IP in Hoppers Crossing/Werribee (VIC)

[investor2009]

Ever heard of supply and demand? No matter what your opinion, it does drive prices either way depending. Along with lots of other things.

Plus, there will always be high, and low income earners.
FWIW I like to buy cheaper properties because there are more low income earners than higher ones and my properties have all appreciated well because they have more room to do so.

I don't understand how people can assume that just because Melbourne's population is set to grow from new migrants, that this automatically affects their own area's property prices. That is just plain wrong. The question is, do these migrants have money?

If they are refugees/poor, then of course having them live in your area is not going to increase prices! If anything, it would stagnate the value of the area that they settle in. Further, they would settle in the cheapest, most run down part of Melbourne (i.e. the West). Contrast this with the rich Chinese who are coming here - people who live where the Chinese want to live will definitely see their property prices increase because they have money to spend on buying houses (e.g. Box Hill, Campberwell).

Moreover, migrants are not stupid - they would rather live in the best, established suburbs - why would rich people from a poorer country want to live in Werribee? It just doesn't accord with human nature nor logic.

 

[sash]

Okay........so what do you think will happen when interest rates reach 7.5% as opposed to 5.6% currently?

To put it in perspective.....you say you bought it for 650k with say a 550K mortgage. Currently you would be paying 34K per annum at 5.6%...when interest rates hit 7.5% you will be paying 45K.

When do you think you will be buying your next property? Lets do the numbers....600K property...will be worth $1m in 5 years.

Purchase price 650k
Stamp Duty & costs 40k
Holding costs per year 100K (20K over 5 years includes repairs, exp)
(assuming 6.5% IR avg)
Selling costs (2%) 20K
TOTAL 810K

I think I can do better than 190K profit in 5 years....can you? As a matter of fact as per my previous thread....the $455K should be worth about $815K in 2012 (about 5 years from purchase). So the numbers on these are

Purchase price 455K
Stamp Duty & costs 20k
Holding costs 5K (they are now positively geared)
Selling costs 10K
TOTAL 490K

So the profit is more like 325K....get the picture???

And when do you think you will be add more to your portfolio???......2013...by then I would have added another 12 properties to my name.

3BR small weatherboard house behind Victoria St (ie far end of Brunswick) quoted 700k-770k.
Sold for 855k
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2008052795

3BR house right off Albion St. Another weatherboard house. And you can't get much further from the centre of Brunswick than this. Sold for 803k
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2008052797

Edward St is around 4-5 blocks closer to Brunswick Rd and borders Parkville. You might not know as I've noticed you're starting to talk without thinking about or looking at the facts. A simple search on Domain would've revealed these prices to you.

But again, just for your interest
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2008030796
Run-down 2BR house to be knocked down and rebuilt on, sold for $1.76m

I'm sure it's all going to crash soon. These buyers must be complete idiots paying so much for a suburb worth $550k. Looking forward to your views on when's this crash coming, because I'd love to pick these up for $550k. Even $750k would make me happy.

Cheers

 

[Aazar]

lol I think you mean you like to buy cheap properties because that's what you can afford. I never said there's anything wrong with not being able to afford million dollar homes. But saying that your cheap properties have gone up in value doesn't mean anything. I could have bought acres of land in whoop whoop Melton 50 years ago and I would have made money.

Would I have made more if I had paid a bit more and bought in Richmond, Carlton or any other Eastern Suburb? Yes! Why? Because people like living in the East and there isn't much land there.

On the other hand, there is acres and acres of land in the West which has not been developed. All you need to do is drive on the Princes Freeway to see how much empty land there is between Melbourne and Werribee. Using your 'supply and demand', what does that mean for people with houses in Werribee? It means that any population growth would be offset by developers pumping out large numbers of houses on those acres of land. More supply with more demand (if we assume people 'demand' Werribee) equals no real price appreciation. This explains why I would rather buy elsewhere - I am assured that there aren't acres of land that can be turned into a Mirvac village and I know that most people will want to live there.

 

[DeeHwa]

Ever heard of supply and demand? No matter what your opinion, it does drive prices either way depending. Along with lots of other things.

Plus, there will always be high, and low income earners.
FWIW I like to buy cheaper properties because there are more low income earners than higher ones and my properties have all appreciated well because they have more room to do so.

