What does everyone think about the way the land value changes, in relation to housing in a new estate. It seems to me at the moment, that land value (not blocks, but with a house on it) falls a little as the estate ages, then, at some point in time (possibly when the previously outlying estate started to become more central, as in better supported by shops, schools etc), it starts to increase again. I've never liked the look of investing in one of these estates before, but the rental returns are good (at least in the ones I've looked at). I'm just wondering if the good returns are because investors generally feel that there will be very little capital growth as the building ages, and the whole estate loses it's shiny new appeal and goes through a bit of a daggy period before maturing and increasing in value again. The estates that I am looking at are very much entry level housing, largely populated by investment properties, 400 – 500sqm blocks with mostly 4 + 2 homes which all look the same. Driving down the street is a bit surreal as the whole thing is hundreds and hundreds of new homes, set exactly the same distance from the twirly whirly streets, with no front fences – you know the drill.
Seperately, I've noticed several DHA let properties advertised at a better rental return than other similar properties in the same area. Some of these are in these estates. I always steered clear of DHA because I thought it had lower returns, because of the much lower risk. These houses seemed priced similarly to others in the area, not paying a premium for the DHA lease or anything. Any comments? I'd avoid a 14 year DHA commitment, but I'm considering one with 3 years left, then and option for another 3. Defence commitments are growing in this town.
SH, houses in previous land releases have depreciated somewhat as compared the newer properties in new areas hence the price difference. The land itself is quite possibly more attractive hence worth more than in the newer estates (also better located and possibly larger). As services, amenities are developed around the older areas they may become more desireable to purchasers and the rate of depreciation has stabilised (it is very steep in the first few years). When compared to newer but aging housing in the next land release, these houses may have already slowed the rapid decline in depreciation.
I think the big thing that you look back and remember is that these have been extremely good times for investors. Absolutely everything has gone our way, only a few tiny pockets of properties have ever gone down. We have had cuts to capital gains tax that makes capital gains tax pretty much insigificant. We have tax deductable negetive gearing, making interest partially free. We now have interest rates lower than rental yields. And the most important thing is that we have had a housing shortage that has continually worsened. The housing shortage is going to get much worse, especially in growth areas like SE QLD. Everytime you think prices have jumped enough, they keep on jumping. I brought one house ins 2007 for $330k that I thought would not go up for many years after it jumped from $200k to $330k in about 4 years. Much worse ones in the neighbour hood are now going for $380k. Property is still going up nearly 20% per year on average and with the shortage worsening, not getting better, and interest rates dropping, we are set for property to boom even more. If interest rates stay low we are going to have booming prices as all the people paying high rent will be looking to buy. I don't know about you but so many properties are nearly positive geared! Rental yields are now higher than interest rates!
dacium wrote:Property is still going up nearly 20% per year on average and with the shortage worsening, not getting better, and interest rates dropping, we are set for property to boom even more. If interest rates stay low we are going to have booming prices as all the people paying high rent will be looking to buy. I don't know about you but so many properties are nearly positive geared! Rental yields are now higher than interest rates!Ever the optimist? Where are property prices increasing 20%pa? There would be very few areas where 20% has been sustained over the past few years, you'd be lucky to find areas which have not suffered some form of correction.
Thanks for your comments.
I'm feeling that staying away from the newest estates might be best for me at the moment. There is another estate, probably about 10 yrs old, much closer to shopping centres, schools, etc. The property is cheaper, but rental demand is greater. I think that's more my cup of tea.I agree, 20% cap gains haven't been happening for the last few years.
S
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