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Hi all,
As we near the end of 2017, I thought it would be interesting to take a look at this well-worn topic once again. Things have changed – as I am sure we are all aware. Like, Syd and Mel have continued their climb into the Stratosphere. To the point where Syd now shows as needing 12 x Annual wage to afford the median house.As Steve mentioned just a few weeks back, the super-low Interest Rates have contributed to these abnormally high prices (along with other factors). Meanwhile, wages have NOT kept pace, so the gap continues to grow. Recent signs seem to show that Syd might be settling lower after driving its Median Price into the $1million+ range.
An earlier post (back a page) tried to shine a light on the “Demographia survey” that had so many calling Australia property expensive. This particular quote was an interesting one to me:-
Another key issue with Demographia is that it compares cities in Australia with cities in only six other countries, yet the media proceeds to claim that Australia is the ‘most expensive country in the world’. The survey conveniently ignores all the many cities around the world with much higher house prices than Australian cities. For example Moscow, Tokyo, Oslo, Seoul, Hong Kong, Geneva, Zurich, Milan, Paris, Singapore, Monaco.
The other link I had added back then, takes us to see many cities around the world with the darker colours (i.e. with affordability figures greater than Syd’s) and, as well as those mentioned above, a host of cities in India and the Middle East ALSO have figures above 12. Why are they not mentioned? What is on their agenda, in stating Australian cities are some of “the most expensive in the world?” And why did they leave out so many others who have figures WAY higher than Aussie?
Let me post the link again here – http://www.numbeo.com/property-investment/gmaps_rankings.jsp
Take a look at any “paddles” that have a colour approaching Red. Syd’s shows as a light brown with a figure of just below 12. But LOOK at all of the Red and Brown paddles that have figures higher than Syd (click on the paddle to show the “Price vs Income ratio”). Many European cities, but also SE Asian cities too, and even the Middle East, have MANY cities that are more unaffordable than Sydney.
To be fair, the Demographia survey for Mid 2017 appears way more sensible than the previous one linked (2014) so they appear to have learned some things over the last few years.
Meanwhile, echoing Steve’s latest Article ( https://www.propertyinvesting.com/australias-sub-prime-debt-shocker/ ), where do YOU see this heading? Is Scamp going to finally be proved right after nearly a decade? Or is this going to become an orderly settling down of values over the next year or four? A 10% drop? More? What do you see for Australia’s house prices?
Benny
Hi Codie,
How did it all pan out? Did you get to move in, and maybe you ahve already moved out again? Looking forward to your update.Benny
Hi Ajay,
How did your trip go? DId you get to check out the Mermaid Waters one?Benny
Ben>>> “The look of their site doesn’t instil much confidence though.”
+1 to that comment
Benny
Hi John,
I’ll have a guess and say sell the Frankston one. Why? Well, from the numbers shown, it has the larger Gross Profit if sold, thus likely the largest Nett Profit after Sale. Sure, it will cost a bit more in CGT (or a Tax on Profits) but it should leave you with the larger amount to parlay into the next Ip.That also leaves you holding the “better postcode” IP which cant be bad…. Let’s see whether others agree or not… ;)
Benny
Hi Steven,
On page 1 of the “Big Picture” thread is a post about Offset Accounts. You can find that one here:-In the embedded link, there are several useful posts relating to Offsets and how to use them.
Then, on page 2 of the “Big Picture” thread is a post about “GOTCHA’s” – it reads like this:-
“The first GOTCHA is to do with my old mate, the OFFSET ACCOUNT. But, it could be about any other Account too – so do read it, even if you don’t have an Offset – and relate the thoughts to your account (savings, redraw, whatever).“The first GOTCHA relates to how Mixed Loans can be created by not thinking about HOW to refinance. Or by withdrawing both deductible and non-deductible amounts from any existing account. Once a MIXED LOAN is created, it becomes more and more messy – so better to NOT make it messy in the first place.
