IP in Hoppers Crossing/Werribee (VIC)

[Deltaberry]

I love 30+ yr old houses, don't get me wrong. In fact, I have never looked at buying brand new houses for either investment or to live in. 300-360K sounds pretty cheap for Bayswater.. I am mainly looking at properties with land that are within walking distance to train station and the new shopping facilities, and they are around 400k mark. Given that Wantirna's house is around 500K now for a standard BV 3 bedroom houses, 400K in Bayswater is still relatively reasonable compared to Ringwood, Wantirna, etc. But when you compare the overall area to the other side of the town, suddenly it looks dearer.

I have absolutely nothing against Outer East or Outer South East, since I have lived in Wantirna South, Berwick, and now back to Wantirna, and they are all very nice places to live in. There are also visible evidences that the areas are getting gentrified big time. But CG wise, cheaper areas tend to run harder once the uptrend starts (after a long stagnant period), as was the case for Outer East. More importantly, cheaper properties will put less pressure on one's cashflow, which is very important for buy and holders.

Just my 2c worth.

I think more expensive areas tend to run harder. There's a limit on how far cheaper places can run because it's more proportional to a person's salaries and what an average person can afford. People can pay several millions of dollars in premium for blue-ribbon suburbs because they are akin to discretionary, consumer items.

Anyway the east is always more expensive than the west at the same distance due to stigma, infrastructure etc. The difference between Bayswater + HC is not big enough for HC to appreciate more steeply because that would mean the suburbs are on par and unless we say the west = the east in the long-run, I don't see it happenning.

 

[Deltaberry]

Some even like to live in the north!

Funny you should say, because I reckon north > west

Inner west = West Melbourne/Swap land vs Parkville/Carlton
One step out = Footscray vs Brunswick
Moving along eventually it becomes = Sunshine vs Preston

 

[Aazar]

Top of the market does tend to run harder than the bottom of the market. But at the same time top of the market is the first one to cop it when things turn bad because less people can afford the expensive properties.

Of course the 'cheaper' properties are going to show bigger growth - it's off a low base. A $300,000 house that sells for $350,000 has only gone up by $50,000, but in percentage terms that is 16%. This is easy to do since auctions always go up in $10,000 or so increments anyway.

A comparable house that goes from $600,000 to $650,000 has only made a gain of 6%, even though the absolute gain is the same. And I don't think people would go and buy 2 'cheaper' properties rather than only one more 'expensive' one due to this misleading calculation.

 

[feihong]

Top of the market does tend to run harder than the bottom of the market. But at the same time top of the market is the first one to cop it when things turn bad because less people can afford the expensive properties.

Of course the 'cheaper' properties are going to show bigger growth - it's off a low base. A $300,000 house that sells for $350,000 has only gone up by $50,000, but in percentage terms that is 16%. This is easy to do since auctions always go up in $10,000 or so increments anyway.

A comparable house that goes from $600,000 to $650,000 has only made a gain of 6%, even though the absolute gain is the same. And I don't think people would go and buy 2 'cheaper' properties rather than only one more 'expensive' one due to this misleading calculation.

Your very calculation showed exactly why I personally like to target cheaper properties. % CG wise it's bigger, and also because of the lower holding cost, I can buy more cheaper properties faster, and build my asset base faster. e.g., I could buy 3-4 Hoppers Crossing IPs with 500-600sqm land vs say 1 Doncaster house with 800sqm land for the same price, and I could still stretch and buy more IP with the former case, whereas I am more likely to be stuck with Doncaster house for a while, and waiting for my salary to increase before I can buy next one. In addition, as shown on your calculation, I would be getting more equity too.

 

[Tuppence]

Funny you should say, because I reckon north > west

Inner west = West Melbourne/Swap land vs Parkville/Carlton
One step out = Footscray vs Brunswick
Moving along eventually it becomes = Sunshine vs Preston

It was a joke mate. Just pointing out that it's different strokes for different folks.

 

[Aazar]

The problem I have with that analysis is that those cheap houses are not always in those good, high demand areas. I would rather buy a more expensive property in Carlton, Richmond etc because I know that pretty much anyone wants to live near the city when they're shopping for a house. Contrast that with a place like hopper's crossing - not many people want to live there so your pool of potential buyers has shrunk considerably. You have to play it smart

 

[sash]

That is interesting......because this strategy of buying in places like Hoppers Crossing has made me more money than people I know in expensive areas.

For example....just yesterday I was told my property in Hopper bought for 170k in 2006 will be worth 270K after a quick paint and floor polish! On my calulations that is about 38% growth in 3.5 years!

So this concept only better areas increase is rubbish...just ask people like Margaret Lomas or Terry Rydher.

