For one reason or another, an apartment is considered a bad investment in Australian cities. This is because the demand here isn't huge yet (people in general would rather live outer-city in houses/townhouses), there is a large supply (new complexes constantly being built in every inner-city suburb), and just the general nature of apartments (depreciation, can't do extensions, no real land-ownership, etc.).
I'm a young 25 year old and I make $77,000 a year from my full-time job, plus I do freelancing work and make around $20,000 (after tax) from that. I've saved enough for a 15% home-deposit and have been pre-approved on up to a $350,000 AUD place - around the cost of a 2 Bedroom Apartment on the inner city. Basically, I can afford to get an apartment, and even maintain/pay for it myself.
I really want to buy an apartment on the inner-city near my work. It works well with commuting time, with the lifestyle I desire (I would rent in the city as an alternative anyway!), and meets my requirements (I don't need a yard, I don't need lots of space, and I only want to live with myself or 1 person maximum). But I'm just concerned getting into a loan so early for such an asset could bite me in the ass later, so I'm here for a second opinion.
Some things I have considered:
- Only get 2 bedroom apartments (not 1), as these hold their value better and are easier to rent
- Not buying a new apartment "off the plan", because the value of these drops hugely on the apartment complex opening day when a huge influx of supply enters the market
- The fact that the banks actually do their own research on the apartment you choose before they approve the loan, because technically they are the ones buying the majority of the apartment (therefore, they will only "allow" you to select a half-decent investment)
- Buying in an area which has good rent demand, meaning when I move out one day it will be easy to rent the apartment
- Making extra repayments (duh)
With all of this considered, do you think that getting a mortgage and purchasing such an apartment is a better choice than renting? The way I see it, spending $350 a week on repayments is me actually investing something, versus $300 a week on rent just burnt. I know I haven't brought up some of the negative financial aspects (money is lost on interest, depreciation of the unit over time, some large up-front payments and taxes) - but there are also positive things I haven't brought up either (in Australia anyway, you can claim interest on tax as a deduction for example).
My question is more so, is there really any way this could end badly and I'm better off just renting? I plan to live in this city for at least the next 5 years, and if it's sustainable I'm happy to keep ownership of the apartment forever - not just sell it off once I decide to move.
Any opinions on this situation for this financial newbie would be greatly appreciated! Thanks :)