All Topics / Help Needed! / Is now a good time to invest in building a new property in Adelaide?

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  • Profile photo of katherineMkatherineM
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    @katherinem
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    Hi! I bought a house and land package with Devine in Andrews Farm last April it has done well. I'm now thinking of doing it again. I was wondering about Munno Para West, Burton, Salisbury North, Seaford Rise??? Any suggestions I was looking for around $250,000 to rent out for $260? I'm a new investor. Am I doing the right thing? Any experienced investors out there I would love your investing insight!!!!Do you think the market is headed for a down turn???Thanks.

    Profile photo of R3R3
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    @r3
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    market is definitely flattening. I dont' think the next 12mths will do aswell as the previous 12mths

    Profile photo of RVPRVP
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    @rvp
    Join Date: 2006
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    Niether do I however i feel/think that within 3 years we will start seeing the trend moving upwards again especially out North. Im not sure exactly where i did see it KatherineM but i know you can get land as cheap as 88000 in munno para west i will get back to you if i come across it again

    Good Luck

    Profile photo of RVPRVP
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    @rvp
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    I have alittle info which i was going to pm you privately KatherineM so if you are interested in hearing my little piece of info then feel free to pm me.

    Profile photo of ScampScamp
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    @scamp
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    RVP wrote:
    I have alittle info

    oh please don't keep us waiting, c'mon spit it out.

    Profile photo of ItalianDragonItalianDragon
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    @italiandragon
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    Stay away, the bubble will burst really badly.  Australians can`t keep paying 6 times their income for houses.

    Profile photo of ScampScamp
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    @scamp
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    ItalianDragon wrote:
    Stay away, the bubble will burst really badly.  Australians can`t keep paying 6 times their income for houses.

    It's actually immensely worse than that : it's 12 times their income.
    And not at low interest rates either, it's an unbelieveable 9% interest.

    Italian : yes, it's unsustainable. Like I said a few months ago : This crash will dwarf 1929.

    Profile photo of XeniaXenia
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    @xenia
    Join Date: 2002
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    Our next investing network meeting will be about the Adelaide real estate market. Anyone who is interested is invited to come along and listen to the experts. Please email me [email protected] for details.

    Profile photo of ScampScamp
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    @scamp
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    Xenia wrote:
    Our next investing network meeting will be about the Adelaide real estate market. Anyone who is interested is invited to come along and listen to the experts. Please email me [email protected] for details.

    From the website of adprop.com.au : AdProp Pty Ltd is definitely a licensed Real Estate agency

    Aha… a real estate agency. "listen to the experts" certainly means : "listen to our spruikers" ?

    Please, enlighten me, are you positive or negative about the Adelaide property market ? Also please state why. These 'sessions' aren't needed. For information about the Adelaide property market, just turn your TV on and switch to the news channel, or visit a local Adelaide foreclosure auction to see how 'well' the property market is doing :)

    Profile photo of ItalianDragonItalianDragon
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    @italiandragon
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    You guys may find VERY USEFUL to read this report:

    It`s long but it is absolutely worth the reading.

    4th Annual Demographia International Housing Affordability Survey:

    2008 Ratings for Major Urban Markets

    Australia ???? Canada ???? Republic of Ireland
    New Zealand ???? United Kingdom ???? United States

    http://www.demographia.com/dhi.pdf

    from the website:

    http://www.demographia.com

    I would love your opinions AFTER you read it.

    Profile photo of MaxxiMaxxi
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    @maxxi
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    This is to post such as Scamp and similar …

    what you are neglecting to remember is that the elements of supply and demand govern the market.  For you to understand the market well you need to understand the local market.  Many capital cities are struggling to meet the housing demands.  I saw one of your other post (scamp) saying that the average income in Australia is $50K … if you understand mortgages well then you will know that the Serviceability ratios for purchasing/lending are between 4-6 to 1 depending on O/O or Investment Property. 
    Therefore, it's not the $50K income earners that are driving the market.  And …. all of those that cant get into the market are long term renters/tenants…. even more reason for prudent investors to buy up more of the market.  Our property market is NOT governed by foreign investment.
    It is true however that the property market is slowing down …. and we need to be more diligent in our research.  Families are still able to purchase property as more and more are double income families.

