Author Topic: Property in Australia  (Read 34196 times)

happy

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Re: Property in Australia
« Reply #100 on: May 25, 2016, 04:50:03 AM »
I<3 my 2009 Prius. 5.0l/100km
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Primm

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Re: Property in Australia
« Reply #101 on: May 25, 2016, 05:53:01 AM »
I<3 my 2009 Prius. 5.0l/100km

That's the same as I get in my Fiat 500! Only without the expensive batteries...

happy

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Re: Property in Australia
« Reply #102 on: May 25, 2016, 06:00:39 AM »
Yes a number of smaller cars will give around that e.g. Yaris. The batteries came with the car and didn't cost extra!
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Re: Property in Australia
« Reply #103 on: June 02, 2016, 04:43:04 PM »
We settled on a used 2012 VW Polo for $10 500. 5.5l/100km. We pick it up today. Bought cash of course... now we just have to sell the gas guzzler we are replacing. Anyone want a 2010 Toyota Rav-4?

alsoknownasDean

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Re: Property in Australia
« Reply #104 on: July 30, 2016, 10:52:54 PM »
I've been keeping an eye on buying a place (this time to live in, cbf with the investment property thing at this point in time). There's two bedroom units around in alright areas that are in a price range I consider comfortably affordable.

All good, except for the deposit. My original plan was to save up 10%, of which I'm currently about $10,000 short. Then again, part of me wonders whether I should buy sooner using what I have now (and pay a bit extra LMI) or just wait until I've got the extra.

Especially with the anticipated interest rate cuts likely to give the housing market yet another sugar hit.

green trees

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Re: Property in Australia
« Reply #105 on: July 31, 2016, 10:56:50 PM »
My car is a subaru, which i love, but its used for school runs, so its drinking a lot. I would like to replace it with a prius at around the 10K price range - they seem to have a reasonable amount of space in them for their fuel usage. it seems like all other fuel efficient cars are really small. I am happy to have a smaller car than we currently have and use a roof box for trips, but there needs to be enough room for the day to day stuff. I am trying to research whether the options MMM talks about for cheaper servicing and battery replacement is an option in Australia. Hubby has heard many nasty stories about what happens to them in crashes, which sound crazy to me, so I also need to do some research into that (always so much research to do, and so little time).
Hubby's station run car is going to die soon (needs major repairs that are not worth doing considering the servicing and fuel costs of it and how little it's worth now) so I am leaning towards a yaris or something. I know he would love a fiat 500 but i am yet to see how cheaply we can get an older one and what the servicing costs are

@happy - have u any feedback on the cheap serving and battery replacement options here?
@primm - do you have an feedback on fiat 500 servicing costs?

green trees

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Re: Property in Australia
« Reply #106 on: July 31, 2016, 11:09:18 PM »
or, the subaru could become my husbands car, so it only does really short trips, but we still have it for bigger trips where we have heaps of gear or want to borrow the parents' caravan, and i get something like a yaris for the school run...

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Re: Property in Australia
« Reply #107 on: August 01, 2016, 04:56:25 PM »
I ve seen the Honda Jazz here, which I believe is also one of the cheapest car to run that I have seen on the list on the US?
Redbook gives you an idea of consumption etc...

happy

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Re: Property in Australia
« Reply #108 on: August 03, 2016, 06:59:59 AM »
My car is a subaru, which i love, but its used for school runs, so its drinking a lot. I would like to replace it with a prius at around the 10K price range - they seem to have a reasonable amount of space in them for their fuel usage. it seems like all other fuel efficient cars are really small. I am happy to have a smaller car than we currently have and use a roof box for trips, but there needs to be enough room for the day to day stuff. I am trying to research whether the options MMM talks about for cheaper servicing and battery replacement is an option in Australia. Hubby has heard many nasty stories about what happens to them in crashes, which sound crazy to me, so I also need to do some research into that (always so much research to do, and so little time).
Hubby's station run car is going to die soon (needs major repairs that are not worth doing considering the servicing and fuel costs of it and how little it's worth now) so I am leaning towards a yaris or something. I know he would love a fiat 500 but i am yet to see how cheaply we can get an older one and what the servicing costs are

@happy - have u any feedback on the cheap serving and battery replacement options here?
@primm - do you have an feedback on fiat 500 servicing costs?

