Gold Coast... keep it or flog it off to the knackery

[Bird Dog]

Afternoon all.

Just wanting your advice on the local market in Mouldy Goldie?
My sister has a stand alone 2bed x 1bath (2 x toilets) x 1car space two storey townhouse in Labrador which she’s had for approx 4 years. Unfortunately she purchase right around the last peak and is considering flogging it off as it’s been a bit of a dead horse ever since.
It was originally her PPOR whilst she was in Australia but she owns nothing else and has moved into a rental in another suburb to try and offset some of the cost’s.
• It’s in a complex of 10.
• Her body corps have just gone from $32 to $50 p’week as they upgraded the pool
• It was built around the mid 80’s
• It’s close to the Uni and it’s never been vacant.
• It will need a new stove and possible HWS sometime in the next year or so.
• She’s getting $320 p’week in rent.
• She reckons after rates, water, repairs, body Corp etc she’s haemorrhaging about $10,000 before tax each year.

She’s planning on moving back to Melb sometime in the next 12 months and will most likely never live in it again.

I’m not that fond of the Gold Coast market and most indicators are saying it’s going to remain pretty flat for the short to med term however my concern is she’ll step out of the property market and will find it next to impossible to return again..

Should she
1. Get rid of it and realistically.. what’s it worth in today’s market?
2. Keep it and weather the storm til the market picks up and if so, when do you think this might be?

 

[Rolf Latham]

depends on where and how many in the strata ?

Seeing some good buying acitivity at the moment for strata units is 6 packs.

prices look like they have stopped falling.................but

ta

rolf

 

[Player]

Afternoon all.

Just wanting your advice on the local market in Mouldy Goldie?

Market is still sick although probably at, or near bottom. Having said that, I don't envisage it picking up any time soon. Rental demand is better than it was a couple of years ago and IMO as a newcomer to the area, Labrador and Southport will gentrify. More demand here than the housing estates to the north of the coast. Southport and Labrador are well located with good amenity and as your sister's place is close to the Uni and the near complete new hospital, I doubt vacancies will be an issue and perhaps rent gains may be seen soon.

My sister has a stand alone 2bed x 1bath (2 x toilets) x 1car space two storey townhouse in Labrador which she’s had for approx 4 years. Unfortunately she purchase right around the last peak and is considering flogging it off as it’s been a bit of a dead horse ever since.

I don't follow T/H or unit markets much, so can't comment too much on the asset type.

Obviously as you state she purchased at peak and is now looking for the exit at the bottom. Some more info if you are willing to share will help the responses you get.

How much did she pay? Probably look at least for a 25-30 % decline in capital values from that purchase price of four years ago.
What is her loan (fixed, variable, what rate?). Can her loan be re-strucutred somehow, without triggering a valuation ?
How much does she owe? Will she be upside down in equity?


It was originally her PPOR whilst she was in Australia but she owns nothing else and has moved into a rental in another suburb to try and offset some of the cost’s.
• It’s in a complex of 10.
• Her body corps have just gone from $32 to $50 p’week as they upgraded the pool
• It was built around the mid 80’s
• It’s close to the Uni and it’s never been vacant.
• It will need a new stove and possible HWS sometime in the next year or so.
• She’s getting $320 p’week in rent.
• She reckons after rates, water, repairs, body Corp etc she’s haemorrhaging about $10,000 before tax each year.

Ouch ten kay is a lot for something that's also lost capital value, irrespective of her tax rate.

She’s planning on moving back to Melb sometime in the next 12 months and will most likely never live in it again.

I’m not that fond of the Gold Coast market and most indicators are saying it’s going to remain pretty flat for the short to med term however my concern is she’ll step out of the property market and will find it next to impossible to return again..

Sometimes it's a case of two steps back and a step forward one at a time into a better market. Of course to allow this to occur, she needs to be able to extinguish the loan when wiping the slate clean to start again.

If the annual losses weren't so large, I would say hold on because the transaction costs to sell up and re-enter may be another loss she would be copping and, it is in an area with demand. If I bought an IP on the GC it would be in Southport, Labrador or Parkwood.

Should she
1. Get rid of it and realistically.. what’s it worth in today’s market?

BD, you can work this out by going to www.onthehouse.com.au and punch in the address and navigate looking at what everything in the street has sold for recently. Also, this will likely correlate with a circa 30 % loss of value since purchase. Even rea.com.au will give you some comps that you can correlate a value to her type of T/H.

2. Keep it and weather the storm til the market picks up and if so, when do you think this might be?

My guess is at bottom now for everything except highrise and sideways for a couple of years. Exit stage left at around the time of the Commonwealth Games here. People have short memories and the yipee kayay feel of the coast should have returned by then.

