sooo something like werribee? 
melbourne up 25% in 2007!
- Thread starter Soren Lorenson
- Start date
All outer suburbs aren't created equally.
Melton is 97.4kms away from Frankston South, which is 45kms from Packenham which is 90km's away from Werribee. Given such a a big geographical area, so to simply debate outer v inner is relatively meaningless unless you get more specific about the area.
Melton is 97.4kms away from Frankston South, which is 45kms from Packenham which is 90km's away from Werribee. Given such a a big geographical area, so to simply debate outer v inner is relatively meaningless unless you get more specific about the area.
Got slammed on my last comments...
I didn't intend to tell you something you didn't know, we all know the inner suburbs are proven performers. Hence it is why it is the only thing I will touch, I feel comfortable in the fact that my small portfolio of 5 properties are in Hawthorn, Surrey Hills and Malvern. I will take 10% every year... with the occassion 30-40% now an then.
There won't be forced sales... that's all I'm saying.
The outer ring of suburbs have a large number of customers who are really stretched, with two rate rises already priced in we will see some pain. I'm afraid I can't give you the analysis on this as it is the property of one of the banks.
I didn't intend to tell you something you didn't know, we all know the inner suburbs are proven performers. Hence it is why it is the only thing I will touch, I feel comfortable in the fact that my small portfolio of 5 properties are in Hawthorn, Surrey Hills and Malvern. I will take 10% every year... with the occassion 30-40% now an then.
There won't be forced sales... that's all I'm saying.
The outer ring of suburbs have a large number of customers who are really stretched, with two rate rises already priced in we will see some pain. I'm afraid I can't give you the analysis on this as it is the property of one of the banks.
Retire Early,
There is no right or wrong...do what floats your boat! I certainly do.
If you have 5 properties in the blue ribbon suburbs....I am presuming housing...I think you are set! If we assume 800K house that is 4 million in assets...if so well done!
The point, I think people are trying to make is if you were starting today or have a modest portfolio it would be very hard to acquire more than of these blue chips every couple of years due to the cashflow drain...as these properties typically have 3-4% returns. Having a diversified portfolio of mutiple properties across different cities and states also give you some risk management as OZ cities move in different cycles.
Sash
There is no right or wrong...do what floats your boat!
I certainly do.If you have 5 properties in the blue ribbon suburbs....I am presuming housing...I think you are set! If we assume 800K house that is 4 million in assets...if so well done!
The point, I think people are trying to make is if you were starting today or have a modest portfolio it would be very hard to acquire more than of these blue chips every couple of years due to the cashflow drain...as these properties typically have 3-4% returns. Having a diversified portfolio of mutiple properties across different cities and states also give you some risk management as OZ cities move in different cycles.
Sash
THERE WILL BE PAIN IN THE OUTER SUBURBS THIS YEAR! I have just completed an extensive review of a major banks mortgage portfolio and the outer suburbs are full of people who will be struggling with another rate rise. FORCED SALES!
The inner suburbs are strong, very low LVRs and the majority have the capacity to over pay on their mortgage... a very apparent trend, AUSTRALIA WIDE.
You might get a bargain in the outer suburbs as of plenty supply... you will be waiting a while for growth though, you may even see it comeback a bit western Sydney Like. Stick to Bluechip and buy early this year and you will probably get double digit....
I am not convinced on the ripple effect everyone talks of... yes the outer suburbs rise eventually... usually following a inner boom, but the inner keeps increasing consistently.
There is a reason why there is gap between inner an outer suburbs.... they are a better place to live with proximity to the city, schools and education.
Check this out very interesting...
http://www.latestsales.com.au/melbourne-price-growth/
Thank you so much for that information. It is consistent with what I experienced in the early 90's in MElbourne. Forced sales of some people I knew personally left them with negative equity. I do believe in the ripple effect but i think it is strong near the city and loses its strenth as it heads out. It makes sense that the pressure be on the small % close to the city. I think that you can make good money if you time your purchase ahead of the wave but in an outer area you may not then experience much growth for some time and the prices may be more sensitive to interest rate rises.
How much rate rise do you think is required to cause real pain further out? .5% ? Less?
