Melbourne vs Perth

[popo7]

You must be joking, seriously this is incredibly high risk at the moment, this market is still falling including rents, with an oversupply of stock its not going anywhere.

Mining is a dead duck at the moment and companies are sacking not employing people. Recovery could be 10-20 years away, mining cycles are not like property cycles, 7-10 years.

MTR

But wouldn't mining crash affect the property market ?

 

[popo7]

A lot more room for development?

What exactly do you mean by this

Land for development?? If that's what you mean then it's a bad thing not a good thing

What I mean is Perth has more potential for development on city infrastructure such as bus routes, railroads, means of transport etc. Where as Melbourne is fairly developed and no other drastic improvements can be made.

The development of the city correlates with population and ultimately price of property. Therefore, Perth properties are still relatively cheap. You can buy a good 2 by 1 or 3 by 2 unit for much less than if it was in Melbourne or Sydney. If my theory is correct, the property price of Perth will eventually catch up to Melbourne and thus a bigger margin of profit can be obtained if you purchase a property in Perth now than in Melbourne.

Is it safe to now conclude that Perth is a better buy in general than Melbourne? I am no expert and seems you guys are and would appreciate your thoughts to this.

Kind regards,
Jo

 

[popo7]

It's much easier to make money in a rising market, Melb is still rising. Find areas that fit your budget and find out what product is selling. View auction clearance rates etc etc.

Perth stocks are increasing, therefore in many areas supply is greater than demand.

MTR

Hmm normally property markets run in cycles. When there is a period of boom there is a period of decline. At the moment Perth property prices in general have flattened and may present a good buying opportunity. If I purchase a property in Melbourne at the peak of the cycle, this may not be a good idea.

 

[popo7]

Fantastic advice TB.

Jo, as TB said above, what and where to buy is dependent upon your chosen investment strategy.

You see property is merely the vehicle. The strategy is how you intend driving that vehicle.

Unfortunately the mistake I see newbies and sometimes not so newbies is that they are property focused instead of strategy focused which is like putting the cart before the horse.

Property investing is not about property rather about the strategy and the way you intend to use the vehicle to get to where you are wanting to go. No good buying a small shopping car if you intend driving interstate on a family holiday.

What strategy/s are best for you is determined by where you are wanting to go, the time frame you want to get there in and how hands on along the way you want to be - all based around your personal risk profile.

I hope this provides some food for thought.

What is your chosen investment strategy?

Hi Rixter,

I've actually been stalking you for some time reading on your success stories!!!
I can see you went for the LOE method over cash flow. You must have huge debt but also equity. How can you sleep at night knowing that the property market may crash one day and watch your equity disappear?

I guess you have been doing this for sometime but what about people who have just recently entered the property market and would like to go for the LOE method. Do you think it's good to have lot of debt to finance multiple properties at this time? How certain are you that property prices will keep on increasing? How do you determine when to enter the property market especially when now it seems so expensive?

Kind regards,
Jo

 

[popo7]

With that sort of $$ just buy one house in melb and one in perth. Buy a house not a unit.

Can you please tell me how can I buy 2 houses with that kind of money? Houses seem to be so much more expensive than units these days. A 2 by 1 house in a good location in Melbourne would cost you 500 to 800k where as a unit will be 400 to 700k.

Also why do you recommend houses over units?

 

[Rixter]

I can see you went for the LOE method over cash flow. You must have huge debt but also equity. How can you sleep at night knowing that the property market may crash one day and watch your equity disappear?

Yeah there is debt, its all paid for by the tenants. The portfolio is structured for CG and as such its value far outstrips the debt. There would have to be a toxic waste dump built in the middle of the city for the supply/demand equation to affect the CG. With all the equity I sleep like a baby.

Do you think it's good to have lot of debt to finance multiple properties at this time? How certain are you that property prices will keep on increasing? How do you determine when to enter the property market especially when now it seems so expensive?