    KatherineM,

    The South Australian market is doing very well at the moment.  Last year it increased by 23% and it sutuated as one of the best capital cities for growth in Australia.  The March results were already reported at 4.5% which is setting it up for double figures for the year.  This growth is due to four things …. 1/ The relatively well priced housing in SA …2/ The increase in rental values…
    3/ The Defense Contracts that are flurishing in Adelaide eg Submarine base construction contract…. 4/ The Mining Boom in Northern SA.

    Profile photo of ScampScamp
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    @scamp
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    Maxxi wrote:
    if you understand mortgages well then you will know that the Serviceability ratios for purchasing/lending are between 4-6 to 1 depending on O/O or Investment Property. 
    Therefore, it's not the $50K income earners that are driving the market.  And …. all of those that cant get into the market are long term renters/tenants….

    KatherineM,

    The South Australian market is doing very well at the moment.  Last year it increased by 23% and it sutuated as one of the best capital cities for growth in Australia.  The March results were already reported at 4.5% which is setting it up for double figures for the year.  This growth is due to four things …. 1/ The relatively well priced housing in SA …2/ The increase in rental values…
    3/ The Defense Contracts that are flurishing in Adelaide eg Submarine base construction contract…. 4/ The Mining Boom in Northern SA.

    – The right mortgage ratio should be 3 times income. 4 times is pushing it. 6 times is plain idioticly high.
    – Those that can't get into the market are people who borrow up to 10 times their wages, and even buy PI's.
    You're right to say they "should not be allowed in the market" .. but sad truth is they get themselves into more debt than they can afford. At the moment, we're at the point that even 2 incomes can't keep up with the house prices. That's assuming you're a dink, and don't have kids. If you have kids, you're already outpriced now, no matter if you have 1 or 2 incomes in the household. Only dinks can afford houses now, but they have locked themselves into 10% mortgages for the next 20 years.
    – Who cares about last year increase of 23% ? That figure by itself should be a BIG warning to stay out of the market. Never buy in a topped off market.
    – The march results don't say anything. It's median houseprices. In the end of a housing boom , the houseprices go down but medians go up, I have already explained why ( less cheap houses sell, thus the 'median' will go up, but only because less houses are sold )

    1/ The relatively well priced housing in SA …
    It's not well-prices. Well priced compared to what ? Compared to Sydney CBD ? Relatively well-priced SHOULD be 100.000 median houseprice, they're unproportionally higher. Those who lived in Adelaide 20 years ago will remember the 10% unemployment, and houses worth squat.
    2/ The increase in rental values…
    Rental values are about to drop , because a massive amount of non-sold houses will flood the market , driving rental prices down.
    3/ The Defense Contracts that are flurishing in Adelaide
    Economy is slowing, this means defense contracts will end soon or be cancelled.
    4/ The Mining Boom in Northern SA.
    In what way does a mining boom affect a city 400 km away from the mining area ? And besides, China's economy is in a BIG recession and also plunged 8% in 1 day. What happens to Australia's mining boom when China goes into a fatal recession ?

    Conclusion : Don't buy any housing now, ESPECIALLY not in Adelaide.

    Profile photo of yarposyarpos
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    @yarpos
    Join Date: 2004
    Post Count: 247
    Scamp wrote:
    Maxxi wrote:
    if you understand mortgages well then you will know that the Serviceability ratios for purchasing/lending are between 4-6 to 1 depending on O/O or Investment Property. 
    Therefore, it's not the $50K income earners that are driving the market.  And …. all of those that cant get into the market are long term renters/tenants….

    KatherineM,

    The South Australian market is doing very well at the moment.  Last year it increased by 23% and it sutuated as one of the best capital cities for growth in Australia.  The March results were already reported at 4.5% which is setting it up for double figures for the year.  This growth is due to four things …. 1/ The relatively well priced housing in SA …2/ The increase in rental values…
    3/ The Defense Contracts that are flurishing in Adelaide eg Submarine base construction contract…. 4/ The Mining Boom in Northern SA.