Go to the link below to read more where @terryw shares some extra REALLY useful and important information:-
https://www.propertyinvesting.com/topic/4997918-redraw-from-an-offset/#post-5029521———————————————————–
Steven, I hope the above words and links help to shine more light on the subject of Offset Accounts for you
Benny.
Hi Ajay,
One of the two links you posted is a standout to me – and that is the Mermaid Waters one. It appears to be an older style, but looks great inside – and its price is HALF of the Median. Rental return appears pretty darn good too.Is the price wrong? ‘cos based on first impressions, I would be wanting to take a close look at that one if the price is correct. I wouldn’t even look at the Pacific Pines one in comparison.
The other thing is that the Median for that area appears to be on the way up. Now might be a really good time to get into something like that.
Benny
Hi all,
Also, what is a building square and were did it originate from?
One square (in the old measure) was 100 square feet. It was easier to say “Twelve squares” (just two syllables) than it was to say “Twelve hundred square feet” (5 syllables).
Then metrics came along – they don’t quite match with the old measures, but are sort of close – close enough for me. As a simple bloke, I used a simple formula – when we don’t need accuracy, “near enough” will do. e.g. If someone asks me the length of a building, I might say “About 10 metres long!” That could be anything from 8 metres to 12 and still be “about” 10 metres. Of course, if you want accuracy, then get out a tape measure or similar.
So, my simple formula for area of house was to multiply by 10:-
12 squares is 12 x10 = 120 m2 (give or take)And, if wanting square feet, same again >>
120m2 x10 = 1200 sq feet (give or take)Of course, where total accuracy is required, use the figures provided in earlier posts. But for checking out a property first time, “near enough” will often do, especially if you are using the same “near enough” formula to compare several properties.
Benny
Hi Ajay,
In case this helps:-Benny
The long posts would have lost almost all readers.
Hehe – well some die-hards are still here !! :p
What I’m trying to say is that the formula you’re using is lacking dimension of time. Rents grow with time so $20K rental income today = $100K tomorrow so sometimes even 1 property is enough to be ‘successful’ :-)
How does adding a time dimension change your calculations? Probably significantly…
True Ethan, at least in part – but then, if we are to look at how rents have moved with inflation, so too have living costs. So the $100k needed to be “rich” today would need to grow over time too, thus necessitating owning the five IPs. The one thing that doesn’t grow (depending) is a Mortgage, so long as one doesn’t borrow to buy more, or to draw living costs from Capital.
I hope others do get to read this – if only to test THEIR theories against one or other side of the argument.
Benny
Hi Ben,
“(I wanted) to get the message across how monumentally difficult it is, and why anyone who does actually reach this level of property investment success can be so proud of their achievement.”
Worked for me, Ben – that is a very interesting summation and I must admit to never having thought of that limitation which does, as you spelled out, show just how special it is to reach that level.
Well written !!
Benny
Hi Dave,
I went looking for this topic as it expands on what has been discussed so far re CGT and a PPOR.
https://www.propertyinvesting.com/topic/5031769-retrospective-property-valuation/The REALLY important bit is Terryw’s answer to my question here:-
So, am I right in saying we would not be lying to nominate one place as PPOR for State records, and another for Federal records?
His answer was a HUGE learning for me, and required reading for all I think.
The latter part of the topic heads off in another direction, but the major parts (for you) go through to the posts dated 15 Dec 2016 – after that date the topic has changed, so later replies are far less relevant to your post.
Benny
Hi Mike,
A Sinking Fund is (I believe) a separate fund set aside to cover some expected large maintenance cost into the future. It might be that the block of flats was built 50 years ago, and the Body Corp folk believe that it will cost (say) $500k to smarten up the building – rendering, etc. Thus, they might have previously voted to have each owner contribute their %age of that cost into a Sinking Fund. If your unit is one of 10 in the block, they will want $50k from you.I always thought of the Body Corp fees handling the “day-to-day stuff” – rates, insurances for common areas, maintenance, Services (lawn-mowing, gardening), etc – but it is possible that a Sinking Fund might also be part of the Body Corp fees (IDK for sure, as I have never owned a Unit). Whatever, a large Sinking Fund will need some large thought around it.