It would take a long long time to save to purchase IPs if leverage was not available. Show me where good quality well located property in middle market metro areas of mainland cities hasnt increased over 10 years?
Look back to what median prices were 10-20 years ago? In 10-20 years time you will look back at todays prices and think how cheap it was in 2015. There is no guarrantee's for anything but as long as I place myself to be position for CG and minimise the risks along the way, IM way way ahead of doing nothing and letting fear dictate my position in life.

I hope this helps.

 

[Rixter]

Also why do you recommend houses over units?

Jo, I prefer to purchase Townhouses & Villas with courtyards of 30% or greater land area thereby eliminating multi story units / high rise apartments with balcony's, for several reasons. The mains ones being (in no particular order) -

1/ lower maintenance & upkeep for the tenant

2/ lower purchase or entry level into a Higher capital growth suburb area

3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Baby boomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.

4/ greater tax advantages & effectiveness thus maximises cash flow.

5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak.

I hope this provides some food for thought.

 

[MTR]

But wouldn't mining crash affect the property market ?

Of course, have you looked at Perth market today

 

[MTR]

What I mean is Perth has more potential for development on city infrastructure such as bus routes, railroads, means of transport etc. Where as Melbourne is fairly developed and no other drastic improvements can be made.

The development of the city correlates with population and ultimately price of property. Therefore, Perth properties are still relatively cheap. You can buy a good 2 by 1 or 3 by 2 unit for much less than if it was in Melbourne or Sydney. If my theory is correct, the property price of Perth will eventually catch up to Melbourne and thus a bigger margin of profit can be obtained if you purchase a property in Perth now than in Melbourne.

Is it safe to now conclude that Perth is a better buy in general than Melbourne? I am no expert and seems you guys are and would appreciate your thoughts to this.

Kind regards,
Jo

You don't need to be an expert, all you need to know is what market is rising and what market is falling and what product is in demand

 

[popo7]

Jo, I prefer to purchase Townhouses & Villas with courtyards of 30% or greater land area thereby eliminating multi story units / high rise apartments with balcony's, for several reasons. The mains ones being (in no particular order) -

1/ lower maintenance & upkeep for the tenant

2/ lower purchase or entry level into a Higher capital growth suburb area

3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Baby boomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.

4/ greater tax advantages & effectiveness thus maximises cash flow.

5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak.

I hope this provides some food for thought.

Thanks Rixter I agree with pretty much everything you said! Just hope that the market keeps on rising like it did in the past!!!

 

[Rixter]

Thanks Rixter I agree with pretty much everything you said! Just hope that the market keeps on rising like it did in the past!!!

Thanks Jo. You just have to conduct your appropriate DD, make a decision, have faith in your decision and the courage to step out of your comfort zone to take action.

The above is why it's the starting that stops most people. Mindset is the controlling factor.

I hope this helps.

 

[MTR]

The development of the city correlates with population and ultimately price of property. Therefore, Perth properties are still relatively cheap. You can buy a good 2 by 1 or 3 by 2 unit for much less than if it was in Melbourne or Sydney. If my theory is correct, the property price of Perth will eventually catch up to Melbourne and thus a bigger margin of profit can be obtained if you purchase a property in Perth now than in Melbourne.

Is it safe to now conclude that Perth is a better buy in general than Melbourne? I am no expert and seems you guys are and would appreciate your thoughts to this.

Kind regards,
Jo

Hi Jo

This is what has happened recently in Perth, no guesses, the facts

2012- (mid) 2014 - rising market Perth
Properties that performed that had the greatest growth were generally development sites.

Perth market is currently falling back or going sideways. Why? because there is more stock coming on the market, supply vs demand. When we had a rising market in Perth, I believe it was something like 30% FHB jumping in, not the case at the moment

The logic that Perth will catch up to Melb is flawed, there are many other factors to consider than just population growth.

Perth is cheaper than Melb? there are so many areas/suburbs I don't really understand this comment, one size does not fit all.
I actually see the opposite in my particular market in Melb, if I compare proximity/km to CBD

Happy hunting, just keep looking/researching. If you still think you want to buy in Perth, don't rush, you have plenty of time for reasons mentioned above.

If you considering Melb, you need to work on this now as the market is moving fast in certain pockets.