In 1971 my father and his friend each bought a family home. My parents paid $13K and he paid $15K. He bought in Croyden. They bought in Canterbury. In 1988 they sold. He sold for $150K and my parents sold for $332,500K. Fast forward to today and the average price in Croydon is $367,250 and Canterbury $1,416,500.
They are not more proven than outer suburbs... If you work for a bank/ completed study for them, surely you would give importance to numbers, stats, factual evidence, past trends, etc.. ? Based on all of those, outer suburbs have never lagged behind inner in capital growth and in most cases they have exceeded the inner.
Have a look at this thread and come back.
http://www.somersoft.com/forums/showthread.php?t=34338&highlight=myth
Another misunderstanding and a big one... I have an inner melbourne blue chip portfolio that I acquired at the tail end of last boom in 2002. I didnt get a 10% increase each year.. far from it. I got 7% growth from late 2002 till well in 2006 and then 15% in 2006 and more than 40% in 2007. Almost exactly similar to most Melb blue chip suburbs.
What was the 10% each year growth you are referring to..?
Inner blue chip didnt get 10% each year even before the boom of 2000. No growth there for almost 6 years. Look at the growth charts.
Inner belt got hammered in 1991/ 1992 falling by over 15% in those 2-3 years alone. Then came a long patch of no growth followed by the boom starting in 1999.
This myth has been perpetuated so many times (and normally along the time of an inner area boom) that it almost sounds like fact.
I agree. There will be delinquincies in inner as well, however the number in outer will be far greater.
Point taken. Just that some of the charts and links you provided had such a "no-brainer" info, that I doubted at your claim of doing the study for the bank. I thought it was such basic info that everyone knew the info without you having to highlight the fact that median in inner is higher than median in outer.
Harris
Refer to earlier post - Inner get growth spurts like outer suburbs (one of those we just saw, one before started in 2000). Show me any 10 year period where inner suburbs saw a consistent 7-10% growth whilst outer lacked in that growth. I couldnt find any in the last 35 years of data.
Yep. It causes pain for a while and results in some forced sales. Then the interest rates stabilise (as is the uniform commentary amongst all economists that rates will stabilise late this year followed by a downward pressure). Once that happens, the cycle begins all over again and the growth spurts in outer always end up balancing the growth with the inner. And that gets reflected in long term charts.
I would be the last person to ever doubt the integrity of the information coming from you.. knowing you personally. However over the last 25 years, Canterbury has grown at a rate of 12.1 % and Croydon at 10.8% - (If you take 2007 out of the equation where Canterbury grew at close to 40%) then both Croydon and Canterbury grew at almost identical rate long term... There must be huge differences in the kind of property that they bought since median for both suburbs even back then had a big difference.
Harris
GoAnna
Inner city is not better than Outer suburbs and vice versa. It is much easier to build a property portfolio due to cashflow and serviceability.
I tend to agee with Harris....inner city propery does do well but over all the rates of growth change. Bare in mind some suburbs change a move faster than others....for example the traditional working class suburbs like Brunswick, Preston, Footscray are now in demand. In the 70s no body would touch them. This is driven by infrastructure and other amenities.
To use a example Gordon (a good upper Sydney North Shore suburb about 18Klms out similar to Canterbury) has not moved as a well like an outer Sydney suburbs like Quakers Hill (similar to Melton). For example in the early 90s the Gordon median was 500K now it over 1 million. At the same time Quakers Hill which is about 40 klms out has moved from a 90K median to 360K. This is predominately due to road infrastructure and other amenities.
Additionally, how many newbies could get in at 300k plus homes on a say an above average wage of 70K. If they buy a home at 300K with 10% deposit their shortfall today is going to be close to $180 week after tax deductions based on 280 per week rent.
Now if they bought somewhere in Melton...they could get a house for 180K and with a 10% deposit their shortfall would be around $65 per week after taxes.
So if you have only have 2-3 properties in better areas working for you vs say 7-10 properties spread over a couple of areas around the country you will spread your risk and cover the growth spurts OZ wide as cities perform in different cycles. Remember that eventually the growth will come of your asset base so 2-3 properties in years maybe worth 1.2 million vs say 2.4 mil. Even if the better portfolio grows at 10% pa you are adding 120pa in wealth but even if the less desirable portfolio grows at 8% it is still about 190K. So eventually there is a balancing affect.