The problem I have with that analysis is that those cheap houses are not always in those good, high demand areas. I would rather buy a more expensive property in Carlton, Richmond etc because I know that pretty much anyone wants to live near the city when they're shopping for a house. Contrast that with a place like hopper's crossing - not many people want to live there so your pool of potential buyers has shrunk considerably. You have to play it smart

 

[Peter Parker]

I would rather buy a more expensive property in Carlton, Richmond etc because I know that pretty much anyone wants to live near the city when they're shopping for a house. Contrast that with a place like hopper's crossing - not many people want to live there so your pool of potential buyers has shrunk considerably.

Yes and no.

Far more people can afford to buy in Hoppers than an expensive inner suburb, so in that sense the market for Hoppers is larger.

In other words, maybe 80% of first home buyers can afford something in Hoppers, and only a slightly lower proportion of ASPIRING first home buyers can afford there, versus an inner suburb where the proportion that can afford there is maybe 20-30% of the popuation.

Admittedly the latter doesn't matter if inner areas continue to be sought-after (fashions change and they weren't always, eg for several decades from the 1950s), provided the incomes and financial health of the upper-middle class minority remain strong.

 

[Deltaberry]

Your very calculation showed exactly why I personally like to target cheaper properties. % CG wise it's bigger, and also because of the lower holding cost, I can buy more cheaper properties faster, and build my asset base faster. e.g., I could buy 3-4 Hoppers Crossing IPs with 500-600sqm land vs say 1 Doncaster house with 800sqm land for the same price, and I could still stretch and buy more IP with the former case, whereas I am more likely to be stuck with Doncaster house for a while, and waiting for my salary to increase before I can buy next one. In addition, as shown on your calculation, I would be getting more equity too.

Well that's because the Doncaster one would grow at an awesome rate of 1% per century. Besides where are the growth figures coming off? Kew just reported 61% growth and sure sure there's all these flaws with such research figures blah blah blah and it's just reflective of the auctions that happen to go at the time and blah blah blah, but least it's got a headline growth figure of 61% in 6 months. Love to know what HC achieved in 6 months.

 

[Deltaberry]

That is interesting......because this strategy of buying in places like Hoppers Crossing has made me more money than people I know in expensive areas.

For example....just yesterday I was told my property in Hopper bought for 170k in 2006 will be worth 270K after a quick paint and floor polish! On my calulations that is about 38% growth in 3.5 years!

So this concept only better areas increase is rubbish...just ask people like Margaret Lomas or Terry Rydher.

Well it's interesting too because the flipside of the story is this. In fact I've got lots of stories but just one time that comes to mind (admittedly one of the better ones).

We bought something in the CBD of a particular state not long ago (probably around 2002?) for, let's just use a nominal figure as I'm not here to boast or anything, $700k. Council valued it recently at $2.5m. So that's 357% return over around 7 years, which averages out to 51% gain pa.

38% in 3.5 years is 10.86% return pa. Check out what ANZ pays for franked dividends. I think dividend yield is nearly 9% franked. Not putting anyone down but hey, numbers are numbers.

In other news I bought an inner city residential place 2-3 months ago for, again just a nominal figure, let's say $600k. A few places down the street is selling and it's the EXACT same thing (literally), now quoted at 590k to 660k (again just nominal figures but the %s match). So in line with most auctions nowadays (which go over the moon) if this goes for say 680k (conservatively speaking, knowing how the market is), that's 13.3% in er... 2.5 months (now how do I do these smileys). I just settled last week. Of course the place is not sold yet and could pass in at $5 (the price of an icecream). But I'll fill you in with what happens.

 

[Deltaberry]

Yes and no.

Far more people can afford to buy in Hoppers than an expensive inner suburb, so in that sense the market for Hoppers is larger.

That's the difference between volume traded and value traded. Bit like cent stocks vs blue chip.

If 1m shares worth 1c are exchanged in a day, that's $10k.
If 1,000 BHP shares are traded, that's worth $40k of trades a day.

 

[Peter Parker]

That's the difference between volume traded and value traded. Bit like cent stocks vs blue chip.

If 1m shares worth 1c are exchanged in a day, that's $10k.
If 1,000 BHP shares are traded, that's worth $40k of trades a day.

Sorry, I don't see the connection.

4 houses in Hoppers worth $250k each is worth the same as 1 in Surrey Hills for $1m.

If you believe inner suburbs appreciate more rapidly then the holder of the latter may do better than the holder of the former. But both have their pros and cons, and location is by no means the only or even the main determinant of property investing success.

