WTF - is buying an apartment a total rip-off?

I'm 28, single and looking to find my own place after saving for about a year. This is my first ever time in the real-estate market (perfect time apparently) so I don't know much, but after browsing thru prices for the last couple of days I'm disgusted. Apartments cost virtually the same as a full-sized home! How is that even possible?

I'm not talking about the city. I'm from Western Sydney and plan on staying there. A decent, semi-modern apartment runs at least $480k in Bonnyrigg. Parramatta and Baulkham Hills the price rises another $100k on top for just a single bedroom place, and that's not even counting the strata fees which can be around $400 a month! Honestly for all that money I can just buy myself my own private 3-bedroom mansion (by comparison) and enjoy the luxury of a backyard too. What's going on?

I was kind of set on an apartment because I like living small in a populated area but not at that price. Would appreciate any insight.

Comments

  • +136 votes

    Where's the rock that you've just crawled out from? Must have been comfy.

    • -2 votes

      Heh I've always known the real-estate market in Sydney was a joke, but the people complaining loudest were the ones buying the newest and nicest houses for a growing family, decking it out with with crystal shower handles and built-in surround-sound systems. I would've thought that foregoing all the typical luxuries and just settling for a tiny space for 1 person wasn't as bad.

      • +41 votes

        That's not true at all. Do you really think the overwhelming majority of people care about crystal shower handles and built in surround systems? No, like you, they're just looking for a place to live.

        That said, I don't quite understand your point. You're saying in one breath that you want the conveniences of an apartment, but in the next breath, are talking about how they're expensive compared to houses. Your interests aren't unique, other people like to be near the city and live in densely populated areas as well. That drives up the prices of dwellings in those areas. If you believe the benefits aren't worth it, then buy a house.

        The fact that you're "disgusted" with prices means you're making emotional judgements rather than economic judgements. This is a terrible way to be buying and you're much more likely to make bad decisions this way. You need to be comparing prices to value and, ultimately, look at renting vs. buying in terms of the value proposition. Basically your post shows you have little understanding about the market, so probably not a bad time to start doing your homework. Also, no, research is not looking at ads for properties you're interested in.

        • +9 votes

          "Basically your post shows you have little understanding about the market, so probably not a bad time to start doing your homework."

          Very insightful. What gave you this impression? Was it the bit where s/he said: "This is my first ever time in the real-estate market (perfect time apparently) so I don't know much…"

          • +3 votes

            @Some Guy: Not knowing much about the property market because it's your first time buying is one thing, but being completely ignorant about how markets work, what the drivers of property value are and not being in tune with what is basically popular news for the last almost decade is just another level.

            I just think that before someone complains about things (especially saying something as arrogant as most other people wanting crystal shower handles and surround systems), that they actually know just a little bit about what they're saying.

      •  

        many factors affect city appartments price and it’s strata fees.. Living urban life, best public transport, cheap take out, no need car save money for insurance rego petrol etc, free gym and swiming pool so save gym membership, close to work, Also easy rent out with6% yield if you decide to expand family and move out of city and buy bigger house or unit.

    • +1 vote

      Mom and dad's rock is the comfiest (read: free)

      • +39 votes

        The problem is also how many people on OzB have an attitude (and encourage it) of always telling OPs to "get f**ked". "What's the rock you're living under?", "Living with parents for free must be nice" and so on rather than just contributing any ideas or information towards the question. If someone could provide their knowledge as to may be how the prices may go down at a certain point due to a certain issue etc that's more helpful than this dismissive attitude.

  • -3 votes

    Can't compete with foreign buyers especially the asians who prefer apartments.

  • +54 votes

    ‘Apartments cost virtually the same as a full-sized home!’

    Where in Sydney can you buy a 3 bedroom mansion for $480k???

    • -27 votes

      virtually the same doesn't mean exactly the same. What I'm saying is that at $480k plus the ridiculous strata fees every month you can pay slightly more for a standard full-sized home (avg. price of which around similar areas is around $600-750k).

      • +26 votes

        a standard full-sized home

        Where in western Sydney may one purchase a 3 bedroom house for ~$500k?

        • +15 votes

          When you start stretching the meaning of 'western','Sydney','3 bedroom' and 'house', I think you can get that. Easily if you install some cardboard wall.