    – The right mortgage ratio should be 3 times income. 4 times is pushing it. 6 times is plain idioticly high.
    – Those that can't get into the market are people who borrow up to 10 times their wages, and even buy PI's.
    You're right to say they "should not be allowed in the market" .. but sad truth is they get themselves into more debt than they can afford. At the moment, we're at the point that even 2 incomes can't keep up with the house prices. That's assuming you're a dink, and don't have kids. If you have kids, you're already outpriced now, no matter if you have 1 or 2 incomes in the household. Only dinks can afford houses now, but they have locked themselves into 10% mortgages for the next 20 years.
    – Who cares about last year increase of 23% ? That figure by itself should be a BIG warning to stay out of the market. Never buy in a topped off market.
    – The march results don't say anything. It's median houseprices. In the end of a housing boom , the houseprices go down but medians go up, I have already explained why ( less cheap houses sell, thus the 'median' will go up, but only because less houses are sold )

    1/ The relatively well priced housing in SA …
    It's not well-prices. Well priced compared to what ? Compared to Sydney CBD ? Relatively well-priced SHOULD be 100.000 median houseprice, they're unproportionally higher. Those who lived in Adelaide 20 years ago will remember the 10% unemployment, and houses worth squat.
    2/ The increase in rental values…
    Rental values are about to drop , because a massive amount of non-sold houses will flood the market , driving rental prices down.
    3/ The Defense Contracts that are flurishing in Adelaide
    Economy is slowing, this means defense contracts will end soon or be cancelled.
    4/ The Mining Boom in Northern SA.
    In what way does a mining boom affect a city 400 km away from the mining area ? And besides, China's economy is in a BIG recession and also plunged 8% in 1 day. What happens to Australia's mining boom when China goes into a fatal recession ?

    Conclusion : Don't buy any housing now, ESPECIALLY not in Adelaide.

    the whole Chinese economy plunged 8% in one day?  how did you measure that Scamp?  you really have your finger on the global pulse!  what a guy

    the mining actvity 400km from Adelaide will have a similar impact on Adelaide as the mining activity 100's or 1000's of kilometers from Perth has had.    Its cyclical sure,  but cant be dismissed just cause it doesnt fit your template

    Profile photo of MaxxiMaxxi
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    @maxxi
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    Scamp,

    With the ratios I was quoting relative serviceability calculations that the banks use to determine the affordability …. I wasnt quoting what you 'Should' borrow … naturally you should borrow less rather than more, ideally no more than 80% if you can do it.
    4 times borrowing ratios are the maximum you will getfor owner occupied and for Investment/Rental properties they will allow you a relative amount more since your receiving rental payments to pay for a large part of your costs and your main household living expenses are already calculated in the owner occupied scenarios (if you have a home loan and buy a rental property). The housing prices in Australia topped off well over 2-3years ago…. and if you look at the history of Median prices in Adelaide it is the most steady of all the capital cities …. it usually doesnt take the big rises like sydney, nor the big falls either.

    For you to quote poeple borrowing up to ten times their wage is absolutely ridiculous!!! 

    Don't forget too … here in Australia we have a serviceability factor of up to 3% above the market rate… that didn't exist in the USA …. they could borrow just about anything with virtually no evidence and at the ridicilously understated and unrealisticly low 'Honeymoon rates'…. that's why the USA economy bust …. because when these shark lenders offerred these 3% rates to unsuspecting home owners they had absolutely no way of affording their ridiculous debt levels at doube the rate in the 'real world economy'!

    Besides the biggest critic of spending in Australia is lifestyle 'personal' credit spending.
    I agree with you that the maket will continue to slow but I disagree that the prices will slump like the USA … the is NOT the USA and housing loans in Australia are nothing like the loans in the USA …… you cannot fool the banks and borrow too much like in the USA….even Lo Doc loans are under close scrutiny here, and only businesses can access them … and even then they have to show evidence and statements to show their business activity, and No-Doc loans are virtually next to impossible to find.  But that still hasn't slowed the market much in Many areas … best thing to do is follow the facts …. watch the reports and figures each quarter and judge for yur self.  Facts dont lie what ever the state of the economy.

