Some might argue that Sydney’s hot property market makes buying an investment property less appealing than in the past. Doing the sums, a high purchase price and modest rental rises means that yields are still sitting at a comparatively low level, even when taking into account reduced interest rates. However, we believe there are still plenty of opportunities for buying investment properties that do stack up within a long term investment strategy.
Depending on your financial situation, the first question to ask is whether you are looking for a property that’s negatively geared or positively geared. If negative gearing to minimise your tax obligations is your goal, then a brand new property has plenty of appeal. While the initial purchase price on new properties tends to be higher than for older homes, and new apartments will usually have higher strata fees because of additional amenities, new properties provide maximum depreciation benefits against fixtures and fittings as well as the overall construction costs. There is also the decision as to whether to buy an apartment, which traditionally provides higher yields but less capital growth, or a house which will be more likely to provide capital growth as land values rise in the future.
When looking for investment properties, it’s always important to do your research on house and unit values, potential capital growth and expected rental returns. There are numerous suburb reports available from leading property researchers such as Residex, RP Data, or SQM Research, as well as reports specifically designed for investors that identify “hot spots”, showcase areas with the highest yields or predict growth potential. It’s a great way to find potential areas for investment that you weren’t aware of, or to simply assess returns for property against other options. If you find a property that you’re interested in for investment purposes, our Property Management team is always happy to provide you with a market rental appraisal. And if you’re thinking of buying new, talk to our Special Projects Team for the latest news on where the best new developments can be found.