NSW CBD Apartment or 1h from CBD House?

Property experts, I am looking for advice on what to buy.

I am early in career and have a budget of about $700-750K to spend. I work in Sydney CBD and for this money I am thinking of one of two things:
- An old, brick, low-rise, 2 bedroom apartment in Lane Cove
Pros: Close to work, simple life, convenient location
Cons: Potentially can get an upstairs neighbour from hell/annoying people on either side of apartment, building could have construction problems down the track which are much harder to resolve compared to a house, and high strata fees
- A older brick house on a block of land in Seven Hills
Pros: More land, more privacy, more room for 'at-home' hobbies, potentially higher capital gains on land?, more space for a future family
Cons: Lower socio-economic area, longer commute time, more maintenance/management of garden

I am thinking one of multiple options:
1. Buy the apartment live in it now and rent it out in the future when I plan to have a family to move into a house
2. Buy the house live in it for 6 months and then rent it out and move and rent in Lane Cove to reduce housing cost

Questions I'm looking to get answered:
1. Which is the best option for financial gain and is there a third or fourth option I am not considering?
2. Why does land appreciate? My theory is land only appreciates around areas in demand or desired, and people only live in the fringes of Sydney because they can't afford a house anywhere else, if they could they would live in a more desirable location.
3. How can I find historical data on which suburbs are experiencing an increase of prices for houses?

 

what were the fringe suburbs 20, 30, 50 years ago? How about now?where will the fringe be in 20 years?

How does a house 20 km from the cbd become more desirable? When it becomes the closest house to the cbd you can find because the inner houses disappear and turn into units.

why would the yuppies invade western sydney? Because its cheap with a train line and they can buy some land and build a mansion. They can, and will, pay more.

1000sqm 25km from the city doesnt mean much if its adelaide with 1m people because theres lots of it relative to demand (population). Its very different in sydney with 5m people.

More simply: gentrification and redevelopment, driven by population increase.

 

Land: they stopped making it years ago.

 

Population increase would mean more people working in the CBD surely? Which means a higher demand for apartments closer to work? It should benefit both apartments and houses equally?

What about the trend of older folks downsizing? Australia's baby boomers are heading to retirement and if I was an elderly person I would prefer living in a two bedroom apartment to have less house maintenance. I wouldn't need a four bedroom mansion?

 

They can keep building more apartments near the city, but can they conjure up more houses on 700sqm 25km out from the city?

Note, you might do ok with the older apartment, if soneone buys the block later for even higher density buildings.

I think the Seven Hills house may appreciate more in say the next 10 years.
And, maybe Council will let people start putting duplexes on their normal blocks someday.

 

Very easy to turn a house into multiple units. Then there are fewer houses left. Demand and supply.

What happens when sydney hits 8 or 10 million people? the downsizing old person will be replaced with 2 young families looking for 4 bed mansions. The family that loses the auction will keep moving out to find the mansion they can afford.

 

Rentvest?

I would'nt want a 1 hour commute

 

They can put up more apartments, but can they put up more affordable older apartments? All the new ones are asking higher prices. Supply of apartment is going up but they want a premium for it in a denser space?

I was planning to buy an apartment that is in a underdeveloped zone to experience capital growth this way, how would this compare with a block of land for capital growth?

Then the demand for 3-4 bedroom apartments would go up and surely developers would jump in to meet that demand? The supply of 3-4 bedroom apartments would go up. People want to be close to where they work, they wouldn't pay for a 2 hour commute as the inner suburbs get more dense and public infrastructure fails to provide efficient commutes for people living 25 km away?

 

You are going to get a mix of views from this blog, which is great because there is a lot of experience. Not everyone has applied the same strategy, so it is good for you to get a diverse range of views.

I always look at the choices in two ways: 1) what would I be more pleased to own 20 years from now if price wasn't a factor; and 2) what option has the least downside risk.

In my opinion, a well chosen, well located Lane Cove apartment is slightly better for a few reasons based on local knowledge. But you would make money out of both options in the long run anyway. If lifestyle is going to be a consideration, that is only something you can answer.

Out of the two choices - I should be clear: neither a generic lane cove apartments nor seven hills houses have any scarcity. So the devil is in the detail and it will come down to specific locations and specific asset choices.

Land appreciates because it is fixed and has scarcity. But land also gives you choices (to develop, to farm, to exploit etc). But not all land is created equal, so don't just fetishise soil - location is everything.

 

Oh well. You believe what you want.

take a drive nw or sw of sydney cbd. Keep going and see what you see.

