Buy a new house as PPOR? Are prices inflated?

Viewing 7 posts - 1 through 7 (of 7 total)

TontoBonto
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@tontobonto
Join Date: 2012
Post Count: 1
March 25, 2012 - 2:48 am
Hi there,
My wife and I are looking to purchase our first house, which I would like to turn into our first IP in the future.
The house is brand new and is $485k which we will lay out a 10% with any remaining funds going into the offset account and we hope to have the loan as IO since we will only be in it for a couple of years, if that.
The house is located outside of the greater the lower hunter area, close to the hunter express way, but what I’m asking is, for 485k and a slow property market, will there be any capital growth do you think? Being a brand new house there is little value to add apart from a nice garden, maybe new paint to freshen things up..
Is buying at this price going to be of benefit to us do you think? Rental of around 460-470pw at this stage, will probably take 10 years or so for neutral gearing i would expect.
Jamie Moore
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@jamie-m
Join Date: 2010
Post Count: 5,069
March 25, 2012 - 3:48 am
Hi Tonto
Welcome to the forum.
As a general rule, new properties are sold at a premium and as you’ve alluded to, there’s often little scope to add value.
Will it experience capital growth? Some questions id be asking are what growth factors exist within the current area? Are there growing industries? Is the population increasing? What are comparable sales like? What has the past growth been like?
Cheers
Jamie
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greentitle
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@greentitle
Join Date: 2012
Post Count: 7
March 25, 2012 - 8:38 am
I believe there is money to be made if you are building however if you are buying off a developer then there will be little space to create equity as you and Jamie has suggested.
By living in the house upfront you will be losing out on a fair bit of depreciation in the early years of the property. Of course the tax advantages shouldnt be motivation to buy but it is something to consider.
mattsta
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@mattsta
Join Date: 2011
Post Count: 604
March 25, 2012 - 9:40 pm
hmmm. im looking to perhaps buy a new property to buy, Any tips for reducing any premiums and reducing the selling price?
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
March 25, 2012 - 10:16 pm
Get an independant valuation done
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Aaron_C
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@aaron_c
Join Date: 2012
Post Count: 65
March 27, 2012 - 12:12 am
As a general rule, new properties are not good ‘investments’ because you are paying retail price for a product. Do you see people who shop at Myer making money by on-selling the products they bought? Of course not. Developers make money by buying land cheap, building for cheaper than what you can build for, and charging you retail price for both land and building. Not that that’s a bad thing – but as long as you aware of it.
luke86
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@luke86
Join Date: 2010
Post Count: 470
March 27, 2012 - 12:57 am
Aaron_C wrote:
As a general rule, new properties are not good 'investments' because you are paying retail price for a product. Do you see people who shop at Myer making money by on-selling the products they bought? Of course not. Developers make money by buying land cheap, building for cheaper than what you can build for, and charging you retail price for both land and building. Not that that's a bad thing – but as long as you aware of it.
Well put Aaron- this is the reason why I will never buy a brand new house as an investment. Someone has already extracted as much profit as possible by buying the land, building the house and then selling it at a premium to you. I dont think there is much profit to be had after you by a new house or townhouse.
Cheers,
Luke