Re: Servicing a hybrid. I'm researching this currently since I'm not happy with my toyota dealership servicing. From my reading, many jobs on a hybrid are exactly the same as a petrol engine and can be done by any good mechanic. Anything to do the the electrical engine/traction battery (200V) needs some extra training/certification and apparently some specialised tools. So you need to find a mechanic who has hybrid skills. Haven't found anyone in my regional centre yet, but quite possibly more likely if you are in capital city. If you were doing home servicing you need to know enough to stay away from that 200V traction battery!  I have managed to fill up the oil my self without it being a shocking experience, so to speak, but not the vehicle to learn to DIY repairs.

Battery replacement is Toyota genuine parts only at this point. The replacement battery includes its housing or something like that, and its not cheap. Haven't got a price on one. Mine has done 140k km with no signs of battery fade at all. There is a big uptake of Priuii by taxi's now, which serves  to reinforce in my mind longevity/economy. I think the fear of replacing the battery is overstated in the general public...and that equates to cheaper prices secondhand - good if you want to buy a secondhand one.  The petrol engine doesn't run continuously, and I wonder if that actually means the engine lasts longer too...since for 100km of travel the engine won't be running all 100km. No data on that , just wondering.
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BattlaP

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Re: Property in Australia
« Reply #109 on: August 03, 2016, 02:57:23 PM »
haha we need a separate Vehicles in Australia thread. I guess everyone is finally exhausted over Australian property.

I was hideously disappointed that Labor's negative gearing restrictions won't get the chance to see the light of day. All discussion on the policy has disappeared from the media and the status quo has returned. Couple that with more dropping rates and it's now just farcical. The only chance I will have to ever own property in the Sydney basin now is inheritance.

marty998

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Re: Property in Australia
« Reply #110 on: August 03, 2016, 03:48:06 PM »
haha we need a separate Vehicles in Australia thread. I guess everyone is finally exhausted over Australian property.

I was hideously disappointed that Labor's negative gearing restrictions won't get the chance to see the light of day. All discussion on the policy has disappeared from the media and the status quo has returned. Couple that with more dropping rates and it's now just farcical. The only chance I will have to ever own property in the Sydney basin now is inheritance.

Dropping rates will actually mean there is less of a negative gear (all things being equal) so the tax office will benefit slightly.

All else is not equal though because as you rightly imply, people can take on bigger loans now!

Eucalyptus

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Re: Property in Australia
« Reply #111 on: August 04, 2016, 04:39:53 AM »
haha we need a separate Vehicles in Australia thread. I guess everyone is finally exhausted over Australian property.

I was hideously disappointed that Labor's negative gearing restrictions won't get the chance to see the light of day. All discussion on the policy has disappeared from the media and the status quo has returned. Couple that with more dropping rates and it's now just farcical. The only chance I will have to ever own property in the Sydney basin now is inheritance.

Yeah, I've decided to gear my focus of the next year or so into saving a deposit to get a PPOR in Inner Adelaide. Just something cheap, an old solid unit like what I'm renting right now. I don't need much else. Otherwise I reckon I'd never be able to FIRE or own a place within cooee of the CBD and work (I realise the concept of FIRE and work together in the same sentence is strange...)

happy

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Re: Property in Australia
« Reply #112 on: August 04, 2016, 05:33:13 AM »
haha we need a separate Vehicles in Australia thread. I guess everyone is finally exhausted over Australian property.

Yes to vehicles thread...Nope to the property question.

I was going to post a question but got distracted by the question for me re Priui. Then internet dropped out.

Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns. Issues seem to be poor capital gain, but I am interested in yield. Other issues in the rural setting might be vacancies,  and can you get a sharp property manager in the country ( since probably too far away to do it yourself).  Anyone got any experience they care to share?
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arebelspy

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Re: Property in Australia
« Reply #113 on: August 04, 2016, 05:50:00 AM »
Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns. Issues seem to be poor capital gain, but I am interested in yield. Other issues in the rural setting might be vacancies,  and can you get a sharp property manager in the country ( since probably too far away to do it yourself).  Anyone got any experience they care to share?

This article (posted just two months ago) is relevant:
http://www.adelaidenow.com.au/realestate/buying/property-investors-should-not-be-so-negative-but-look-to-positively-geared-property-instead/news-story/7e72df7dace59c820360f44828c02c98?nk=f42688e8fb61b3fa33ca0d48dad22389-1470311131
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Freshwater

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Re: Property in Australia
« Reply #114 on: August 04, 2016, 05:56:11 AM »

Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns.