          •  

            @syousef: I am not from Sydney, but looking at these listings, they are (according to Google map) only 40-50 min drive from Opera house weekday 9am. That's actually not bad considering what people say about travel time in Sydney. In Melbourne peak hour you can't get very far in 40min near the city. $500k for 700 sqm… not bad at all… I am a bit surprised…

            • +1 vote

              @oztite: The first one with the 700sqm has a nice and clean lawn. It's reasonable to think that the property is in good condition.

              High unemployment and crime rates are driving investors away from this suburb and the surrounding areas.

              •  

                @whooah1979: At lot of it is ex-housing commission. Crime there isn't great and I wouldn't walk around at night, and the schools suck. I remember when I was growing up there were riots at some of the local highschools. I lived in Emerton for a while 20 years ago and back then, day to day, you wouldn't have trouble unless you looked for it.

      • -1 vote

        plus the ridiculous strata fees every month

        Do you have to mow the lawn in an apartment, etc.?

        Some of it might be capital in nature set aside for the future.

      • +23 votes

        750k is 56% more than 480k. An increase of more than half is not "slight".

      •  

        virtually the same doesn't mean exactly the same

        The implication is there.

      • +1 vote

        So $480k is virtually the same as $600k to op.

        I'm glad to hear $120k is nothing to you. Then buying a $480k apartment should be a breeze to you.

        Get used to the Sydney market,or you're free to leave for another Australian city. Living in Sydney is not a born right, you can buy a house in Orange much cheaper if that suits you.

      •  

        If you are saying you think the price of a a "standard full-sized home" for $600-750k is too cheap, go ahead and offer them $750k to $1m. They will gladly accept and your problem will be solved.

    • +1 vote

      One or two years ago? Plenty of places out west and south west. Give it another half year and prices will be back there again.

  • +19 votes

    If I was going to buy an apartment I would look for a smaller development, no pool/gym/concierge/lifts (so prob max 4-5 levels?). Keep those costs down as low as possible. Over time they really add up, especially when they need attention.

    Apartments also often appreciate much less than houses (if at all heh), as you don't own any land - and what you do own is depreciating day by day ;)

    People often live in them for the convenience (pool/gym/concierge/close to x,y,z).

    • +1 vote

      Thanks for the tips :D

    •  

      maybe even less, so you don't pay gst on strata.

    • +7 votes

      What makes you say this: "as you don't own any land"?

      My understanding in a strata scheme you own a percentage of the land and the contribute a percentage to the overall on-going costs of the building. These percentages can be set differently.

      Is this not always the case?

      •  

        You're right - technically you're a part-owner of the common property which includes the land on which the entire apartment block sits.

        Practically, unless you're in a very small strata plan (<20 lots), you have no real individual decision making power or ability to control the land, and so you have no practically useful interest in that land.

        (Practically being - able to redevelop it, resell it, etc, which are the highest return potential uses for land).

    • +3 votes

      For me a lift is always compulsory.

    • +5 votes

      Rent an apartment and use all the facilities on the landlord's dime.

      Buy a house.

    • +10 votes

      "Apartments also often appreciate much less than houses (if at all heh)"

      sydney median house price 1970 – $18,700 -> 2018 – $1,058,306
      sydney median unit price 1970 – $13,490 -> 2018 – $774,124

      house growth rate 8.77%
      unit growth rate 8.8%

      if apartments appreciated much less (or even slightly less) than houses, they would become very cheap relative to houses over time. instead, the price of apartments has kept up with houses over time.

      • +1 vote

        units are not always the same as apartments. perhaps they classify apartments under the term unit, but doesn't mean they're equal.
        you can have a villa unit, which is classified as a unit, where you own the land and have a small backyard on title. Even a half block 200-300sqm can come under your stats of a 'unit'. That is not what is being discussed in this post.

        Likewise realestate.com.au groups 'Unit/Apartment' but they are not the same. And the realestate sales results haven't been the same for city apartments in cbd Melbourne compared with villa units in the suburbs, etc.

        I've seen a lot of money made in real estate over the years, but not as much money made in the selling of city apartments in Melb. People often sell years later for around what they have paid for it, or not much more. Sure, some ppl may get lucky with apartment sales, but in general, the capital gain from city apartments haven't really been comparable to the capital gain from houses etc.

      •  

        That's not the same units that have gone up. Old unit buildings get demolished and new ones built. No one wants to live in an apartment from 1970

      • +1 vote

        But the yield is usually higher and the depreciation rate for the capital is higher, too. So the accumulated return on both asset type is pretty similar.

