A unit in inner Sydney or an apartment in New York?

posted in: Real estate stories | 1

The apartment was on the small side, a bomb to rent and on the fourth floor of a building with no lift. But it was in the trendy Manhattan neighbourhood of Chelsea and offered everything a city dweller could want. To my shock, it was cheaper than places I’d been looking at in Brisbane.

I spent a lot of time in New York when I was a teenager. I lived in the US for a bit over a year as an exchange student and was lucky enough to be placed with a family that loved to spend time in the city. I became more familiar with the Big Apple than I am with somewhere like Sydney.

As I’d wander around different pockets of the city, peering adoringly at the beautiful brownstones and hip, renovated warehouses, I imagined securing a small slice of New York real estate would cost someone a small fortune.

On a trip back years later, this time as an adult, I was surprised to learn how wrong I’d been about those price tags. While crashing on a friend’s couch, I had the opportunity to meet her landlord. He was an Australian pilot who bought the apartment in 2008 as an investment.

While marketed as a two-bedroom, it was originally a one-bedder and the new second space had only enough room for a single bed and a very, very small desk. The master ‘room’ was divided with a thin sliding door and situated right next to the lounge. Still, it was a renovated pad with an amazing bathroom and more than adequate kitchen.

It was right in the thick of the action and never vacant. The landlord bought it for about $300,000 and spent another $40,000 on a total renovation and a slight rejig to the floor plan. After that, he started enjoying an incredible $3,500 per month in rent. That’s a gross 12 per cent yield that doesn’t factor in tax, maintenance, holding costs and the like, but still.

I was recounting this story to a house-hunting friend recently and he could barely believe me. He’s looking to buy a house in Sydney at the moment and has a budget of about $800,000. That’s about double the cost of a basic pad in Manhattan – an attractive prospect for any travel-mad young person with constantly itchy feet. I pulled up an American real estate website, plotted in some search criteria and showed him.

Sure, there are multi-million dollar properties across the island of Manhattan. There are just as many reasonably-priced apartments in good neighbourhoods too – well, reasonably-priced by our standards. A lot of folks in Sydney would have no issue dropping $500,000 for a city unit and you can get a comparable property for the same price in the city that never sleeps.

Here’s an example. With a maximum budget of $500,000, I found this: a two-bedroom light, airy and renovated apartment in a pre-war building with a doorman. It’s up town but near Colombia University and a few blocks from the tip of Central Park.

Let’s go a step further, with a look at the uber chic and iconic summer getaway of the Hamptons. With the same maximum budget, I found a very cute three-bedroom ‘ranch’ in the outskirts of Southampton.

Looking abroad, there are very good bargains in the economically depressed housing markets of France, Spain, Greece and Italy. Here’s an interactive tool to see what you can get for your money, from a five-bedroom villa in Croatia to a one-bedroom apartment in Switzerland. As well as having a holiday home in western Europe, there are occasionally other perks on offer – Spain is even offering residency to foreign property investors.

Simply looking at the asking price of properties in Australia versus the rest of the world isn’t fair – it’s far from comparing apples with apples. There’s a whole range of other factors to take into account.

Additionally, there are obviously mammoth considerations when it comes to buying a property abroad. Getting finance in the country of purchase could be very difficult, if not impossible. There are sometimes ownership restrictions and bureaucratic nightmares to navigate.

There are tax considerations if you’re renting it. Upkeep, maintenance and additional fees could add up very quickly. Plus, a cheap price tag mightn’t equal a good investment.

But you’ve got to admit, the idea of owning a property in New York or Paris is pretty fun.

Shannon Molloy is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au