    I must say I definitely would not overcommit myself in this market…. and would only buy property myself if it is under market value and repayments are comfortable.  Afterall it is a buyers market.

    You did however fail to comment on the housing demand in many Australian capital cities which we will struggle to meet… and the record number of migrants over the last 12 months.

    If you are going to buy property Adelaide would be one of the first regions you would consider …. a mining boom has many repercussions on the whole ecomony and infrastructures …. surely you understand these economics since you seem to know everything about everything??  Besdies the mining boom is more like 600-800 kms from Adelaide, which is irrelevant anyway.  The mining companies are set to house their Head offcies in North Adelaide.  There are many jobs created by both Defense and Mining, not just in the heart of the mining.  Pt Augusta, Pt Pirie and Whyalla are set to be the supply hubs for the mining projects.

    To quote housing prices 20 years ago is ridiculous …. why dont you quote the price of bread and wages ….eg the ecomomies of scale from 20years ago also ??? It's all relative.  Houses worth squat in Adelaide were worth a bit more than squat in Sydney and so on.  Relatively low prices in Adelaide compare to therest of Australia especially Perth and Brisbane which have always thru history been very similar sized economies … Perth is still similar to Adelaide but has a much higher median price thanks to the Mining Boom there and now Perth is paying the price for the unrealistic Median prices.  Brisbane also had a mining boom and prices went up.  There is also a loto fmigration to Queensland fueling prices.  It's all relative.  Next you'll say we're headed for 19% interest rates agin from 20 years ago??? And how does a non-sold house drive down the rental values??  Dont families remain living there if they dont sell?  And not everyone has high mortgages or even a mortgage!

    I agree with you … people have to enmasse stop buying houses for the prices to crash …. its all about supply and demand!!

    Scamp… even you stated that the economy will recover by 2011.  Do you really think that the economy will change that much in 2.5years? Lets watch the reports ….

    Having read your responses you dont actually quote anything or use any facts or even any relative common sense…. only dooms day fear tactics!!!  I will lsten gladly to your comments when you start to show evidence of your dooms day theory.  Try not to be so general in your responses .. grow some balls and lay something meaty down huh??

    Profile photo of ScampScamp
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    Maxxi, just show up at http://www.globalhousepricecrash.com
    Read and educate yourself, some smart people around there. There's bears and bulls alike on the forum, there's statistics and everything you want to make up your own mind. What I do here is exactly the same as everyone else is doing on this forum : Provide no data or statistics at all , just feelings and opinions.

    For my statistics and data , go to GPHC.

    Profile photo of LinarLinar
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    @linar
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    Hi Katherine

    I have heard some fantastic snippets of advice along my investing journey.  One of them was something to the effect of:

    "In 10 years time you will look back at the investment property you bought and think that it was a bargain and you should have bought more of them".

    Property goes up in price.  Sure it may go up and down along the way but it will always go up, just like the share market.  Property today is worth more than it was 10 years ago.  In 10 years time it will be worth more than it is today.

    I don't have a problem at all with Adelaide (I live here).  House prices in other cities may increase in value more than Adelaide or Adelaide may see better growth.  I don't know.  But GENERALLY SPEAKING, properties double in value every 7 – 10 years, whether it is in Adelaide, Sydney, Bunbury or Mt Isa.

    If you can afford, get in the market.

    Cheers

    K

    Profile photo of ScampScamp
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    Let's take a house worth 500.000$ AUD. Let's assume you only pay off interest ( for mathematical ease )
    The interest over 10 years ( at current rates , which will go up ) is 475.000$ AUD.
    IF … ( and they don't ) properties go up every 10 years, that still means you didn't make a profit if you calculate CPI over 10 years ( 5% per year = 71% over 10 years ).