I get regular emails from a buyers agent. In the past they seem to have found positively geared situations for their clients based on buying a house and large yard in say Western Sydney and then putting a granny flat up cheaply which almost doubles the rent. However, I've heard that there's now a glut of granny flats out west so vacancies would be a problem. I think recently they've been spruiking dual occupancy new builds in Queensland. I think there may be positively geared property in Queensland in general but you'd need help to find good stuff not being from there. Also, I'm thinking ahead to what will happen to returns once interest rates go back up to long term averages (7%?).

happy

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Re: Property in Australia
« Reply #115 on: August 04, 2016, 06:11:54 AM »
Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns. Issues seem to be poor capital gain, but I am interested in yield. Other issues in the rural setting might be vacancies,  and can you get a sharp property manager in the country ( since probably too far away to do it yourself).  Anyone got any experience they care to share?

This article (posted just two months ago) is relevant:
http://www.adelaidenow.com.au/realestate/buying/property-investors-should-not-be-so-negative-but-look-to-positively-geared-property-instead/news-story/7e72df7dace59c820360f44828c02c98?nk=f42688e8fb61b3fa33ca0d48dad22389-1470311131

Thanks Rebs, it aligns nicely with my philosophy.



Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns.

I get regular emails from a buyers agent. In the past they seem to have found positively geared situations for their clients based on buying a house and large yard in say Western Sydney and then putting a granny flat up cheaply which almost doubles the rent. However, I've heard that there's now a glut of granny flats out west so vacancies would be a problem. I think recently they've been spruiking dual occupancy new builds in Queensland. I think there may be positively geared property in Queensland in general but you'd need help to find good stuff not being from there. Also, I'm thinking ahead to what will happen to returns once interest rates go back up to long term averages (7%?).

Yes the granny flat concept is all there age in my area also - 2 yields from the one investment. But the cost to buy the property is still around $500k.  by buying somewhere where the property costs half of that or less, it seems to me, not only can you positively gear, but if interest rate rise you are not looking at a rise on 500k or more, and if the property market tanks, lets say by 50%, you are losing (if you sell) 50 or 100k, not half a million.

My FIRE numbers look a whole lot better if I can create an additional income stream of around 5-10k a year. I could work a little in an alternative low stress job (not that keen), or create that with one or two positively geared rentals.
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arebelspy

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Re: Property in Australia
« Reply #116 on: August 04, 2016, 06:22:12 AM »
My FIRE numbers look a whole lot better if I can create an additional income stream of around 5-10k a year. I could work a little in an alternative low stress job (not that keen), or create that with one or two positively geared rentals.

Can't you just take the money you'd invest in a property and put it to work in another investment that yields better?
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marty998

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Re: Property in Australia
« Reply #117 on: August 04, 2016, 06:23:03 AM »

Is anyone doing positively geared IPs? You can occasionally find them if you look very hard - in rural towns.

I get regular emails from a buyers agent. In the past they seem to have found positively geared situations for their clients based on buying a house and large yard in say Western Sydney and then putting a granny flat up cheaply which almost doubles the rent. However, I've heard that there's now a glut of granny flats out west so vacancies would be a problem. I think recently they've been spruiking dual occupancy new builds in Queensland. I think there may be positively geared property in Queensland in general but you'd need help to find good stuff not being from there. Also, I'm thinking ahead to what will happen to returns once interest rates go back up to long term averages (7%?).

Granny flat strategy is tried and tested, until you run out of tenants that want to live in one. But I think it's a really good idea for young singles who can't afford to move out of home but want a little independence.

Regarding rates, there's a school of thought taking root that interest rates will be lower for longer.

You can bet as soon as everyone assumes so we'll start getting rampant inflation and rates will start going up up up.

My properties will be pretty awfully negatively geared at 7%, much more so than they are now at 4% (about $50 a week per property after depreciation and tax). To get there though will take 12 interest rate rises and at least 3 years (given part of my loans are fixed).

On the flip side if inflation goes up then rents could probably be adjusted up too which will offset the pain.

marty998

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Re: Property in Australia
« Reply #118 on: August 04, 2016, 06:38:15 AM »
My FIRE numbers look a whole lot better if I can create an additional income stream of around 5-10k a year. I could work a little in an alternative low stress job (not that keen), or create that with one or two positively geared rentals.

Can't you just take the money you'd invest in a property and put it to work in another investment that yields better?

This is why people buy for capital gain instead of yield (in Sydney anyway).... example (using my actual numbers)

I purchased a 2 bed, 1 bath apartment at the end of July 2014. Standard 3 story walk up, nothing special at all about it.