Your logic and way of thinking is immensely flawed. Yes, property is governed by economic forces of supply and demand, but to assume this translates to more demand in 'cheaper' suburbs given a greater % of the population are low earners and thus achieve greater property appreciation is wrong and borders on naivety.

Think about it this way...a typical Werribee house has 100 potential bidders (all low income earners, or else they would buy elsewhere). Given they are all low income earners, they all have a price ceiling they are willing to pay, say $350K max. Thus, no matter what levels of demand, the maximum price would be $350K. An extra $10K is a lot to these people.

In a more affluent suburb, say Hawthorn for example...bidders are high income earners. Say there are 2 bidders...(both high income earners)...and they really want the house really bad, so they will beat the living day lights out of each other to secure it, even if it means a lazy $100K more than the reserve (remember, $100K is peanuts to high income earners). I can give you many examples of houses in Hawthorn, Kew, Canterbury, Armadale, Toorak etc...which the final price fetched has exceeded $500K+ above the reserve (and these reserves are often $1.1mil selling for $1.6mil or $1.7mil) or even that Union St, Northcote house selling for $1.37mil with a reserve in the mid $800K's. Why does this happen? Because bidders in these areas can and often will push further...they do not have the same financial constraints. Again, what I term emotional premium!!!

I don't know about you, but I rather have 2 bidders going for my house and beating the daylights out of each other, than having 100 bidders who are too sh*t scared to go that extra $1,000.

You can be the judge my friend.

 

[Deltaberry]

Okay........so what do you think will happen when interest rates reach 7.5% as opposed to 5.6% currently?

To put it in perspective.....you say you bought it for 650k with say a 550K mortgage. Currently you would be paying 34K per annum at 5.6%...when interest rates hit 7.5% you will be paying 45K.

When do you think you will be buying your next property? Lets do the numbers....600K property...will be worth $1m in 5 years.

Purchase price 650k
Stamp Duty & costs 40k
Holding costs per year 100K (20K over 5 years includes repairs, exp)
(assuming 6.5% IR avg)
Selling costs (2%) 20K
TOTAL 810K

I think I can do better than 190K profit in 5 years....can you? As a matter of fact as per my previous thread....the $455K should be worth about $815K in 2012 (about 5 years from purchase). So the numbers on these are

Purchase price 455K
Stamp Duty & costs 20k
Holding costs 5K (they are now positively geared)
Selling costs 10K
TOTAL 490K

So the profit is more like 325K....get the picture???

And when do you think you will be add more to your portfolio???......2013...by then I would have added another 12 properties to my name.

Bought what for 650k and where's this 550k loan coming from? Didn't I say all my figures are nominal only?

Anyway the number of houses does not equate to a wealthier portfolio. It depends what the houses are worth.

Also your comparison is pretty skewed. What makes you think this 650k house is not positively geared? At 34k interest repayments you're saying this 650k property (which as I said is a nominal figure only) is still negatively geared by 20k. So that must mean you're saying the rent is only 15k per annum.

15k rent for a 650k house or $288 per week. I think not.

Anyway why are you comparing a 650k house purchased in 2009 with your 2006/2007 purchasess for 445k? You said in the other post that this 445k portfolio is actually worth 700k now. So use that as your starting base because if you didn't buy the 650k and went to buy your Werribie houses now, it'd be 700k. Redoing your calc means:

Purchase price 700K
Stamp Duty & costs 20k
Holding costs 5K (they are now positively geared)
Selling costs 10K
TOTAL 735K

That's 75k profit between 2009 and 2012 (819k less 745k). Seems a lot less than 185k to me.

Don't go comparing things held over different horizons. I'm very mathematically attuned, dealing with financial models all day so naturally pick up these inconsistencies, to say the least.

 

[Deltaberry]

I forgot to give you higher stamp duty. It's actually 35k stamp duty. so your profits are 60k. I just made more than that in 2 months in an inner city purchase. No need to disclose the details though in case people figure out where it is. There, a success story, as requested by you earlier.

 

[Deltaberry]

lol I think you mean you like to buy cheap properties because that's what you can afford. I never said there's anything wrong with not being able to afford million dollar homes. But saying that your cheap properties have gone up in value doesn't mean anything. I could have bought acres of land in whoop whoop Melton 50 years ago and I would have made money.

