Australian Housing Affordability Discussion

[cove]

Try land tax. If you own multiple properties you get to pay land tax annually regardless of whether each place has tenants.

 

[ComeFlyWithMe]

Try land tax. If you own multiple properties you get to pay land tax annually regardless of whether each place has tenants.

Seems fair to me. Discourages holding swathes of unoccupied properties thus constraining supply.

 

[Denali]

Seems fair to me. Discourages holding swathes of unoccupied properties thus constraining supply.

What about those sitting on parcels of vacant land? Cant build on it, it has zero services but its "value" is multiplying because of the surrounding area/upcoming plans. But, right now/next 5 years and for the past 30 years, its bush land but we get a big tax bill.

 

[mushez]

What about those sitting on parcels of vacant land? Cant build on it, it has zero services but its "value" is multiplying because of the surrounding area/upcoming plans. But, right now/next 5 years and for the past 30 years, its bush land but we get a big tax bill.

Land tax comes down to what zoning it currently has. Once its zone is changed to residential, better quick smart get all the services sorted and sections saleable & sell - or sit back happy to pay the increased tax because you don't want to subdivide and sell. If you love the idea of owing land that has bush on it - knock yourself out, just cough up the tax.

 

[zainman]

Would you guys recommend buying in MEL at the moment? I feel like prices have peaked but I'm certainly no expert... Maybe wait longer? Feels like been waiting a long time.

 

[whatmeworry]

Would you guys recommend buying in MEL at the moment? I feel like prices have peaked but I'm certainly no expert... Maybe wait longer? Feels like been waiting a long time.

Depends. If you're going to be in MEL for at least 20-30 years and only certain areas and certain properties are worth it. Avoid apartments or anything with a strata.

If you did buy now, you have to be prepared for a possible correction of 10-20% and prices being flat for a decade or so.

 

[PDog]

Depends. If you're going to be in MEL for at least 20-30 years and only certain areas and certain properties are worth it. Avoid apartments or anything with a strata.

If you did buy now, you have to be prepared for a possible correction of 10-20% and prices being flat for a decade or so.

Hey wmw,
Just curious as to why you say this? (my bolding). Not challenging, just wondering.

 

[alieninperth]

I would agree with WMW said, and I've been wrestling with the same question over the last few weeks.

My rationale for the unit/apartment/strata support is that there certainly appears to be an oversupply issue. I would not be comfortable with that level of risk into the medium term.

 

[whatmeworry]

Hey wmw,
Just curious as to why you say this? (my bolding). Not challenging, just wondering.

For apartments definite risk of oversupply. Even units and Townhouses on a strata can pose difficulties. Firstly fees. Difficulties with Neighbours. Cousin lived in a townhouse complex and they couldn't agreed on getting foxtel connected to their site. Parking Issues. Needing permission for alterations or improvements to your property.

 

[PDog]

For apartments definite risk of oversupply. Even units and Townhouses on a strata can pose difficulties. Firstly fees. Difficulties with Neighbours. Cousin lived in a townhouse complex and they couldn't agreed on getting foxtel connected to their site. Parking Issues. Needing permission for alterations or improvements to your property.

Yup, agree with all those as generalisations. I thought you were referring to something in the current climate (which your first point does, but has been a risk forever, perhaps just greater now?). For all the other issues - which are real, don't get me wrong- I guess they're offset by the (generally) lower purchase price?

We had a quote for $35k to connect Foxtel to our apartment building (12 apartments) years ago, not owning a TV you bet I voted no!! We are in a non strata now for the first time after 15 years (not intentional, but because of where we now live) and although there are disadvantages to strata, it's not all bad. I would still consider an individual value assessment rather than a blanket no

 

[penegal]

Melbourne is a big place with lots of [sub] markets.

I wouldn't rule out apartments or strata titles entirely. The "hold cost" is often higher due to the strata/BC levies (which usually include building insurance), however in many cases you don't have a garden to care for (which can be equally, or more, expensive if you do a good job of it).

In Melbourne currently there are some markets where apartments are selling at "appropriate" rental yields and represent good value IMHO.

There are other areas 5 mins down the road which I wouldn't touch with a 10 ft pole. There are some localities and buildings which I think are fundamentally overpriced by easily up to 30%. Don't touch. Equally there are houses selling at ridiculous rates, which I don't think are sustainable. Families may get into them with big loans thanks to cheap debt, but in a low wage growth environment, an interest rate shock may cause them some serious mortgage stress.



For me personally, I have trimmed my exposure to Melbourne property, and turned some stock over at good rates, but I have not eliminated my exposure, nor do I intend to. I do need somewhere to live, and our market is subtly different to Sydney, where if I wanted to live within 5km of the city, I would struggle to justify a purchase given I could rent a very nice home on rental yield as low as 1%.

 

[penegal]

I would struggle to justify a purchase given I could rent a very nice home on rental yield as low as 1%.

I showed this post to a colleague who reckons you can rent on less than a 1% yield in Sydney. I am not sure I believe him without evidence, but you get my point.

You can buy on much more appropriate numbers in some parts of Melbourne still. If the market softens further, then more of the city may be more attractive.

 

[PDog]

Melbourne is a big place with lots of [sub] markets.

I wouldn't rule out apartments or strata titles entirely. The "hold cost" is often higher due to the strata/BC levies (which usually include building insurance), however in many cases you don't have a garden to care for (which can be equally, or more, expensive if you do a good job of it).