Perhaps someone could do a poll on their networth and what type of properties predominate in their portfolios - outer vs inner suburbs. There will be some anamolies as some people could have bought in the once unfashionable inner suburbs very early on. But if you are starting a portfolio today and want build quickly this is a strategy that works. Margaret Lomas has built a $9 million portfolio using this strategy, so has Jan Somers (over $10 million), and Paul Giezemkamp (Property Secrets) in relatively short period of time 15 years.
My thoughts anyway....if you are still on Somersoft in 5 years...I will gently remind you... lol....lol...lol.
Inner city is not better than Outer suburbs and vice versa. It is much easier to build a property portfolio due to cashflow and serviceability.
I tend to agee with Harris....inner city propery does do well but over all the rates of growth change. Bare in mind some suburbs change a move faster than others....for example the traditional working class suburbs like Brunswick, Preston, Footscray are now in demand. In the 70s no body would touch them. This is driven by infrastructure and other amenities.
To use a example Gordon (a good upper Sydney North Shore suburb about 18Klms out similar to Canterbury) has not moved as a well like an outer Sydney suburbs like Quakers Hill (similar to Melton). For example in the early 90s the Gordon median was 500K now it over 1 million. At the same time Quakers Hill which is about 40 klms out has moved from a 90K median to 360K. This is predominately due to road infrastructure and other amenities.
Additionally, how many newbies could get in at 300k plus homes on a say an above average wage of 70K. If they buy a home at 300K with 10% deposit their shortfall today is going to be close to $180 week after tax deductions based on 280 per week rent.
Now if they bought somewhere in Melton...they could get a house for 180K and with a 10% deposit their shortfall would be around $65 per week after taxes.
So if you have only have 2-3 properties in better areas working for you vs say 7-10 properties spread over a couple of areas around the country you will spread your risk and cover the growth spurts OZ wide as cities perform in different cycles. Remember that eventually the growth will come of your asset base so 2-3 properties in years maybe worth 1.2 million vs say 2.4 mil. Even if the better portfolio grows at 10% pa you are adding 120pa in wealth but even if the less desirable portfolio grows at 8% it is still about 190K. So eventually there is a balancing affect.
Perhaps someone could do a poll on their networth and what type of properties predominate in their portfolios - outer vs inner suburbs. There will be some anamolies as some people could have bought in the once unfashionable inner suburbs very early on. But if you are starting a portfolio today and want build quickly this is a strategy that works. Margaret Lomas has built a $9 million portfolio using this strategy, so has Jan Somers (over $10 million), and Paul Giezemkamp (Property Secrets) in relatively short period of time 15 years.
My thoughts anyway....if you are still on Somersoft in 5 years...I will gently remind you... lol....lol...lol.
Totally agree (actually I am not sure how much we disagree at all). Capital growth is only one small part of the picture. I did not build my portfolio soley on inner Melbourne. (sure wish I had had the stack of cash to buy blue ribbon properties but alas I relied on finance for my strategy)
Our strategy focuses on unappreciated (usually completely overlooked by other investors) "x factor" blue ribbon properties with potential to improve (reno, develop, strata whatever) higher than usual yield for the given area AND (the most important thing) to buy just before the growth wave hits. Buying under market is also nice but not essential. Happy to sell if that moves our plan forward. We are happy to go so far out in Melbourne that we found ourselves in Geelong andTasmania
) So I am not sure what point I should argue with you. Yeeees. And some blue ribbon properties always had and continue to have excellent amenties, infastructure, services....Yes places go in and out of fashion and smart investors can take advantage if these changed perceptions. (we did
)Personally I woud want to be VERY confident of a good wave of growth in next 6 - 12 months to be negatively gearing in outer mortgage belt regions. (shoot me me down in flames hehehe)
Yes we appreciated the million dollar capital growth we received last year but would happily have swapped it for the multi millions we would have got had we the cashflow to hold the same sized portfolio in blue ribbon Melbourne.
Perhaps someone could do a poll on their networth and what type of properties predominate in their portfolios - outer vs inner suburbs. There will be some anamolies as some people could have bought in the once unfashionable inner suburbs very early on. But if you are starting a portfolio today and want build quickly this is a strategy that works. Margaret Lomas has built a $9 million portfolio using this strategy, so has Jan Somers (over $10 million), and Paul Giezemkamp (Property Secrets) in relatively short period of time 15 years.