Then read the posts about newbies wanting new houses in box hill or oran park.

just because you wont pay for a 2 hour commute.....

an older unit in a small block will still appreciate. More than an old house on a decent sized block in an established suburb? Imho, the old house will do better. But what do i know.

 

Option C: Do neither and sit on your hands until you financial position improves.

Option D: Buy a house wherever you think makes sense and rent an apartment closer the city.

I've rented a few apartments old and new, and I would be very reluctant to ever own one. If I did it would be an old style in a small complex.
You wont always be an hour from work. Either traffic will worsen, or you will eventually change jobs and maybe work closer from home. The apartment will always be the same apartment however.

Why does land appreciate? Because the supply of money increases.

 

Think about rentvesting. Live, and rent, where you want to live and where you can have the lifestyle you desire.

Invest for capital growth into assets that are scarce.

A 1 hour commute is not pleasant. Do not underestimate how much a long commute actually impacts your life - your mood, stress levels and general fitness. I once did a 1.5 hour drive each way in heavy traffic to work for over a year - and it was a shocker. If on a train, and you are likely to get a seat, that is better. Sorry, a bit off topic.

 

Good on ya. Thats a really loaded question with way too many variables.

I can gather that your ultimate goal is to eventually buy your own house and start a family.

If thats the case then if you happy raising your family in seven hills then go for it and rent in the city to enable you enough free time to socialize and enjoy your youth (plenty of cheap rentals at the moment).

 

I think rentvesting can work - I've done it. But here's my problem with it as a concept: in a world of infinite credit, by all means, load up on investment properties. But in a world where credit is scarce, you need to make some bigger choices early on. Because what you don't want to happen is to buy all of these investment properties (probably in in secondary locations with less growth), and then have tapped out on credit, making it difficult to make the more important purchase - which is your home. So don't crowd out your credit on secondary properties and be left with no primary residence. I've seen a lot of people do this and regret it.

So don't go all in on rentvesting. It's okay to put the big rocks in the jar first.

 

Cheers everyone for their replies to help the beginner to the forum. I love a good discussion and I especially love one when I learn something new. I can see how the supply of land is restricted and this will lead it drive up the prices of areas such as Seven Hills.

What makes you say the Lane Cove place is better? I can see how it is one of the lower cost areas close to the city, but what are your reasons for speculating it will have higher capital gains?

Apologies if I was coming across as hostile or ignorant, that was not my intention. I can see your point and I will agree with you that families will always look for land to have a dog and kids on their lawn once population grows. Interested to hear your points on why a house would do better than an apartment however. We are all speculating and we all have our reasons for doing so, I'm just trying to widen my perspective here as it is a discussion forum after all.

This is what I'm leaning towards now. But wouldn't the supply of money increase both the value of land and apartments?

What makes you reluctant to own an apartment?

Lifestyle choices are important and I understand it is up to each individual to value the sacrifices they make. For me, I have been sacrificing for quite sometime so now it is time for me to build a lifestyle I desire but I need to know I'm not going in being tricked into a horrible quality OTP apartment.

 

Lane Cove apartments have under-performed the market for the last few years as more supply has come on board.

No new developments in the pipeline, so it is jut about absorbing existing stock.

The new developments at the Canopy is giving a lot of new vibrancy, including eating out and shopping. It is poor man's Chatswood.

 

Supply of money will increase both, and as a result more 1 and 2 bed apartments will be built somewhat negating the effect. It's more difficult to do with a house.

I wouldnt own one because of the expense and restrictions imposed by strata (by way of example my apartments strata fees are about 25% of what I pay in rent and the apartments on the north side of the complex are prohibited from installing aircon presumably due to aesthetics). If you dont have strata issues now, you will eventually.

Furthermore you are stuck with the nuances of your building and neighbours. If you have lived in an apartment you will know what I mean. If you havnt, then dont go buying one as a PPOR until you have.
I enjoy apartment living for the benefits it brings me now as tenant, but I wouldnt want to deal with the negatives long term.

 

Seven hills to central by train is 35min not 1 hour.

 

I can see how supply will be constricted on land and housing, but how will the Australian government address the issues? How can we ensure that land and houses won't go through the same trajectory as Ireland and Japan?

 

Sorry I'm not sure how to edit my post on this forum so I will post some reference links here. As a bit of a pessimist, it almost seems like Australia is about to repeat history?

Irish property bubble - Wikipedia
Japanese asset price bubble - Wikipedia