Selling Townsville buying Adelaide

Hi All,


I am at the crossroads. Need some advice please. I have had a property at Douglas in Townsville for past 7 years. It is a really nice 4 bedroom house, former DHA , well maintained on a nice 650sm block. I bought it for $ 400K and I reckon I would be lucky to get $420K now. I have held it in the hope that it would bounce back to the boom period 2006-2007. ( yep, I bought at the top of the boom argh ). My rent has dropped from a high of $420 to $360 currently but I have had Zero vacancy.

Can anyone see Townsville picking up enough for me to continue to hold this property ? It is negative geared and I need to work our what I should do moving forward.

Do I bite the bullet and offload it and try another location, possibly Adelaide ?

The latest CG predications for Doulas QLD is :

  • Median price
  • $397,000
  • Quarterly growth
  • -0.50%
  • 12-month growth
  • 0.51%
  • 3-year growth
  • 2.45%
  • 5-year growth
  • -2.82%
  • Average Annual Growth
  • 4.00%
  • Weekly median advertised rent
  • $390
  • Number of sales
  • 120
  • Gross rental yield
  • 5.11%
  • Days on market
  • 70.99

Any advice is always appreciated.....
 
Hi All,


I am at the crossroads. Need some advice please. I have had a property at Douglas in Townsville for past 7 years. It is a really nice 4 bedroom house, former DHA , well maintained on a nice 650sm block. I bought it for $ 400K and I reckon I would be lucky to get $420K now. I have held it in the hope that it would bounce back to the boom period 2006-2007. ( yep, I bought at the top of the boom argh ). My rent has dropped from a high of $420 to $360 currently but I have had Zero vacancy.

Can anyone see Townsville picking up enough for me to continue to hold this property ? It is negative geared and I need to work our what I should do moving forward.

Do I bite the bullet and offload it and try another location, possibly Adelaide ?

The latest CG predications for Doulas QLD is :

  • Median price
  • $397,000
  • Quarterly growth
  • -0.50%
  • 12-month growth
  • 0.51%
  • 3-year growth
  • 2.45%
  • 5-year growth
  • -2.82%
  • Average Annual Growth
  • 4.00%
  • Weekly median advertised rent
  • $390
  • Number of sales
  • 120
  • Gross rental yield
  • 5.11%
  • Days on market
  • 70.99

Any advice is always appreciated.....

What was your initial plan? Seems like a long time to still be negative geared. When will it become positively geared? Why not hang onto it and make an additional purchase in Adelaide if it fits your journey?
 
I'm not familiar with Townsville so I'll focus on Adelaide :)

In Adelaide, considering a budget of say $400-450k excl. costs, you would for example be able to buy a quality, good condition or newly renovated 2-br unit (single storey) or a two-storey townhouse in the premium Eastern suburbs (built in 1970s-1980s) or beachside suburbs. There would be several other alternatives though, depending on your strategy.

Quality units provide a gross rental yield (annual rent divided by purchase price) of around 4.5 to 5% less strata fees = 4-4.5% after strata. According to rpdata, Annual Change in Median Price (10yrs) of units in the premium areas has been typically 6-9%. Typically, closer to CBD = higher CG. Therefore the total return on average over past 10 years (after strata) has been typically 10-13% (plus any tax benefits but building depreciation would be zero). Many of these properties enjoyed over 10% average capital growth in the past 15-20 years and some went up in value 3 times.
 
why not both?

Could you rent to buy your Townsville property out or look at room by room rental? I know to rent a room in Townsville around that area is hard to get.

Then since it is not neg geared you could go a head with your next purchase?

Of course depends if you can still borrow if you keep Townsville house.

good luck
 
What makes you think Adelaide has better prospects than Townsville?

Adelaide has been flat for 5 years, I know of a few suburbs that are still at circa 2008-2009 prices (obviously some have also outperformed the median). So if the only reason you want to sell up is under performance that you think will continue... well there's probably some investors in Adelaide who are in a similar position to you and might be thinking the same.
 
