Canberra and Mr Fluffy

[danwatto]

What do you locals in ACT think - Will the market change after the government buys and demolishes all the Mr Fluffy properties due to supply reduction?

That was my PMs only hope for a rental increase next year.. Is there really enough to make any difference though?

Also what's going to happen to the land where they demolish? Are they selling off the blocks of land?

I think I'm still going to hold on regardless but curious all the same, the rent covers everything and would cost too much to sell.

 

[Canberran]

Mr Fluffy houses will be demolished and most of the owners are buying new houses. So won't effect rental market a lot.

Competition for the houses in the range of 600k-700k is fierce but may be short term. Mr Fluffy house owners are desperate to buy a replacement after they opt in the scheme.

The Canberra market will underperform for an extended time. Cash flow neutual is not the reason to have the equity stuck in the investment which has limited potential. imho Sydney market even after a big jump still offer better values than Canberra.

 

[redwing]

Had to google to see what you were talking about

Families trapped in the Mr Fluffy asbestos nightmare

THE call came through on Lisa *Ziolkowski?s mobile as she was rushing around the shops with two young children in tow gathering party supplies for her son?s third birthday.

?I got off the phone.?? she says. ?I could feel my body physically falling apart, my mind just falling to pieces. I had a full-on emotional meltdown in the middle of the food court.?

The caller was an asbestos assessor. The news was stomach-churning. The 1972 three-bedroom house in the north Canberra suburb of Latham that Ziolkowski and her husband And*rew had called home for the past three years was riddled with the sil*ent killer.

It was the home in which they had reared Jonny, 3, and eight-month-old Natalie.

The assessor ran through the contamination. ?Every cupboard, every bedroom, the linen closet, the skirting board around the lounge room floor and, of course, the worst was the fact it was in the actual vents of the ducted heating,? Lisa Ziolkowski says.

The family moved out that day, July 21 this year, never to live in their home again. As they fled, they left their possessions behind, frozen in time like a ?miniature Chernobyl?.

 

[Jamie M]

I think it will have short/medium term effect in the established areas of Canberra.

I'm seeing it already - owners who's home were effected coming to seek advice on bidding at auctions, borrowing capacity, etc. The general consensus is that they want to remain within their current location and this will put pressure on that $600k+ bracket in established suburbs where there's already bugger all stock.

Cheers

Jamie

 

[danwatto]

The Canberra market will underperform for an extended time. Cash flow neutual is not the reason to have the equity stuck in the investment which has limited potential. imho Sydney market even after a big jump still offer better values than Canberra.

My situation is a bit different than that, such that I gain nothing from selling because:
a) My last refinance for equity (before the ACT downturn) had a higher valuation than I would get by selling, so my LVR is already probably 90%
b) I've had it for 13 years, so the value is about 70% growth 30% purchase price. The CGT would be massive plus agent fees would take away all the 10% equity I would get from selling
c) Cashflow positive now

After the sale I won't be in any better position than before, after costs it would leave me with no extra cash, therefore I'll just hold it as a flat growth property for now, with a potential turnaround medium to long turn.

Canberra is often counter-cyclical, if the economy does have a downturn 2015/2016 the government stimulus programs can cause an influx of residents moving back to the ACT once again.

We also have to wait and see when the construction slows down now the market has been slow. Supply will decrease soon.

Mr Fluffy houses will be demolished and most of the owners are buying new houses. So won't effect rental market a lot.

Do no landlords own Mr Fluffy homes? Or is the O/O percentage so high that it won't reduce the stock of rentals very much?

 

[Redom]

What do you locals in ACT think - Will the market change after the government buys and demolishes all the Mr Fluffy properties due to supply reduction?

That was my PMs only hope for a rental increase next year.. Is there really enough to make any difference though?

Also what's going to happen to the land where they demolish? Are they selling off the blocks of land?

I think I'm still going to hold on regardless but curious all the same, the rent covers everything and would cost too much to sell.

Agree with general consensus - short term effect will add demand pressure to 600-700k+ market. May have some impact on the rental market for houses.

Overall though, oversupply will weigh on house price growth in Canberra for a while yet.

What type of housing do you own in Canberra and where?

Cheers,
Redom

 

[Redom]

Canberra is often counter-cyclical, if the economy does have a downturn 2015/2016 the government stimulus programs can cause an influx of residents moving back to the ACT once again.

We also have to wait and see when the construction slows down now the market has been slow. Supply will decrease soon.

Great point danwatto. I think in terms of 'macro effects', it ties in with fiscal policy i think. When the federal coffers has more money than it knows what to do with, Canberra's employment spikes and rental market tightens.