MTR

 

[nevernotspurs]

Perth is cheaper than Melb? there are so many areas/suburbs I don't really understand this comment, one size does not fit all.
I actually see the opposite in my particular market in Melb, if I compare proximity/km to CBD


MTR

Something that always needs to be rememebered... You can talk about the overall pictures of Melbourne and Perth but there are always suburbs and areas that aren't following the pattern for whatever reason which I've seen first hand with a suburb like Forrestfield.

 

[Deltaberry]

Hi guys,

Deciding on where to buy an ip. Which city in the long term is a better investment: melbourne or perth?

Looking at the property prices I find I can find better value for money properties in perth than melbourne. Melbourne is already developed im not sure how it can further develop to increase house prices. What are your thoughts?

Cheers
Jo

Melbourne, easy. Perth won't even reach Melbourne's current population in 15 years, nor have its culture etc. Yet its prices are almost on par.

 

[boeman]

Melbourne, easy. Perth won't even reach Melbourne's current population in 15 years, nor have its culture etc. Yet its prices are almost on par.

Been out in Perth recently?

I cant think of anything Perth doesn't have now in regards to entertainment and culture that Melbourne doesn't, except for sporting events. We have the best entertainment centre in the country and bars and restaurants popping up everywhere.

 

[MTR]

Something that always needs to be rememebered... You can talk about the overall pictures of Melbourne and Perth but there are always suburbs and areas that aren't following the pattern for whatever reason which I've seen first hand with a suburb like Forrestfield.

I agree with you, price point/product comes into play, so many variables, there will always be pockets that may be going against the trend, and its a matter of finding out where and what.

I have just sold all my villas in Spearwood in just over one month, even though the market has softened, why? price point, product and buyers - employees Fiona Stanley Hospital.

However, if we talk in general terms at the moment, Perth/Melb, one market is a buyers market while the other is a sellers market.

I am not dismissing Perth completely, but IMO if you want less risk and prepared to step outside your comfort zone it would be easier with the buy and hold strategy to go Melb.

MTR

 

[MTR]

Been out in Perth recently?

I cant think of anything Perth doesn't have now in regards to entertainment and culture that Melbourne doesn't, except for sporting events. We have the best entertainment centre in the country and bars and restaurants popping up everywhere.

This is true, Perth has really come out of the dark ages for sure. Had a friend from Melb come over recently and I think they were pleasantly surprised

The issue I see with regards to property in Perth at the moment is market sentiment, this creates uncertainly and buyers then sit on their hands and they have choices. Agents tell me that buyers don't rush in now, they keep looking because they can, an indication that there is plenty of stock around.

I am sure many will continue to make money because they will find pockets that buck the trend, buying well and possibly using other strategies other than buy and hold.

 

[MTR]

Melbourne, easy. Perth won't even reach Melbourne's current population in 15 years, nor have its culture etc. Yet its prices are almost on par.

Median on par, but this can change very quickly when one market is rising and the other is going sideways or falling.

Last Perth boom cycle, talking about the mother of all booms end of 2006 prior to crashing (I refer it as mother.... because this Perth cycle went from 2001-2006 Dec). Perth Median was close to $690-700K, it actually for first time ever went slightly higher than Sydney Median house price, not for long perhaps 1 month?? as the Perth market crashed shortly afterwards.

Now we see Syd median house price close to $1M, Perth median house price I think is around $560K 2015.

My point is Melb median will end up much higher than Perth median, how much higher, I don't know as its dependent on how long the Melb markets continues to rise. It will be very interesting to watch this over the next 6-12 months and how it plays out.

Amazing what can happen when a market is booming, fact can be stranger than fiction.

MTR

 

[Rixter]

Been out in Perth recently?

I cant think of anything Perth doesn't have now in regards to entertainment and culture that Melbourne doesn't, except for sporting events. We have the best entertainment centre in the country and bars and restaurants popping up everywhere.

I can think of one thing Perth does, that Melbourne doesn't - Close shop at 10pm.

 

[JDP1]

I can think of one thing Perth does, that Melbourne doesn't - Close shop at 10pm.

Correction. They close at 6pm sharp.)