    If property doubled every 7 years, then a house since 1800 has multiplied in value by a factor of 2097152
    So, if anyone in 1800 bought a house for 1 dollar, it would be worth 2097152 dollars now.

    Looking a bit in the future, that house would be worth 33.554.432 in 2050.
    If the house was worth 3 dollars in 1800, the house would be worth 100.000.000 in 2050.
    Call me crazy, but I really don't think house prices have doubled every 10 years. that's only since the 50's , and even then, it's only because of the cheap credit available.

    Oh.. and guess what : http://www.news.com.au/business/money/story/0,25479,23846881-5013952,00.html
    Days of easy credit are over. Like I predicted long time ago, and like I predicted also that banks will be limited by law in the amount they are allowed to lend to people. Sorry for the bad news guys, but this really can't be stopped.

    Profile photo of MaxxiMaxxi
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    Oh Please scamp …. tightening of credit is a normal economic policy in times of an overheated economy.  We've had tighter credit for the past few years and over the past 12 months it has been more difficult to get loans with poor credit.  But that is logical right???  The Australian market is NOT like the USA market …. but yes people are spending way too much in persnal credit and expenditure …. so people do need a lifestyle wake up call.  Besides you have never been able to get personal credit (apart from Home Loans) with poor credit score.

    Also, in oyur calculations on capital growth … you neglect to state that your capital investment in the property is often about $50K  and in the course of a property cycle you would double your money if you were to realise a reral growth of $100K after costs right???

    Again … Scamp …. it's all relative ….. the idea is to look at ways that will grow your parcel of money … and in different times in different economies there are different measures and results from different sectors.

    With people like you spreading dispear and fear … that's when and how the economy does crash!!!  Idiot!

    Profile photo of kum yin laukum yin lau
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    @kum-yin-lau
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    Post Count: 342

    Hi, there's no evidence on the ground that Adelaide property is going to go down significantly. It has slowed & properties are taking longer to sell but they sell & not necessarily at a discount.

    I'm kicking myself now for not buying the house I liked at Alberton 2 weeks ago. It was a Brocks inhouse auction & I left without finding out what happened to the house which was last quoted at $365000. It's no longer on the books therefore must have sold. I thought up to $380000 would be a good price for that house – vintage Aussie style with good modern extensions at the back on close to 800m2. The suburb is interesting, not rough. It's just off the hot Woodville/Ethelton corridor but close to Cheltenham where the racecourse will be redeveloped.

    The tramline to Semaphore is a foregone conclusion, just like the redevelopment of Newport & the Swinging Basin of the Port area. Cheltenham Racecourse devt is also a decided conclusion. When the devt is complete in a few years, property would have gone ahead 50% & by then, everyone would be able to see what they can't see right in front of their eyes at this moment.

    There was another one at Brighton – house & shop [you can't build those anymore because council won't allow you], only around $450000. Didn't get to the auction.

    And the land at Selby St near the Central Market was auctioned last week.

    The good buys are still there. I've quoted you only those that I was interested in. I didn't buy not because I didn't like the property or because I thought prices would crash. I didn't buy because I can't buy them all & I also can't buy a business, a car and a property all on the same day.

    6 months from now, we at Adelaide will report to everyone what's happening here & then, we'll decide whether property prices will crash or not.
    KY

    Profile photo of Skip101Skip101
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    @skip101
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    Linar wrote:
    Hi Katherine

    "In 10 years time you will look back at the investment property you bought and think that it was a bargain and you should have bought more of them".

    Property goes up in price.  Sure it may go up and down along the way but it will always go up, just like the share market.  Property today is worth more than it was 10 years ago.  In 10 years time it will be worth more than it is today.

    I don't have a problem at all with Adelaide (I live here).  House prices in other cities may increase in value more than Adelaide or Adelaide may see better growth.  I don't know.  But GENERALLY SPEAKING, properties double in value every 7 – 10 years, whether it is in Adelaide, Sydney, Bunbury or Mt Isa.

    If you can afford, get in the market.

    Cheers

    K

    Excellent advise. Or you could listen to the doomsayers, wait 3 years and pay 20-30% more.

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