Would I have made more if I had paid a bit more and bought in Richmond, Carlton or any other Eastern Suburb? Yes! Why? Because people like living in the East and there isn't much land there.

On the other hand, there is acres and acres of land in the West which has not been developed. All you need to do is drive on the Princes Freeway to see how much empty land there is between Melbourne and Werribee. Using your 'supply and demand', what does that mean for people with houses in Werribee? It means that any population growth would be offset by developers pumping out large numbers of houses on those acres of land. More supply with more demand (if we assume people 'demand' Werribee) equals no real price appreciation. This explains why I would rather buy elsewhere - I am assured that there aren't acres of land that can be turned into a Mirvac village and I know that most people will want to live there.

Well said.

In an unrelated thread.
http://www.somersoft.com/forums/showthread.php?t=56950

"By the way, Population increase in a suburb does not necessarily equate to price increase for that suburb. For instance Blacktown in Sydney. People with 'more' spending power moved out as the place got crowded with people who came in with 'lesser' money (helped by the department of housing) into some of these suburbs, and as a result prices went nowhere."

Time to use those heads people.

 

[Aazar]

read the comments here people. sums up our arguments about werribee

http://www.heraldsun.com.au/news/vi...-price-record/comments-e6frf7kx-1225803568882

 

[JIT]

You should however ask yourself the question how a 24 year old can get into a position to afford a house knocking on the doors of the $1mil price tag.

So how do you afford a close to $1MM 1st property at your age?

Did your parents lend you some money?

Anyway, haven't we done this silly inner/outer debate before?

 

[sash]

Question: What is the individual stamp duties for 1 (one) 130k property, 1 (one) 155k property, and 1 (one) 170k property in Victoria bought in 2006-2007? Note: Stamp duty has changes since then but only on PPOR.

A: Approximates only - $3700 + $5200 + $6100 = $15K (oh look....I have been over generous in stamp duty!)

I forgot to give you higher stamp duty. It's actually 35k stamp duty. so your profits are 60k. I just made more than that in 2 months in an inner city purchase. No need to disclose the details though in case people figure out where it is. There, a success story, as requested by you earlier.

 

[sash]

See responses below....

Bought what for 650k and where's this 550k loan coming from? Didn't I say all my figures are nominal only?
Is that code for I don't own anything?

Anyway the number of houses does not equate to a wealthier portfolio. It depends what the houses are worth.
Very true!

Also your comparison is pretty skewed. What makes you think this 650k house is not positively geared? At 34k interest repayments you're saying this 650k property (which as I said is a nominal figure only) is still negatively geared by 20k. So that must mean you're saying the rent is only 15k per annum.
Nope...used a rent of $400pw

15k rent for a 650k house or $288 per week. I think not.

Anyway why are you comparing a 650k house purchased in 2009 with your 2006/2007 purchasess for 445k? You said in the other post that this 445k portfolio is actually worth 700k now. So use that as your starting base because if you didn't buy the 650k and went to buy your Werribie houses now, it'd be 700k. Redoing your calc means:

Purchase price 700K
Stamp Duty & costs 20k
Holding costs 5K (they are now positively geared)
Selling costs 10K
TOTAL 735K

That's 75k profit between 2009 and 2012 (819k less 745k). Seems a lot less than 185k to me.
Yes...that is me being conservative....rather than hoping for the best..so it is all apples....as you point out I there is more upside! In anycase I have made about $240K odd to date if I used a figure of $700k based on all the purchases totally to $455K

Don't go comparing things held over different horizons. I'm very mathematically attuned, dealing with financial models all day so naturally pick up these inconsistencies, to say the least.
I can see ....by how you worked the stamp duty across one single property instead of calculating the stamps individuallly for each ..the attention to detail is one of your stronger suits. Further more your ability to subtract $455k from $700k and arriving at that number being less than $185K puts you in Mensa category.

