I found a cheap deal in a north suburb of Melbourne which is 10% below the market price.
Want to renovate & live for a while & sell it after 1 year.(Cut for capital gain tax)
However,the whole realestate market in Melbourne is flat. And may fall in the near future.
1.What the investing stratage in Melbourne gloom market now?
2.Buy this deal or not?[cigar]I would buy it if:
1. You think it is in a suburb that is insulated against downturns i.e. close to major infrastructure, within 10kms of city, large block of land etc.
2. You believe you can add value to the property through renovation, sub-division etc.Life is like a box of chocolates – you never know what you’re going to get!
While the general Melbourne market is flat there are some suburbs that are performing strongly.
I have the latest REIV figures in front of me- some suburbs have grown over 20% in the last 12 months.
So choose the right property in the correct area and buy below market price.
It would be great if you add value through renovation but why would you sell it if you went to all the hard work of finding the right property and doing it up. If it is the right property it will keep going up in value.
Why should someone else get the benefit.
You could always refinance it. That’s one of the great things about property – you don’t have to sell it to take your profits out.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.propertyupdate.com.auMichaelYardney i like your general premise that some suburbs are doing well in a down market. my question would be whats the best way to determine which suburbs will do well from now, should we assume that the ones that are up 20% will continue at a similr rate?
how else would one chose the right area in a choppy market? i’ve heard talk of sticking with ‘quality’ through tough times, but i’m yet to hear a definitive definition of what quality is and i’d love to see some data to back up the theory.
Craig Sillitoe
Hi Craig,
I would class quality suburbs as those that people aspire to live in. Just ask yourself a quick question, are there people outside the suburb that would like to live there? What is the reason? If the only answer you can come up with is “Because its cheap” I would class it as a low quality suburb.
In a buyers market there is little reason for people to look at these areas because there a affordable properties in areas they would rather live.
The more reasons there are for people to want to live in an area and/or the more compelling the reason(s) the higher the quality.
My parents got caught by this in a new estate in Werribee in the early 90’s, they developed a dual occ and sold one immediately at a nice profit. However, before they could sell the second property prices crashed and they had to hold it for about 5 years before they were in a position to get there money back. In this time, if they had held a second property in Hampton, where they live, they would have made a very large profit.
Just my thoughts.
Regards
AlistairThanks for everybody’s words.Thanks very much.
Seems i need to get a REIV report.
Moreover, this property is in RESERVOIR. Seems not a perfect place as APerry said.
Thanks Alistair, I’m sure you’re right but I wouldn’t call it a definitive answer. Sorry but I’m the type who just needs to see the figures, I find that way many assumtions are true but surprizingly useful ones are false.
Craig Sillitoe
Originally posted by toe:MichaelYardney i like your general premise that some suburbs are doing well in a down market. my question would be whats the best way to determine which suburbs will do well from now, should we assume that the ones that are up 20% will continue at a similr rate?
how else would one chose the right area in a choppy market? i’ve heard talk of sticking with ‘quality’ through tough times, but i’m yet to hear a definitive definition of what quality is and i’d love to see some data to back up the theory.
Craig Sillitoe
I am sure you know how statistics lie.
They say that a certain suburb’s median price has gone up 20%, but that doesn’t mean all proeprties in that suburb have gone up 20%.’
So you need to choose the right property in that suburb.
Some suburbs will always outperform the average, and some streets will always be more popular than others and some properties in those streets will always attract more buyers – pushing up prices.
I believe it will be the more affluent suburbs that will outperform the general property market next year
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.propertyupdate.com.auRegarding the Melbourne market can anyone say if the Tarneit and Point Cook areas are overvalued with land lots priced around $180000 for a 740-800 sqm block, Would i be better looking to the northern or eastern sites.
I have been told that $243 per sqm in Tarneit and Point Cook is overpriced especialy with a house to build as well, any general thoughts about this area would be great as i have no hard experiance of the Melbourne market.Michael I’m afraid I don’t agree that statistics lie. They can either be massaged by statisticians, or the people interpreting them can missunderstand the bounds of their use.
On median prices I agree with you,and I would say that median prices are of less value because they dont decern between different land sizes, quality of housing etc. So if you have a situation where large block high quality housing was sold last quarter, and small block low quality housing was sold this quarter, then the figures will be unreliable.
Thats where I prefer the Residex model of pricing where you only compare a new sale to a previous sale of the same property. As long as you have an accurate information on any improvements theres little that can go wrong.
I’m not doubting that you will be right about which suburbs will outperform next, the fundamentals of the market are what drives it in the long term. But how can you believe that one area has always outperformed the others without refering to statistics?
Most importantly what can you determine if you know the statistics are accurate? For example I heard a radio story recently of an Australian who set up a statistical based horse betting business in Hong Kong and has made $250Million. He takes bets where the odds his stats gave a horse were way shorter than the bookies odds.
Remembering that the bookies set their odds based on the favour of the punters, the fact that he made so much money essentially shows the punters get it reliably wrong. I’m not saying this can be done in property, but I am saying that statistics dont lie.
Craig Sillitoe
Hi Craig,
If you want figures go the information victoria web site or shop in the city. They publish a book with median prices for the last 10 years, split up into houses, units/apartments, and vacant land. You will see that performances between different suburbs vary quite widely.
Regards
AlistairThanks Alistair
Craig Sillitoe
Originally posted by toe:Michael I’m afraid I don’t agree that statistics lie. They can either be massaged by statisticians, or the people interpreting them can missunderstand the bounds of their use.
……..
Craig Sillitoe
Craig
I agree with much of what you say. At Metropole we have a researcher looking at and interpreting data all day.
What made me say what I did was that as I was posting, I had the latest figures from the REIV in front of me. because I was doing some research for an article for A.P.I.magazine.
The figures showed some weird anomolies, for example:
Figures for Wonga Park an out eastern suburb showed a fall in median price of 48.6% for the year to September 2005. But there had been only 7 sales reported in the last quarter.
In the adjoining suburb of Warrandyte there was a reported increase in median price of 80.4% for the year to September 2005. Again there were only 7 sales reported in the last quarter.
I agree that Residex’s method of reporting price movments sounds more statistically accurate and we subcribe to their data as well as many other sources.
My surprise is that Residex is now in partnership with the REIV and “managing” their data research.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.propertyupdate.com.auMichael thanks for that, I think we may be heading down the same path after all.
Yes seven sales will make it a little hard difficult in terms of having ‘confidence’ in the figures. In fact there is a calculation that quants use called confidence interval. If I can find it I’ll post the link to a website that calculates it for you. It essentially lets you know how confident you can be in your figures if there are few observations.
Residex teaming with REIV is interesting, hmmm.
Craig Sillitoe
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