Impact of FHOG on 'Brisbane' market

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Reply: 1
From: Sergey Golovin


Yep,

Small article in Daily Telegraph today - rent is up by $5 on average from $270 to $275 in Sydney.
Vacancy rate steady - 4%.

Real estate prise up in Melbourne 8% ( last quarter or last year?), Sydney 6.3%, Canberra, Perth...

Serge.
 
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Reply: 1.1
From: Ian Parham


'Morning All

We are in the throes of moving from Sydney back to WA. I had the landlord's agent (very prominent agency in this locale) pop in yesterday afternoon to discuss closure of our tenancy.

He said in this particular area (Connells Point, Blakehurst), "rents have fallen approx. 15%"!!! This place we are in would struggle to get 350/wk at present. We had been paying 400/wk.

He also mentioned that most of his current listings (rentals) are also being listed with other agents, by owners, because they simply aren't moving. He has a lot of empty properties on his books.

I know there were lots of sales around the area over last two years that were put up for lease immediately. There are now lots of 'For Lease' signs dotting the neighbourhood....won't be long before the 'For Sale' signs come back out!!!

Cheers Ian
 
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Reply: 1.1.1
From: Michael Croft


Hi Ian, what is your estimate of the current market value of the property were it for sale? This is so I can work out a yield. Thanks in advance.

Michael Croft
"The best parachute folders are those who jump themselves."
 
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Reply: 1.1.1.1
From: Robert Forward


Hi Michael

Connells Point, Blakehurst is just around the corner from me and is part of the area that I've been looking at lately. Ians comments have hit the nail on the head for the area.

Cheers
Robert
 
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Reply: 1.1.1.1.1
From: Michael Croft


So what would you anticipate as a yield for the area on a straight IP purchase ie. annual rent divided by purchase price?

Michael Croft
"The best parachute folders are those who jump themselves."
 
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Reply: 1.1.1.1.1.1
From: Robert Forward


It depends on what type of property it is.

But here is one that I've got my eye on at the moment (only cause I know the vendor MUST sell before or at auction). It's a 3 bed house that has high ceilings and 3 year old kitchen, newly carpeted and painted, sitting on 500sqm of land.

For this property the RE Agents are trying to talk it up to $380k+ of which the property would have exceeded $400k 2 months ago. But now my thoughts are it'll be lucky to get $350k but the rents have fallen so far (ie: 15% that it will only rent for $260-280pw). The house can be value added with gardening (as it has none) and decking out the back with a pergola etc. This would probably lift the rent upwards towards the $320-340pw mark.

So renting at $280pw and purchasing at $350k the returns would be 4.16%. With purchasing at $350k and throwing $10k on improvements and renting at $340pw it would be 4.91% return.

Now, if the property rented at the rates before the drop it would have received $340pw without the reno, so a 4.91% return and probably $380-400 after doing the garden up which would equate to a 5.77% return (on $400pw).

Still not enough to my mind. But there is your question answered. And at the moment in my area properties are simply not renting if they are not renovated. So if a tight arsed landlord isn't willing to spend some $$$'s or they simply can't afford to they will end up with 2-3 months of vacancy and that has got to hurt.

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 1.1.1.1.1.1.1
From: Lisa Southgate


Hi,
Glad of your post Ian, because my gut feeling from years of property writing for the usual suspects is that the "rental increase of $5 a week," thing in Sydney is a lie. I didn't see the Tele story so Serge, I was wondering who the story was sourced to? Real estate agents will say anything, and they'll commission any number of reports and analyses to back it up. And let me tell you, when you've got an editor on your back and a 25cm hole on the page to fill, the temptation to believe any 'expert' is amazingly strong.
One adage is that there are several news stories that will always be recycled, no matter what era. One is that the Brisbane property market is about to take off. Surprisingly though I've noticed signs around the place that the Brisbane market is hotting up - rental and sale prices in the northern 'burbs. Sydney though? There's a lot of reverse migration happening there and no economic boost like the Games to look forward to - I'd be surprised at any increase.
That's all. Apologies for sounding like Marvin the depressed computer. Lisa.
 
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Reply: 1.1.1.1.1.1.1.1
From: Ian Parham


Good Morning All!

Michael & Robert - sorry for delay I didn't spend much time on here last night, so missed your posts.

Essentially this house (in Terry Street Connells Point) was renovated by owners about 4 yrs ago. 3xBr, large 'L' shaped lounge/dining room, revamped open plan kitchen/family room at rear, new tile job in bathroom, second shower in large laundry, largish block...say 700 to 750 sq.m?? Red brick, and although renovated I believe it still needs work to roof tiles, lots of rising damp, yard is a bit shabby. A second storey on top would give some views of the river...$$$$$$

Owners (who don't want to sell by the way ;>)) said 2yrs ago...640k on VG report....a few months ago..580K in their opinion. Me...I reckon it would struggle to get past 520 - 530K, but there are lots of silly people out there borrowing truck loads of low interest (for the time being) money!!

As I mentioned in earlier post, perhaps 350/wk rent as is. So the yield figures would be negligible, hardly worth turning on the calculator for. Potential capital growth next cycle though???

Have a good day!
Cheers Ian
 
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