My thoughts anyway....if you are still on Somersoft in 5 years...I will gently remind you... lol....lol...lol.
Why wait? We could chat now
BTW how did you source their property numbers?
Hi Sash,
I believe this would be an interesting poll. I have no idea how to set one up, but if someone does I will happily participate. I hold Inner and Outer properties as part of my portfolio. (As do lots of others no doubt!).
Regards Jason.
Hi GoAnna.
Congratulations on your success! Your portfolio is truly one to die for!!
Regards Jason.
Are the 12.1% and 10.8% figures compound interest rate %'s???
Outer Melbourne land values
Hey all,
Have been observing that over the last few months the supply of residential land in outer developing areas of Melbourne has been running behind demand.
to give a couple of examples....
Point Cook...Alamanda estate, if you want a block, it will only be titled near end of 08, people are camping out to secure some dirt!
Lyndhurst, Marriott waters estate, 19 of 22 blocks sell in 30 minutes last friday...titles expected sep/october.....
i have received emails from land sales agents, that due to demand and the cost of infrastructure increasing (whatever that means)...that there will be price rises greater than the "normal" ammount from stage to stage.
with land getting snapped up faster than it can be supplied, the fact that vacant land prices are increasing in the outer suburbs should help prop up or raise the price of established properties in these same areas as the cost of replacing a home increases by the increase in the value of the dirt its on.
watch the cost of construction as building suppliers and trades start to feel the squeeze of higher interest rates and petrol etc, which then gets passed on to the consumer...it seems that prices could be on the way up from this side also.
Combine a shortage of vacant land with 60 thousand new melbournites a year needing a roof over thier heads, and it should lead to a couple of things....higher rents and higher values, including the outer suburbs.
Cheers,
Hey all,
Have been observing that over the last few months the supply of residential land in outer developing areas of Melbourne has been running behind demand.
to give a couple of examples....
Point Cook...Alamanda estate, if you want a block, it will only be titled near end of 08, people are camping out to secure some dirt!
Lyndhurst, Marriott waters estate, 19 of 22 blocks sell in 30 minutes last friday...titles expected sep/october.....
i have received emails from land sales agents, that due to demand and the cost of infrastructure increasing (whatever that means
)...that there will be price rises greater than the "normal" ammount from stage to stage.with land getting snapped up faster than it can be supplied, the fact that vacant land prices are increasing in the outer suburbs should help prop up or raise the price of established properties in these same areas as the cost of replacing a home increases by the increase in the value of the dirt its on.
watch the cost of construction as building suppliers and trades start to feel the squeeze of higher interest rates and petrol etc, which then gets passed on to the consumer...it seems that prices could be on the way up from this side also.
Combine a shortage of vacant land with 60 thousand new melbournites a year needing a roof over thier heads, and it should lead to a couple of things....higher rents and higher values, including the outer suburbs.
Cheers,
Hey all,
Have been observing that over the last few months the supply of residential land in outer developing areas of Melbourne has been running behind demand.
to give a couple of examples....
Point Cook...Alamanda estate, if you want a block, it will only be titled near end of 08, people are camping out to secure some dirt!
Lyndhurst, Marriott waters estate, 19 of 22 blocks sell in 30 minutes last friday...titles expected sep/october.....
i have received emails from land sales agents, that due to demand and the cost of infrastructure increasing (whatever that means
with land getting snapped up faster than it can be supplied, the fact that vacant land prices are increasing in the outer suburbs should help prop up or raise the price of established properties in these same areas as the cost of replacing a home increases by the increase in the value of the dirt its on.
watch the cost of construction as building suppliers and trades start to feel the squeeze of higher interest rates and petrol etc, which then gets passed on to the consumer...it seems that prices could be on the way up from this side also.
Combine a shortage of vacant land with 60 thousand new melbournites a year needing a roof over thier heads, and it should lead to a couple of things....higher rents and higher values, including the outer suburbs.
