NSW Entering the Parramatta market

Hi, I have looking into entering he Parramatta market for a while now and a new opportunity has just presented itself which is kind of interesting to me. Its a 1 bed unit in a nice apartment complex in Westmead, a bit west of Parramatta but still good area because of light rail. The yield is close to 5.5% although strata costs will eat up a little bit.

What do you think about apartment market in Parramatta in the next 5 years. I am looking for a long term hold and benefit from Parramatta transformation projects.

 

I was looking at para too but back out as not confident of CG with floods of new apartments (still looking at time to time. Near hospital apartments usually rent out quick at westmead. old or new unit? benefit with depreciation?

 

Prices for units in Parramatta might not go up in the next 5 years. Lots of supply coming on. If prices still rise, you will probably be fighting to secure good tenants due to the additional supply.

If you happen to see something way under market value, that would be what i'd buy. Or maybe a unit in Harris Park. Its still close to Parramatta but I think prices have started to come down to reasonable levels.

Do your own due diligence....

 

Have you had a look around, specifically the amount of stock being built in the town centre? I was tempted on paper, but a look might change your mind. Agree also lots of offices being built, but consider the cost of replacement. It won't do if your unit is one of a thousand in a block.

 

We've bought for many investors and home owners in Parra and surrounds over the last 11 years. Lots of new stock coming onto the market, however it is Sydney's 2nd biggest CBD so no surprises there. Our clients tend to go for older more established stock (personally I'd go for an older 2 bedder over a newer 1 bedder here but that's just MHO) rather than OTP or new, as strata costs are often lesser and some of the older units offer more benefits than new eg: tandem garages, bigger balconies, smaller blocks, bigger common areas/outdoor spaces etc.

Good luck with your search!

 

For the same price you could probably buy a house with land with similar returns in Brisbane or Adelaide. Those would be better investments for capital growth.

If small, new and shiny makes you feel safe - I'll let you park your money in a small tin at my house. It'll be guaranteed to be worth the same amount in 5yrs. Can't say the same for the parramatta unit.

 

Sydney has just boomed .....

Most long term members on the forum are not buying investments in Sydney .

After its last peak in 2002 , parramatta unit price went sideways for six years . I'd hazard a guess that some of the price increase since has been with more upmarket properties selling .

Cliff

 

Don't take offence @Foxdan but I always find these statements by posters so interesting, as no-one can guarantee anything in property investment.
How do you know Brissy or Adelaide houses will out-perform Parramatta area units?
How do any of us know what will or won't happen in the future? We can only speculate based on the information we have at hand. Historical growth rates only tell part of the story, that's for certain.
Sure, Sydney has been through a boom period for the last 3 years but this doesn't mean it's not worthwhile investing (for the right opportunity). Everyone needs to make their own decisions, based on as much information and knowledge as they can amass during any purchasing process.

 

Hiya @See Change have to disagree with you on a couple of points here Let's not forget the 2000-2002 boom was significantly larger than the 2013-2015 one, resulting in over 50% cg over a 3 yr period (see attached) and the ensuing years 2003-2008 still saw some growth (albeit nothing to write home about but averaging 2.1% p/a). Last boom was actually smaller, which I put down to sufficient supply for buyers here. Market is actually still quite active, with majority of interest in the $500-650K price bracket. Value still to be had, if you search hard enough, and especially if you're a renovator.

Demand may well be less than 2015 and DOM a little longer but it's a big suburb with lots happening, mass appeal (due to affordability) and great infrastructure. Where we will agree is that new stock has limited appeal and we may certainly see some fire sales out of the OTP dvpts sold in the last year or so....

 

2003 to 2009. I dont think the growth met inflation.

 

@hash_investor

I think you need to step back and consider what your goal is with this purchase.

I understand you are also looking at Brisbane currently - Brisbane and Parramatta/Sydney are different ball games altogether.

As already mentioned, no one has a crystal ball.

Having said this....what is your goal with this purchase?

