Sydney Office Update December Leasing Magazine online | Page 5

DNEY OFFICE UPDATE
CASE STUDY: BUY VS LEASE Below is a hypothetical case study S Y we’ve
prepared using
| 3
today’s estimated rental and lease values for a whole floor at 23 Hunter Street, Sydney.
23 HUNTER STREET SYDNEY
Purchase
Fit out
Area ( m2)
Price to buy psm
Total purchase price
Interest rate ( assume)
Interest cost PA ( Interest only loan)
Interest cost PA expressed as a rate psm Assume fitted
300
$13,000.00
$3,900,000.00
5.00%
$195,000.00
$650.00 Lease
Fit out
Area ( m2)
Gross cost to rent psm
Total gross rent PA
Fixed rent increases
Outgoings ( stay static)
Incentive
Assume outgoings ( stay static) psm $150.00 Make good
Total cost psm
$800.00 psm
Total cost psm
Assume fitted
300
$800.00
$240,000.00
5.00%
Assume fully gross lease
Assume nil incentive as fully
fitted
Assume nil make good as trade
off for nil incentive and existing
fit out
$800.00 psm
Interest paid over 5 years
Year
1
2
3
4
5 Interest PA
$195,000.00
$195,000.00
$195,000.00
$195,000.00
$195,000.00 Rent paid over 5 years
Year
1
2
3
4
5 Rent PA
$240,000.00
$252,000.00
$264,600.00
$277,830.00
$291,721.50
Total Interest paid
Total outgoings paid
Total interest and outgoings $975,000.00
$180,000.00
$1,155,000.00 Total rent paid $1,326,151.50
Add stamp duty on purchase at $3.9M $150,000.00 Total cost over 5 years $1,305,000.00
Increases
0.00%
5.00%
5.00%
5.00%
5.00%
Total cost over 5 years $1,326,151.50
NOTE: So using the above example the costs of ownership versus renting is very similar however this model assumes no capital growth
If you assume capital growth at say 5% per annum the outcome goes in favour of the purchase scenario as noted below.
Assume 5% per annum sales capital growth
Sales value by year (assume 5% pa)
Value
Year 1
$3,900,000.00
Year 2
$4,095,000.00
Year 3
$4,299,750.00
Year 4
$4,514,737.50
Year 5
$4,740,474.38
Original purchase price
Sale price at end of year 5
Capital growth over 5 years $3,900,000.00
$4,740,474.38
$840,474.38
Stamp duty on purchase of $3.9 M
Selling costs at 2% on sale price
Total of these costs
Total capital gain $150,000.00
$94,809.49
$244,809.49
$595,664.89
Increase
0.00%
5.00%
5.00%
5.00%
5.00%
Your individual circumstances will have a heavy bearing on what works best for you, but for many successful investors the
biggest driver is the timing of entering and exiting the market. If you decide it’s an option for you (even just an option), let our
team know and we can put you on our radar. In any case, if you’re looking at changing your premise - to buy or to lease - we
can talk you through the finer points of one scenario versus the other to help you make an informed choice.
Disclaimer: This case study is hypothetical and in no way reflects a likely investment outcome. In some cases rounding has been used as well as estimates for
outgoings and annual capital growth.