Potts Point Studios / 1 Bedrooms on a tear due to first home owners grant. Sell?

Hey guys I used to live in Sydney but I moved to HK 2 years and have been watching the low end housing market in Sydney rip up with interest due to the FOHG. In particular Potts Point as I have a 1 bedroom and studio apartment there. I spent a bit of time researching this weekend and sent something out to my friends (see below), I reckon its time to sell. My units have run up 20% pa pretty good return for the crappy current investment climate. What do you guys think? Comments / feedback welcome thanks for your time!

----------------------------------------------------------------------

On 14 October 2008, the Australian Government announced that it was introducing the First Home Owners Boost, which together with the current $7,000 First Home Owner Grant (“FHOG”) and the Bonus Grant ("FHBG") of up to $4000 will provide first home buyers with up to $25,000 on new homes purchased or built before 30 June 2009. First home buyers purchasing an established home may receive up to $18,000.

From the rough data set I looked at it looks like lower end properties in Potts Point have moved up aggressively since this policy announcement. Rudd still has to announce what he’s doing with at the end of June. Interest rates still trending down and don’t look like popping back up in the near future which should keep Aussie property relatively well supported in the near future.

Thus, I’m thinking wait till end of June and revaluate I think once Rudd releases his policy on first home owners grant and whether he’s going to extend it. Aiming to sell in approx 6 months as I think the first home owner property prices have a little bit more room to move. Going to keep an eye on interest rates and unemployment numbers if the former starts to turn up or the latter starts to get worse I’ll probably sell earlier as these two are the key drivers for property in Australia in my opinion.

Tax wise its more advantageous for me to sell while I’m overseas as I effectively only have to pay 30% on half the capital gain vs it being the top tax rate if I were to work in Sydney and sell it when I get back. My understanding if I remember right is that I have to pay CGT still on physical property in Australia as it is not excluded can anyone confirm this? However its paid on non resident income threshold rates i.e. 30% on half the gain.

I’ve attached an estimate of what my estimated gains are: gross for each property are approx 20% and net is approx 17% after tax if I sell (see attached spreadsheet). Not bad for a shitty investment climate in the last 3 years and I still maintain that I think this temporary slowing down of bad economic data / people talking about green shoots recovery / bounce in stock markets is a temporary bounce in a terrible investment climate and things are going to turn south again hitting new lows within the next 1.5 years. So I'm happy to sell down at a good price and reduce my leverage a bit.
 
Hey guys I used to live in Sydney but I moved to HK 2 years and have been watching the low end housing market in Sydney rip up with interest due to the FOHG. In particular Potts Point as I have a 1 bedroom and studio apartment there. I spent a bit of time researching this weekend and sent something out to my friends (see below), I reckon its time to sell. My units have run up 20% pa pretty good return for the crappy current investment climate. What do you guys think?

I'm a big advocate (excuse the pun) of 'buy and never sell'. You have proven these units to be a good investment - i.e. they went up 20% in a "crappy current investment climate". You can always refi $cash out of them as they grow. Why lock yourself out of future CG forever?:confused:

However, if you are still determined to sell, then IMO the time to do so is before 30 June this year. Plenty of federally cashed-up FHBs out there falling over each other to pay top $ for your property.;)
 
I'm a big advocate (excuse the pun) of 'buy and never sell'. You have proven these units to be a good investment - i.e. they went up 20% in a "crappy current investment climate". You can always refi $cash out of them as they grow. Why lock yourself out of future CG forever?:confused:

However, if you are still determined to sell, then IMO the time to do so is before 30 June this year. Plenty of federally cashed-up FHBs out there falling over each other to pay top $ for your property.;)

Hey thanks for replying. I generally believe in the buy don't sell as well but I think these units aren't quality (1 is next to brothel!). I really think its a temporary increase due to government policy thats why....

Better to leverage in this investment climate and park the cash somewhere and wait for a rebound and buy some shares or something...
 
I understand your dilema...I've bought a cheap 2 bedroom unit in Auburn 2 years ago that is up over 20% (part of that being from first home owners grant and part from falling interest rates). Not sure if I sell or not. Cashflow neutral after all expenses.

You need to be aware of budget announcements FHOG increase to $14k (for established properties) remains in full until 30 Sepember...then halved until end of December.

Are your units self funding (cash-flow positive) now? And where do you see rents and interest rates in 3 years time?

Can you put the $ from the sale to better use...i.e. sharemarket etc.

For me the more liquid your investment is (the most liquid being cash) the more likely the equity you have will flow away from you.

Have lived in Hong Kong for a while...sometimes being in another country
/market can give you good perspective on the Australian market (detachment). Found the financial information available in Hong Kong via news/tv far superior to Australia.



Ajax
 
Hey Ajax. Thanks for your responses.

There are positive cashflow right now and will be even better when I get off my fixed rate interest loan expiring soon. Thanks for the heads up on the FOHG just saw it tonight when i watched 7.30 report online and read the budget papers. I'm inclined to wait till end of August and review my situation.

No view on rents as I don't live there any more. I work in financial markets so my view of interest rates is pretty much consensus, Australia willl be flat to down even more giving a natural supposedly bid to property. Having said that the risk is economy turns down (which I think it will this bounce in share markets and everyone getting exceited about recovery I think its crap) thus I"m happy to sell and leverage a bit and sit on cash.

I'm prob biased from my job but I get paid to time the market and I"m happy to sit it out for now in cash leverage I can always get back in and buy stocks at any time with the cash or a better performing property (albeit with transaction costs over again).

One thing also is I bought a property in HK and that is massively leverage up although +ve cashflow. My wealth is heavily skewed towards property as well so I'm happy to reduce.

Having said all this I did my analysis and numbers and gut tells me to sell. But I have a soft spot for my Sydney properties (which is bad on an investment point of view) since I slogged it out when I was younger in blood sweat and tears to find good deals...

I understand your dilema...I've bought a cheap 2 bedroom unit in Auburn 2 years ago that is up over 20% (part of that being from first home owners grant and part from falling interest rates). Not sure if I sell or not. Cashflow neutral after all expenses.

You need to be aware of budget announcements FHOG increase to $14k (for established properties) remains in full until 30 Sepember...then halved until end of December.

Are your units self funding (cash-flow positive) now? And where do you see rents and interest rates in 3 years time?

Can you put the $ from the sale to better use...i.e. sharemarket etc.

For me the more liquid your investment is (the most liquid being cash) the more likely the equity you have will flow away from you.

Have lived in Hong Kong for a while...sometimes being in another country
/market can give you good perspective on the Australian market (detachment). Found the financial information available in Hong Kong via news/tv far superior to Australia.



Ajax
 
Back
Top