Purchase price: $450,000
Stamp duty taxes, legal costs and fees: $18,055
Total purchase price: $468,055

Funded by loans: $468,000
Funded by cash: $55 (hehehe)

FY 2015 (July 2014 to June 2015)
Rent income FY15 (Sep14-Jun15):  $16,374
Interest expense: ($17,151)
Other expenses: ($6,288)
Cash loss: ($7,065)
Depn and Capital works deductions: ($5,521)
Net taxable loss ($12,586)
Tax benefit: $4,909
Net cash loss 2015: ($2,157)

FY 2016 (July 2015 to June 2016)
Rent income FY16 (Jul15-Jun16):  $20,559
Interest expense: ($22,272)
Other expenses: ($5,896)
Cash loss: ($7,609)
Depn and Capital works deductions: ($4,573)
Net taxable loss ($12,183)
Tax benefit: $4,751
Net cash loss 2016: ($2,858)

Total cash losses over the 2 years: ($5,015)


Valuation at 30 June 2016: $575,000

Profit:  (575-468-5) = $102,000

Return on equity: A Lot! ($55 remember :P)
« Last Edit: August 04, 2016, 06:40:35 AM by marty998 »

arebelspy

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Re: Property in Australia
« Reply #119 on: August 04, 2016, 07:43:46 AM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
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Freshwater

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Re: Property in Australia
« Reply #120 on: August 04, 2016, 04:30:48 PM »

Granny flat strategy is tried and tested, until you run out of tenants that want to live in one. But I think it's a really good idea for young singles who can't afford to move out of home but want a little independence.


My neighbour just built a two storey granny flat with 2 small bedrooms but a parking space and a nice square of lawn and has successfully rented it at $825 incl. utilities. It's hardly meeting the aim of the affordable housing planning act but he sure is getting a fabulous return on a ~$150k build. Next door another one is going up with a LUG and 2 bedrooms, no yard though. In my area the only affordable rentals are apartments so a stand alone building, normally pet friendly, is quite appealing to the general market not just the singles. 


potm

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Re: Property in Australia
« Reply #122 on: August 04, 2016, 08:14:46 PM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.

Meanwhile in Australia we have plenty of companies yeilding 6%+ including franking. The latest company I bought has a gross yeild of over 14% and growing! Nobody cares though, all too busy leveraging up into negatively geared property and maybe a little bit of bank shares for 'diversification'.

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Re: Property in Australia
« Reply #123 on: August 04, 2016, 09:04:42 PM »
My properties will be pretty awfully negatively geared at 7%, much more so than they are now at 4% (about $50 a week per property after depreciation and tax). To get there though will take 12 interest rate rises and at least 3 years (given part of my loans are fixed).
It usually takes a lot less time than that for the interest rate to go up that much, if you look at the figures.



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Re: Property in Australia
« Reply #124 on: August 04, 2016, 09:18:10 PM »
I have an NRAS property that was positive cashflow due to NRAS bonus. I was hoping that rents would increase to at least cover costs by the time the 10-year NRAS bonus runs out. However, they've just substantially dropped, so it looks like no.
It's also deep into capital loss territory at the moment. Should've done more research, the developers have driven that area far into oversupply.

happy

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Re: Property in Australia
« Reply #125 on: August 05, 2016, 06:16:05 AM »
My FIRE numbers look a whole lot better if I can create an additional income stream of around 5-10k a year. I could work a little in an alternative low stress job (not that keen), or create that with one or two positively geared rentals.

Can't you just take the money you'd invest in a property and put it to work in another investment that yields better?

Well my plan would be to finance on an interest only loan,  so to do an alternative investment, I'd need to margin loan on shares. Too scary for me. Plus I firmly believe its not the right time to buy majorly into stocks.  It might be an Aussie thing but am much happier taking finance on a positively geared property. There's a few places that will still positively gear, but as I say not so good on capital gain, and not liquid at all, it could take  a long time to sell if you ever wanted to.

It seems to me the negatively geared plan worked really well in the 70s, early 80s when inflation  and capital gain were  high- so were interest rates-  but all you had to to was buy and hold and your property would increase in value, and the loan would decrease in value - by about 10% PA when inflation was that high. Any loss you could claim as a tax deduction. I think Aussies got sold on this formula...it doesn't work near so well now. I want to retire soon, so neg gearing is not a good strategy for me , even if I believed in it.


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marty998

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Re: Property in Australia
« Reply #126 on: August 05, 2016, 06:21:55 AM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.

