NSW IP Wentworth Falls Area vs Sydney Lower North Shore?

Hi Everyone

If you had pre-approval up to $1M and were considering between an apartment close to Sydney, or a house outside of Sydney around Wentworth Falls with a goal of decent capital growth and balanced risk - what would you choose, or what would you be thinking about?

Would appreciate any advice, thanks!

Context:

• I currently own a 2 bed, 1 bath, 1 car investment property in Artarmon. Value ~$950-1M. I plan to hold very long term.
• PPOR is not a consideration. I am Australian but will continue to live oversees for the time being.

Option 1: Buy a second 2 bedroom apartment on Sydney's lower north shore (Artarmon, Neutral Bay, Crows Nest, etc.)

Pros:

• Close to CBD
• High rental demand (generally, although not in 2021 YTD)
• Easy to manage remotely, plenty of good property managers

Cons:

• Low rental yields - likely for next ~3 years until borders reopen and rental demand increases
• Lower / medium capital growth potential given current pricing / market conditions (low rates for foreseeable future)
• Over exposure to similar area / property type?

Option 2: House with land in Wentworth Falls (3 bed)

Pros:

• Long term Sydney "three city" vision could mean that some would commute the ~60 minutes down into Badgery's Creek or even across to Parramatta a few times a week. This could take a few decades to come to fruition.
  
• Regional properties seem to be in favor given work from home trends.
• Climate a bit cooler than Western Sydney generally which some prefer
• Blue Mountains Grammar School - seems like a fairly new but strong private school
• Overall mountain town / lifestyle feel
  
• Higher potential capital growth than Sydney apartments?
• I have family that visits the area regularly so can inspect, deal with major issues if necessary

Cons:

• Houses generally harder to manage than strata apartments, with more maintenance
• Regional / WFH living may go out of favor in the next ~3-5 years when the world is vaccinated
• Potential for long vacancies in regional areas
• Potentially difficult to find a good property manager and I am not in Australia so cannot handle emergencies myself

Option 3: Wild card - somewhere else?

 

I would be happy to own a home in the mountains!! Go canyoning when its not bucketing down with rain!!! Great German bakery there too opposite Wentworth Falls station. Lots to like.

 

I personally wouldn’t buy Artarmon because of the power plant there which deters a lot of buyers around the area. I do however think that Gordon, Pymble and Wahroonga (upper north shore) would have strong potentials because they are running out of land for development and these areas tend to be very popular amongst high income professionals who mostly work in the Sydney CBD or North Sydney. The average yield in the abovementioned suburbs is generally higher than Artarmon too, because of the perception that the areas are nice for families and therefore attracts a premium.

 

But if your budget is up to $1mill, you can only afford an apartment in the Upper North Shore area, so the idea that it’s nice for families is ruled out cause families don’t tend to go for apartments in the area.

 

There are many young families/couples renting in the areas, because the houses are too expensive to buy or rent. I think the Upper North Shore is a hidden gem because there are an increasing number of FMCG/pharmaceutical companies setting up their headquarters in Macquarie Park and the Upper North Shore is arguably nicer than Ryde and Macquarie Park.

$1m is definitely okay for an older but decent 2 bedder in the Lower North Shore. Lane Cove, Chatswood and Willoughby would be the obvious choice.

 

Which one? There is no "power plant" - there is a large substation in the industrial estate on Reserve Road and another adjoining the TV tower on Mowbray Road . There is also a larger one in Lane Cove West industrial estate.

I would stick with LNS, should be fine - Metro is being built and should lighten the load on existing rail line or consider Chatswood/Crows Nest.

Artarmon Public is difficult to get into due to the Gifted & Talented stream - so a positive for families seeking the location.

Wentworth Falls on the other hand - love the area but it won't have the same capital growth. Simply too long a commute to the CBD/Parramatta (lower blue mountains isn't as bad). The flight paths for the new airport have not been announced so the noise effects are undetermined (I assume that they will still be less than living anywhere within 10-20km from KSA).

 

As you already hold an apartment in Artarmon, consider somewhere on Lower North Shore. Alternatively, option 3, consider a house elsewhere.

 

As an Australian living overseas, make sure you have considered the huuuuuge extra taxes that you will pay.

This is way more than a 'local' buying. Extra taxes on any rental income and extra taxes on any capital gain. And if you sell while you are overseas, it's even worse.