 

[natecv8]

read the comments here people. sums up our arguments about werribee

http://www.heraldsun.com.au/news/vi...-price-record/comments-e6frf7kx-1225803568882

Mate, that's the Herald Sun. Their entire business is letting uneducated rednecks comment on stories. If you would like to quote Herald Sun readers in your property research then for sure you'd be selling your entire portfolio (if it even exists) as according to them you'd be a greedy grub who is destroying the property market for their precious children, which doesn't matter as it will all collapse tomorrow anyway.

You're entitled to your opinion but you're preaching to people who a) have more experience in the region that you're bagging and b) have already seen real results. I'd expect you would be exasperated if we claimed that your property portfolio wasn't performing and quite frankly I feel the same. I have plenty of southwest property and own a business there, and I couldn't give two ***** what someone else thinks of it, it works absolutely fine for me and I'll buy some more. And absolutely nothing anyone says will change my opinion.

 

[sash]

You mean I can't believe all the stuff in a quality paper like the Herald Sun...which is written at a grade 10 reading standard!

If you own a business there....I would expect you to a get the feedin from all the infrastructure spending.......$4b on rail plus the 6% (about 3.5 times the national growth rate) per annum population growth has to feed into the local businesses.

What I don't get is that people on this site are bagging this Wyndham region without looking at facts and figures. I am not anti innner Melbourne. It is just that it has gone up to the point that people are being priced out and the numbers just don't work. A couple of years ago yes....now it is more difficult.

Mate, that's the Herald Sun. Their entire business is letting uneducated rednecks comment on stories. If you would like to quote Herald Sun readers in your property research then for sure you'd be selling your entire portfolio (if it even exists) as according to them you'd be a greedy grub who is destroying the property market for their precious children, which doesn't matter as it will all collapse tomorrow anyway.

You're entitled to your opinion but you're preaching to people who a) have more experience in the region that you're bagging and b) have already seen real results. I'd expect you would be exasperated if we claimed that your property portfolio wasn't performing and quite frankly I feel the same. I have plenty of southwest property and own a business there, and I couldn't give two ***** what someone else thinks of it, it works absolutely fine for me and I'll buy some more. And absolutely nothing anyone says will change my opinion.

 

[MCS_80]

read the comments here people. sums up our arguments about werribee

http://www.heraldsun.com.au/news/vi...-price-record/comments-e6frf7kx-1225803568882

And what exactly is your argument?

We all know Werribee has a bad wrap, no one is denying that, what we are discussing here is if the area is a suitable place to invest in using IP's.

And, once again, it is.

With correctly financed investment property, only a fool can not see the potential. No one is claiming it is "The Best" or even a "Gold Nugget", and we all know the demographics, however, the bad rap that Werribee gets is uncalled for.

I have lived here for only just over a year and could think of much worse places to live that are much closer to the City.

Enjoy your day.

Cheers

Mick

 

[Tuppence]

Mate, that's the Herald Sun. Their entire business is letting uneducated rednecks comment on stories. If you would like to quote Herald Sun readers in your property research then for sure you'd be selling your entire portfolio (if it even exists) as according to them you'd be a greedy grub who is destroying the property market for their precious children, which doesn't matter as it will all collapse tomorrow anyway.

You're entitled to your opinion but you're preaching to people who a) have more experience in the region that you're bagging and b) have already seen real results. I'd expect you would be exasperated if we claimed that your property portfolio wasn't performing and quite frankly I feel the same. I have plenty of southwest property and own a business there, and I couldn't give two ***** what someone else thinks of it, it works absolutely fine for me and I'll buy some more. And absolutely nothing anyone says will change my opinion.

This! I'm loving this!
All I can say is that some people obviously get paid by the word. Tired now.

 

[DeeHwa]

So how do you afford a close to $1MM 1st property at your age?

Did your parents lend you some money?

Anyway, haven't we done this silly inner/outer debate before?

Yes, we have done this inner/outer debate before. Refer thread on Point Cook.

As to me, well...yes, my parents did give me money. And how were they able to give me enough money to buy such a house you may ask? Well...as I said, it comes back to them investing in little shoeboxes inner city when these very properties once did *surprisingly* cost the same as those new built 700sqm+ houses in St Albans, Melton, Sydenham, Werribee, Hoppers, Taylors Lakes etc...

 

[DeeHwa]

Question: What is the individual stamp duties for 1 (one) 130k property, 1 (one) 155k property, and 1 (one) 170k property in Victoria bought in 2006-2007? Note: Stamp duty has changes since then but only on PPOR.

