The future of Australian property prices

Julia · 1 March 2013

Kingpin said:
Hi everyone I am very interested in buying real estate in the near future .

I am 19 years old with no debt or liabilities(besides a gym membership )
i currently have 3k saved and a small amount in stocks ( just bought DYL at 58 should of waited i know) I have been looking at land at various suburbs for around 20k-30k .

Where is this? I haven't seen any decent land at such a price for many, many years. Average price for a house block in the regional coastal Qld centre where I live is around $200K. It will be a lot more in a capital city, I imagine.

If you were to buy that land, how and when would you anticipate it offering you some return? Land alone is going to require outgoings on rates, without bringing you any revenue.

You don't say anything about your earning capacity.

Kingpin · 1 March 2013

griffith nsw quite a few in that are although i am not from there.
i have also looked at a few in broken hill.
i recently have landed a caual job paying between 800 - 1000 pw
to be honest i am not to sure when to expect a return it would be more like a pay and forget type investment if i could call it that. i do realise the outgoings so i would be relying on the capital .

chops_a_must · 1 March 2013

I dunno.

Plenty of people underwater there with their properties at the moment.

Julia · 1 March 2013

Kingpin said:
griffith nsw quite a few in that are although i am not from there.
i have also looked at a few in broken hill.
i recently have landed a caual job paying between 800 - 1000 pw
to be honest i am not to sure when to expect a return it would be more like a pay and forget type investment if i could call it that. i do realise the outgoings so i would be relying on the capital .

So what would you consider the potential for capital gain in either Griffith or Broken Hill?

tinhat · 2 March 2013

Kingpin said:
Hi everyone I am very interested in buying real estate in the near future .

I am 19 years old with no debt or liabilities(besides a gym membership )
i currently have 3k saved and a small amount in stocks ( just bought DYL at 58 should of waited i know) I have been looking at land at various suburbs for around 20k-30k .
My question is at my age would you continue to save for an investment and incur passive income
or take out a personal loan for a block of land and wait for capital , i do realise i will have to pay rates and etc but atm i belive this will be good debt .

I appreciate everyones advice on the subject as i know alot of people on this forum have been around the block a few times
. my long term goal is to have a positive geared investment by 21
thank you all kingpin

Kingpin, if I were in your situation I would look into and consider a first home buyer savings accounts with one of the banks. You need to deposit a minimum of $1,000 per year for up to four years before you can withdraw the money to use for a deposit on a house. For the first $6,000 you deposit each year, the government will top up your account by another 17%. So if you deposit $6,000 the government will deposit $1,020 in the following financial year. The interest you earn is taxed at 15%. Great deal, but if you don't use it to buy a house and you want to close the account it will get put into your super and you won't be able to touch it until you retire.

I don't know of any other investment that will give you 17% (tax free) bonus on your contributions each year plus a tax break on your compounding interest.

See:
https://www.moneysmart.gov.au/managing-my-money/banking/savings-accounts/first-home-saver-accounts
http://www.ato.gov.au/individuals/pathway.aspx?pc=001/002/066

chops_a_must · 2 March 2013

And the catch is, you have to use it at the end of the 4th year.

They seem so much better to set up once you know you are going to buy a house... And then just dump your savings into your mortgage after the 4th year.

Tink · 2 March 2013

70% clearance in Melbourne last weekend, lets see what this weekend brings

http://www.reiv.com.au/Property-Research

http://www.rs.realestate.com.au/cgi-bin/rsearch?a=ars

qldfrog · 2 March 2013

Kingpin said:
griffith nsw quite a few in that are although i am not from there.
i have also looked at a few in broken hill.
i recently have landed a caual job paying between 800 - 1000 pw
to be honest i am not to sure when to expect a return it would be more like a pay and forget type investment if i could call it that. i do realise the outgoings so i would be relying on the capital .

im ,y opinion, this is a very scary option: you will pay rate, then your neighbour might erect a fence, or need to repair it-> you have to pay half,
it rains, the grass grows-> you need to maintain your lot; as you are away you need to call jim the mower guy or the kid next door every months at least...
hum let's see $500 rate a year
new estate 3 neighbours with 3 fences 1k a year average shared cost in the first 5 years (with potential much higher one off outlay),
Jim or the boy next door for mowing and or removing declared weeds 40$ a month->500$ pa
so you spend 20k, leak 2k a year or 10% in cost and you do not get any other return , no negative gearing
add the costs to buy/sell (sollicitor, stamp duty (even if waived for first buy it means you will pay full SD when you actually purchase your first own property)
you buy a cheap asset and much of the cost will be mostly fixed or not proportional (more or less same amount as a 200k block)
unless it doubles in the next 3 years or so, you will loose money; and my own opinion is it will not double in that time
For this to happen, you would anyway get 10% interest on your cash saving at the bank.
so do your sum but i would not even consider it unless you want to build and live there
DYOR as I am not in a position to give you advice

Kingpin · 2 March 2013

thank you tinhat for those links
I actually seen my family finacial advisor and he talked me through the scheme but i believe that i could save a nice enough deposit on my own in the next year and a half rather the four .

qld frog you raised some very good points which i admit i did overlook , the reason iam interested in the land is because it is cheap and in my opinion it is good debt ( i may be wrong ) .
i do not have any intentions of building a house on the block it was merely for capital and julia i do not have an idea what to expect i do have alot of research ahead of me .

