Tough choice, and no wonder you're in a bit of a pickle over this. Ordinarily, I would take location over everything else, at least to a certain extent. I also once read in an article about some 'expert' who stated that if you had to compromise because of budget, don't compromise on location. Compromise on land size.

If your family wanted to live in the place for a while, I'd also be guessing that Wantirna might be more comfortable than Bayswater, given the current existence of amenity and entertainment, and you could do up the house in the meantime. Plus, if the Wantirna house has been on the market for ages, the vendor may be ripe for negotiations so you can get a better price.

However, my suspicion is that the convenience and amenity has already been built into the price at Wantirna. Bayswater on the other hand, with a current stigma, has great potential for upside given the proposed redevelopment. People who are priced out of Wantirna and Heathmont (prices in these areas already are much increased) will probably head over to Bayswater (the ripple effect). In short, the only way for Bayswater to go is upwards, that's if current market conditions hold.

My uncle once made a joke about Dandenong when I once talked about buying there, and should have, only that I didn't have the money then. Of course, this joke is meant to taken as tongue in cheek, and not meant to offend those who live or have bought there: in a place dominated by robberies and witchcraft, things can only get better from here. And Bayswater could very well be the same.

Agreed with this. There is an impression by some that the property market simply has to crash because the growth in property prices has so far outstripped inflation and the growth in wages, and that property buyers are simply speculating and using property as a tool simply to save on tax.

Indeed as you say, a crash has to be due to more significant negative events or sentiment in the economy, and that's logical enough. Either that, or Australia as a whole has to become so unpopular and unlivable that everybody wants to leave, migration ceases, and somebody remarks, 'Last one to leave, please switch off the lights!'

Thanks AHP, it was a good one. There's another thread that I've been following and you might have seen this one as well:

https://www.propertyinvesting.com/forums/property-investing/general-property/4335661

It's an interesting read and there's good opinions for both sides of the story.

No, I'm not confirming a point you've already made, much as I agree with your assessment. I'm simply saying to please, for goodness sake, read what I'm saying and stop assuming that I'm implying what hasn't been implied.

Geez! What a mouthful that was. Nevertheless, I'm not going to waste my time to explain myself any further. I do not need to further justify what's been written.

Fantastic. So property venture is a business and it's perfectly ok for property to change hands at increasing prices (or decreasing prices if property becomes unfashionable)! I don't know what makes people think it is NOT ok for property prices to increase. In my line of work, we increase the fees of some of our services every couple of years and I'm sure many other companies do this. Has their level or service or what they offer actually increased when their fees are increased? Absolutely not.

This is going to waste our time by going back to square one. We've debated this for the last few pages, much to the amusement I suspect, of our onlookers. I don't understand this: what makes you think that property changes hands each time for increasing prices, yet remains unchanged itself throughout? Haven't we considered what houses are like today compared to what they were like 30 years ago?

Furthermore, we need to consider the upgrades to infrastructure that is occurring all the time. This would explain why areas that were previously considered 'holes' out in the middle of nowhere are suddenly more accessible, more livable, and, you guessed it: more expensive. Perhaps you could argue that the land itself didn't change. It didn't move an inch (save for what the Geologists would tell us), and it's still a piece of dirt. But did the utility of that piece of dirt increase? Yes. Did the residential density on that piece of dirt increase? Yes as well. Did the desirability of the piece of dirt increase? Of course!

An old guy I used to work with told me about how, in his younger days, a part of Burwood in Melbourne was a church in the middle of vast fields of vacant land. Now, what do we have? Just looking around that spot, I see K Mart plaza, a petrol station, a massive highway with tramlines and yes, houses. Lots of them. And the church is still there. How can we say property never really changed at all when it changed hands from one owner to another?

The way I see it is, this is the way things work. Whether I'm ok with that or not is immaterial. The world does not stop moving for even one second, or change its course whatsoever, not for one man, a few hundred, or even a few thousand, unless, touch wood, these people died in a calamity of some sort. Then they get a minute of silence. I either decide to fight the evil scheme by abandoning the thought of purchasing property forever, and hoping enough people do the same so that property prices fall, or I buckle down and learn to ride the monster on its own terms.

Now I had to chuckle when reading this one. That looks like a half-finished sentence. If I may continue from where you left off: '…and those who do not own property, or otherwise have a vested interest in the market crashing (so that they can finally get a foot in the market) say that we are in a bubble, and prices will crash 40% at the very least.'

