Sydney. That way, you’ll be able to make informed decisions when it comes to location, price and value. Whether you’re a beginner investor looking to buy an apartment or considering adding to your growing portfolio with a slew of townhouses, Cohen Handler is here to provide a detailed guide into Sydney’s property market.
Why invest in property?
In comparison to other ventures, such as shares or other investments, property is often seen as less risky. If you are serious about investing in property in Sydney, you will be joining thousands of other investors who are enjoying the many benefits that it can yield, such as:
- Opportunity for disposable income: If your property is tenanted, you can earn rental income
- Capital growth: Should your property increase in value, you may be able to sell it later down the track and at a gain
- Tax deductions: There are some property expenses that you can offset against rental income
- Physical aspect: You are investing in something tangible and visible
Sydney’s property market trends: what you need to know
Capital growth is one of the main reasons why people invest in residential property. According to CoreLogic and Aussie, on average, house property prices in Sydney have seen an annual increase of 7.6% for the last 25 years. In particular, Sydney has enjoyed a steady increase, with 78 suburbs passing the $2m median house price mark. Apartments aren’t too far behind, with an annual percentage change of 6.3% over 25 years.
While no market is immune to ebbs and flows, Sydney’s housing market overall has certainly grown markedly.
When is the ‘right’ time to buy property in Sydney?
Understanding all the factors about Sydney’s property market can also influence when you should buy an investment property. Some things to consider include:
- The economic stability of the Australian Government. Unfortunately, the current market has taken a hit due to COVID-19. However, if the 2008 global financial crisis is anything to go by (in which property prices declined by almost 15%), we know that the property market is usually one of the first to recover. Choosing to buy property when the market is starting to rise – or when it’s stable – is a good indication that you’re making a sound investment.
- When you are financially stable, and don’t have a huge financial commitment pending (e.g. renovating your own home)
Factor in what type of property you want to purchase, and where
Choosing to purchase a townhouse over an apartment can produce different results for you, financially. You’ll also want to consider low-maintenance properties that don’t require much initial input or upkeep. For example, while a large backyard with an in-ground swimming pool might sound appealing, it can be very costly to maintain. It’s good to keep in mind that it’s not necessarily a bad thing to buy a property that requires a bit of fixing, as this enables you to improve the value of the property.
Furthermore, you want to look for suburbs that are showing good prospects. Ideally, you want to be looking for areas that are expanding their population and local infrastructure. As the population begins to grow, so too will your property likely appreciate over time. More importantly, you want to buy where there are low vacancy rates, so you will always have someone living in your rental property.
Your financial situation plays an important part in buying an investment property
Needless to say, buying an investment property in Sydney is costly. In addition to the purchasing price of a property, you’ll also need to factor the following costs into your budget:
- Stamp duty
- Valuation fee
- Council and water rates
- Legal fees and conveyancing costs
- Property title transfer fee
- Lender’s Mortgage Insurance (LMI)
You may also need to pay for maintenance costs as they arise, as well as the difference in home loan repayments should your tenants not cover the entire costs with their rent. Finally, it is important to note that unlike shares or managed funds, you can’t sell your investment property immediately if you’re in the red.
Having a clear understanding about your financial situation and responsibilities can help you prepare for any surprises down the road.
Finally, consider your renters
You will also need to think about the types of people who will want to rent your property. Whether it’s a growing family who needs extra space or a young professional, it’s just as important to take this into consideration, as appealing to your desired renters will mean ensuring your property has useful features and amenities. Is on-site parking important to them? How about nearby schools or public transport?
You could start your research by looking at what other tenants or body corporates are offering near your ideal property. If the local demographics lean towards professional graduates who don’t yet have a family, they may not be interested in a large space that is out of their rental price.
Work with a professional that truly understands the market
Buying an investment property can be a complex and challenging process. However, it doesn’t need to be. Working with Cohen Handler’s buyer’s advocates in Sydney can take the stress away from exerting all your efforts in finding that ideal investment property on your own. Our access to off-market properties combined with our expert advice on value and timing will ensure you’re significantly adding to your portfolio and at a price that suits your means. Contact us today for more information about buying a property investment in Sydney.