All things been equal, will half of a duplex (one of the pair) have the same growth speed as what a house would if both were in the same street?
Or would the house go up in value faster as a few years go by due to having more land? I know the house will always be worth more but it’s the speed of the growth that I’m questioning.
Like for example if you compare a unit and a house in the same street the CG of the house will be greater over time as it has much more land value than a unit.. I’m trying to do the same comparison but rather than with a unit and a house, with a semi-duplex and a house.
The reason I’m asking is because I want to buy a brand new duplex (half of one) now for $900k in Sydney and in about 4 years I want to sell it and buy a house. At the moment a house in the same suburb is around $1.2m.. $300k difference.
I’m worried that as time goes by that the difference will be greater, or is this not the case?
For the sake of the calculation, if both the house and the half duplex were next to each other in the same street would there always be that same ‘$300k’ difference in price? Or would I find that 10 years later the house is now worth for example double what the duplex is worth?
-Frank
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This topic was modified 7 years, 8 months ago by
Frank.
Hi Frank,
I would tend to think that, all things being equal, the ratio between the two would remain similar. At the moment it is 3:4 based on the prices you quoted (900/1200). I expect that land size for the duplex half would likely be smaller than the house for $1.2m – perhaps in the same ratio (or similar).That would mean that, if the house were to become $1.8m in a few years, you might expect the duplex to grow also to 1.8 X 3 / 4 = $1.35m (so, now a $450k gap between them, rather than $300k).
But wait a minute – you said this:-
I want to buy a brand new duplex
… but are you then comparing a “brand new house” when you say it is $1.2m? Or are you comparing the new duplex with an older house?
See, unless you build it yourself, by buying a NEW duplex, its growth is likely to be stunted as you will be paying the profit for the developer for this shiny new duplex. Its value might well stagnate while other values grow around it…. for a year or three, and then start growing.
Steve would say “Buy problems and sell solutions!” – with the brand new duplex, you are buying someone else’s “solution” and you will be paying top price for it (unless you built it yourself). Whereas, if you looked for a “problem” house or duplex, you might be able to buy it for $800k or less, depending on what problem you are buying.
What do other (older) duplexes sell for in that area? What if you checked for “problems” you could solve? Like, can you do reno’s? If not, look for other problems – e.g. someone has been transferred and have already bought in their new area – now they MUST sell this one. If you can suit their conditions (e.g. a quick sale) then you can negotiate the price with them. Or, a deceased estate just wants to “winds things up quickly” – same deal from your end.
But what if you COULD do renos too? Or can find tradies to do them, and you just “project manage”?
Food for thought,
Benny
Thats Benny for your very informative post..
I’m just trying to work out of there is anything bad about buying a duplex over a house in the way of CG..
I might ask another question..
Lets say I buy a duplex for $800K in one suburb and a house out west in another suburb is also $800k right now.. In 8 years time, assuming the areas go up in value at the same rate, the prices of both the duplex and the house should remain the same right?
As you can see I’m not comparing houses to houses but a duplex to a house. Hence the reason for the question.
-Frank
Well Frank, now I see where you are going – but again, comparing an “out West” house with an “inner West” duplex introduces so many variables. Location being key. The suburb itself could well add value to one, and not to the other. A different Council for one might give one property another advantage too.
So many variables. But OK, since “I get you”, let’s put aside values, locations, and just compare a duplex with a house (of roughly similar values in roughly the same area).
My money would be on the house as being the winner in CG stakes. The main reason would be that whomever buys a house, buys the right to control the block of land it sits on, as well as the structure on the land.
If buying a duplex, then whatever you might want to do to the duplex and/or the land it sits on, there is another party who will have quite a “say” in what you want to do, thus lowering the amount of control you have. e.g. If you own a house, you can choose to knock it down, subdivide and rebuild, and add a granny flat or similar.
It is a LOT harder to “knock down” a duplex without profoundly upsetting your “neighbour”. ;)
So, you might own the land your duplex sits on, but you DON’T own the structure – you only own HALF of it. Hence the lower desirability of a duplex.
Add to that, your “neighbours” are way closer in a duplex than if you lived in an ordinary house. I hope you don’t get the kind that SHOUT !!! (Another mark against a duplex in my book).
I’m sure there would be other differences that might spring to mind too…. Let’s see what others think….
Benny
Generally speaking, properties usually grow in price in this order (from most to least):
House > duplex > townhouse > unit
Can’t see ratios between them changing much but I bet it fluctuates. If I were you I would probably guesstimate them to have the same growth speed with some margin of error to feel safer.
Hope this helps?
Cheers,
Ethan-
This reply was modified 7 years, 8 months ago by Ethan Timor.
Ethan Timor | Aligned Finance Pty Ltd
http://www.alignedfinance.com.au/
Email Me | Phone MeActive Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)
Its the same as what is the price of a bannana over a apple in 10 years?
It depends on a bunch on things…This question will only get you good guesses.Ethan Timor hits the nail on the head (mostly)
A house has more options for Financial growth and therefore usually (USUALLY) has more growth potential.
Also I think your stratergy could possibly be improved by this website, do more research on here, read, read and read more, it has so much really great information.
Jaxon | Jaxon Avery – Financial Adviser
http://www.jpafinancialservices.com.au
Email Me | Phone MeJPA Financial Services Pty Ltd
Hi Jaxon,
An interesting take on the question. There I was, about to say to myself “Jaxon just doesn’t understand…”…………. and then it hit me – you are right Jaxon – we really don’t know WHAT might happen in the next 10 years.
Thinking in terms of a Govt that wants to squeeze more people onto smaller blocks of land (maximise urban infill), perhaps laws might be passed that makes having a large block of land financially disadvantageous.
Just like what happened with cars in the 70’s when the first oil shock hit – no-one wanted big engines after that – everyone flocked to buying small engined vehicles as the huge running costs hit home.
In this case, any financial impediments (taxes) that might be imposed on those owning larger blocks of land could swing the average punter toward buying only homes with small blocks. Supply vs demand would then do the rest to push the “house on 600m2” way down in value compared to a “duplex with 300m2”.
Or, thinking again, maybe that could push people even more toward apartments (with really tiny land allowances). As Jaxon said “It depends on a bunch of things” – one of which could be that Govts might go overboard attempting to affect free markets by “steering them too much in one direction”. Any bets that Govts WON’T do this? And if they do, which direction would that be?
Well said, Jaxon, your response was a good catalyst for further thoughts,
Benny
aw thank you Benny,
Very nice of you, Glad to be any level of help.
Hope your Investments go your way mate.
Jaxon | Jaxon Avery – Financial Adviser
http://www.jpafinancialservices.com.au
Email Me | Phone MeJPA Financial Services Pty Ltd
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