As with all things opportunity costs need to be borne in mind when looking at taking a punch now for a better future (assuming she doesn't owe more than it's worth) and what will she want to purchase if she does sell? If she wishes to buy in Melbourne, then most of the market there is at bottom also and likely better chance of an upswing in the nearer term. More consistency in Melbourne also, however as with all things volatile, when Goldie fires it will be rapid and sharp (just as spectacular as the recent falls)

I'm new here...........merely my 0.02c

 

[The Y-man]

I'm new here...........merely my 0.02c

Wow, I heard of serious lowballing, but 2 cents for that property?

The Y-man

 

[boomtown]

GC property prices aren't going anywhere for at least a year. Probably much longer.

 

[BMan]

does she have anything to offset the CGL if she sold?

 

[JWR]

I'd be selling...

Those holding costs are suicide

And GC going nowhere for ages!

 

[Dazz]

does she have anything to offset the CGL if she sold?

what on Earth have you abbreviated there ??........surely not the made up term Capital Gain Loss ??

 

[murph14]

It depends on her mindset imo...

Is she all about wealth creation and early retirement? Or happy to work on and retire with super and the age pension?

Might as well weather the storm if the latter, otherwise she should set some goals based purely on numbers (which means flogging it off).

 

[BMan]

what on Earth have you abbreviated there ??........surely not the made up term Capital Gain Loss ??

haha it appears i have made up a new abbreviation now just need to work out what it Capital Gain Loss is.... any takers?

 

[Belbo]

haha it appears i have made up a new abbreviation now just need to work out what it Capital Gain Loss is.... any takers?

I reckon it's one of those high-flier's CGs that mysteriously disappears in the direction of the Cayman Islands around tax time every year. Has the bewildered ATO guy asking, HTF did that get lost?

 

[fernfurn]

We are in the same boat although I bought after it had dropped quite a bit. Could have made $100k if I had sold 2 years ago but it has dropped more since then and we would break even. Rent is good and we are dobbing in towards rates and water (suicidal council rates) but I intend to hold for another 18mths 2years and then I believe it will go up. What with the new hospital, the games, the general length of the downturn and just the overall economy I feel it will start to rise (just my personal opinion) so I am taking the gamble instead of pulling out now an breaking even. However I know with the GC it is the first to drop and the last to rise, but when it does go up it goes up fast and high

 

[JWR]

The thing with GC is that the gamble may or may not pay off.

You can go many other places and buy sure things that don't cost you a cent to hold.

 

[The Y-man]

haha it appears i have made up a new abbreviation now just need to work out what it Capital Gain Loss is.... any takers?

You obviously made a typo - it should of course be GCL

Gold Coast Loss

The Y-man

 

[Player]

I reckon it's one of those high-flier's CGs that mysteriously disappears in the direction of the Cayman Islands around tax time every year. Has the bewildered ATO guy asking, HTF did that get lost?

There is a saying, that the Gold Coast is a sunny place for shady people............but I don't believe them.

Now, where did I put my white shoes and gold chains?

 

[Belbo]

There is a saying, that the Gold Coast is a sunny place for shady people............but I don't believe them.

Now, where did I put my white shoes and gold chains?

Yes, of course! But this lot use CGL in a completely different way, as seen in the seminars - "Ïf you turn down the amazing chance to buy this condo, your immediate capital gain loss will be $150K. Worse still, if you don't upgrade to the platinum members club furniture package, your CGL will increase to $180K!"

 

[Belbo]

Also not to be overlooked is the capital gain loss of your clueless bank manager –

“Let me get this straight. . . .

You just bought this beautiful fibro & iron beach shack for $1M and you want to knock it down. You want borrow $2M to build a six-pack apartment block that you claim will sell for $4M on completion.

But you’re not adding to the land area at all, and you’re going to throw away a perfectly good family weekender into the bargain, right?

Sorry, but I’m at a total capital gain loss here! How can this bank risk financing such a crazy idea?”

 

[Bird Dog]

Thanks and apologies for the delayed response as I was securing more info from my sister so I could adequately respond to your questions.

You’re feedback is great and particular thanks to Player as I was hoping you would chime in so thanks buddy…

She purchased the property for $268K and judging by the values, I suspect it’s worth either this amount or most likely less… She’s had a P&I loan with a decent deposit and has paid down a small portion so she’s not looking at a negative equity situation however when you factor in the deposit and payments over the last 4 years, she’s obviously emotionally attached to the loss.
It’s very easy for me to say pull the pin as I’m only looking at it from a purely monetary perspective but as I mentioned, I’m worried that if she does get off, it may mean she never get back on the property train again.

You have confirmed my suspicions however that the local market is in the toilet and may well be there for the short to med term (comm games aren’t til 2017 yeah) so try and entice her into investing in the areas I’m currently looking at over in the west.

I’ll also look at her financing in more detail this week and see if we can’t get a little more creative although as you say Player, this may not be an option if a revalue is required.