See how that works? This is another occasion when I'd like to see a show of hands: How many people here who think (or know) property would crash 40% in say, the next 12 months but are still holding on to 'investment' property (ie. a house which they rent out, a house other than the one which they live in) and not planning to sell up soon? Also, how many people here who think (or know) that a property bubble does not currently exist and yet either own no 'investment' property (even though you can well afford to do so), or otherwise used to own them but have sold everything?

The results would be very revealing if we did a poll in this manner and got ONLY honest responses.

That's like me saying that I should have gone broke years ago if I had not continued to work, generating more savings for myself. I'm tired of reading about the belief that we are in a bubble. I want to see with some degree of certainty when it is going to occur. If not, I might as well preach, for example, that the end of the world is near. Repent now or burn forever in hell. Why is it that many people do not listen to this belief that the end of the world is coming soon? That's because nobody has been able to, with any degree of certainty, say when it is likely to occur.

It's like the boy that cried 'Wolf'. The more something is spoken about without evidence to substantiate the part, the more dilute its effect becomes.

Let's talk about 'median' prices. Let's say the 'median' price in Melbourne today is $601,500 (as of Dec 2010 from the REIV). And as you say, prices doubling in say, 10 years. That brings us a Melbourne median price of around $1.2 million in 2021. Because this is a 'median', there will be prices higher and lower than this. Nobody is forcing a buyer to look at a house that is priced at (or higher than) the Melbourne metro median. There will be plenty of houses under that price point which people can buy.

To assume that a person should be able to afford something at the median price for Melbourne metro (today, in 10 years time, or in a 100 years time) is folly. Many years ago, a friend in my line of work could afford a house in Hawthorn that then sold for $320K. Today that same house is worth $1.2 million. Is it then fair for me to say, 'Hey, I'm at the same age now as she was when she bought that place, and in the same job, so I should be able to buy a $1.2 million house also.' Truth of the matter is, there are plenty of $320K houses out there still, which is what I can afford to buy, and who knows, today's $320K house could be worth $1.2 million in 20 years time.

Besides, how can we even begin to predict how high wages will indeed be in 10 years time? We just don't know, do we?

I've been reading a very interesting book titled 'Unlocking the Riches of Oz – A case study of the social and economic costs of real estate bubbles (1972-2006)' by Bryan Kavanagh. This is what he says happens during a recession, and I'll quote him here for the sake of discussion:

"Swinging voters, that is, those people not permanently committed to either one of the two major parties, will usually throw the government of the day out at the next election, influenced mainly by their 'hip-pocket nerve'."

This happened in the 1974-75 recession with the dismissal of the Whitlam government, in the 1982-83 recession with the ousting of the Fraser government, the losing of an unloseable election by the Hewson-led party during the 1991-92 recession, and the loss of the Keating federal and Goss Queensland governments in 1996 when Queensland was in recession (info from the same book, the chart titled "The Barometer of the Economy").

Looking at history, can today's government afford to allow Australia to sink into recession? I don't blame them for treading exceptionally carefully in today's economic environment, because they KNOW they will lose their seats if we see a recession.

It'd be difficult to assess the situation from here since none of us get to see what your house really looks like and what sort of condition it's in. The cleanliness of a place or the neatness of the lawn is a subjective thing. For example, we could have a very lax landlord who believes 'reasonably clean' still means there is junk in the backyard and the grass is up to your shin, coming into contact then with potential tenants who absolutely want a place free of dust from the ground up, manicured lawns and nicely shaped hedges.

Personally, I believe that so long as your property manager has photographed the premises through and through and the tenants eventually return the place to you in a similar condition to what is depicted in the photos, then it's as good an outcome as you can hope for.

The statement about getting all this done for tax purposes needs to be considered more deeply. It is not necessarily wise to do something for the sake of getting a tax deduction because you're still spending money, even though the tax refund essentially makes the venture a little cheaper for you.

Prices in another area (in Melbourne's outer-east) that I've been following have also taken a hit in the last months of the last year (subjectively the price has fallen 5% or so), although it appears that demand is picking up again (although as you say, stats do lie). Hard to say where it's going to go from here, but it'd be very interesting to observe. Where do you think we're headed from here, at least in the local area that you're studying?

Geez, at that kind of rent for the 'slumsville' you describe, I'd be looking elsewhere.

Well, who's forcing you to buy there? Buy something that is within your means. Why do people worry about the house that they CANNOT afford rather than researching on the areas that they CAN buy into? This is the thing that baffles me to no end. For some reason, people know how to look at cars and go, 'Oh, that Aston Martin costs $300K, I really can't afford that. So I'll buy a second-hand Mazda for $12K.'

