Buying an apartment in Sydney - what to look out for

19 December 2019

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.

As of 2018, the Greater Sydney area had over 800,000 units according to CoreLogicThis may seem like an intimidatingly large number of apartments at first, but you’ll be able to quickly whittle that number down by drawing up a checklist based on what you’re looking for in an apartment. 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?

Two key factors that are likely to influence your decision as to where in Sydney you’d like to buy an apartment ware liveability and cost. The challenge is often finding a balance between the two.

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 affordability, community, employability, amenity, and accessibility. Each suburb was 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 were the top 10 ranking suburbs in Sydney 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. 

couple looking at apartments
Credit – Mika Heittola (Shutterstock)

How much do apartments in Sydney cost?

As of October 2019, Sydney’s median unit price was either $720,658 according to CoreLogic or $694,840 according to Domain

Regardless of the exact figure you go with, Sydney’s unit prices have increased in recent months. CoreLogic’s data pegged the increase in Sydney’s overall dwelling values at 5% for the three months up to October 2019. 

However, there is no guarantee that these increases will continue into the future, meaning that Sydney apartments, like any investment, may not keep going up in value. 

For those chasing affordability, here are the five suburbs with the cheapest median apartment prices in Sydney as of August 2019 according to Aussie Home Loans and CoreLogic:

  1. Carramar – $334,653
  2. Ambarvale – $346,450
  3. Leumeah – $364, 786
  4. Minto – $384, 701
  5. Fairfield – $387,852

If you’re looking to buy in a slightly more inner-city area, says that within 10km of the CBD, Eastlakes is currently the most affordable, with a median unit price of $558,791. 

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.
  • Living in an apartment building will generally mean paying strata/body corporate fees, usually on either a quarterly or annual basis. Body corporate fees generally vary by building, but consider any amenities the building offers such as a car park, pool, or gym, as these may come with higher body corporate fees.
  • 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.
cars parked on street
Think of the money you could save on parking costs if your apartment comes with a parking space. Credit – Dmitri Ma (Shutterstock)

Is buying an apartment in Sydney a good investment?

While Sydney is Australia’s most expensive capital city for property, and subsequently it has Australia’s highest value units, some property experts aren’t convinced that the city’s apartment market is headed for another boom any time soon. 

According to modelling from QBE and BIS Oxford Economics, Sydney’s unit values are predicted to have decreased by 0.3% overall by 2022, while house prices are expected have grown by nearly 6% in the same period. 

Furthermore, real estate services firm JLL is predicting that the recent uptick in Sydney’s unit prices represents a stabilisation rather than a sharp rebound, and subsequently that prices are unlikely to grow much further. 

With all of 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. This may be especially prudent for Sydney apartments, considering the recent Mascot and Opal towers cases
  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. 

Is Sydney’s apartment market over or under-supplied?

Sydney’s apartment market has been described by some commentators as over-supplied at present. Property analyst Andrew Wilson has said that Sydney’s apartment boom has put the market at “peak supply”, and there’s still an estimated 54,000 apartments in the pipeline. 

sydney apartment construction
Sydney has plenty of apartments currently under construction. Credit – Taras Vyshnya (Shutterstock)

That being said, this state of oversupply may stand to benefit potential apartment buyers, with developers offering purchase incentives such as mortgage payments, cash bonuses, and furniture vouchers in an attempt to sell apartments. However, you should consider any apartment on its merits rather than be swayed solely by any incentives that come with it. 

Should I buy an existing Sydney apartment or off-the-plan?

At the time of writing, buying an off-the-plan apartment in Sydney could be considered a risky proposition by some, but it may still be worth considering. 

The market can change in the time between paying for an off-the-plan apartment and seeing it completed. CoreLogic data for August 2019 revealed that 60% of Sydney’s off-the-plan apartments were worth less at settlement than their owners had originally paid for them, and nearly a third had dropped in value by at least 10%. 

That being said, buying an off-the-plan Sydney apartment may still be a prudent option for you depending on your personal circumstances and what you’re looking for in an apartment. If you’re willing to deal with any short or long-term depreciation your apartment might go through it’s an option worth considering, but you may want to consult with a finance or property expert before making any significant decisions. 

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

There’s certainly evidence to suggest it has done in the past. According to Domain, Sydney has some of both the best and worst-performing suburbs for apartment value growth in the country. 

For example, Kirrawee and Elizabeth Bay posted year-on-year growth figures of 17.20% and 17% respectively, whereas Cammeray (-28.40%), Rose Bay (-20.30%), Redfern (-19.50%), Warwick Farm (-19.50%), and Balgowlah (-19.30%) saw their apartment values sink year-on-year. 

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 make up 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. 

A 2019 report from the Economist Intelligence Unit placed Sydney at 16th place on its list of the most expensive cities in the world to live, beating out both New York and London. The rankings were based on the prices of food, clothing, rent, transport, utility bills, private school fees, domestic help, and recreational costs. 

Sydney had moved down from it 10th-place spot in 2018, and the report attributed this move in part to a weak Australian dollar, and a correction to the national economy in the wake of the mining boom. 

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

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