A: Approximates only - $3700 + $5200 + $6100 = $15K (oh look....I have been over generous in stamp duty!)

er...sorry to point this out to you (although it was blatantly obvious), but Deltaberry was working on the $700K figure because as identified, you using the $455K figure is not correct based on comparing properties purchased/value on different time horizons. Also, in your post, you referred to it as purchase price and you somehow assumed this implied 3 properties. Hum...you sure do have funny assumptions.

 

[DeeHwa]

You mean I can't believe all the stuff in a quality paper like the Herald Sun...which is written at a grade 10 reading standard!

If you own a business there....I would expect you to a get the feedin from all the infrastructure spending.......$4b on rail plus the 6% (about 3.5 times the national growth rate) per annum population growth has to feed into the local businesses.

What I don't get is that people on this site are bagging this Wyndham region without looking at facts and figures. I am not anti innner Melbourne. It is just that it has gone up to the point that people are being priced out and the numbers just don't work. A couple of years ago yes....now it is more difficult.

Sash, you seem to confuse commercial and residential markets by making that statement. As identified by Aazar in particular and several others on SS, population growth and density is not directly correlated with growth and strength of property prices in selected suburbs. This has been proven numerous times historically in Melbourne and all over the world. If this was the case, Toorak would be a povo suburb because the population is actually decreasing through a combination of ghost land banking and residents hoarding and buying neighbouring blocks to continually build mega-mansions. Further, there are a stack of commercial properties in Footscray that are worth way more than an equivalent sized shop in Chapel St, South Yarra highlighting the mutually exclusiveness of commercial and residential sub-markets.

As to the Wyndham region...well, it is no different to any other community based development like Caroline Springs, Sanctuary Lakes, Point Cook...(potentially even worst given it is even further out) and I know these areas in utmost detail because I work in the construction industry.

Btw, not that you realised it, but you have just validated what we have said all along about inner city. 'A couple of years ago yes....now it is more difficult' you said...hahaha, which begs the question why you didn't buy inner city but instead, decided to buy double digit houses which are worth $280-300K each. As you should know, it is capital growth which creates wealthy investors, not yields. You can argue this as much as you can, and I am sure many people do, but I'd think it is pretty obvious who is really laughing.

 

[DeeHwa]

And what exactly is your argument?

We all know Werribee has a bad wrap, no one is denying that, what we are discussing here is if the area is a suitable place to invest in using IP's.

And, once again, it is.

With correctly financed investment property, only a fool can not see the potential. No one is claiming it is "The Best" or even a "Gold Nugget", and we all know the demographics, however, the bad rap that Werribee gets is uncalled for.

I have lived here for only just over a year and could think of much worse places to live that are much closer to the City.

Enjoy your day.

Cheers

Mick

Clearly you have missed the point all along and the crux of the argument. Just because you achieve capital growth in Werribee means nothing when we have substantiated with mathematical, anecdotal, historical, factual and psychological reasoning that the capital growth + yield in a dump like Werribee does not beat inner city (or the east for that matter) investing. By congratulating yourself on achieving market underperformance is really something!

 

[MCS_80]

Clearly you have missed the point all along and the crux of the argument. Just because you achieve capital growth in Werribee means nothing when we have substantiated with mathematical, anecdotal, historical, factual and psychological reasoning that the capital growth + yield in a dump like Werribee does not beat inner city (or the east for that matter) investing. By congratulating yourself on achieving market underperformance is really something!

Oh no , I get the point

And who ever mentioned that Werribee would "Beat" inner city property? Not me sunshine. You might want to clean your compute screen, oh, im sorry, would you get your butler to do it?.

I do not and have never claimed that Werribee or the surrounding areas are the be all and end all of areas for IP, far from. What my point is, is that it can help a lot of people achieve their property investment goals and does not deserve the bad wrap it gets.

You are welcome to an opinion and I am the first person to discuss anything that can be discussed with an open mind and with a little respect, however, the comments you are making show your character and class... Or lack there of... and quite frankly, your comments are a little insulting.

But hey, this is an open forum and free country, its great that discussions like these are welcomed and available for people to get involved in and also learn from.

Cheers

Mick