    •  

      also for cheaper inner city living and because thats the size they are used to and comfortable in.

    •  

      Don't you actually own a portion of land as a part of strata in case of apartment? I know you can't trade that land, but you can if all apartment owners agree to at the same time.

  • +1 vote

    Parramatta and Baulkham Hills

    private 3-bedroom mansion , for $580k ?

      • +14 votes

        20KM away isn't "little" That could be an extra hour (or two) in peak hour depending on where you are.

        Also the difference between 480k for an apartment vs 650K for a house might seem small, but that additional $170k could mean the difference between getting a loan and not (and could be years of additional repayments)

        • +3 votes

          Depending on where you are it could also be an hour or two LESS traffic. I've been self employed for about 2 years now and most of clientele comes from the West. That's going to become even better when the new airport and business hub get built in the West.

          Sydney is way too big already to use the CBD as some sort of yardstick for appeal. You can find good work and bountiful shopping centres/amenities anywhere in Sydney.

          •  

            @SlavOz:

            Sydney is way too big already to use the CBD as some sort of yardstick for appeal.

            Depends on your market segment.

            Anything away from the CBD is still going to be basically hard-capped at about the $1 - $1.5 million mark (excepting halo properties like penthouse suites) because the availability of land means no one has any reason to pay above that instead of buying up new land and redeveloping. And there's also the fact that for 99% of people, once their income/networth rise beyond a certain point, would rather move eastwards instead of spending more on (self-occupied) property out west.

            Scarcity of supply is still the holy-grail of driving prices up.

    •  

      I would buy right away if there is a deal like this. :D

  • +8 votes

    Hi welcome to OzBargain

  •  

    I was kind of set on an apartment because I like living small in a populated area

    Yes, others were too but just didn't care about the price as much.

    But you're right - buying an apartment in Western Sydney (or anywhere else) where land is plentiful is foolish. There's always more land to develop so prices will never rise past a pretty hard cap.

  • +5 votes

    A house you have to get home insurance for the loan and higher council rates and higher water rates and you pay for every repair and I bet your mansion is not within walking distance to a train station and Bonnyrigg for a unit, maybe no comparison yet. All adds up to rental return.

    •  

      you pay for every repair

      Don't you "prepay" that through strata? Possibly paying more to fix your neighbours apartment too.

    •  

      Insurance and maintenance costs generally even out - because it's not as if apartments don't need insurance or maintenance. You just pay those as part of your strata levies.

      •  

        but with body corp, there's a management levies as well

        •  

          Yup. Though I think it evens out a little, because there are economies of scale with strata properties, and also apartments tend to just need less maintenance per property than houses due to difference in sheer size/surface area.

  • -1 vote

    Well honestly theres a reason why people complain about the housing market in Sydney (and similar places), prices are ludicrous, I think many people have their own hypothesis on why. The one I hear often is that the fight for rich internationals buying up apartment blocks, forcing prices and rent to skyrocket. Because they're only the rich international people, all the 'above average' workers and even 'well above average' workers have no chance in getting an apartment leaving it only for rich people for investment and rental properties (not really homes).

  • +2 votes

    They aren't a rip-off, they are worth exactly what a buyer is willing to pay for them.

    • +3 votes

      People bought Bitcoin when it was at 20k. I'm willing to bet they feel ripped off now.

      •  

        But they didn't when they bought it. In your case they took an investment gamble and lost, all part of the game.

      • +1 vote

        People also bought bitcoin when it was $1. I'm willing to bet they won't accept a $1 offer now.

  • +4 votes

    It's all about supply and demand, nothing else. More people want to live near Shopping Centres, Public Transport, Entertainmet Areas, etc, so demand keeps prices high. Fewer people want to live in a small country town because it doesn't have all the above facilities, so prices are a lot lower.

    As Adoshouse stated, real estate is worth exactly what buyers are willing to pay.

  • +3 votes

    Give it a year or so and I'm sure things will be much more affordable.

  • +35 votes

    Apartments in Opal Tower are much cheaper than houses

  • +14 votes

    Yes, thanks to lax foreign ownership rules, we now have to compete with anyone in the world wanting to buy Aussie property. Thus the price goes up and up, especially on apartments that foreigners can leave empty and have no maintenance costs.

      • +31 votes

        What sort of backwards logic is this?
        "Aussies are privileged in other ways, so who cares if houses are not affordable for Aussies."

