Melbourne market-your thoughts

Hello forum friends!!
I wanted to get some feedback from some of you clever folk, regarding the state of the Melbourne market.
I have 3 properties, 1 in a leafy north eastern suburb, (purchased 16yrs ago) , and 2 in another leafy eastern suburb. All a units, in nice neighbourhoods, close to all amenities and relatively low maintenance. Their capital growth in the last few years(as with most in melb) has been very very average. The last two properties were purchased 6 and 4 yrs respectively and have seen an average growth of about 5%. Very hard to get moving when the capital growth is so slow.
What do you guys reckon; anybody think that we may see great growth in the next 12 months, or shall I cut some losses and move on. Argh!!! So hard!!
Awaiting your words of wisdom and feel free to ask questions!!
Thanks,
Tgan
 
Hi Tgan

What did you buy the properties for, and what are they worth now?

Remember if you sell then you'll have to pay Capital Gains Tax (followed by stamp duty to re-sink the money back into another property).

What are your goals, and are these properties moving you closer to these goals?
 
What do you guys reckon; anybody think that we may see great growth in the next 12 months, or shall I cut some losses and move on. Argh!!! So hard!!
Awaiting your words of wisdom and feel free to ask questions!!
Thanks,
Tgan

My crystal ball says more of the same - but if your do the so called "cutting losses" what will you do as an alternative?

Also, what are the losses? (in $ terms per year)

The Y-man
 
Growth of 5% pa is hardly 'losses'....I think that Melbourne is all about timing. You bought 4 years ago - this coincided with the peak in 2009-10 so I am not surprised growth was slow since that time. If you bought 12-18 months ago you would be laughing at your equity position now.
 
It can be a little hard to gauge things two weeks before Christmas but generally speaking the Melbourne market has been performing quite well over the last few months from what I've seen on the ground.

I would expect things to continue ticking along nicely in the new year, all else being equal. Is there potential to manually increase the equity in those properties by adding value somehow whilst waiting for the market?

And if you were to sell, the obvious question is what would you do with the proceeds instead?
 
At 90% gearing, 5% growth translate to around 50% return, on top of rent.

If you are getting 50% on your capital in shares every year for 6 years, you'll be on track to be a sizeable hedge fund in Australia.
 
Hi Tgan

What did you buy the properties for, and what are they worth now?

Remember if you sell then you'll have to pay Capital Gains Tax (followed by stamp duty to re-sink the money back into another property).

What are your goals, and are these properties moving you closer to these goals?

Hi JacM,
The 1st property, purchased 16yrs ago, wasn't purchased with a purpose in mind. In the time of ownership, it has gone up from $155k to $600k. It was originally our home, then we upgraded and kept it as an investment. It has served us well in that, we have been able to access equity to buy the other properties. The next 2, (purchased 6 & 4yrs ago) were purchased with the simple idea that they would double in about 7yrs time, that I would sell one and pay for kids education! I have learnt a lot in the last few years, and in hindsight, probably would have invested differently. The were purchased for $400k ea and are valued at about $570k and $520k. Currently neg geared.
My goals?
Put my 3 kids through education (son is 2 yrs away from secondary school and daughter is 5yrs away).
Would love to have 100k income in about 5-7yrs...but realising that somehow I have painted my self in to a corner!!! :-(
Hence wondering if melb will take off again any time soon!!
Tgan
 
So you've made close to 300 k capital gain in around five years at a time when the market isn't hot ......

How much have you had to pay to hold them and how much tax have you got back ?

Cliff
 
Hmmm.... would it be fair to say the problem seems to be more to do with the negative cashflow (i.e. not being able to pay for the schooling)?

Perhaps you could do the sums on selling one and a re-buying in a different state (i.e. QLD), something that is around the $330k mark and CF neutral or slightly positive?
 
Hmmm.... would it be fair to say the problem seems to be more to do with the negative cashflow (i.e. not being able to pay for the schooling)?

Perhaps you could do the sums on selling one and a re-buying in a different state (i.e. QLD), something that is around the $330k mark and CF neutral or slightly positive?

Nail on the head. I imagine op is putting a fair chunk of his income into topping up said mortgages.

To op, as others have said, the numbers don't lie. Do your calculations and you'll know if it's time to cash out or hang in there.

Seems like your properties have capital growth but the yields haven't improved. I feel this is true for most inner city purchases.

I also want to make 100k per annum, but not sure how best to achieve it. If a property turns over 25k a year, then subtract costs I may have 17-20k clear, that means at least 5 properties fully paid off to reach that goal. Oh lordie help me please...
 
It will be interesting to see whether Melb actually pips Brissy this year for growth, past history went like this..... Syd booms, Melb booms then Brissy.

Most seem to be tipping Brissy.

I am not on the ground but very interested in the Melb market, I feel there are some very cheap pockets close to the city.

Any thoughts from those on the ground??

MTR:)
 
Purely based on typical yield, I just cannot see how Melbourne can outperform other cities like Sydney Perth and Brisbane? What incentives are there for home buyers IN GENERAL to buy when renting is so much cheaper? What I had observed in 2013 was that only eastern suburbs went crazy (largely due to Asian buyers' activities), while other suburbs' growth were more subdued.
 
Purely based on typical yield, I just cannot see how Melbourne can outperform other cities like Sydney Perth and Brisbane? What incentives are there for home buyers IN GENERAL to buy when renting is so much cheaper? What I had observed in 2013 was that only eastern suburbs went crazy (largely due to Asian buyers' activities), while other suburbs' growth were more subdued.


Most people don't buy a property because buying is cheaper than renting . They buy because they want to own it , not rent it.

Cliff
 
purely based on typical yield, i just cannot see how melbourne can outperform other cities like sydney perth and brisbane? What incentives are there for home buyers in general to buy when renting is so much cheaper? What i had observed in 2013 was that only eastern suburbs went crazy (largely due to asian buyers' activities), while other suburbs' growth were more subdued.

+1. ........
 
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Most people don't buy a property because buying is cheaper than renting . They buy because they want to own it , not rent it.

Cliff

But why should Melbourne's dynamic be any different to Sydney's? If Sydney had gone through a very flat period from 2003-2007 (and my understanding was Sydney's general yield was below 3% at its peak), why shouldn't Melbourne's property price be flat too for a few years with the current yield being sub-4%? In 2010 when Sydney's yield was above 5-6% (and above 8% in outer-western Sydney), that was a no brainer to buy in Sydney..
 
Melbourne is a bit sketchy. Some places have boomed, some have not. With suburbs I have been following some have had price movements since early last year and other only a few months ago.

What I've noticed is all decent stick has been sold so supply is very low. To me it seems like it will continue if the demand is the same as last year. Time will tell.
 
Market has been flat since 2010 in Melbourne except for suburbs with good schools. Melbourne is due for a rebound you can buy a house for about $380k in western suburbs that is cheap, when the median is closer to 550K.
 
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