Err yes, looking for positive cash flow real estate is one thing. Finding one that you can actually be able to live off is the unicorn we search for here :)

I don't see what I've done as speculating or gambling... with such a high population growth and a market that places a very high premium on home ownership you can pretty much assume long term growth of 3-4% on average over a cycle.

I am fully aware I will likely have 3-4 years from now of flat price growth. The cost of holding for the next few years is less than $10k, which will more than be compensated for when the next upswing of the cycle comes around.

The cost of exiting, paying capital gains tax, and then paying 4% stamp duty re-entering the market is the bigger problem, which is why you only go into property for very short term reno and flip or very long term holds (10-20 years). Those that go in and out in 3-5 years are the ones who don't do very well at all.

All IMHO. Your experiences may be different.

Ozlady

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Re: Property in Australia
« Reply #127 on: August 11, 2016, 08:41:32 PM »
Hi

My exit plan atm is to pass(sell?) my properties to my kids...i bought years ago with that vague notion in mind that i am locking in prices for them....hence a long investing horizon in a quirky sort of way...

and yes, they are all positively geared...my worst one was neutrally geared at the start and then rents started to rise...(and yes positively geared at 100% loan)

I do not like negative gear ... it's like hoping for a bigger fool...

There is a disconnect between demand and supply (at least in Sydney atm)...but be patient...those off-the-plan will be in trouble soon ..

I see no value in the market and so spend my time throwing excess monies against my loans...which then leads to more positive gearing and then more tax !

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Re: Property in Australia
« Reply #128 on: August 21, 2016, 12:08:11 AM »

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Re: Property in Australia
« Reply #129 on: August 21, 2016, 05:38:29 PM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.

Err yes, looking for positive cash flow real estate is one thing. Finding one that you can actually be able to live off is the unicorn we search for here :)

I don't see what I've done as speculating or gambling... with such a high population growth and a market that places a very high premium on home ownership you can pretty much assume long term growth of 3-4% on average over a cycle.

I am fully aware I will likely have 3-4 years from now of flat price growth. The cost of holding for the next few years is less than $10k, which will more than be compensated for when the next upswing of the cycle comes around.

The cost of exiting, paying capital gains tax, and then paying 4% stamp duty re-entering the market is the bigger problem, which is why you only go into property for very short term reno and flip or very long term holds (10-20 years). Those that go in and out in 3-5 years are the ones who don't do very well at all.

All IMHO. Your experiences may be different.

I think from a US point of view, he wanted to explain that we don't know what a recession is and the damages that it does here in OZ. From what I see as a foreigner, I can see that we're not prepared at all for a crash. In fact, an entire generation has never witnessed economic downturn in Australia. If they had, they probably would invest more conservatively. We LOVE property here and it provides huge benefits one of them gearing... but if all goes bad - and it will - I can see no one (that I personally know) preparing for it.

marty998

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Re: Property in Australia
« Reply #130 on: August 22, 2016, 02:16:02 AM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.

Err yes, looking for positive cash flow real estate is one thing. Finding one that you can actually be able to live off is the unicorn we search for here :)

I don't see what I've done as speculating or gambling... with such a high population growth and a market that places a very high premium on home ownership you can pretty much assume long term growth of 3-4% on average over a cycle.

I am fully aware I will likely have 3-4 years from now of flat price growth. The cost of holding for the next few years is less than $10k, which will more than be compensated for when the next upswing of the cycle comes around.

The cost of exiting, paying capital gains tax, and then paying 4% stamp duty re-entering the market is the bigger problem, which is why you only go into property for very short term reno and flip or very long term holds (10-20 years). Those that go in and out in 3-5 years are the ones who don't do very well at all.

All IMHO. Your experiences may be different.

I think from a US point of view, he wanted to explain that we don't know what a recession is and the damages that it does here in OZ. From what I see as a foreigner, I can see that we're not prepared at all for a crash. In fact, an entire generation has never witnessed economic downturn in Australia. If they had, they probably would invest more conservatively. We LOVE property here and it provides huge benefits one of them gearing... but if all goes bad - and it will - I can see no one (that I personally know) preparing for it.


I have $260k cash in offset accounts right now and my overall gearing is around 55%.

So yeah, I'm trying to be as prepared as I could be in the event of catastrophe. But honestly I do not see it happening.

Consider that it is generally accepted (barring incorrect census data) that 1/3 of homes are owned outright, 1/3 carry a mortgage, and 1/3 are rented.

If a major recession were to hit, the no-mortgage homeowners will be ok, and of the ones paying a mortgage the average LVR is about 45-50% according to the big banks. This is because not everyone is at 80% (most people are several years into their loans) and there's quite a bit of equity built up with the rise in prices, and those prices are not going to drop like a stone overnight.