Benny
Hi Ajay,
Hi Benny – that’s what I’m betting on. But it’s surprising there was such limited growth in Gold Coast houses over the last 10 years. Articles such as these seem to contradict this. Am I missing something?
One of the articles mentioned the median growing more than twice as fast as Brisbane – that could be valid – IDK, as I only see the Brisbane Median figures. But watch out for some little tricky things:-
1. As one commenter pointed out in the 2nd link – the map at the top shows MOST of the Gold Coast either lost value or stayed the same (based on the colours on the map). A few went up in value, and one or two wildly so.
My question to that comment is this – How accurate is the map? It seems to have 10% rests between each colour. So, if a suburb went down by 4%, and the suburb next door went up by 4%, how would they signify that? Likely both would show the same colour (in which case one colour can represent an 8% difference in values without being notated – how weird!!).2. A mention of Pimpama going up 61% over 5 years – what is not mentioned is that they will be comparing sales of 50-year-old farm workers cottages being sold, against brand new 4Bd2Ba homes being built. All of that development started about 3-4 years ago. There was a small loss in median value in the last 12 months.
3. Is there a “Commonwealth Games in Apr2018” factor in all this? Is that some kind of catalyst helping folk to decide to migrate from Southern States once more? Supply/demand lifts prices..
4. Some areas lifting by 30% – sure, it happens. Currumbin has never been a high-flyer – too far from Surfers, but is getting close to the airport. Perhaps it has been overlooked and just been re-discovered? And re-look at point 2. Is it repeated in other areas apart from Pimpama?
5. The overall mismatch of median data between sources. The figures supplied by Jason over the last few months has seen Sydney’s median exceed $1m, and Mel nearing $900k – while THIS sample shows Syd at $930k and Mel at $650k. Which figures can be trusted? These in the links were from Mar17 – perhaps that is part of the difference.
As I mentioned, I haven’t seen Gold Coast Medians in a while – it could be that GC IS stretching ahead of Brisbane right now – but don’t forget a Median is the “middle sale” in ALL of the sales in ALL suburbs of the Gold Coast. Many suburbs will have Medians less than the GC Median, while others will wildly outstrip the GC Median value. Hard to get accuracy with an across-the-board Median like that.
6. Good work, Ajay – it is good that you challenge what you hear that doesn’t seem to make sense to you. As mentioned above, my comments were coming from a point of “less information”. As such, they were open to challenge, and I have learned, thanks to you. Keep on looking and making up your mind about all of the facts and opinions in front of you.
The main thing is to NOT confuse those two (FACT and OPINION). ;)
Benny
Hi Mike,
I am personally in favour of houses over apartments. Many factors can sway things though, and high cost in major cities can have people opt for an apartment. For investors, apartments can often bring better returns “on the surface”, but beware of Body Corp fees and high-cost Sinking Funds that can throw the good returns under a bus !!Just one thing I really wanted to share though – and that is to watch out for ‘bad dudes’ that might be wanting to sell you a lemon. First up, I have never heard of Blue Wealth, one way or the other.
If you take the warnings from in there, it should keep you alert and safe.
Benny
Hi Dave,
I have a few concerns with that one.“If you really want to avoid CGT and keep your negative gearing ….”
1. I don’t see where these two are related in any way – but, to be fair, perhaps they were answering a question from someone else who had referred to both CGT and -ve gearing. Not a big deal…..
“Buy your house and then live in it for 12 months. Buy another house and move into it and rent the first one. You have 6 years before the first house will attract capital gains tax. Sell it before then.”