Cheers,
Natedog
interesting comments about land supply for new blocks in the house and land areas, i was interested in your 60K new melbournites coming per year, where did this come from, i found stats on abs website that shows last year there was a net gain of 71,000 migrants to victoria or 1400 per week , but i hardly expect them all to go to melbourne, i would say maybe half at most which would be 35K per year, still alot in anyones book
Hi Sornen,
i think over the last 2 years it was about 49,000 and 51,000 population growth in melbourne each year....i remember the Herald sun brought out the same type of article 2 years running, showing the population growth of all capitals over the same period.
not sure where they got the info from ABS i guess....i then remember an article from somewhere that they had underestimated the growth of Melbourne somehow....i just picked 60,000 out of thin air, but you can bank on approx 50,000 per year increase anyway,
Cheers
i think over the last 2 years it was about 49,000 and 51,000 population growth in melbourne each year....i remember the Herald sun brought out the same type of article 2 years running, showing the population growth of all capitals over the same period.
not sure where they got the info from ABS i guess....i then remember an article from somewhere that they had underestimated the growth of Melbourne somehow....i just picked 60,000 out of thin air, but you can bank on approx 50,000 per year increase anyway,
Cheers
I remember reading 71K net migration just Melbourne. I believe that 41K is just in immigration. The remaining is from people moving within Victoria and other states. This represents almost 2% growth...which is considered very good.
I can personally attest to Land in the Western suburbs...whilst everyone is under the impression that there is plenty of land. There is not as supply takes time to develop. Blocks in Wyndam Shire has gone from 90-100K for 500 sqm plus square blocks to 115k-140k and wait for it....you have to wait it to register which can take 6-12 months.
The developers are very smart these days and will strongly control supply so this is not going to go away. The Melbourne developers are copying what is happening in Brisbane where land prices have gone from lwo 100k to almost 200K. They have worked out they can do less and sell less but make very good profits by controlling supply carefully.
I can personally attest to Land in the Western suburbs...whilst everyone is under the impression that there is plenty of land. There is not as supply takes time to develop. Blocks in Wyndam Shire has gone from 90-100K for 500 sqm plus square blocks to 115k-140k and wait for it....you have to wait it to register which can take 6-12 months.
The developers are very smart these days and will strongly control supply so this is not going to go away. The Melbourne developers are copying what is happening in Brisbane where land prices have gone from lwo 100k to almost 200K. They have worked out they can do less and sell less but make very good profits by controlling supply carefully.
thats fair enough nate, i'm not sure but i think your probably in the right ball park though, it would be good to get a source on this.
what does this mean? "41K is just in immigration"
surely the net figure is the 'just in'
see here: http://www.abs.gov.au/ausstats/[email protected]/mf/3101.0/
Victoria June 07 key figures show +76.9 thousand net or 1.5% increase; this increase represents only average growth in australia, WA and Queensland are growing @ 2.3 and 2.2% annually going on this data
how many of the 76,900 VIC bound are going to melly though that the question is it most? 1/2? 2/3?(probably)
STATES AND TERRITORIES: POPULATION AND GROWTH
The estimated resident populations for the states and territories at 30 June 2007 were as follows: New South Wales 6,889,000, Victoria 5,205,000, Queensland 4,182,000, South Australia 1,585,000, Western Australia 2,106,000, Tasmania 493,300, the Northern Territory 215,000, and the Australian Capital Territory 339,900. All states and territories recorded positive population growth over the 12 months ended 30 June 2007. Western Australia recorded the fastest growth rate (2.3%), followed by Queensland (2.2%), the Northern Territory (2.0%), the Australian Capital Territory (1.7%), Victoria (1.5%), New South Wales (1.1%), South Australia (1.0%) and Tasmania (0.7%).
Net interstate migration VIC is actually losing people here (2,200 people), but only a very small amount
http://www.abs.gov.au/ausstats/[email protected]&prodno=3101.0&issue=Jun 2007&num=&view=
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Here's another article, net +60k:
http://www.news.com.au/heraldsun/story/0,21985,22742898-2862,00.html
Not sure where Mr Salt gets his data, but going by past performance I assume he's good for it?
http://www.news.com.au/heraldsun/story/0,21985,22742898-2862,00.html
Not sure where Mr Salt gets his data, but going by past performance I assume he's good for it?