My units? One I live in, one is rented to someone who has indicated he will be there long term and works in a recession proof industry, and the 3rd is very much in a desirable location with a major hospital, schools and recreation facilities in walking distance. Perfect for Docs, nurses and teachers.

Hold for the very long term and ride it out. If I'm forced to sell tomorrow I'll be smart about it, list it for lower than comparables and get it done... no use hanging out for $5-$10k here or there which is small change in the grand scheme of things.

nnls

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Re: Property in Australia
« Reply #131 on: August 22, 2016, 02:19:43 AM »
Sure, people speculate in the States, too.  So you gambled, with leverage, and it went up.  It works out a lot of the time, until it doesn't.  What's your exit point?  Clearly 10% YOY forever is unsustainable, so at what point are you going to find the biggest sucker and bail?

My question you quoted though wasn't related to speculating though.  My question was related to a positive investment that will yield money for happy for ER.

Err yes, looking for positive cash flow real estate is one thing. Finding one that you can actually be able to live off is the unicorn we search for here :)

I don't see what I've done as speculating or gambling... with such a high population growth and a market that places a very high premium on home ownership you can pretty much assume long term growth of 3-4% on average over a cycle.

I am fully aware I will likely have 3-4 years from now of flat price growth. The cost of holding for the next few years is less than $10k, which will more than be compensated for when the next upswing of the cycle comes around.

The cost of exiting, paying capital gains tax, and then paying 4% stamp duty re-entering the market is the bigger problem, which is why you only go into property for very short term reno and flip or very long term holds (10-20 years). Those that go in and out in 3-5 years are the ones who don't do very well at all.

All IMHO. Your experiences may be different.

I think from a US point of view, he wanted to explain that we don't know what a recession is and the damages that it does here in OZ. From what I see as a foreigner, I can see that we're not prepared at all for a crash. In fact, an entire generation has never witnessed economic downturn in Australia. If they had, they probably would invest more conservatively. We LOVE property here and it provides huge benefits one of them gearing... but if all goes bad - and it will - I can see no one (that I personally know) preparing for it.


I have $260k cash in offset accounts right now and my overall gearing is around 55%.

So yeah, I'm trying to be as prepared as I could be in the event of catastrophe. But honestly I do not see it happening.

Consider that it is generally accepted (barring incorrect census data) that 1/3 of homes are owned outright, 1/3 carry a mortgage, and 1/3 are rented.

If a major recession were to hit, the no-mortgage homeowners will be ok, and of the ones paying a mortgage the average LVR is about 45-50% according to the big banks. This is because not everyone is at 80% (most people are several years into their loans) and there's quite a bit of equity built up with the rise in prices, and those prices are not going to drop like a stone overnight.

My units? One I live in, one is rented to someone who has indicated he will be there long term and works in a recession proof industry, and the 3rd is very much in a desirable location with a major hospital, schools and recreation facilities in walking distance. Perfect for Docs, nurses and teachers.

Hold for the very long term and ride it out. If I'm forced to sell tomorrow I'll be smart about it, list it for lower than comparables and get it done... no use hanging out for $5-$10k here or there which is small change in the grand scheme of things.

Sounds like you are pretty well prepared. But hopefully it doesnt come to that :)

marty998

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Re: Property in Australia
« Reply #132 on: August 22, 2016, 02:29:55 AM »
I could have been much more aggressive with LVRs and acquiring more properties... I just judged that there was not enough value to be had for risk involved, and not enough in reserve if I lost my job etc.

At the moment I was be stretched if I did lose my income, but if you don't take a risk or a chance you will never get ahead.

I feel I've struck a middle ground and a balance. The results could have been a lot better if I was more aggressive, but I'm happy to do without the "seat of your pants" risk involved in that.

arebelspy

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Re: Property in Australia
« Reply #133 on: August 22, 2016, 03:02:12 AM »
So yeah, I'm trying to be as prepared as I could be in the event of catastrophe. But honestly I do not see it happening.

Consider that it is generally accepted (barring incorrect census data) that 1/3 of homes are owned outright, 1/3 carry a mortgage, and 1/3 are rented.

If a major recession were to hit, the no-mortgage homeowners will be ok, and of the ones paying a mortgage the average LVR is about 45-50% according to the big banks. This is because not everyone is at 80% (most people are several years into their loans) and there's quite a bit of equity built up with the rise in prices

The US data when our bubble burst wasn't that different.  1/3 renting, same as you (about 66% home ownership), of the owners, around 1/3 had no mortgage, and the average equity was about 20%

So worse than yours, yes, but not drastically so, and there were people making the same arguments you're making.