I have asked myself this question generally about Adelaide but when you can buy reasonable quality places for 7.5-8% yield and borrow money at 4.7% with relatively inexpensive rates and insurance costs it looks very low risk to me. Some are +ve geared at purchase or at least +ve casflow
Vacancy rates are also sub 3%, I don't really care that it hasn't done anything for some time, eventually it will and in the mean time I can hold/subdivide/ renovate/pay down debt or do nothing which suites my passive approach
 
Hi All,


I am at the crossroads. Need some advice please. I have had a property at Douglas in Townsville for past 7 years. It is a really nice 4 bedroom house, former DHA , well maintained on a nice 650sm block. I bought it for $ 400K and I reckon I would be lucky to get $420K now. I have held it in the hope that it would bounce back to the boom period 2006-2007. ( yep, I bought at the top of the boom argh ). My rent has dropped from a high of $420 to $360 currently but I have had Zero vacancy.

Can anyone see Townsville picking up enough for me to continue to hold this property ? It is negative geared and I need to work our what I should do moving forward.

Do I bite the bullet and offload it and try another location, possibly Adelaide ?

The latest CG predications for Doulas QLD is :

  • Median price
  • $397,000
  • Quarterly growth
  • -0.50%
  • 12-month growth
  • 0.51%
  • 3-year growth
  • 2.45%
  • 5-year growth
  • -2.82%
  • Average Annual Growth
  • 4.00%
  • Weekly median advertised rent
  • $390
  • Number of sales
  • 120
  • Gross rental yield
  • 5.11%
  • Days on market
  • 70.99

Any advice is always appreciated.....

So besides buying at the top of the market what other lessons were there?

You bought a new house in boom time = higher cost of building (Perth....)
You bought in a newish area where land is worth less and most of the property value is in the new house construction

how can you expect capital gains when most of the tenants in the area have subsidised rent and if they were to buy they would lose those benefits ?

Douglas also has average proximity to CBD being the outer suburb

I think DHA is an ok strategy for people who like to set and forget and have no fuss tenants pay down their mortgage - but this doesn't sound like you

Hope that rant helps as it would be easy to make the same mistakes in Adelaide

We settled on a place in townsville (west end ) a month ago
Purchased for 398, vendor purchased for 480 in 2007

Ouch
 
Hi Strongy,

Having just purchased in Townsville - you must have some degree of confidence in the market or was it more that you bought so well and can ride out the next few years ?

My Townsville House is a quality house, well looked after, nice area. But I don't know whether I have the patience to hold for another 5-7 years in hope of CG.

I know that you don't own a crystal ball but can you see the market up there improving any time soon ?

Cheers
 
Hi Strongy,

Having just purchased in Townsville - you must have some degree of confidence in the market or was it more that you bought so well and can ride out the next few years ?

My Townsville House is a quality house, well looked after, nice area. But I don't know whether I have the patience to hold for another 5-7 years in hope of CG.

I know that you don't own a crystal ball but can you see the market up there improving any time soon ?

Cheers

The market there is at a trough and the city is at a low point, can it go 15 years without growth? Doubt it

Townsville would probably be the 10th biggest city in Australia. Compare the land prices to any other similar sized city - much lower

Compare incomes - generally much higher, unemployment has spiked though

So I think it should come good it has a pretty diverse economy

Question to you, why do you think it's a nice area?

I'm not saying it's bad but look at it on a map of townsville
 
Hi Strongy,

Having just purchased in Townsville - you must have some degree of confidence in the market or was it more that you bought so well and can ride out the next few years ?

My Townsville House is a quality house, well looked after, nice area. But I don't know whether I have the patience to hold for another 5-7 years in hope of CG.

I know that you don't own a crystal ball but can you see the market up there improving any time soon ?

