First of all, Merry Christmas and have a safe and wonderful new year. This is my first post on this forum, so excuse me if have posted wrong section.
I’m looking to purchase a new town house is Burpengary East, Brisbane QLD. The area looks good, lost of things plans for the future, however, comparing property listings in neighbouring suburbs for basically the same thing, there’s nearly a price difference of $100K, for an established place 10 years older, compared to a new town house.
I haven’t invested in Brisbane before, so very interested to see why there’s over 30% price difference, with an older town house nearby.
Has anyone looked at these areas to invest?
Older properties also (often) have a larger block of land associated with them, making the purchase of the older property even more enticing. Many wish to buy new – but we often pay a price for wanting that. Older properties tend to offer better value in most cases.
Main thing though is that new estates often sell based on this “newness” that soon becomes 10 years old itself. Are you wanting a new home, or a good buy?
I’m in the process of setting up my SMSF, and looking to buy a new place being the preferred way, subjected to approval from ASIC, APRIA and ATO.
Obviously there’s the deprecation and fixtures straight up with a new property over an existing property, but there’s also a premiums with the developer and managing agent margins in the purchase price.
My main concern with buying a new place vs existing, is the value of the new one in 10 years’ time. Also looking at the area, the medium house price was $568k in 2010, dropped to $445k in 2015 and increased to $530k in 2017, still below 2010. With that said, this area is growing, with lots of major shopping centers nearby, such as Westfield and IKEA. They wouldn’t build in these areas, without having a very good understanding of the area.
The land and town house size is basically the same, and there’s about $20pw more rental for the new place. I keep hearing there will be a down turn in the economy in 2019, so a new place under the median rental will always be more attractive to rent. There’s also the ongoing maintenance to consider with new vs old.
Run the numbers to get an idea what each +ve or -ve of either option will cost. Without knowing such numbers, it is hard to make good decisions.
e.g. What would maintenance of a 10year-old townhouse be expected to cost? Would it be $2k pa, or $5k, or $10k? Compared to that, what is the cost to you of paying $100k more on a mortgage? Is that extra mortgage cost more than offset by Tax benefits of depreciation and/or extra rent?
Will the new home be complete with all of the niceties that 10-year-old homes have – e.g. fencing, lawns, trees, concrete, schools nearby, shops, etc? Will the new home have a warranty that has a meaningful amount of value (e.g. with regard to maintenance)? Likely it should have….
Your current decision should be to quantify these things. As a quick back-of-the-envelope bit of maths, an extra $100k on a mortgage is likely to cost you (say) $5.5k pa in actual cost on an IO mortgage – but you can be nearly double that if doing P&I. And, that is ONLY the day-to-day running cost. You are automatically “down” $100k in equity when compared to a 10-year-old townhouse.
What if instead you can spend $20k on that 10-year-old townhouse and lift its value by $60k? Haven’t you then increased your equity by $40k (making it far easier to buy #2) and maybe even lifted the rent to the equivalent of a new place? Could be that the “old place” is slightly closer to town than the new one too…. Lots of things to consider.
Good luck with your decision, Micksta – the time you spend “running the numbers” could pay you off handsomely methinks !!
BennyRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Merry Xmas to you also and here’s to a successful 2019 all-round.
We finance a lot of SMSF thru our own warehouse lines and the one thing we do find with Burpengary at the moment is the difference between the purchase price and valuation. Many of the valuers I have spoken to recently tell me the good old property marketing firms are still alive and well and the premiums being charged are quite large.
For a SMSF the last thing you want to do is put in additional cash funds (assuming you have access to cash) from your SMSF to support the variance as it will take a long time to even break even.
Given the rate of Tax inside SMSF you have to ask yourself is paying over the odds for the property worth the small initial Tax saving. Remember if you buy a property that is 1 year old you will still get the majority of Depreciation and Capital Allowance claims without the developers/marketers premium.
Personally would be very careful.
Yours in Finance
Happy new year and all the best for 2019.
This is fanatic feedback and very helpful information.
I ran all the numbers to compared buying new around $330k, vs old around $260k, to be on par. New is a much better option with the deprecation to create cash flow up to about 7-8 years, then starts to change. Looking down the track and 8-10 years from now. That nice shiny new property could take a dive in value, end up being worth the second-hand properties I’m comparing too, based on past sales in the area. If there’s an oversupply of town house in the area and the rents are the same, the new properties will look more attractive to rent.
Looking at the value of the deprecation schedule over 10-year estimation of $50k, would probably be the developers and agents’ profits?
