Purchasing an apartment in Sydney – does old or new offer greater investment potential?
When it comes to purchasing an apartment in Sydney, one decision that you need to make is whether your preference is for a brand-new apartment (off the plan or newly completed) or an older, established property. Each option has its advantages and potential risks, and recent defective developments in Sydney have brought these issues into sharper focus.
What’s the best option for long term potential capital gain? We’ll let you know our thoughts..
New apartments : off the plan and newly completed
Buying off the plan involves purchasing an apartment that has not yet been built or is still under construction. Buyers make decisions based on architectural plans, renders, and display suites, sometimes before any physical construction has even commenced.
On the other hand, buying a newly built apartment involves purchasing an apartment that has been just completed. Buyers can physically inspect the property before making a purchase decision.
Purchasing off-the-plan and brand new apartments have gained popularity in urban areas like Sydney. There are many reasons for the appeal including the prospect of moving into a pristine, brand-new home complete with warranties and free from the wear and tear that comes with older properties. New properties also come with good modern floor plans and a range of desirable fixtures such as built in wardrobes and balconies.
Examples of new apartments
Established apartments
Established apartments are properties that have been built and occupied for many years, often decades. These apartments have a history of use and maintenance, making them different from newly built or off-the-plan apartments. The majority of older style apartments in Sydney are either art deco in style, built around the 1920’s and 30’s, or more recently build between the 1960’s to 80’s.
While older established properties may not boast the modern finishes and amenities of new builds, these properties have proven their durability and reliability over time. Buildings often benefit from superior workmanship and architectural features that add character and charm—attributes that can be highly desirable to buyers. However, it’s crucial to ensure that regular maintenance has been carried out and any issues have been addressed (or are scheduled to be addressed). A thorough review of the strata report should reveal any concerns in this regard.
Examples of established apartments
When considering purchasing an apartment as a long-term property investment, both newly constructed apartments and established older-style apartments have their merits, but the better choice for you can depend on various factors, including market conditions, location, and personal investment goals. Here’s a breakdown of how each property type stacks up:
The advantages and disadvantages of newly constructed apartments
Advantages:
- Modern Amenities: Newer apartments typically come with contemporary amenities and design features, making them attractive to renters and buyers seeking convenience and lifestyle benefits.
- Low Maintenance: Being new, these apartments generally require less maintenance in the early years, reducing ownership costs.
- Energy Efficiency: New constructions are usually built with modern energy-efficient materials and appliances, appealing to environmentally conscious buyers and helping to reduce utility costs.
- Depreciation Benefits: Investors can take advantage of tax benefits related to the depreciation of a new property, improving cash flow.
Disadvantages:
- Shoddy Workmanship: A significant concern with purchasing an apartment that is new is the potential for poor-quality construction (with cracking and waterproofing common problems). These problems can result in costly repairs, legal battles, and even safety concerns for occupants. Given the current state of Sydney’s construction industry, as highlighted by the Building Commission NSW’s 2023 report, the risks associated with new builds—whether off the plan or newly constructed—cannot be ignored. Without significant improvements in building standards and oversight, the likelihood of encountering issues similar to those seen in Mascot Towers remains a genuine concern.
- Market Saturation: The Sydney market is set to see a surge in new apartment developments over the coming years. This Government push for significant high density living across many areas of Sydney, could well cause downward pressure on prices and rental yields in the future when new developments come online.
- Potential for Lower Long-Term Growth: While new apartments might offer strong initial appeal, they may not appreciate in value as quickly as well-located older apartments in established areas. The initial allure of modern features may fade as the building ages, particularly if defects emerge.
- Location: Newer developments are often located in less desirable areas such as along main roads where the acquisition of land or existing buildings to demolish is easier for developers
The advantages and disadvantages of older style apartments
Advantages:
- Location and Scarcity: Older apartments are often located in prime, established areas close to the city center, beaches, or other desirable locations. These areas are typically well-developed, with strong demand for both rentals and sales, leading to steady capital growth.
- Character and Build Quality: Older apartments often feature more robust construction, with thicker walls, higher ceilings, and unique architectural details that newer buildings might lack. These characteristics appeal to buyers or renters seeking charm and durability.
- Stable Market Performance: The value of established apartments in Sydney has generally been stable or rising over time, making them a relatively safe investment. They’ve weathered various market cycles, demonstrating resilience.
- Potential for Renovation: Older apartments may offer opportunities for value-adding renovations, which can increase rental yield or resale value.
Disadvantages:
- Maintenance Costs: As these buildings age, they may require more frequent repairs and maintenance, adding to the ongoing costs of ownership.
- Limited Amenities: Established apartments may lack modern amenities like gyms, pools, or communal spaces that newer developments often include, which can affect their appeal to some renters or buyers.
- Art deco apartments may lack features considered important to today’s buyers such as parking and lift access.
- The more recent 60’s to 80’s buildings may also be walk up with no lift access and sometimes have low ceilings and smaller bedrooms.
Which offers the better investment potential
When purchasing an apartment in Sydney for long-term investment, in our opinion established older-style apartments generally offer a more reliable opportunity for stable capital growth, particularly if they are located in sought-after areas with limited supply. Their proven track record, solid construction, and desirable locations make them a safer bet for long-term appreciation.
On the other hand, newly constructed apartments can still be a good investment if they are in a well-chosen location with strong demand, and the investor is looking for lower maintenance and modern amenities. However, the risks associated with shoddy workmanship and potential oversupply make it crucial to thoroughly research the developer’s reputation and the specific property before committing to a purchase.