Cheers
I don't think your hold timeframe is long enough CG is not guaranteed anywhere but eventually there will be some.. It has to be a long term game IMO
 
I'm also looking to buy in Townsville while it's pretty flat, some good buys to be had. Pretty sure it will pick up when the QLD government gets their stuff together.
 
What makes you think Adelaide has better prospects than Townsville?

Adelaide has been flat for 5 years, I know of a few suburbs that are still at circa 2008-2009 prices (obviously some have also outperformed the median). So if the only reason you want to sell up is under performance that you think will continue... well there's probably some investors in Adelaide who are in a similar position to you and might be thinking the same.

In my experience market in Adelaide has been far from flat. Yes, on average Adelaide prices are only 3-5% above the peak of 2010 so the market has been down and up and patchy over the past 5 years or so.

But there is no single market of course. Quality, well-located properties in Unley, Mitcham and prticularly Norwood councils have experienced 10% or more growth in the past 12 months alone... but of course not all properties.

Going back to the well located, premium suburbs units, if one looks at the resale figures of the same properties (multiple sales over time) units that now sell for $370-410k would have typically sold for $130-150k around 2000-2001 (of course some renovation would have been required in that time). Time in the market. Food for thought.
 
In my experience market in Adelaide has been far from flat. Yes, on average Adelaide prices are only 3-5% above the peak of 2010 so the market has been down and up and patchy over the past 5 years or so.

But there is no single market of course. Quality, well-located properties in Unley, Mitcham and prticularly Norwood councils have experienced 10% or more growth in the past 12 months alone... but of course not all properties.

Going back to the well located, premium suburbs units, if one looks at the resale figures of the same properties (multiple sales over time) units that now sell for $370-410k would have typically sold for $130-150k around 2000-2001 (of course some renovation would have been required in that time). Time in the market. Food for thought.

A very important point.

To look at Adelaide/State figures and to extrapolate to investing in the area as a whole isn't going to give you a realistic view.

Prime and super-prime markets have especially been going strong, the 1mil+ bracket has done quite well.

Even inner-middle ring 400-600k houses have been moving well during this period - last auction I was at recently had 12 registered bidders and went 15% above the very realistic price guide. Development sites are going crazy, in auction conditions shooting as high as 30% above expectations as there is extensive capacity in the market at this time.
 
In my experience market in Adelaide has been far from flat. Yes, on average Adelaide prices are only 3-5% above the peak of 2010 so the market has been down and up and patchy over the past 5 years or so.
You are right, it's had ups and downs over that time, what I meant is that prices are flat if you compare now to 5 years ago.

If you think Adelaide prices will continue to rise (as they have done on average from around mid 2012), what do you think will be the key drivers (specifically those which might differentiate the city from other markets)?
 
This is a $100,000 question hobo-jo. I wish I had a clear answer to it :)

I'm cautious about looking for a few clear drivers in any large, mature market. For example it's hard to explain using just "drivers" what happened in Sydney over the last two years with prices going up 30% in some places...

For a 5-6 years now Adelaide has been underperforming the trend and a large market like this is eventually going to turn the corner and catch up with its own long-term trend. It always did over the past 20-30 years, and there were some large corrections at times.

Affordability will be a factor too. With prices in real term below 2010 level many quality properties in great locations look cheap by comparison to Eastern states... which fuels growing number of enquiries I've been receiving, both locally and from Sydney and Melbourne.

I also think that the "supply and demand" model is a better way to understand what's happening. I believe that past performance is a good indicators of the future performance providing there is no significant negative change to supply-demand equation and no negative change to socio-economic equation in a given area.

There would be suburbs in Adelaide where the demand for some properties had been continually growing for a long, long time yet the supply had been getting tighter and tighter. Take the 2-bedroom single storey units near "hotspots" of Norwood or Unley for example. Parkside has one of the highest demand ratios in the whole of Australia...

I would certainly not recommend whole of Adelaide but expect some areas to do well for some types of properties. Time will tell :D
 
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