2. Seems correct as far as the wording goes, except they have forgotten one major thing – the one you buy and move into CAN’T then be your PPOR if you are keeping the first one as “PPOR exempt” while you rent it. We cannot own TWO PPOR’s at the one time (except for a short period when changing from one to another). If you were to do it as mentioned in quotes, the SECOND house would NOT be CGT exempt (i.e. NOT your PPOR).
“You will however have all your eggs in one basket if you keep tying new properties to old ones with the bank….”
Eeekkk !! Sounds like they are cross-collateralising their houses. It IS a valid way to go, BUT it can cause major problems down the track – when trying to sell a property, or when wanting to switch lenders. We warn AGAINST cross-coll here.
Actually, on a re-read, just like in 1. perhaps they are responding to an earlier comment, and this part of their reply was a warning (not a suggestion) to the one asking a question. On that basis, I am less concerned about that last bit now.
But 2. remains as a major concern….
Benny
Hi Narinder,
If you are wanting Capital growth, I would suggest the way to get that in Pimpama or Coomera is to look for second-hand property there. Anything new is going to be at top price, on a smaller block of land, and Capital Growth is likely to be NIL for at least 5 years, and even more.I am always wary of someone offering a “rental guarantee” especially for NINE years. If a place is good value, it should stand on its merits without having to be propped up !! And, rental guarantees would NOT be coming out of the developer’s pocket (you can bet on that) so guess where it comes from !!
:)
Pimpama is becoming wall-to-wall terracotta roofs instead of green fields. I think this kind of purchase can suit a FHOB as they often “make it their home” and add value while the community grows and infrastructure gets added over time. They become the P&C’s for the yet-to-be-built schools, etc. By the time 5 years is up, there might be early signs of some growth in values. FHOB’s hold on in bad times as it is “their home” and, eventually, Pimpama will become a complete suburb. Will it be a place where people desire to live? Dunno. Time will tell. But if the homes built there are shoddy and on tiny blocks, I don’t like its chances.
Good thing is that there is so much land, it should be cheap, so a chance the house sites might be 600m2 or so. If not, I’d steer clear, as houses jammed together do not a happy community make !!
Before jumping into a H&L in Pimpama, compare it with the values of similar second-hand properties in neighbouring ‘burbs – Coomera, Ormeau, Beenleigh, etc. If the H&L is dearer, then by how much, and is their value for those extra tens of thousands?
Benny
Hi Rema, and Lauren,
Rema, you replied to a 2.5 year-old post – no guarantees if Arron is still around. But maybe you and Lauren can touch base, BuyersAgent is a regular contributor on here, and Tom appears to be in business in Perth, so maybe it is worth asking your questions anyway, and see who pops in to answer.Depending on what you wish to ask, you might wish to post a topic in another Forum (e.g. the Finance forum if you have finance questions, etc). Anyway, don’t be put off re my comment that Arron might not still be here, but use what is available to help with answering your questions.
On the Home page is the “Training Centre” and that has a host of Articles with all kinds of subjects addressed in it. Maybe a look in there can yield gems !!
Benny
Good one, Matt !!
Benny
Hi Blackhotel,
I purchased 3 x houses in 2008, 2009 & 2010 on the Gold Coast (Ashmore). Yes great rental return but absolute crapppppppppp growth.
The timing of your purchases was unfortunate – I would have thought this was just a year after the peak of the market in SEQ. Since 2008, Brisbane has pretty much stood still. I suspect the GC would have been similar. I would have thought Ashmore to be a burb that will do well over time – it is hardly “out in the boonies”.
Right now, the Brisbane property clock time shows 8 o’clock. Barring any major change in fundamentals, Bne (and perhaps the GC?) should do pretty nicely thank you over the next 3 years or so. I am seeing definite upward signs in Bne.
What are you seeing in the GC, or have you given up checking? ;) It could be just the time for a big hike in the values.
Benny