I think for now i will continue to save a nice deposit for an investment property and keep playing the stock game which i am loosing at the moment .

thank you all for the advice any more is very much so appreciated

sydboy007 · 2 March 2013

Tink said:
70% clearance in Melbourne last weekend, lets see what this weekend brings

http://www.reiv.com.au/Property-Research

http://www.rs.realestate.com.au/cgi-bin/rsearch?a=ars

Stock might be selling, but unless people are willing to increase their debt levels I can't see too much of the property market taking off. Household debt levels are still over 150% of income which puts us up there just behind the Canadians and Dutch.

Other problem is the banks are seeing a lot less deposits flowing in over the last quarter of 2012. I'd say that has continued into 2013. Even with the run up in prices there's quite a few shares out there over 7%+ grossed up returns. Certainly beats a 4.75% 5 year TD if you need to cash to live on.

qldfrog · 2 March 2013

Kingpin said:
qld frog you raised some very good points which i admit i did overlook , the reason iam interested in the land is because it is cheap and in my opinion it is good debt ( i may be wrong ) .

Glad it helps, I agree on the "good debt" side but too costly, save a bit more and maybe target the area where you would get your fist home if still interested in pure land

Julia · 2 March 2013

qldfrog said:
im ,y opinion, this is a very scary option: you will pay rate, then your neighbour might erect a fence, or need to repair it-> you have to pay half,
it rains, the grass grows-> you need to maintain your lot; as you are away you need to call jim the mower guy or the kid next door every months at least...
hum let's see $500 rate a year
new estate 3 neighbours with 3 fences 1k a year average shared cost in the first 5 years (with potential much higher one off outlay),
Jim or the boy next door for mowing and or removing declared weeds 40$ a month->500$ pa
so you spend 20k, leak 2k a year or 10% in cost and you do not get any other return , no negative gearing
add the costs to buy/sell (sollicitor, stamp duty (even if waived for first buy it means you will pay full SD when you actually purchase your first own property)
you buy a cheap asset and much of the cost will be mostly fixed or not proportional (more or less same amount as a 200k block)
unless it doubles in the next 3 years or so, you will loose money; and my own opinion is it will not double in that time
For this to happen, you would anyway get 10% interest on your cash saving at the bank.
so do your sum but i would not even consider it unless you want to build and live there

And the above does not include repayment of the loan. Kingpin, what would be the calculation when you say OK I have $X for a deposit, the cost of the land is $X, so the loan at X% p.a. is going to cost $X?

RandR · 2 March 2013

Kingpin said:
thank you tinhat for those links
I actually seen my family finacial advisor and he talked me through the scheme but i believe that i could save a nice enough deposit on my own in the next year and a half rather the four .

qld frog you raised some very good points which i admit i did overlook , the reason iam interested in the land is because it is cheap and in my opinion it is good debt ( i may be wrong ) .
i do not have any intentions of building a house on the block it was merely for capital and julia i do not have an idea what to expect i do have alot of research ahead of me .

I think for now i will continue to save a nice deposit for an investment property and keep playing the stock game which i am loosing at the moment .

thank you all for the advice any more is very much so appreciated

The four years is only 4 financial years kingpin. Thereby currently 12-13,13-14,14-15, 15-16 being the fourth. So if started now in about 28 months from now you could have had a FHSA for four financial years of goverment bonuses.. only just over 2 calender years ...

And the catch is, you have to use it at the end of the 4th year.

They seem so much better to set up once you know you are going to buy a house... And then just dump your savings into your mortgage after the 4th year.

You have not been kept up to date with the scheme chops .. you DONT have to use it at the end of the 4th year any more and if you do buy before the min time in the scheme has passed you can roll the money into a mortgage (this was not the case when it was first introduced)

Julia · 2 March 2013

FlyingFox said:
What will it go for? My guess is if it sells, it will be around the 1.2 to 1.4M range.

Too far off?

So_Cynical said:
I've walked past that house a few times, very quiet and a very good area....beautiful houses in surrounding streets but not over the top beautiful.

realistic price: over 1.1 would be my guess...it is Epping after all.

Mr J said:
You may call it entry level to a good area, i.e. the families will tend to be better off than those in cheaper suburbs further west. It is most certainly not an outer suburb, unless you are like me and insist on every west of the bridge to be "way out west" .

For 1.6m I know I would look at other areas.

