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Aug 26, 2014

Rental returns on smaller apartments in Sydney are acceptable

Last Updated: Aug. 26, 2014
SYDNEY - Apartments COST (US$) YIELD (p.a.) PRICE/SQ.M. (US$)
1 BR 492,345 2,036 4.96% n.a. n.a.
2 BR 870,047 3,182 4.39% n.a. n.a.
3-4 BR 1,822,159 4,299 2.83% n.a. n.a.
Districts researched:
Sydney: CBD, Paddington, Darling Point, Double Bay, Kirribilli, Rose Bay, Tamarama, Bellevue Hill, Point Piper, Potts Point, and Vaucluse
Source: Global Property Guide Definitions: Data FAQ See also: Update Schedule

Our Sydney apartment survey is based on the number of bedrooms, because so few advertisements cite square metre measurements. A 1-bedroom apartment costs around US$ 500,000, and a 3-4 bedroom apartment around USD 1.8 million. Amazing prices! Monthly rents average US$ 2,000 for 1 bedroom apartments and US$ 4,300 for 3-4 bedroom apartments. So the gross rental yield for apartments, i.e., the gross return on investment in an apartment if fully rented out, ranges widely, from 2.8% to 5.0%.

Small apartments earn significantly higher rental returns than big apartments.


#1 ALEX ARMADA | November 30, 2013

These figures are unrealistic because:
- Inner city apartment average price is about $500,000 . Add 10% buying-selling fees and taxes for your actual cost.
- Such property rents for $1,800-2,200 per month. Assume 50 week rent annually. Most units are rented by singles and students 2-3 people sharing one bedroom and moving around almost every year or two. Allocate some funds for renovation every 3-4 years unless you're lucky to have a single professional long term tenant.
- Annual strata management, insurance, council and water rates will be about $7,000-9,000.
- 6-7% real estate agency fees deducted from your rent
- Plus maintenance... Simplest repair, handyman will charge you $150 for changing the light bulb in Sydney

So, you are looking at a poor 2.5-3% return. Your only chances is capital gain. With average house prices about 9-10 times the average income, all time low only 5% first home buyer rate, interest rates at 30 year low (slowing economy?), AUD at 30 year high, the market is stretched like a balloon full of water. The government is also removing first home buyer incentives in 2014. Your chances are not so great in this saturated market. Take the risk, and cross your fingers.

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