 

I just wonder why Wentworth Falls particularly?

Is it a random pick? Or you have other plans in mind? Or some niche other don't have?

 

Thanks very much for the callout, it's top of mind.

I know that my "final destination" is Australia (born and raised, family ties, love the lifestyle more every year I'm gone, etc.) and likely to return permanently in next 3-5 years.

• Income tax -- I will neutral or negatively gear. Any losses become a tax credit upon return to Australia. Serviceability is not an issue for me, it's harder to get a larger loan from the banks in Australia as an expat and current AUD strength.
• Capital Gains Tax -- Noted. I plan to hold for the very long term, ideally never selling, but at least 30 years. The no CGT discount period experienced if I return in 3-5 years will hopefully be a minimal portion of growth over the next 3 decades. However, always a risk.
• Land Tax -- No foreign surcharge issues in NSW being an Australian Citizen.

 

It's not random in so much that I have family who know the area well, can act for me at auction, etc.

Longer term plans would be to redevelop with a larger home, if Wentworth Falls becomes more attractive as Western Sydney is developed over the next ~30 years (I am young and have a long time horizon).

Other areas could be Central Coast, but I honestly don't know here to look - Somersby / Kincumber, etc. could be interesting but might be priced out of a house there.

 

Thanks. Agree that the Upper North Shore is a lovely area with a strong long term value proposition, particularly as Sydney continues to grow and Macquarie Park continues to grow in importance commercially.

I know the area very well and personally don't like the apartments that have gone up along the Pacific Highway. In short, I question the quality of the builds. There are some interesting "luxury" townhouses that have gone up around Turramurra in recent years that if lucky could be had for $1.5M but unfortunately I can't get a loan large enough being an expat.

 

Thanks for the feedback, this was my original investment thesis for Artarmon when I bought my first IP there:

• Artarmon Public, very strong school and a "feeder school" to other strong schools in the area.
• 1-2 sets of traffic lights to the CBD
• Train line
• Shopping village ripe for redevelopment in coming decade
• 1 stop from growth Chatswood business hub / connection to North West rail line but unlikely to be entirely redeveloped the way Chatswood has been, and is much "leafier"
• Metro line (although my place is about ~150m from the Train line, it's a long walk to the Metro station that is going in).

Artarmon is a bit cheaper than going closer in to say Crows Nest, Cammeray, Wollstonecraft, etc.

Do you personally see any suburb risk owning to properties in Artarmon, or would you prefer to diversify to one of those other suburbs (Crows Nest, Cammeray, Wollstonecraft, Neutral Bay, etc.)?

 

It sure is pretty nice up there!

Are you endorsing the owner occupier appeal / long term value proposition compared to other areas (in your opinion)?

 

Linky...... but it's been a known quantity for years.

 

Got it. Interesting, it's a 22 minute walk from Artarmon station. Seems more likely to have a more significant impact on transport down Willoughby Road (M40 bus line...if it's still called that).

 

I’ve lived on the north shore for most of the last 50 years and not quite shore of what you mean by a power plant .

certainly not aware of a stigma about Artarmon .

but generally lower north shore moves before upper . We live in the upper and have seen the property wave move up on a couple of occasions .
Personally I’d be wary on relying on further capital growth in Sydney in the current cycle so if I was buying in Sydney I’d be doing it with the next cycle in mind and for me that would make it lower north shore .

Covid is dominating the conversation a the moment so people are moving out and while that will continue to a degree , once we’re over Covid the lure of the inner city will reassert itself .

none of my three kids are talking about wanting to move anywhere except closer to the CBD with all of its attractions .

outer Sydney eg northern beaches have been very strong , but you want to buy where growth is going to happen , not where it has happened .

one relative has been looking to buy on the northern beaches for over a year , initially low 2’s but sadly now they now will need to pay 3 + . Two good incomes but it’s tight . Even with low interest rates I’m not sure how much prices can go up in terms of affordability .

At the moment I’d be buying in Brisbane if you’re looking at cap growth in the short term 240-270 for a 3 bedder in goodna - ipswich with a rental of 270 . Just started moving and current prices are around the peak of over ten years ago . Lot of catch considering prices for equivalents in Sydney are 550 + ( lethbridge park ) and at the end of each cycle , they’re around the same . Last cycle brisbane equivalents were more expensive ...

cliff