Not the time to buy yet in Melbourne?

[ceciliaa]

Hi all,
I'm fairly new to the property investment market and I've been asking around alot in terms of when and where to buy as a first time home buyer.
Firstly, where -
I don't really mind where I buy my property, it may be a long term investment for either me to live in for the first 6 months, then be turned into an investment property or just me living in there permanently (until I upgrade of course)
I've looked at and researched a few places that could experience growth later on through the years and they include flats in Box Hill (high return on rent) and also one bedder flats very close to the CBD (Brunswick, Fitzroy, St Kilda, Preston, Thornbury, Murrumbeena and Carnegie) You can't really get much bang for your buck in these suburbs as the price range that I'm looking for (max 250k) can only get you flats in these suburbs.
I've also looked at 2 and 3 bedroom units/houses further out from the CBD (no more than 20km) from all sides of Melbourne including Broadmeadows, Thomastown, Epping, Glenroy, Noble Park and Reservoir.
So here's the decision - should I choose a smaller house closer to the city or a larger house further from the city. Taking both aspects of living or investing to account. I'm not sure if this is correct but I'm assuming I could probably expect that same rental returns for some of the one bedroom flats I've been looking at as the larger places in the cheaper suburbs. $250-260 seems the norm for one bedroom flats in the above mentioned suburbs close to the CBD.
Also, I am receiving conflicting information of when to buy a property. A couple of people have told me to wait 4-6 months as we have yet to see the full decline and impact of the global economic crisis on the property market. But with the new home owner grant and interest rates sharply declining, I'm worried that this injection to boost economic activity might balance out the dip in prices. Should I be hesitant and wait it out? Or is now the time to pounce?
Your advice would be greatly appreciated!

EDIT:
I've spoken to my dad and he keeps telling me to hold and wait until he says goes. I'm getting really frustrated because he acts as if he knows when prices will reach rock bottom. Can anyone prove him wrong?

 

[bailz66]

If you think about being a first home buyer in australia there are a few things to consider.

Right now there is 21k first home buyers grant for new homes or 14k for existing homes.

That will drop back to 7000 come july 1 next year.

Now if you were to buy a house after july next year in the first home buyer range prices should come off quite a lot but you will see a lot less sellers. Leading up to july all the first home buyers will be trying to get in before july 1 when the grant ends thus pushing up prices.

You need to decide where you want to fall. Cheaper prices afterwards or more expencive but grant prices before.

Personally i think if you buy in any of the middle ring suburbs you are doing ok and any of those inner suburbs would also be great. Try to pick up a bargain as a few should be coming up on the market.

Anyways best of luck

 

[Gools]

That will drop back to 7000 come july 1 next year.

That's a huge assumption. Wouldn't be unusual for the grant to actually be extended.

Ceciliaa, you're asking some tough questions that not even the experts know at the moment. Me personally, I'd be waiting till at least next year to see how it all shakes out.

You'll need to consider running costs (rates, body corp etc) when looking at Units v Houses. I think units are easier for newbies into property. I find they have less things to worry about than an old house in the outer suburbs.

Can I simplify it and say they are selling at their percieved value so you can't pick one area / property type over the other??

 

[ceciliaa]

Can I simplify it and say they are selling at their percieved value so you can't pick one area / property type over the other??

Ah, didn't quite get that sorry, do you think you could elaborate?

 

[Gools]

Ah, didn't quite get that sorry, do you think you could elaborate?

The market is setting the same value for the inner city unit as the outer suburban house. Isn't that a fair indication of their value so asking here which one you should buy will not be of much benefit unless you are going to show certain specific properties for us to indicate which is better?

If one is seen to be a better investment than the other then wouldn't it already be shown in their current pricing? You're asking for someone to hold your hand but they would be just guessing right? I'd be trusting my research and the market.....

 

[Bayside]

Everyone is so big at the moment on inner city appartments but what happens when the city gets so over populated, polluted and full of crime that the prices drop and people want to go back to having a backyard for the family. Say 10-15yrs from now
Could happen?

 

[feihong]

Everyone is so big at the moment on inner city appartments but what happens when the city gets so over populated, polluted and full of crime that the prices drop and people want to go back to having a backyard for the family. Say 10-15yrs from now
Could happen?

I'm seeing vacancy in CBD apartments rising significantly in the next 6-18 months due to unaffordable rent and waning demand for CBD (job loss = no need to pay premium for walking distance to work), putting downward pressure on both rents and prices of CBD apartments. Already, students are slowing shunning away from CBD and moving to cheaper inner suburban dwellings, and it wouldn't surprise me if younger singles/families moving back with parents in times like this, creating oversupply of rental properties.

So, it's actually a good advice to wait and see.. lot of opportunities will come soon.

