Buying an apartment in Sydney – what to look out for

Looking for guidance on buying an apartment in Sydney? Here’s what we think may be worth considering when searching for an apartment in Australia’s most expensive capital city.

Buying an apartment in Sydney can involve a lot of careful planning as you get your finances in order and search for a property that’s right for you and your needs, but drawing up a checklist of what you would like could help you to narrow down your choices.

Here are some key considerations you may want to keep in mind when deciding whether a Sydney apartment is right for you and, if so, what you want in one.

Where in Sydney should you buy an apartment?

Where you decide to live in Sydney will depend on your personal circumstances. In general, however, two key factors likely to influence your decision are liveability and cost.

The Urban Living Index compiled by McCrindle and Urban Taskforce Australia, is a tool designed to measure the liveability of Sydney’s suburbs based on density, affordability, community, employability, amenity, and accessibility.

Each suburb is given an Index score out of 100, with a score between 70-79 indicating ‘excellent’ liveability and a score over 80 indicating ‘superior’ liveability.

These are the top 10 ranking suburbs in Sydney at the time of writing, according to the index.

1. Crows Nest-Waverton – 85
2. Surry Hills – 85
3. Pyrmont-Ultimo – 83
4. Marrickville – 83
5. Potts Point-Woolloomooloo – 82
6. North Sydney-Lavender Bay – 82
7. Randwick – 82
8. Chatswood (East)-Artarmon – 82
9. Leichhardt-Annandale – 82
10. Neutral Bay-Kirribilli – 81

Striking the right balance between liveability and affordability may be difficult depending on your budget, and it may be worth seeking the advice of a property expert to determine and analyse your options.

How much do apartments in Sydney cost?

According to the latest CoreLogic Home Value Index, Sydney’s median unit price is $776,780, and in the 12 months to April 2023, the median price for units fell in Sydney by 8.7%.

What suburbs have the cheapest units to buy in Sydney?

A National Australia Bank report looking at where it was cheaper to buy than rent in Australia found that there were some areas that could be more affordable than others for apartment purchases.

Those areas were “predominantly in the outer-west and north-western suburbs of Sydney”, the report says, as there were higher volumes of unit developments there. They are listed below, with their median apartment price as listed by Domain.com.au.

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Source: NAB, Domain.com.au. Median is based on sales within the past 12 months.

Cost factors to keep in mind when buying an apartment

In order to buy an apartment in Sydney, you’ll most likely need to take out a home loan. We’ve listed some of the factors you may want to keep in mind when navigating the home loan process in Sydney:

• You may require at least 20% of your apartment’s value as a deposit in order to get a home loan for it – if you don’t have 20%, you may not be approved, or you may be charged a higher interest rate or have to pay lender’s mortgage insurance (LMI).
• If you’re buying your first home, you may also want to consider the First Home Loan Deposit Scheme as an option, as it could help you avoid paying LMI.
• First home buyers may also be eligible for the New South Wales First Home Owner Grant.
• Don’t forget to factor the cost of stamp duty into your budget –  although keep in mind that at the time of writing stamp duty is not payable in New South Wales if you’re a first home buyer and the property in question is worth less than $650,000.
• Owning an apartment in a complex will generally mean paying strata/body corporate fees, usually on either a quarterly or annual basis. Body corporate fees generally vary between apartment complexes. Factors that could influence fees include the building’s location, property management arrangements, age and amenities, such as if the building has a car park, pool, or gym. It’s important to factor these extra costs into the equation when considering whether or not to buy an apartment.
• That being said, if your building does have a gym or a car park, consider whether you may stand to save money by making use of them rather than paying for an external car park or gym membership.

Is buying an apartment in Sydney a good investment?

Sydney is widely regarded as Australia’s most expensive capital city for property, and subsequently it has Australia’s highest value units. With this in mind, you may want to consider the overall outlook for Sydney’s apartment market if your main goal is medium or short-term growth.

Also consider the condition of the property itself. This can be just as important as the state of the local property market when it comes to your investment’s potential and, importantly, your future maintenance costs.

There are a few steps you may wish to take before buying any apartment which could help you determine its condition and whether it represents good value.

1. Have a building inspection carried out – whether the apartment is in an old or new building, having a building inspection done can be crucial. An apartment in an old building may come with wear and tear caused by age, whereas an apartment in a new building may come with structural flaws that haven’t been found or diagnosed yet.
2. Get a pest inspector to take a look – while a building inspection is designed to identify any damage done by termites or other pests, it may not identify the ongoing presence of such pests. With this in mind, you may want to have a separate pest inspection done for any apartment you plan on buying, or some providers bundle building and pest inspections together.
3. Obtain a strata report – a strata report will tell you the history of the building, including any past, pending, needed, or planned repairs. It will also help you figure out how much you’d pay in strata fees if you bought the apartment.
4. Check resale prices – while market conditions can give you an idea of how your apartment might perform in coming years, you can get more specific by checking how much apartments in the same building have sold for in recent years.

Can my choice of suburb affect the long-term value of my apartment?

There’s certainly evidence to suggest that the location of a property can affect its long-term value, and according to Domain, Sydney has some of both the best and worst-performing suburbs for apartment value growth in the country.

Canstar’s second annual Rising Stars Australian Property Market Report highlighted four suburbs for apartment buying.

• Campsie, where the median unit price of $620,000 is less than half the median house price, and unit sales outnumber houses four to one.
• Liverpool, with a median unit price of $485,000, based on more than 500 annual sales.
• Marrickville, although the  median for units is $840,000, unit sales are outnumbering house sales.
• Westmead with a median price of $560,000.

You may want to consult with a financial adviser or a property market expert if you have any concerns about choosing a Sydney suburb to buy in.

Will you be able to afford the cost of living in Sydney?

While mortgage repayments are likely to be a significant portion of your budget once you’ve bought a Sydney apartment, the city’s cost of living is notoriously high, so it may be worth checking you’ll be able to afford the Sydney life before committing to anything.

The Economist Intelligence Unit’s (EIU) latest Worldwide Cost of Living (WCOL) survey ranks Sydney as the 10th most expensive city in the world to live.

The survey, which was conducted between August 16th and September 16th 2022, tracks the prices of over 200 goods and services in 172 cities worldwide.

It says on average, WCOL prices have risen by 8.1% year on year in local-currency terms. This is the highest inflation rate recorded since digital WCOL surveys began almost 20 years ago. Petrol prices have seen the most rapid increases, but utility and food prices have also increased sharply.

If you’re planning on buying an apartment in Sydney, you can compare home loans with Canstar.

Cover image source: Kmpzzz/Shutterstock.com