What I struggle to understand is, why the median house price for Burpengary East is $565k and Burpengary is $445k. Looking at the two suburbs, there’s a freeway splitting them and East is closer to the water?
There’s still lots of big blocks around East, so more than likely there will be more developments planned for the future.
In summary and my concern is the real valve of the property in 10 years’ time and how will my SMSF look? Will there be at least 50% growth in this area, or could it go backwards. When you track the house prices over the last 10 years, the trends are terrible for capital growth.
Do you guys know of good property valuers in this region?
A few extra thoughts, thanks to your added information:-
1. The medians you quote for East and West ($565k and $445K) are wildly different to what you are wanting to look at buying (new $330k or old $260k). Am I missing something, or are there some screaming bargains in Burpengary?
2. On the subject of medians, there is a lot to learn about them – first they are the “middle” price, and NOT an Average price, in a string of sold prices. One thread asked a lot of questions and we learned a lot about medians by following the topic:-
3. I can’t imagine ANY developer selling new for $330k up there – but then these are townhouses, and not houses – could it make that much difference? In fact, maybe THAT earlier question 1 is referring to “House Medians” ($565k vs $445k) rather than townhouse medians – could there be such a massive difference? Land size differences will play a part – but that much???? Could be – but you will KNOW !!
4. “What I struggle to understand is, why the median house price for Burpengary East is $565k and Burpengary is $445k.”
Micksta, it is rather normal for newer areas to be $100k up on older areas – not that they really are worth more, but developers SAY they are worth more (“They are new, and they have tax deductions, and a warranty, and even a rental guarantee, and we think they are better so we will lift the price. And if you think this is steep, watch out for our Stage 2 !!”) :p
5. As Steve would say, “Buy problem properties and sell solution properties”. You buy the problem, spend a bit to fix the problem, then sell it to someone with the solution in place (for a profit). A new property is a solution – there is nothing to be fixed, so you won’t be paid for doing it. In fact, YOU will be paying the developer, builder, for having built it – and there will usually be little chance of any discount. There will also likely be few Capital Gains for a number of years. OK for home-owners who might sit still for 10 years plus, but not so good for investors who are wanting to “make a bit” on their investment.
Let’s see what you think of a few of those questions/comments.
I just purchased a copy of Steve’s book- 0 To 130 Properties In 3.5 Years, and looking forward reading through it. The way I see it, valuable advice shouldn’t be free!
I used the median house price from realstate.com.au. It doesn’t detail town houses or unit prices. When you look at the selling price for the town house I’m referring too (one side of a duplex), it looks like a bargain to me. To describe the property, its 2 story, 3 bedrooms upstairs, en suite, bathroom upstairs, with a balcony off the main bedroom. Kitchen, Living, dining with a 3rd toilet in the laundry. I don’t have the actual land size, however, based on the building drawings, I would estimate 130-140m2. These are basically built with a cookie cutter and mirror reverse approach all in one little community, but not a gated community. The area is right next to the freeway, with a bus top about 450 meters away, 30kms from Brisbane, 5km from the high school and 10-minute drive to the water. There’re some big blocks in the east side, so plenty of developments opportunities in the future.
As for the median house price for Burpengary east, there’s bugger all townhouses in the east, compared to the west. The East has some high-end houses and some big blocks. Looking at the lower end of the hoses solid, 4 bed, double garage, 2 baths on a 500-600m2 block for just over $400K, compared to higher end over a million. This indicates why the median house price is higher in the east. The key thing I’ve noticed is the big blocks of land in the east. With new developments planned for the future, this could drive the median house price down, if I’m on the right track?
The comment “Buy problem properties and sell solution properties” is bang on, however, considering I’m doing this in my SMSF, time poor, hassle free for 7-10 years and the tax reduction benefits, probably suites my situation for now, compared to relaying on super company’s and the stock exchange. I’m also looking at town houses in Northlands that’s is more matched to the median house price and doesn’t seem to have the same vacant land volume as Burpengary East. Plus, its not far from the hospital, so I figure better class of people.
To summarise the risk over reward. I probably won’t see much capital growth in the next 5 years, and there is the risk of the property being worth the same in 10 years from now, possibly less. Considering I can’t leverage off property in SMSF’s, I will need to inject a lot more into my super fund to buy the next one. I’m hearing lenders don’t like to people buying property in SMSF’s, and the rules are changing reduce people buying properties in SMSF.
I’m not in a position to buy another property out of super for the next 12 months at least. So, with your experience and knowledge, would you consider doing this in a SMSF, if the numbers stack up to be positive cash flow, or run the other way?
I found this web site detailing the median unit price in Burpengary.$395k seems to be the median unit price.