Quote
and those prices are not going to drop like a stone overnight.

That's exactly what happened here though.  They dropped fast enough that one couldn't sell--there were suddenly no buyers.  Homes sat on the market, and kept dropping prices.  So sure, it may not have been overnight, it may have been 6 mo - 1 yr before they sold at a much lower price, but since they couldn't sell in the meantime, it effectively was overnight, going from "high valuation" to much lower at the time it could be sold.

The same thing won't happen, but it's still good to be prepared for different eventualities, and recognize it is speculating.

Speculating is not inherently bad, but you can't do it forever without getting burned.  Taking a short term gamble on appreciation and then cashing out can be a smart play.  Counting on it to keep going up, forever...maybe not as much.
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marty998

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Re: Property in Australia
« Reply #134 on: August 22, 2016, 03:36:05 AM »
Get what you're saying but surely not every market in the US was burned in exactly the same way in 2007?

Markets within markets, suburbs within cities etc.

We've seen little mining towns here drop like a stone overnight when the tide turns, so it does happen. But across the board? Never say never, but it's not so likely that you should sit on the sideline and refuse to play the game.

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Re: Property in Australia
« Reply #135 on: August 22, 2016, 03:52:38 AM »
Get what you're saying but surely not every market in the US was burned in exactly the same way in 2007?

Markets within markets, suburbs within cities etc.

Pretty much the whole country, yeah.

Our Federal Chairman at the time (Ben Bernanke) said the same thing as you, almost word for word.

"It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis."
https://mises.org/library/ben-bernanke-was-incredibly-uncannily-wrong

But yes, it turned out to be country-wide.  Of course, some places were hit harder than others (ones that rose the most generally had the most to fall), but the whole country was hit.

You really should read about the US mortgage crisis.  At the very least, if it doesn't turn out applicable, it's interesting.  :)

Quote
We've seen little mining towns here drop like a stone overnight when the tide turns, so it does happen. But across the board?

Sure, and we'd seen certain areas have their own cycles.  That's typically how it is.  For you guys, maybe mining towns, for us a similar example would be towns in Texas very dependent on oil in the '80s.

But this was unique, and across the board.

Quote
Never say never, but it's not so likely that you should sit on the sideline and refuse to play the game.

Sure, but at what point do you pull back? 

I'd rather take more risk up front and then scale it back rather than take a medium amount of risk all throughout.  I.e. going all in in 2012-2013, then scaling back by 2015-2016, rather than doing a moderate amount in 2012, 13, 14, 15, 16, and still being there.  If you're going to speculate, IMO, recognize it and then do it quick.  YMMV.  :)
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Re: Property in Australia
« Reply #136 on: August 22, 2016, 04:03:06 AM »
One huge difference here is that people actually owe the money to the banks. They cannot just send their keys in, because they still owe the mortgage money. And bankruptcy is more draconian here than in the US. This means that a drop shouldn't be quite as significant. I remember times when a lot of people had tosell their houses (when mortgages went to 18% and people just couldn't keep up), but there wasn't a drop because of those two things.



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Re: Property in Australia
« Reply #137 on: August 22, 2016, 04:39:29 AM »
Good point deborah. There are consequences here... you can't just walk away and say it's the bank's problem.

arebelspy

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Re: Property in Australia
« Reply #138 on: August 22, 2016, 04:43:00 AM »
Good point deborah. There are consequences here... you can't just walk away and say it's the bank's problem.

This is true in many states as well, it's a state-by-state thing if you're still responsible or not (recourse or non-recourse).

But that does make it seem less likely people will default...but more likely they'll be stuck in situations they can't get out of.
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Freshwater

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Re: Property in Australia
« Reply #139 on: August 22, 2016, 05:26:50 AM »
My understanding of the property market in the US and Ireland was one of oversupply, which led to a collapse in prices. I think in Australia, well Sydney at least, undersupply is still a massive problem. This is why when all the indicators say we should have a correction, it doesn't happen. If there's a big recession and 10% are unemployed, 90% still have jobs and would eagerly await a few mortgagee auctions to pick up a bargain because they haven't been able to compete to get a residence, let alone investment properties.

There's supposed to be a glut in units soon so maybe prices and rents might plateau for a bit but as soon as the population increases enough we'll be off again, that's my prediction! I'm interested to see what happens this spring because I heard last weekend the auctions were a bit crazy after the interest rate was cut.

