Property direction

[Jonchilds]

I'm looking to buy a property (small flat/unit around $200k) with the intention to spruce the place up and possibly turn it into a rental depending on circumstances in the next 6-9 months.

At the moment I need to save another $20k or so on a $200k-$220k property, but could take the plunge in the next 3 months if the market was looking to make a sharp turn around. Conversely, if there was an extended slide in prices, I'm happy to wait that little bit to get the better deal.

What's likely to happen to the prices and rental returns of flats/apartments in the inner northern suburbs over the shorter (and longer) term?

Just sounding out opinions, not professional advice at this stage.

[Scoundrel]

Make no mistake, there is not going to be a "sharp turn around" in property prices in the time you have outlined. Perhaps in 12 to 18 months the market will have recovered from it's current slump, but that is contingent on a number of factors.

Personally I wouldnt be putting my money into a flat simply with the idea of doing reno's with the intent of flogging it off later to make a dollar - you won't get anywhere near as much a return as you would with a duplex half of some such.

[xanthian]

Demand is unlikely to increase, imo. Interest rates will keep it down. Even if the reserve bank sits on its hands, banks will increase them independently. And economics 101 states that if people can afford less money, they spend less money. Assuming anyone's desperate to sell, they'll need to sell what people can afford and are willing to pay.

As it is, I think it's already cheaper to buy properties in the Eastern States than it is in Perth; and this would be what, the first time in history? The market has further to slide, quite comfortably.

On the flip side, the further it slides, the fewer people will actually sell. While demand increases prices, falling prices influence supply almost equally so; so if everyone who owns property in Perth can afford to be a tight arse and nobody loses their house to interest rates, prices could remain fairly steady until inflation catches up.

That'll mean a lot of real estate companies are out on the street though, because there's no house sales for them to get a commission on.

[Jonchilds]

I wasn't going to do reno's and flog it off. I'd be looking at hanging onto it for 5 years or so if I wasn't living in it. I wouldn't be buying something I'd not neccesarily live in.

Long term, there is going to be a greater number of people needing to live in smaller size accomodation as people get divorced, kids move out or partners pass away, so in the medium to longer term it seems like a good investment.

Unfortunately I'm fairly limited as to the size of the loan I can get as around 20-30% of my income falls into the 'overtime' category, and I'm not comfortable mortgaging up to the hilt as the overtime is sporadic in nature.

[shmoo]

I feel that there will always be demand for the cheaper end of the market, simply because there are always more frst home buyer type people coming into the picture. Having said that, it is also these first home buyers who are often most at risk in terms of mortgage stress.

I think inner city suburbs will continue to weather the storm and because rents are high, these inner suburbs can be good buys even though the overall market is questionable.

I think we could see a further decline in prices - although unlikly to be a large drop. This will be worse in the outer suburbs and, as always, less so in the inner suburbs. It is not a fundamentally bad time to be buying, there are good buys in any market.

I think rennovations could be a good way to go because you can spend the next year or to doing upa place and after that you will see prices returning to more healthy growth.

[D'Artagnan]

Expand your view. Melbourne is great value. Just bought a unit in inner Melbourne. Great prices, good returns and future redevelopment potential.

A lot of people get caught in the "I have to see it" mentality, but really a free trip to Melbourne each year is worth it

The other places are the beaches of Adelaide and Sunshine Coast of Qld.

D'Art

[HughDMan]

I would buy a unit and rent out immediately, alot of financial institutions will allow you to claim up to 80% of the rent received as income thus increasing your borrowing power and relieving your back pocket. I bought a unit 2 years ago and had a tenant from day 1. I would speak to the caretaker and see what the ratio of owners to renters is (the higher the better) and also the caretaker might know of a tenant who is getting flicked as their owner is selling.(This happened to me).As Shmoo said there will always be a demand for cheap housing and from MY experiences over the last 13 years more money has been made with units than houses. Good Luck and Go 4 it.

[DaveR6]

$200k for a small unit (even 1 bedroom) in inner northern suburbs is going to be a complete shit box

article in todays west australian about perth rental returns being the worst in the country.

[XSorXpire]

YOu want property in Melb?
PM me.
That's what i do for a living.
Investment property in Melb.

[Cam]

Originally Posted by XSorXpire

YOu want property in Melb?
PM me.
That's what i do for a living.
Investment property in Melb.

You and I might need to have a serious chat soon.

[-Stevo-]

D'Art is quite right, if it is an investment you are looking for then you should probably be looking eastwards...

Both Melbourne and radelaide have some decent bargains to snap up... and with XS as a contact you could find it is quite easy...

We had a family friend buy a big old church on 3 acres near Geelong for $90k or so..
he has stripped it out, added a big mezzanine floor section and turned it into a super-cool warehouse/loft style home... all for under 200k total... and its only about 50 minutes out of the CBD

[XSorXpire]

This is who i work for if it is any help.

[Deej]

Purchasing a residential property purely for rental returns is not a wise investment for reasons that the most you could hope to achieve (now or even in the past before the boom) would be a touch over 5% on cost.