A 1 cent share three days before bankruptcy is quite a different animal from (say) a BHP share. But rental houses are much more similar to one another, and unlike 1 cent companies about to fold, almost any mainstream piece of real estate is at least a fair quality asset (just ask any bank).

 

[Kenster]

38% in 3.5 years is 10.86% return pa. Check out what ANZ pays for franked dividends. I think dividend yield is nearly 9% franked. Not putting anyone down but hey, numbers are numbers.

Comparing IP to ANZ shares is like comparing apples to oranges.

ANZ dividend yield as of today price of $21.50 is 4.7% franked. Then there is the margin call risk if leverage is used, in light of the GFC experience.

The 38% returns Sash quoted was based on purchase price. The return on initial seed money used would be a lot higher when considering rental income and the effect of leverage

In fact, if no seed money was used (ie. 110% borrowing) then the return would be infinity

 

[sash]

I think I got my maths wrong.....I bought it for 170K and and increase to 270K is acutally a 59% increase.

The seed money was about 27K so the return is 370% over 3.5 years!

Comparing IP to ANZ shares is like comparing apples to oranges.

ANZ dividend yield as of today price of $21.50 is 4.7% franked. Then there is the margin call risk if leverage is used, in light of the GFC experience.

The 38% returns Sash quoted was based on purchase price. The return on initial seed money used would be a lot higher when considering rental income and the effect of leverage

In fact, if no seed money was used (ie. 110% borrowing) then the return would be infinity

 

[Deltaberry]

The 38% returns Sash quoted was based on purchase price. The return on initial seed money used would be a lot higher when considering rental income and the effect of leverage

In fact, if no seed money was used (ie. 110% borrowing) then the return would be infinity

Well you are right. The key is to buy cheaply in the right spots because at the right price, anything can be cheap.

I just went to an auction yesterday (by concidence) and saw someone I know pay what I thought was a rather expensive price for the 2nd floor of a really run-down duplex house.

Sort of disappointing for me personally as I tried to warn them it's not a great idea, but I figured each to their own and he seemed really adamant anyway, bidding a good 20% above reserve. So I didn't say anything. Not to mention the house was next to some run-down apartment hotel and was perhaps one of the top 3 busiest streets in the entire Victoria.

 

[mysterious_guy]

Thanks for all your views guys, some interesting facts there.

I think i am still going to buy IP in HP/Werribee area as it's more affordable for me and i do think it will be a good investment.

 

[badcliq]

As long as government/council keeps pumping funds into developing infrastructres and the "greening" of the areas, it'll be good a investment.

Having said that, it'll probably another 10-20 years to achieve what the Eastern suburbs have now.

I think it's a good buy as I have one IP in HC and building my PPOR there next year in Truganina.

 

[Tony3008]

ONE of Port Phillip Bay’s largest and last undeveloped sites will be transformed into a major entertainment, commercial and residential village built around a major new harbour, two beaches and a 1000 berth marina – one of the biggest in Victoria.

The state government, Wyndham City Council and the owner of Werribee South land around the proposed marina – interests associated with Melbourne’s wealthy Liberman family – are expected to unveil plans and images of Wyndham Harbour next week, according to sources.

The proposal – worth about $440 million – is said to include a hotel, retail and restaurant precinct, yacht club, apartments and detached housing. ...

http://www.realestatesource.com.au/major-harbour-planned-for-melbournes-werribee-south.html

 

[houseman]

Hoppers, werribee, wyndham vale - leave the investment buying there to those who live around there. Once you've lived in the inner, middle or even outer east, you can never appreciate the demographic, the culture, the look or the feel of the soul-less western suburbs. Yes as investors we should not get emotional about such things, but even from an investing point of view, there's plenty of reasons why middle to outer western suburbs should all be avoided. If that's all the choice there was, I'd stop investing in property altogether. Personal opinion but but the same held by many.

 

[sash]

Interesting point...that that is what separates professional investors from amateurs.

Experts like Margaret Lomas and Terry Rydher are saying that Wyndham is a go....as a matter of fact the current API (Dec. 2009) says that also.

I think secret is already out....I would say by the end of next year...you will see significant price increases.

Time will tell....as always...but if I was betting man...I know where I would be putting my money...wait a minute I have literally have some money there...he..he

Hoppers, werribee, wyndham vale - leave the investment buying there to those who live around there. Once you've lived in the inner, middle or even outer east, you can never appreciate the demographic, the culture, the look or the feel of the soul-less western suburbs. Yes as investors we should not get emotional about such things, but even from an investing point of view, there's plenty of reasons why middle to outer western suburbs should all be avoided. If that's all the choice there was, I'd stop investing in property altogether. Personal opinion but but the same held by many.