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Re: Property in Australia
« Reply #140 on: August 22, 2016, 06:17:24 AM »
Australia is no different to any other country. Every crisis had their own reasons (US, Spain, Greece, Portugal, ...) but there was a crisis.
My unit has put on 45% on in two years. In Brissie, IP went up by 11%. This is just not sustainable.

I like Marty's approach which is the "taking the risk" by being in the market but being sure you're safe by staying not too much geared.
I believe Marty also points out to the fact that in the future australia's capital cities will do better than regional. I agree again. Safer bet.

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Re: Property in Australia
« Reply #141 on: August 22, 2016, 07:14:11 PM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?

Been in our current PPOR since 2008 and haven't adjusted it's value in my spreadsheet since its initial purchase.  I know it will have gone up since then, but without getting it valued I don't know by how much.  And for some reason just this week I became curious as to how much its actually worth (without selling it).

nnls

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Re: Property in Australia
« Reply #142 on: August 22, 2016, 07:26:00 PM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?

Been in our current PPOR since 2008 and haven't adjusted it's value in my spreadsheet since its initial purchase.  I know it will have gone up since then, but without getting it valued I don't know by how much.  And for some reason just this week I became curious as to how much its actually worth (without selling it).

I just get a rough estimate based on other sales in my area.

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Re: Property in Australia
« Reply #143 on: August 22, 2016, 07:32:27 PM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?

Been in our current PPOR since 2008 and haven't adjusted it's value in my spreadsheet since its initial purchase.  I know it will have gone up since then, but without getting it valued I don't know by how much.  And for some reason just this week I became curious as to how much its actually worth (without selling it).
Any real estate agent is very interested in doing this for free (if it was written it would be charged) - I'm surprised that one hasn't knocked on your door!



GT

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Re: Property in Australia
« Reply #144 on: August 22, 2016, 09:25:12 PM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?

Been in our current PPOR since 2008 and haven't adjusted it's value in my spreadsheet since its initial purchase.  I know it will have gone up since then, but without getting it valued I don't know by how much.  And for some reason just this week I became curious as to how much its actually worth (without selling it).
Any real estate agent is very interested in doing this for free (if it was written it would be charged) - I'm surprised that one hasn't knocked on your door!
Don't get me wrong, the local real estate agents are quite happy to provide me with one, but the associated crap that goes with it isn't worth it IME, especially as we're not looking to sell.

Scoped out http://www.domain.com.au/property-profile and https://www.realestate.com.au/property yesterday with over $100K variance between them.  Will just take the lower value and work from there.

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Re: Property in Australia
« Reply #145 on: August 23, 2016, 01:23:37 AM »
with over $100K variance between them.  Will just take the lower value and work from there.

Difference in asking price or sold price?

marty998

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Re: Property in Australia
« Reply #146 on: August 23, 2016, 01:53:21 AM »
Everything will have a range... depends on how unique your property is.

Mine is an apartment... so I can always go off comparable sales +/- $20,000 or so.

Houses are a little more tricky.

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Re: Property in Australia
« Reply #147 on: August 23, 2016, 02:47:45 AM »
with over $100K variance between them.  Will just take the lower value and work from there.
Difference in asking price or sold price?
Not sure, I don't want to assume, but it's likely that they're taking their prices from sold values for the area.

Did a quick number crunch of house purchase price and the average house increase from the ABS data here http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6416.0Main+Features1Mar%202016?OpenDocument and on the Past & Future Releases tab and it worked out to be <$40K difference between it and the lower value provided by the other wesbsites.  Value calculated by number crunching was lower, so gives me something closer to a possible reality based on actual data.
« Last Edit: August 23, 2016, 02:49:20 AM by GT »

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Re: Property in Australia
« Reply #148 on: August 23, 2016, 09:35:11 PM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?
I use http://www.onthehouse.com.au/, which seems to correlate reasonably with what I see happening in our local market.

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Re: Property in Australia
« Reply #149 on: August 24, 2016, 04:03:29 AM »
Just wondering whether anyone is keeping track of the growth in their PPOR and what are they using to do it?  Are you getting it valued by a valuer or are you using an online freebie service?
I use http://www.onthehouse.com.au/, which seems to correlate reasonably with what I see happening in our local market.

Generally I just keep in touch with what our local market is doing and note the price of comparables.  I just used onthehouse and it seemed about right, although the comparables it used were way off - i.e. weren't the most recent sales of very comparable property..
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