A common rule of thumb for Perth is if you pay $300k for something then you can expect to get about $300 pw, $500k for something then roughly $500 per week rent etc. But the downside with Resi for pure rental return is you have no ability to recover outgoings (insurance, rates, taxes, strata levies etc) from the tenant. This brings your return substantially below 5%, and this is naturally prior to introducing your interests costs (if any), or applying a cost to your own equity (which u should seeing you can get 7.5% risk free on that at the moment).

So with that in mind you will want to be comfortable that you will have capital appreciation in the property (along with increased rents) to actually realize any gains and in most cases, capital appreciation that will fairly compensate you for your other costs associated with your investment such as holding costs, your costs of your planned refurb, the costs to get in and out of the deal, and opportunity costs on your equity.

Generally unless you have a way to add substantial value to such an investment through major improvements (at below inflated market costs), changes in zoning, densities, subdivision, or say new planned Govt infrastructure that the market is not yet reflecting in the area, then you will want to have the long term mindset. In the medium term it may just end up being forced savings for you. But with a long term mindset I challenge anyone to dispute the benefits for property investment.

As for whether now is the right time to buy property or not, I have a difference of opinion to most. I actually think any time is a good time for property for reasons that the market prices and the effect of supply and demand reflect the sentiment and the economic conditions at the time. Provided you are not a short term thinker, you will not loose out. But whether it is the best investment decision for you with the equity you are indicating it is debatable as being the best investment in the time period you mentioned, but if its for a place to live then it will bring some great benifits that are harder to hang a price on.

Right now the fringe areas are suffering and as always those areas close to the CBD are not suffering anywhere near as much in the current environment. The issue you will have though is gone are the days you could buy an apartment for $200k near the city. Dubs bought the last one (a new one) 4 years ago. Blame him.

Discalimer: I know nufn about nufn. Apart from boats. I know boats. But this isnt about boats, its about property, and I dont know nufn about property, or anythin.

[Pkunk]

With the new stamp duty laws, how much cheaper would a place advertised for 200k be? I can't quite find the amount that it has fallen by

[D'Artagnan]

Originally Posted by Deej

Purchasing a residential property purely for rental returns is not a wise investment for reasons that the most you could hope to achieve (now or even in the past before the boom) would be a touch over 5% on cost.

Hence the Options Market

[Deej]

But at least in property if everything goes pear shaped with your investment decision.... you have still got a place you can sleep

[Jedi]

Ok so Deej, we all know you aren't an expert and nothing you say can be construed as advice, but here's a question: what do you see the next generation of what would have been home buyers, like 23-33 years old, doing as far as having a place to live if they want to stay in Perth? Renting for the rest of their lives? Getting a great whopping mortgage when they are very young and paying it off over the next 50 years? And for arguments sake lets say the person in question is a student engineer who would be on an average of about 100k per year, maybe a bit more, over the course of their lifetime (but is a long way from that right now )

[xanthian]

Turning gay so that twin incomes can pay for the place over 20 years, and kids don't strain the financial relationship at all.

DO IT!

[Deej]

Originally Posted by Jedi

Ok so Deej, we all know you aren't an expert and nothing you say can be construed as advice, but here's a question: what do you see the next generation of what would have been home buyers, like 23-33 years old, doing as far as having a place to live if they want to stay in Perth? Renting for the rest of their lives? Getting a great whopping mortgage when they are very young and paying it off over the next 50 years? And for arguments sake lets say the person in question is a student engineer who would be on an average of about 100k per year, maybe a bit more, over the course of their lifetime (but is a long way from that right now )

Unfortunately its going to be (and already is) very tough for anyone who is young and wants property (near the city).

I see parents being stuck with their kids longer, I see parents assisting kids by going guarantor on mortgages and/or risking their own equity to assist with childrens equity, I see the urban sprawl continuing, and I see the young folks who are fresh out of school and may have considered going to uni delaying their studies and forgoing typical late teens lifestyle and accepting well paid jobs in the north in order to put a few good years of savings and no distractions on spending under their belt.

The only way I see inner city (and surrounds) accommodation being affordable to the early home buyer in the years ahead is if councils start allowing the construction of apartments without car bays. This will allow a crap load of bedsitter* apartments that you could flog for under $200k to be produced near transport hubs. But as we ausi’s are a slave to the car, and we have no public transport infrastructure to brag about, and our councils demand a min of one car bay per lot, so I don’t see this happening any time soon.

Its tuff dood. The only way I personally see my own children having their own home in 20 years is if their parents buy it for them.

(* by bedsit Im talking two rooms – one room a bedroom with a queen size bed in it, a plasma on the wall, a single bench kitchen with a benchtop that doubles as a study/office desk. The other room is a shower (no bath) wash basin and laundry combo. All recreation living facilities as such are communal.)

[xanthian]

Ohnoes!!

It'll be the death of the parking your car in her garage innuendo!