        A government should prioritise citizens of its country first and foremost, in every scenario.

        • +2 votes

          High and dry
          Username checks out
          Lot of people geared up to the eyeballs going to be worried
          while domain and the SMH shills said foreign money had nothing to do with the build up in RE they are now calling upon them to save it.

          With China restricting our coal the gloves are off- there is going to be a soft war and RE in Sydney is going down another 10% easy.

        •  

          "A government should prioritise citizens of its country first and foremost, in every scenario." Totally agree. The Japanaese government should put the welfare of Japanese citizens first, the Polish government the welfare of Poles first, and so on.

          Unfortunately in Australia (and the USA and Sweden and Holland and so on) white people - the people who built their country up from Stone Age to modern - come last. White people are now the most despised minority group in the world (and they are a minorty, accounting for 14% of the world's population, falling to 9% in 2050).

          White priviledge doesn't exist. There are some priviledged white people, like the Turnbull family, but their priviledge comes from being wealthy, and not from being white. Most Caucasians begin life with very little and have to save in order to accumulate wealth over time. The government doesn't give you free land and housing simply because you are white.

          • +2 votes

            @Thaal Sinestro: So let me make sure I understand you correctly.

            What hardships have you suffered having been born as a caucasian (I assume) in modern Australia?

            • +1 vote

              @zeggie: Me and my family were expelled from our hometown due to war and mass genocide (from various groups, one of them being brown Muslims). We spent years bumping around immigration camps. We came to Australia and didn't know any English. Lived in housing commission for like 10 years. Dad couldn't get a job so supported us by working 12 hours minimum wage off the books. People constantly made fun of my name at school (including black kids). I struggled to keep up due to having to learn a different language so I fell behind.

              Tell me about this privilege for being white because I'm not seeing it. Even someone born in Australia can suffer just as much.

          •  

            @Thaal Sinestro:

            White people
            Most Caucasians

            Are you referring to light skin people or Caucasians? There is a big difference between these terms.

    •  

      You can also thank political donations & lobbying by property developers who need foreign buyers to buy their junk

  • +8 votes

    Your $400K apartment will be worth $300 in 1-2 years and might keep sliding. Now why are you buying a depreciating asset?

    • -9 votes

      That is not what a depreciating asset is.

    • +22 votes

      Your $400K apartment will be worth $300

      Okay, I'm bearish on the current property market but I don't think it'll be quite that bad…

      • +1 vote

        Maybe, but I'm seeing a glut of apartments, looking at Sydney Skyline I still see heaps of cranes.

        Banks know most people now owe more than their property is worth, leaving the banks exposed. Thus cheap money has dried up and now investors are looking for the door as their seeing with SMSF dwindle away.

        Bad time to buy, we're still in correction phase.

        • +2 votes

          Oh I agree with that wholly. Was more making a light hearted comment because you left out "K" after "$300". I'm not sure that it'll be a 25% downward correction either, but I also wouldn't be too surprised.

      • +2 votes

        I'll take 100 at that price.

  • +1 vote

    For the record, new one and two bedroom apartments in Bowen, SA, ten minutes from Adelaide city centre are in the 380-450k range, and most town houses over 500k. If you're prepared to move further out of the city, say 30 - 40 minutes by train, or an hour by car there are some good options for houses to renovate, but they're getting scarcer.

  • +11 votes

    Be very wary of apartments. I live in a 3 story block with constant water leaks so rain seeps in. The body corporate has slugged the owners (I rent thankfully) thousands a year to try to fix the problem and its still not able to source it. Its a 10 year old block.

    Even worse is the story in Melbourne about the blocks with combustible cladding. The owners are screwed. Probably have the same happening in Sydney blocks.

    If its your place you can decide how much to spend and when. You just plug the gaps with silicon for a few years till you can afford to fix it. When its an apartment block they bring in the structural engineers. Chu-ching $$$$$$$. When its a body corporate they hire anyone and everyone they feel like and slug you whatever they decide and you have to pay or they treat you like a bank loan - potential for debt collectors, bad credit record, foreclosure etc.

    If you want to live in a apartment block choose an older block (solid 70s is good), get someone to check state of roof etc re potential huge bills, check the history of body corporate fees and view their AGM minutes for any sign of pending spends.

  • +1 vote

    Don't under estimate apartments. Supply outweighs the demand at the moment due to new ones just popping up but with the population growing, the tide will shift one day.

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