Melbourne Again

go to say - after 3 interest rate rises this weekend results remained extremely strong.

I went to two auctions and each one went 120 k (around 15 percent) above the 'reserve'.

It really is the case that 1 million bucks will get you a moderately comfortable home (unless you are more that 30km from the cbd).

Our inner urban areas look like they are becoming like London or Manhatten - WIthin a few years at this growth rate many more people may start living in surrounding country towns and making the commute rather than having such large mortgages.
 
Yes Agree. House down the road in Carnegie auctioned at the weekend. Front of two townhouses gained mid 800's with agent asking a million to start before bidders dragged him down. I'd have expected it to get about 650-700k.

Meanwhile out at places like Frankston and Ringwood I'd expect you'd get two or three of the same stock for that sort of money, so a bit more gentrification of those town centres and the 25minute link trip to the city will look very minor.
 
can it really be sustained at that high level though? The jump from $250k to $500k is a matter of leverage and level of debt for the average aussie family - in my opinion the jump from $500k to $1m becomes an issue of servicability - much harder to overcome.
 
can it really be sustained at that high level though? The jump from $250k to $500k is a matter of leverage and level of debt for the average aussie family - in my opinion the jump from $500k to $1m becomes an issue of servicability - much harder to overcome.

It cant and wont last. I would still be very cautious. I am old enough to recall the period from 1990 to 1997, there was close on no growth or very little growth in that time. We may now be entering a similar phase.
 
Our inner urban areas look like they are becoming like London or Manhatten - WIthin a few years at this growth rate many more people may start living in surrounding country towns and making the commute rather than having such large mortgages.

I agree, Melb and Syd will become so called ''supercities''...
 
can it really be sustained at that high level though? The jump from $250k to $500k is a matter of leverage and level of debt for the average aussie family - in my opinion the jump from $500k to $1m becomes an issue of servicability - much harder to overcome.

agree. 1 mil loan * 6% interest rate = 60k interest per annual. most people cannot afford the repayment.
 
agree. 1 mil loan * 6% interest rate = 60k interest per annual. most people cannot afford the repayment.

I think with the median house price in Melbourne around the $500,000 mark that ''most'' people would have a mortgage that's nothing like $1m. And, if you own one of those houses, you'd more than likely have some equity in it - with the average mortgage in Victoria being about $350,000, as far as I'm aware.
Also, house prices are only going to go up by such numbers if other supporting factors do too - such as wages and employment, etc. If ''most people can't afford the repayment'' of a $1m loan, then ''most people'' will not get one. It's as simple as that - supply and demand.:)
 
You are all forgetting the cashed up immigrants. A house I sold in 2005 for $315k for land value only, was pulled down and a new house built on it, was sold at the weekend for $1,015,000.

We are talking a suburb 25kms from the city.

I went to the OFI and was surprised by the number of immigrants who were obviously very interested.

Chris
 
I think with the median house price in Melbourne around the $500,000 mark that ''most'' people would have a mortgage that's nothing like $1m. And, if you own one of those houses, you'd more than likely have some equity in it - with the average mortgage in Victoria being about $350,000, as far as I'm aware.
Also, house prices are only going to go up by such numbers if other supporting factors do too - such as wages and employment, etc. If ''most people can't afford the repayment'' of a $1m loan, then ''most people'' will not get one. It's as simple as that - supply and demand.:)

Totally agree that people buying $1M+ properties have equity and wont have a 100% loan. They would have likely sold up from another property.

I know plenty of "single" first home buyers with enough equity to buy their first place for $250K - $500K. Similarly, a "couple" of professionals in their 30's who are upselling a smaller home/apartment will have around $200-500K equity/cash and will be buying their family home for ~ $1M. Most professionals in Melbourne will be earning $100K or more. With combined income of $200-250K they can afford these homes.
 
Totally agree that people buying $1M+ properties have equity and wont have a 100% loan. They would have likely sold up from another property.

I know plenty of "single" first home buyers with enough equity to buy their first place for $250K - $500K. Similarly, a "couple" of professionals in their 30's who are upselling a smaller home/apartment will have around $200-500K equity/cash and will be buying their family home for ~ $1M. Most professionals in Melbourne will be earning $100K or more. With combined income of $200-250K they can afford these homes.


Yes, I'd agree with this. What the D&Ger's don't take into account when they raise the affordability issue is that people buying 1M+ houses are not borrowing that amount! They have either sold property or have substantial cash to put into the deal.

I was speaking to a colleague who is an exchange teacher from Manchester. He is looking to buy in an inner suburb of Melbourne. Owns his own apartment in Manchester and rekons our house prices are cheap compared to UK!

With the influx of immigrants I think prices, especially those in the inner areas are only going to rise further.

Hold on for the ride - and whatever you do, if you hold property in these areas don't sell it! :D

Regards Jason.
 