McLovin said:
I think she'd be doing very well for herself to get near $1.6m. I agree with others, around $1.1-$1.2m. Nice house too.

tech/a said:
I ll suggest handed in in the 1.3-1.4 range.
Then negotiation starts.
Anything over 1.4 would be a job well done.

My cousin's auction held today. Tech/a was right on the money - passed in at 1.37.

What she hadn't mentioned until today was that she turned down an offer a couple of weeks ago for $1.4M.
She is now, of course, castigating herself for that, and has belatedly realised her $1.6 was unrealistic.

A complication is that one prospective buyer had a building inspection done and it came up with a long list of faults. This prospective buyer lives in the area and is, she says, telling everyone there are huge problems with the house.

Ves · 2 March 2013

Julia said:
This prospective buyer lives in the area and is, she says, telling everyone there are huge problems with the house.

Sounds like a severe case of sour grapes. Who does that, seriously?

young-gun · 2 March 2013

Kingpin said:
Hi everyone I am very interested in buying real estate in the near future .

I am 19 years old with no debt or liabilities(besides a gym membership )
i currently have 3k saved and a small amount in stocks ( just bought DYL at 58 should of waited i know) I have been looking at land at various suburbs for around 20k-30k .
My question is at my age would you continue to save for an investment and incur passive income
or take out a personal loan for a block of land and wait for capital , i do realise i will have to pay rates and etc but atm i belive this will be good debt .

I appreciate everyones advice on the subject as i know alot of people on this forum have been around the block a few times
. my long term goal is to have a positive geared investment by 21
thank you all kingpin

Investment property is definitely the way to go IMO. I personally wouldn't buy one yet(too many headwinds), but it sounds as though you may be a few years off anyway. A block of land is a gamble, an IP is a guaranteed return (it's not going to be vacant for too long, maybe a few weeks a year but check with your local agents as to what the vacancy rates are like). Your goal should be to have a cashflow positive property from day one, not by the time you are twenty one. if you can't find one right away then don't buy until you do.

good on you for considering the IP also. Alot of people on here bang on about home ownership and just how wonderful it makes them feel, but it's utter crap. If you want to get ahead, make sacrifices now.

If you have to negative gear it it's not an investment none of the above is advice, just things to consider.

young-gun · 2 March 2013

Julia said:
Where is this? I haven't seen any decent land at such a price for many, many years. Average price for a house block in the regional coastal Qld centre where I live is around $200K. It will be a lot more in a capital city, I imagine.

If you were to buy that land, how and when would you anticipate it offering you some return? Land alone is going to require outgoings on rates, without bringing you any revenue.

You don't say anything about your earning capacity.

+1, land was an option when everything was going up over night, but now not only is it dam expensive but there is an abundance of it around brisbane in these community developments. Kind of contradicting myself though I guess, if there was such an abundance then prices should be coming down.

chops_a_must · 2 March 2013

RandR said:
You have not been kept up to date with the scheme chops .. you DONT have to use it at the end of the 4th year any more and if you do buy before the min time in the scheme has passed you can roll the money into a mortgage (this was not the case when it was first introduced)

Really?

I was told this recently.

So I can now have an account indefinitely if I wanted? And it doesn't automatically roll into super after 4 years?

RandR · 3 March 2013

chops_a_must said:
Really?

I was told this recently.

So I can now have an account indefinitely if I wanted? And it doesn't automatically roll into super after 4 years?

Correct. You can contribute into an account until the balance hits $90k. Or you turn 65? or simply buy a house.

You have been misinformed .. it definitly does not autoroll roll into super after 4 years.

Read here .. http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00250962.htm&page=1&H1

If you have to negative gear it it's not an investment none of the above is advice, just things to consider.

I have to disagree quite strongly with this young gun. As such a statement should surely be applied to all investment using leverage if you really believe in it. There is always the time and place to negative gear for people if it can be advantageous for their position. There is definitly a level of risk involved in negative gearing that the vast majority do not fully appreciate imo. But I believe there is also a real level of risk in a positively geared propery as well.

A complication is that one prospective buyer had a building inspection done and it came up with a long list of faults. This prospective buyer lives in the area and is, she says, telling everyone there are huge problems with the house.

Just about every proper building inspection will read like the house is about to fall over. Hardly surprising. Id be much more concerned personally if I had a report come back with not too many faults found.

chops_a_must · 3 March 2013

RandR said:
Correct. You can contribute into an account until the balance hits $90k. Or you turn 65? or simply buy a house.

You have been misinformed .. it definitly does not autoroll roll into super after 4 years.

Read here .. http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00250962.htm&page=1&H1

Awesome. That changes things.

For more info: http://www.ato.gov.au/individuals/content.aspx?doc=/content/00155256.htm

Thanks for that by the way.

The future of Australian property prices

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tinhat

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RandR

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Ves

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young-gun

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chops_a_must

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