Why does this same line of thinking not sink in when we're talking about buying houses?

Haha, so is that their problem or yours? Why are you worried about THEIR problems? They chose to live far in excess of their means and so they are paying the price. That's just simple isn't it? Who forced them to buy a house that's going to cost them like $700-800K? There's cheaper houses all around. Why not look at Fawkner (median price $450K) or Meadow Heights (median price $350K)? I know, people are going to jeer, '#(&^!! I'm NEVER gonna live out there!'

Well, then choose: rent in an area you'd prefer, or buy into an area which you can afford. The choice is up to you.

No, I didn't say that property in these inner suburbs offers value for money. That's why I bought regional property. But to entertain your question, first of all, let's consider the term 'value for money'. What does this term really mean? It has different meanings to different people.

What does that term mean for you? Is it a big backyard? Proximity to a school? A train line? Shops? The beach or parks? Five bedrooms, three bathrooms and powder room, tennis court, lagoon-style pool and triple garage? All of the above? Hence, what is 'value for money' to someone is not necessarily so for you. And besides, because of price alone, not everyone can afford even a universally 'good value for money' house.

In seven years time, we'll hear a roar of laughter coming from somewhere. Someone is going to be very wrong.

Sorry, you've got me confused here. Which statement are we referring to that leads you to bring up this point?

Not entirely true. With depreciation benefits and the deductibility of losses from a property venture, it is possible to make a property neutrally or even positively geared. This is especially so for people in the highest tax bracket. It's a pity I just returned that library book, otherwise I'd be quoting that example here.

IMO, underlying profitability is not necessarily rent less expenses. In the line of property, we could look at underlying profitability being the eventual sale price plus rent, less all expenses. That is how you get your eventual loss or gain from the venture. There is no 'one-size-fits-all' equation that determines how we calculate profitability from every form of investment.

For example, some people buy shares in order to get dividends as a form of passive income. But consider also there are people who buy shares from companies that offer little to no dividends (and hence very little in the way of an immediate reward for the investor), but the purchaser is buying with capital growth in mind. On this note, there are some investors who much prefer to buy shares in a sound company that offers little to no dividend because this may indicate that the company would rather invest in itself and then grow exponentially, rather than feeding its investors little bite-sized rewards that in turn affect the company's profitability.

Well then, if we don't look at fundamentals, how do we know when it is the 'right' time to purchase? To a certain extent, a market rebounds after a crash because enough people have looked at the fundamentals and decide things are underpriced or the market is oversold. So the fundamentals can be a driving factor in determining market sentiment or public perception. Wasn't it the fundamentals (eg. wages, inflation rates, the economy, affordability index etc) that made you (and some others) believe that property is overpriced to the tune of 40%? Without the fundamentals, how can people quote the figure of '40%'?

To ignore the fundamentals completely is probably not a wise move. I appreciate that market sentiment and public perception has a big role to play in what the market does. However, how can you look at a crash that has occurred in a country with say, a massive oversupply of houses and predict a crash of similar magnitude in a country with an undersupply?

Just going back to Singapore's property market for a moment. I personally think that prices are awfully high, however the sheer density of living and the size of the population will continue to put upwards pressure on prices. I don't see a property crash occurring in Singapore because, high as the prices are, that's just the way it is. You either decide to buy or decide to rent. That's a personal choice.

The stuff I wrote in those paragraphs does not imply in any way that desirable houses cannot lose value. If you read carefully, my emphasis was on 'location' and 'area', not on prices. Well-located property will be in the highest demand relative to poorly-located property and this is irregardless of market conditions. Does a property crash make a good location less sought after? No, in fact, with a property crash, prices in these areas get even cheaper, and hence become MORE sought after. Would someone prefer to buy in an industrial dump compared to a leafy, beautiful suburb in a property downturn? Guess not.

As you mentioned, the most expensive houses fluctuate the most in value. There is the chance of a greater loss if you make an ill-informed purchase. But let's look at the flip side of it: a knowledgeable buyer also stands the chance of the greatest gain by buying this sort of property.

Everybody has a different 'risk profile'. Those who are willing to take bigger risks should rightly, be rewarded with the greatest reward if they buy right. What's a common regret that older people have? That's right. They wish they took more risks. Of course, they're referring to 'calculated risks'.

More importantly, and without sounding as if I'm repeating myself, circumstances like these only make things more DIFFICULT for people wanting to buy a house. So again, does a property crash really help to improve the prospects of home ownership? If not, then why are people spending so much energy stating that property is overpriced when a property market crash isn't going to help anyway?