When there's deficits till the eyes can see, public servants are often first on the list for potential 'efficiencies' in spending.

Obviously this is just one influence to price growth though - plenty of other factors pulling in different directions.

Cheers,
Redom

 

[danwatto]

What type of housing do you own in Canberra and where?

Cheers,
Redom

It's a 3br townhouse in the first complex on totterdell street Belconnen. The location is good being walking distance to the town centre, mall, uni etc.

However there are alot of new developments in Belconnen, which crowds out the old ones. So rent won't go up because tenants will pay more only if they move into one of the new places. I think I will renovate next time it's vacant.
I'm lucky for now I have a good long term tenant.

 

[Jamie M]

Overall though, oversupply will weigh on house price growth in Canberra for a while yet.

Yeah but we're talking about over supply in new areas - not the established suburbs.

From what I'm seeing - the majority who have been effected are looking to purchase within their immediate area and those suburbs don't have new stock.

Moving from a big old school block in Canberra to a pokey little block in a new suburb isn't an attractive option for a lot of these people.

It's causing a bit of anxiety among them - check out some of the auctions in these established areas (Woden, inner north/south), no doubt you'll find a fair few of those with fluffy houses bidding. One just sold down the road from me last weekend to a lady who's having to leave her inner north home.

Cheers

Jamie

 

[Canberran]

$600k - 700k in new suburbs are selling quickly as well.

The only oversupplies came from apartment markets. If you look at the market as a whole in the next 5 years, looking not good.

 

[Redom]

Yeah but we're talking about over supply in new areas - not the established suburbs.

Agree Jamie.

Its probably a bit deeper than new areas v old areas, but more about where supply is coming online. In saying that, generally, established areas have less of a supply tap - especially compared to new areas. E.g. Belco is an established area (i think!), but has so much supply coming online.

Mr Fluffy should have demand affects for the established areas now though - especially in the short term.

Great point about 'crowding out' effects danwatto.

If we're building 10,000 units, and we only demand 5,000 units, unit prices/rents will fall over time. But it wont only be unit prices, the oversupply in this segment will crowd out demand for other types of housing stock. The person who wants a house/townhouse, but sees units going for peanuts may change their decision because of price. This then has an effect on the demand for other dwellings too (albeit less of an impact). Its what's likely to be driving your rental yield down in belco - rather than too many townhouses in the area being built.

Cheers,
Redom

 

[Nemo30]

Agree Jamie.

Its probably a bit deeper than new areas v old areas, but more about where supply is coming online. In saying that, generally, established areas have less of a supply tap - especially compared to new areas. E.g. Belco is an established area (i think!), but has so much supply coming online.

The oversupply is generally because of the number of new apartments. I don't believe there is an oversupply of houses in established areas.

 

[Redom]

The oversupply is generally because of the number of new apartments. I don't believe there is an oversupply of houses in established areas.

Yep - these are probably a very 'in demand' asset class right now with Mr.Fluffy demand.

 

[Nemo30]

Yep - these are probably a very 'in demand' asset class right now with Mr.Fluffy demand.

Probably not.

 

[Jamie M]

The oversupply is generally because of the number of new apartments. I don't believe there is an oversupply of houses in established areas.

Agreed - and that's the feedback I've been getting from clients looking in established areas. There's just not a whole lot going up for sale - and 1000+ people on the hunt to replace their fluffy homes is going to cause a fair bit of short/medium term activity (IMO).

Cheers

Jamie

 

[Nemo30]

I think a proportion of Mr Fluffy owners will rent, eventually buy back their blocks and build again - mainly in the older inner suburbs.

With public service downsizing, some may combine it with a redundancy package and leave Canb all together.

 

[ChrisA1]

With public service downsizing, some may combine it with a redundancy package and leave Canb all together.

Good point, not sure if/when the next VR round would be (dependent on department) - could be a few years away, but as you say, the older demographic that can retire out of Canberra may take advantage of it. Not sure of the proportion of this demographic that reside in MF houses - from reports it appears mainly younger families.

 

[S1mon]

The only oversupplies came from apartment markets. If you look at the market as a whole in the next 5 years, looking not good.

i note they started removing the tress etc this week for the Gecon building in belco, Wayfarer i think its called. tallest building in Canberra at 27 stories!!
Also LINQ just across the road from it have just finished their landscaping etc..no where near as tall but 2 decent sized buildings..

there goes belco rents by another $20. as i think i have said before...dunno why is buying them..must be pre-sales still from pre glut times