I dunno how the economy seems to be holding together,

property prices have been rising steadily, with the median price at $500k odd,

rentals have been increasing, but our salaries seem to be increasing nowhere near enough,

it just seems that with the median price at $500k, lets assume that rental is $450- 500 per week, for a 4-5% yield,

$500 per week, seems like a very large chunk of income for any one earning person in every family with kids or even, 2 workers with or without kids,

with 3 interest rises, and more to come, it just seems like there is going to be a burst of a bubble.

on the otherhand, we have many immigrants coming in with a massive demand with a shortage in supply,

maybe once the new year comes in, and one more rate rise, the market will flatten out, and auction clearance rates will drop and you won't see reserve prices smashed at auction...
 
property prices have been rising steadily, with the median price at $500k odd,rentals have been increasing, but our salaries seem to be increasing nowhere near enough,it just seems that with the median price at $500k, lets assume that rental is $450- 500 per week, for a 4-5% yield,$500 per week, seems like a very large chunk of income for any one earning person in every family with kids or even, 2 workers with or without kids,
People don't rent the median house. Most house repayments / rents are calculated by banks at 30% of income. People only need to be earning $1,500 per week for this (or $75K pa). If this is not what people are earning then they will need to rent further out for $350pw or whatever.

with 3 interest rises, and more to come, it just seems like there is going to be a burst of a bubble.
There is no bubble

on the otherhand, we have many immigrants coming in with a massive demand with a shortage in supply,
Which is why prices will continue to rise. Huge demand, limited supply.

maybe once the new year comes in, and one more rate rise, the market will flatten out, and auction clearance rates will drop and you won't see reserve prices smashed at auction...
Rates will most likely rise by 1% next year and when that happens it will not put IRs back to where they were pre GCF when we were all (pretty much) affording those IRs. I don't think that will have any effect in all honesty.
 
I bought a house in Carlton in 2001 for $425k, did a $50 reno then and a $42k reno last month, it just valued at $1.2mill.

Good quality properties (fit for demographic, and low maintenance), in good locations (high portion of renters, good public transport, close to uni), with cost effective renovations giving max bang for the buck, plus solid capital growth (research, research, research) = house >$1mill

The only factor is time. This one took 8 years to deliver that result, started with a 97% loan including LMI, if I had pulled no equity the LVR would be about 35% today.

Yes it is negatively geared and hence I contributed funds to this over the years to service the debt. As I pulled equity to do it again, and again...

Jane

PS Chris Gray has an interesting portfolio calculator on his website check it out - and whilst there for a limited time he is giving away his new book, stumbled over this last night, I have no connection with him. The pdf is free or the delivery of the book is the only charge you are up for $4.95. I went both options.
 
Hi Buzz

I reckon if you had spent 425 k plus reno anywhere in metro Melbourne in 2001 - the result you were able to achieve would be the same (with the exception of high fire danger and bad public transport areas).

So in 95 percent of areas that return has been achieved.

Great result though well done.
 
Hi Buzz

I reckon if you had spent 425 k plus reno anywhere in metro Melbourne in 2001 - the result you were able to achieve would be the same (with the exception of high fire danger and bad public transport areas).

So in 95 percent of areas that return has been achieved.

Great result though well done.

Really aussierogue? I have clients who have not had that much growth. The original reno within 6 months revalued the property at $700k so that was nice. Not sure if every property in Melb could of done that (excluding hire fire danger and bad public transport areas). If 95% of properties in Melb have done that I am now kicking myself I only did it to two of them, duh. You live and learn :D

Jane
 
Hi Buzz

So you are saying that in 8 years you have had a property in Carlton experience growth from 700k to 1.2 million?

Not bad but thats really more like the last 5 years growth imo.

My brother bought a place in Surry hills 3 years ago for 560 and its now valued at 870 - never been touched!

My Northcote house has doubled in price in 6 years.

I would be interested on where in you think in Melbourne these results have not been achiveable over 9 years.

Cheers
Aussie
 
The property went from 425k to 1.2mill in 8 years.

My mistake sorry I thought we were talking about the trend for prices to be over $1mill and how people were managing the loans against them. I used this property as an example on how the value increases but the LVR reduces and hence 'affording' the loan could become more manageable. Sorry if that did not make sense, I will bow out now.

Jane

PS Kudos to you and your brother for your great investments, having a property doubling every 6 years, an average of 12% return in such a great location (ie not regional) with anticipated sustainable growth is a good goal for proeprty buyers to have.
 
I bought a house in Carlton in 2001 for $425k, did a $50 reno then and a $42k reno last month, it just valued at $1.2mill.

In contrast MICM are currently listing 2305/668 Bourke Street (City Point), a 2-bed 1 bath flat, for $539K. Central Equity were selling this development off plan from the end of 2000 and this unit would then have cost around $410K - I know because I bought an identical unit a couple of floors up. Unfortunately people at their sales pitches (I was one) fall for "on average Melbourne properties have increased by ..." not realising that this is not representative of what's being sold.
 
In contrast MICM are currently listing 2305/668 Bourke Street (City Point), a 2-bed 1 bath flat, for $539K. Central Equity were selling this development off plan from the end of 2000 and this unit would then have cost around $410K - I know because I bought an identical unit a couple of floors up. Unfortunately people at their sales pitches (I was one) fall for "on average Melbourne properties have increased by ..." not realising that this is not representative of what's being sold.

I'm of the view that while landed property is still cheap in Melbourne, apartments are far from cheap.

In relation to property prices in Manhattan, you can buy a studio in say Chelsea for US$350k-$400k, which stacks up well against what you can get an apartment in Melbourne for - I'd much rather have an apartment in Manhattan than Melbourne. But when it comes to land, Melbourne is cheap in comparison.
 
Top