 

[sash]

It is already happening in Sydney.....suburbs like Randwick (East) and Lower North Shore the rents are coming off.

Meanwhile rents in Bankstown and Liverpool areas the rents are still rising!

I'm seeing vacancy in CBD apartments rising significantly in the next 6-18 months due to unaffordable rent and waning demand for CBD (job loss = no need to pay premium for walking distance to work), putting downward pressure on both rents and prices of CBD apartments. Already, students are slowing shunning away from CBD and moving to cheaper inner suburban dwellings, and it wouldn't surprise me if younger singles/families moving back with parents in times like this, creating oversupply of rental properties.

So, it's actually a good advice to wait and see.. lot of opportunities will come soon.

 

[Aaron Sice]

you'll lose 2 months out of those 4-6 months you mentioned in settlement - god knows how many IR drops we will see in that time. why wait for conditions to improve and have everyone else out there? 6 months is not a long time.

if you want to buy - i see no reason why not to if you find the right property - unless the yield is poor and you are paying more than the surrounding units.

even just fresh carpet / paint / blinds / light fittings / power points can improve your yield by $20-$30pw. something to think about there.

my advice? dont be afraid to haggle hard. not stupid - just hard.

 

[aussierogue]

Your dad is right. Read the papers....there is a twice in a 100 years financial storm happening and it aint turning around soon...you will lose nothing waiting but you might lose big if you jump..

 

[Jamie_D]

I reckon hold off, save more coin and wait for further IR drops so capacity to lend increases

You can even buy some apartments in Melbs where the developer is willing to rebate stamp duty on completed properties.

Why not also look at house and land packages...settle on the land with FHOG.

FYI some of my clients are fortunate to have great parents who assist with equity and servicing for siblings surprising!....
makes it a lot easier to enter the market and saves a heap in mortg insurance.

Sounds like the old man knows a thing or two...he might even be prepared to help in some way too...why not ask...

 

[Carl]

hey Cecilia,

Welcome

Personally i am currently thinking that i will again take the jump at the end of next year. I bought a place end of last year because it was the right time for me for many reasons, and now it is looking towards being neutrally geared when i rent it out in a few weeks.

My bankers have been recommending since end of last year that there is a lot more to hit the markets and to hold out until the end of next year/start of 2010. My thinking is that it is quite strange that they dont want me to borrow at the moment! Seems honest, especially because they have sort of foreseen all the problems of this year (or at least that there were going to be problems)

 

[BayView]

I spoke to one of our local agents last week (Dromana) and he said there are very few buyers, and more desperate sellers coming out. A few Bank sales as well.

He is selling a few properties for a fair bit below their last year's valuations - mostly newer spec projects where the developer's have got caught and needing cashflow.

I'd say that with more rate drops coming, the next 6 months will a very good time to look more seriously.

 

[StanZ]

hi Cecilia,

my 2c worth - do some research on buyers agents - and meet up with a few of them before making any judgements. As they are in the market 100% of their time - their feedback on the market will be a lot more accurate.

Once you've gathered the information - make a decision whether to buy by yourself or get some help - but in either case - most of the above will do a free consultation where you can try to glean as much info as possible.

pm me for some names if you want.

cheers,
stan

 

[buzzlightyear]

The price points you are referring to, will be the strongest in an overall subdued market. However strong doesn't mean substantial price movements either.

You have time to research, really get to know your areas like the back of your hand. The test will be, when seeing a property, you could realistically pick its market value & rent without any input or guidance from the REA.

Comments from your father remind me of some of my family members on occasions over the past 7-8 years. The fact is, they might be right this time. However, its only being in the market can you see & sense market sentiment and a better appreciation of where prices are.

Many more learned people on this site & elsewhere have indicated a bad 2009. How bad, I wouldn't know, but it can't be a positive to prices at least in the short term. I don't know when the bottom will be reached, but my gut tells me sometime in late 2009.

 

[Nth Brisbanite]

Although I live in Brisbane, I know the Melbourne market fairly well. I agree with your father. I'd hold off to middle of next year. Unemployment appears to be rising fairly quickly and people will be reluctant to buy property. The credit crunch is starting to impact on those who want loans again reducing pressure on demand.

 

[Property Meister]

Although I live in Brisbane, I know the Melbourne market fairly well. I agree with your father. I'd hold off to middle of next year. Unemployment appears to be rising fairly quickly and people will be reluctant to buy property. The credit crunch is starting to impact on those who want loans again reducing pressure on demand.

thats exactly what a few people I have known have said and I was thinking about the lines as well..

uneemployment, hasn't been hit fully yet, so the full effects of these economic problems hasn't quite landed. so it may be another few 6-8 months before the full effect is known.