Sydney studio units

Hard to finance and hard to sell, with no capital growth over a long period (generally). Unilodge?

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Most lenders won’t touch anything under 50sq.m. Difficulty in getting finance leads to a lack of potential market of buyers should you wish to sell at any time. Lack of buyers means less price growth.

Having said that, the market will determine the price, and even a bad property can be undervalued.

The other thing to consider is that at the end of the day, how much cashflow will you be getting for it? After interest, management fees, rates, body corporate fees, maintenance, insurance etc etc even if it’s positive how much cash flow will there be? A couple of hundred dollars? A grand? $3k?

If it costs 180k, and you need to put in a deposit of 20% + costs, that’s $45k to get in, with not much prospect of capital growth. If you’re getting less than $1000 positive cash flow a year, there are probably other investments that will get you a better return.

For example, if you put your $45k into an ING direct account @ 5.25%, your “positive cash flow” would be around $2,362 with no risk of vacancy, large repairs, bad tenants, loan defaults. And equal opportunity for capital gain (ie. none). This is not an endorsement of ING. Just an example to illustrate the point.

Will you get $2,362 clear from the studio apt every year?

Of course if you DO get capital growth from it, then the whole scenario changes dramatically. For a $180k unit even 1% capital growth is $1,800. I can’t believe that a studio will never grow. Otherwise you would be able to buy them for $2,500 like they were 40 years ago. Personally I think they will generally rise in line with the market. They are only 1 step below a 1 br unit, so at some stage if the 1 bedders are going up, the gap down to a studio can’t keep widening forever.