Buy in Sydney or Melbourne?

D

dotworx

I am moving from Sydney to Melbourne soon and am thinking to buy an property for investment with a budget for something around 500k to 550K.

The question is where?

I obviously prefer to buy one in Melbourne so I can live in it, but I don't really mind buying something in Sydney and rent it out. Because I feel Melbourne has had a bit too much growth in the last a couple of years and maybe it's Sydney's turn to catch up?

I'd really appreciate if someone can provide some thoughts here to help me make a decision.

I did buy a 2br apartment back in 2007 in Melbourne as an IP and I'd like to keep hold onto it. I never claimed FHO grant or any stamp duty exemption. I believe I should still be able to get FHO but no more exemption on duty?

Thank you all in advance!
 
Melbourne market is fully pumped (don't buy in at the current prices).

Sydney market is still recovering (some good opportunities for growth still).

Overall as a very general statement, buying in Sydney at the moment would be more favourable in general if you want to see capital growth as quickly as possible.
 
Australian property prices are fully pumped. Put your money elsewhere and you'd probably come back in 2 years time and pick this up at 85% of the cost now, except you just saved your holding costs such as interest payments.
 
Being in the market is better than timing the market as they say. I'm sure there are properties out there you can buy below market value and gain CG straight away or be cashflow positive so the holding cost would not be much if any. I'll bet Alan knows a few of these :D
 
Agree with Prop and Recruit.

Melbourne is fully priced. No doubt one can still buy selectively and manufacture growth, however ostensibly Melbourne is likely to go sideways for some time and yields on current purchase price for resi here are not great.

If you want to just buy and forget, then you will be dissapointed with passive IP performance here for the short to medium term.

Sydney still has legs I reckon. Also my observation is that Sydney has a tighter rental market for now so it is good to be a landlord there. Depending on how much one believes in the under-supply of housing myth, I reckon Sydney comes closer to it than any other major on the eastern seaboard. Some areas in Melbourne are softening by way of rentals and there is no drastic under-supply in many areas.

Don't rush, whatever you decide and, realise it is cheaper to rent in the suburb you wish to live in (when you relocate to Melbourne) than to purchase and pay non deductible interest on the PPOR mortgage.

In a general sense resi yields in Sydney are still better than Melbourne which may indicate better cap growth in the shorter term as yields soften (because the value of the IP has increased). That gives you greater opportunity to re-val and suck out some equity into an offset and have greater flexibility for another purchase should that be what you wish to do.

Good luck :)
 
Neither has legs. Offshore properties are a way better investment in next 3 years. Failing that, offshore equities. The best thing that can happen to Sydney and Melb properties is they don't crash. The next best thing would be a mild crash. Each to his own.

I can get 6% yield in China and after 30-40% price rises still maintain that yield (as income actualy rises to support higher rent...)
 
The most unpredictable factor is human nature.

Given the propensity to be lazy here and draw social benefits, people who don't buy now because they can't afford won't be able to afford 1 year later, 2 years later, 10 years later, 100 years later anyway.
 
general rule of thumb is mortgage repayments should not exceed 30% of your disposable income.

my dad worked in the bank for 25 years, and this is the message he told me as a general guide.

times may have changed though....
 
Its interesting that some investors are deciding to rent a house a invest their money in other forms of investments rather than purchase their own house, let also other investment properties.

There are always IP's with potential however in both Sydney and to a lesser degree melbourne but you really have to spend time looking.

better options offshore, European markets currently offering value i believe.
 
keneth said:
general rule of thumb is mortgage repayments should not exceed 30% of your disposable income.

my dad worked in the bank for 25 years, and this is the message he told me as a general guide.

times may have changed though....
Click to expand...

Surely this is a very vague rule... I would say it has changed.

20+ years ago when it was more than likely that the home purchaser was a single income family (spouse + 1 or more kids), yeah 30% of disposable was probably the limit.

Compare that to double income no kid type couples, or double income with 1 kid, and I would say that they could cope with spending more than 30% disposable income.
 
buzzlightyear said:
2/3rds of a Melbournian's take home pay is being spent on a mortgage?:eek: I see it but I don't believe it.....
Click to expand...
Don't believe it.

Its another one of those statistical lies. 2/3 of the median net income would be required to service the median house which is, of course, a complete load of codswollop as a lot of those houses are owned outright and it doesn't compare the incomes with the loans they are actually servicing.

Its just a nonsense media number.

To be honest, it would be possible to show in certain markets that it would take 150% of the median income to service a 100% loan on the median house. Big deal, it means nothing.

Cheers,
Michael
 
When the economy falters, even the best of the cashflow positive properties will crash like a dog. The US has cashflow properties too at 16% yield, but are still falling. Investors are just shell-shocked.

Just because you found a property with 7% positive gearing in Sydney / Melbourne doesn't mean it won't be hit when the predominant market is overpriced. And I hope these properties you're talking about actually have at least 7%, otherwise the shell-shock will be even bigger...

Basically, the trend is your friend. Why would you invest in an asset just because it is bucking the trend...
 
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