 

Not offended at all. As a generalization, I don't think an OTP 1 bed apartment in Sydney in the parramatta area that has a huge amount supply being built is a good idea for investment. Given the growth of the past few years and the amount of apartments being supplied in parramatta, I can't see any drivers to give capital gains or rental increases in the near future that would be worthy of a good investment. So IMHO I don't think it would be a good investment. Yes I'm sure there are deals and im sure some people have had great 1 bed OTP investments but as a generalization, I think there is better value elsewhere.

Adelaide and Brisbane were just suggestions for them to consider other opportunities. Both are big places and as a generalization, I think both may be a better investment than a 1 bed OTP apartment in post boom sydney. I offered alternatives because I think they need to consider other places.

I'll check this post in 10 yrs and let you know if I was providing a misguided opinion.

 

This debate went towards OTP vs older units which it was not intended for. I was asking about the area only not about OTP.

 

A post above revealing ignorance and another one making wild guesses. @Jacque spends a lot of time on the area and I would read her post thoroughly.
I have held an older unit in Harris Park since 2007 and here's my opinion for what it's worth.
Westmead and Harris Park are very similar though at slightly different price points - HP being lower. Both are very good areas. There are some factors which make them great.
1. Walking distance to Parramatta, stations, shopping centres, uni, etc
2. High demand areas. Both have a lot of Indian students and immigrants. This is a massive generalisation but in general, Indian people are good at paying rent.
Also, as happens a lot in Sydney, like attracts like and families, friends and businesses try to stay in the vicinity, pushing up demand further. On the down-side there can be some over-crowding by our standards and familiarity with our laws on garbage collection is lacking.
3.You will also find a mix of Chinese, Lebanese and Anglo aussies.
4. Restaurants and local food outlets are fantastic.
5. Being in the centre of the metropolis is very convenient. Easy access to 5 or 6 major roads.
6. This area no longer considered the outer west.

Values increased in 2009 and 2010 and then held their own while many areas around Australia dropped in value - including Sydney.
At the end of 2013 they started to increase again and are still doing so now, though not as much. The OTPs are starting to come onto nthe market and there is still demand but it's not as great as it was. Western Sydney has had it's big boom and now it's just ticking along. No-one knows how long this will last.
I think you are much better off in Westmead or HP than Parramatta anyway. The reason for this is that units cost more in Parra and there are more OTPs there.
OTPs will decrease in value more rapidly and as there are more coming onto the market, you might be waiting for CG for quite a while if and when things come to a standstill as they inevitably do in Sydney a couple of years after a boom.
Am not trying to sell anything. I do think you should consider your timing carefully. There will be a time in a few years when the demand will dry up for a while ...

 

Parramatta light rail planned route and key stop stops revealed

 

I'm excited about this. Also received Geoff Lee's newsletter about arthur phillip school building etc. There's going to be a lot more people living in Parra for sure.

Also, i think the Western Sydney change of logo will be good for the university...its whole marketing approach will draw more students to their parramatta campus and therefore a demand in housing in Parra.

 

Well it is the largest CBD after Sydney....

 

I think there will be decent capital growth in Parramatta over the next few years. I know Parramatta has boomed but I am one of those who believe there is still some room to improve. Westmead specifically is a bit undervalued considering it is so close to Parramatta and has good facilities as compared to other Parra suburbs.

That was my reason to look into Westmead. However I understand we have spoken a few times and what confuses me most of the time talking to you is that you suggest only to rethink all the time without coming up with a counter argument. May I suggest you should advise a counter investment strategy in case you don't like something so people can evaluate their strategies better. I don't know what your thinking is like on forum participation but we (at least me) value your opinion and you point of view will be appreciated. That is why I read your posts and like to get you feedback.

 

I understand your sentiments. If there is room indeed for more growth, what's the rate of growth compared to say, Brisbane which is a hot topic. Would a brisbane property have a stronger growth than Parra property? Maybe, maybe not. I live in the area and I am optimistic about Parra's long term growth but the buy in is high for me now which may affect me holding it long term when yield is average.

 

I don't understand what you mean. The interest rates on investment property is less than 4.3% IO at the moment which translates to roughly <1K per month. The net rental yield is more than 1300 p/m from the apartment. To me, this means I can hold the property at +ve cash flow now and even neutral at 5% interest rate. Why would that make it too difficult to hold for others?