In Melbourne currently there are some markets where apartments are selling at "appropriate" rental yields and represent good value IMHO.

There are other areas 5 mins down the road which I wouldn't touch with a 10 ft pole. There are some localities and buildings which I think are fundamentally overpriced by easily up to 30%. Don't touch. Equally there are houses selling at ridiculous rates, which I don't think are sustainable. Families may get into them with big loans thanks to cheap debt, but in a low wage growth environment, an interest rate shock may cause them some serious mortgage stress.



For me personally, I have trimmed my exposure to Melbourne property, and turned some stock over at good rates, but I have not eliminated my exposure, nor do I intend to. I do need somewhere to live, and our market is subtly different to Sydney, where if I wanted to live within 5km of the city, I would struggle to justify a purchase given I could rent a very nice home on rental yield as low as 1%.

Agree with all this. 1% (or really, sub 4% just shows how hard it is for FHB.

Sounds similar to us, but our exposure is all Victoria (not just Melb) We sold our townhouse last year where our strata fees were less than our current building insurance (just building, not contents!)

 

[cove]

Our latest boarding house has commenced construction. Prices in Perth for laying 100,000 bricks are now down to 65 cents a brick. During the boom it went well over 100 cents a brick. 2017/18 prices mean we can get more building for less dollars for our social housing projects.
The places we are building are bed sits. We locked the bank part of the finance for 5 years at 5%. It is nice not to have the bank telling us about any increases in their funding costs each week.
I expect the construction prices will fall in many States once the boom turns into a big slow down.

 

[zainman]

Thanks for everyone's responses. Doesn't sound all that positive to be honest. But I do agree that there are sub-markets within Melbourne.

penegal, any recommended areas etc? or properties that you think represent "good value"?

What about regional victoria perhaps? (continue renting in MEL and invest say in ballarat)

 

[pauly7]

Thanks for everyone's responses. Doesn't sound all that positive to be honest. But I do agree that there are sub-markets within Melbourne.

penegal, any recommended areas etc? or properties that you think represent "good value"?

What about regional victoria perhaps? (continue renting in MEL and invest say in ballarat)

Agree with sub markets comment for Melbourne - I would be very very careful with apartments especially in built up areas like CBD, South Yarra etc. Good quality town houses a little safer but same comment applies - avoid the saturated areas.

Free standing houses are in significant shortage across the coveted inner 10k radius - however there are some suburbs within that ring that are still underdeveloped compared to suburbs the same distance away on the other side of town. For example you would be hard pushed to find value in the south east (South Yarra, Prahran, Windsor to). But same distance in the inner north, north west in areas like Brunswick West, Brunswick and Coburg you will find a significant discount in an area that is rapidly gentrifying.

Careful with the regional centres - they may be more accessible but growth drivers (jobs, population growth etc) can be tepid.

All in all Melbournes population is growing fast and will overtake Sydney I think in the early 2020's with better infrastructure and housing still comparably affordable (I choke as I say this but it's true!)

 

[PDog]

Thanks for everyone's responses. Doesn't sound all that positive to be honest. But I do agree that there are sub-markets within Melbourne.

penegal, any recommended areas etc? or properties that you think represent "good value"?

What about regional victoria perhaps? (continue renting in MEL and invest say in ballarat)

We have an investment property in Ballarat. Rents are good (8% when we purchased it, probably 5% now?) but growth is much lower. Have never had trouble finding a tenant.
We have moved to regional Vic (not Ballarat), and although property prices have not increased to / with Melb levels, the increase is dramatic, to the extent I would think twice about buying here now. We had to get revalued to remortgage, and the bank valuation increased by >40% in 3 years? Caveat, there were some cosmetic improvements

I get the feeling you're perhaps looking for housing info from an investment perspective given you're asking about rental properties, in which case there's so many other factors at play. PM me if I'm wrong and you're thinking about a regional move and I will bore you non stop about how fab it is!!

 

[cove]

I have never thought of housing as an investment. It is usually to live in and sure you may make a capital gain or loss when it is time to sell and move to something more suitable.
If it is your home think of it as a lifestyle and endeavour to pay off any debt as quickly as you possibly can. Once you own your place all you need to do is keep it insured and maintained.

 

[Hvr]

I have never thought of housing as an investment. It is usually to live in and sure you may make a capital gain or loss when it is time to sell and move to something more suitable.
If it is your home think of it as a lifestyle and endeavour to pay off any debt as quickly as you possibly can. Once you own your place all you need to do is keep it insured and maintained.

Quite possibly the most sensible post in this thread.

I purchased my current residence in the 90s. The place I sought was one I will live in until I either die or am committed. It is totally suitable for one person, not ostentatious and suits me.

Whilst the value is rising I can't realise the increased value unless I sell which I cannot see happening.

 

[whatmeworry]

I have never thought of housing as an investment. It is usually to live in and sure you may make a capital gain or loss when it is time to sell and move to something more suitable.
If it is your home think of it as a lifestyle and endeavour to pay off any debt as quickly as you possibly can. Once you own your place all you need to do is keep it insured and maintained.

Many people just want a place they can afford to live in, relatively near their work. Not 2 hours by any means.

Land banking has also become a problem. I personally know of a person who land banked near the MEL Western Ring Road before it was built. They joined a political party before that land banking and might have got a good tip... Has a nice picture of him and John Howard. Made at at least 100 million on an initial outlay of one million.