Below is a lot of context. You can skip if you want, it's not essential by any means.
So, I'm a DM crafting a world. I'm going for a very global feel. I have the classic pseudo-medieval fantasy setting, and then a far east, dragon emipres style continent that are connected via isthmus (on which live some mesoamerican style nations). To the far south is a mountainous, cold continent which will be giant-heavy and have Viking-esque culture. Then there's a continent to the east that has Indian, middle eastern, and probably African cultures.
Each of these different areas have different races that populate them. For the middle eastern culture, I am going mostly the four elemental plane touched and suli, on the basis that they're descended from genies and humanoids. They pretty much dominate that area. It's mostly desert, which is fine for me and all the races. But I also want the undine to expand into the ocean and live underneath the waves. As far as I can tell, they can't breathe water.
My question is, can undine breathe water? And if not, would it be much of a stretch for me to give them the aquatic subtype and amphibious special quality, or is that versatility more powerful than I think?
Depends on your campaign. Is the story set on islands or a ship? Probably too powerful. Is the story set in a desert? Who cares.
It will also stop mattering once you get to the upper levels, so if you start with a low-water arc at low levels, you can safely progress to a high-water arc later without changing the characters.
Now that the Advanced Race Guide is out, we have a definitive answer about Undines breathing water. By default, they cannot -- but there are an alternate racial ability, a feat, and an archetype that grant them that ability in exchange for giving up other abilities. Obviously, Undines who wish to live underwater must select the appropriate feat or alternate racial ability (since the archetype ability does not apply at 1st level).
Since Undines are the only race that is potentially fully amphibious, your campaign should begin in a location that is comfortable to the non-Undines in the party (underwater if they are Gillmen or Merfolk, or away from water otherwise).