Should Cap. City / Metro Valuations Concern Me?

[azzae89]

Extremely broad question I know. But considering Aussie property is being touted as grossly overvalued and 'bubblicious' would buying right now in say Sydney or Melbourne be wise (from a value for money standpoint)?

I (and others) think the aussie market will begin to correct itself and go sideways over the next 3 - 5 years.

My strategy is for CF+ properties, so you might wonder why I'd ask this if capital growth doesn't concern me, and if rental demand stays strong in these parts (which it should).

I'm worried that by the time I want to draw equity from IP #1 for IP #2, the market will have corrected itself and a lower valuation means a loss in equity, thereby hindering my borrowing capacity.

I'm becoming more and more drawn to invest in places like Newcastle, Coffs Harbour, Bunbury etc as their valuations seem much more reasonable to me.

Would love your thoughts!

 

[zed_kid]

I think you answered your own question. If your strategy is CF+ valuations shouldn’t concern you in the short to medium term.

I don’t agree with the 3-5 years of sideways. I’m already seeing CF+ deals, that are not obvious, as soon as it becomes obvious to all who trawl realestate.com.au it’ll be too late and there will be 30% CG in that year

This is all just ramblings of man bored at work on a caffeine high…

 

[mikezen]

im interested why u have mentioned coffs... u think there is going to be growth there? i was there yesterday browsing around, umming and aaahing, but i cant seem to see how it is going to preform well in the future.....rental market seems like its tightening in some areas, but i cant see much in the way of many other growth drivers at play...my 2 cents

 

[alexlee]

What sort of yield would you be satisfied with where you wouldn't mind if there was no CG?

 

[azzae89]

I think you answered your own question. If your strategy is CF+ valuations shouldn’t concern you in the short to medium term.

I see what you're saying, though they do concern me when asking prices are so high that it seems only possible to find negatively geared properties. Neutral at best. Doesn't exactly fly with a CF+ strategy.

 

[azzae89]

im interested why u have mentioned coffs... u think there is going to be growth there? i was there yesterday browsing around, umming and aaahing, but i cant seem to see how it is going to preform well in the future.....rental market seems like its tightening in some areas, but i cant see much in the way of many other growth drivers at play...my 2 cents

Hi mikezen,

I think Coffs has a lot of potential for CG but over the long term. It's still very much a holidaying destination for many but like you mentioned the rental market is tightening and it's population has been growing year on year just under 2%. Beautiful beaches, plenty of employment, apparently the "most livable climate in Australia" according to CSIRO. Who knows what it will be like in 15 - 20 years?

But the MAIN reason it's on my radar right now, is it's one of the few regions on the coast of NSW that I feel I can acquire a CF+ property in a moderately densely populated area with good rental yields - like I said, not totally fussed on CG but think down the track that a 2 bed unit a walk away from the beach in Coffs wouldn't be doing too badly.

E.g. - http://www.realestate.com.au/property-unit-nsw-coffs+harbour-107368816

 

[azzae89]

What sort of yield would you be satisfied with where you wouldn't mind if there was no CG?

I'm not saying I want no CG (who would want that? ), but that CG isn't the primary factor in driving an investment purchase for my particular strategy and goals. I believe if you purchase wisely CG is a given over time - i.e. not buying out in woop woop, but in densely populated towns with diverse employment opportunity and low stock.

I'm currently aiming for around 7% net yields - (hence why capital cities aren't quite sitting right with me).