Upgrading PPOR in top end blue chip suburbs?

[mrdobalina]

Anyone have thoughts on upgrading PPOR and buying into top end blue chip suburbs? (I.e. like the 3 suburbs with the highest median price in the capital city).

We are considering it (mainly to be closer for kids future schooling), but not sure if there is any growth in those type of suburbs. Thoughts are that with the aging demographics of those suburbs, baby boomers will be increasingly downgrading to fund their retirements, placing a cap on growth in those suburbs.

I've seen properties on the market, that are listed for the same price the owners paid for them 7 years ago. Is this a continuing flat line trend?

 

[Aaron_C]

Anyone have thoughts on upgrading PPOR and buying into top end blue chip suburbs? (I.e. like the 3 suburbs with the highest median price in the capital city).

Definitely.

We are considering it (mainly to be closer for kids future schooling), but not sure if there is any growth in those type of suburbs.

You're kidding right?

Thoughts are that with the aging demographics of those suburbs, baby boomers will be increasingly downgrading to fund their retirements, placing a cap on growth in those suburbs.

Let's just say that there will always be people like you with money who want to buy into these top suburbs even if that was the case. Plus people who buy into these areas aren't your typical PAYG income earners - we are talking CEOs / very successful businesspeople. During boom times these are tend to skyrocket because everyone wants to spend their new found wealth and the house is the first stop for many people.

I've seen properties on the market, that are listed for the same price the owners paid for them 7 years ago. Is this a continuing flat line trend?

Doesn't matter where the property is, if people are asking too much, time is not going to make that go away.

 

[mrdobalina]

I think a large portion of the people in those suburbs are asset rich and cash poor. Old money with houses that have stayed in the family for decades. Those people will find it a challenge to fund their retirements, without downgrading their ppor.

 

[Aaron_C]

I think a large portion of the people in those suburbs are asset rich and cash poor. Old money with houses that have stayed in the family for decades. Those people will find it a challenge to fund their retirements, without downgrading their ppor.

So what if they are asset rich and cash poor? There are plenty of people who are both asset and cashflow rich looking to buy INTO that area....isn't the new purchasers the ones who dictate prices?

 

[mrdobalina]

Will it create an imbalance of demand and supply?

I guess a lot of the wealth is tied to the economy. In the West, a lot of it is tied to mining....

 

[Aaron_C]

Will it create an imbalance of demand and supply?

I don't know what you are talking about. The mere fact that it's 'blue chip' and people like yourself want to buy into it provides the demand support already. These areas tend to have limited development due to their proximity to the CBD and zoning restrictions. Supply isn't going to increase....

 

[mrdobalina]

Supply increased due to asset rich, cash poor baby boomers downgrading to fund their retirements. Most of these suburbs are non subdivisible, so they cannot subdivide to access portions of the equity.

Demand is tied to the health of the economy, which all things being equal, ain't looking as flash as it did a few years ago.

 

[MTR]

Hi MB

I assume you are talking Perth here.

I think this market has been hammered but I think generally speaking it has now stabilised, when it will take off again, who knows??? I would say if you can jump in and upgrade now why not, when this market is hot you will be fighting with the herd and very difficult to secure anything. Perhaps you are over analysing things here, don't assume its only equity rich BB that live in these areas, that probably is only a very small %?? Who cares anyway, just buy well.

The only thing I would do differently is broaden the group, all blue chip areas which tick the boxes, ie lifestyle, good schools, etc.
I would also look at properties with large land component with perhaps an opportunity to subdivide this could be a very nice little earner one day, there are blue chip areas where you can still do this, or who knows help the kids out give them half a block

This is a brief overview on what Hegney thinks, 5 months ago, this may be of interest/may not
http://www.hegney.com.au/sysnews/154

All be best, keep us posted

MTR

 

[mrdobalina]

Thanks for the thoughts MTR. It's always worth reading hegney's analysis.

Trade off strategies are:
- Buy the biggest and baddest ppor that money can afford, and release equity for investments; or
- Use more for investments and upgrade to a not so grande ppor.

 

[westminster]

Anyone have thoughts on upgrading PPOR and buying into top end blue chip suburbs? (I.e. like the 3 suburbs with the highest median price in the capital city).

We are considering it (mainly to be closer for kids future schooling), but not sure if there is any growth in those type of suburbs. Thoughts are that with the aging demographics of those suburbs, baby boomers will be increasingly downgrading to fund their retirements, placing a cap on growth in those suburbs.

I've seen properties on the market, that are listed for the same price the owners paid for them 7 years ago. Is this a continuing flat line trend?

If you are talking Western Suburbs of Perth then yes they took a hammering in the GFC and have struggled to grow again but I think in the long term will as they are excellent locations.

If you are planning to live there for the 20yrs of schooling then the location, amenities and commute have upsides which are hard to factor at a price but make a huge difference in quality of life.

You might be able to carve off a slice of the block in the future if you buy well now (ie laneway, corner) so you can make even more money.

 

[see_change]

Don't know perth , but in Sydney , we've done well buying PPOR's in blue chip suburbs . We've been able to subdivide them and I know there are sub dividable places that come on the market . Saw one yesterday.

Most of the people who live in these suburbs have made the money themselves through professions or successful businesses . Having lived on the North Shore for round 25 years I only can remember one person who came from family money and the last time I saw his smiling face was in the BRW rich list ...so not your typical resident. The only ten million dollar house I've been to personally , was owned by someone who made his money as a senior executive in a major company.

There are always people looking to buy into these areas or upgrade within them. Some one who started off in a unit on the Pacific Hwy , might upgrade to a house in South turramurra or Campbell Pde in Wahroonga and then move over to a East side , walk station location after a few years ( if they want to ..)

I've seen upmarket , middle market and lower end properties go sideways for years .

Cliff
Cliff

 

[mrdobalina]

You might be able to carve off a slice of the block in the future if you buy well now (ie laneway, corner) so you can make even more money.

Most of the western suburbs cannot be subdivided at the moment. Perhaps in the future, and the trigger may be the local councils consolidation. If that happens, it would unlock quite a bit of value.

 

[mrdobalina]

I've seen upmarket , middle market and lower end properties go sideways for years .

Cliff
Cliff

That's true. Thanks for the insights Cliff.

 

[MTR]

Also, will add when the good times rolled we were able to continually access equity from our primary residence for 16 years, it was gobsmacking every year like clockwork the property continued to rise it was without a doubt the stellar performer. In 2006/2007 that completely stopped as the market crashed.

That is in part why I believe buying blue chip now is probably a great way to go, purchase on a low, once the market moves again you will probably have the best of both worlds, great primary residence/blue chip location and able to access equity to keep growing/investing.


MTR

 

[mrdobalina]

That is in part why I believe buying blue chip now is probably a great way to go, purchase on a low, once the market moves again you will probably have the best of both worlds, great primary residence/blue chip location and able to access equity to keep growing/investing.


MTR

Good point MTR. This is consistent with the contrarian view that as the blue chip properties have seen little growth since the GFC, then they are good buying, as it will soon be their time gain...

 

[HiEquity]

Compared to what?

If you have a lazy million burning a hole in your pocket you could instead use it as a deposit on a nice Cip yielding 8% net with a similar capital growth trajectory and send the kids to a top of the line public school instead. The financial gains of that strategy over the one you are considering are likely to be stupendous over the next twenty or so years.

But living in the western suburbs is nice - just don't kid yourself about the financial benefits.

 

[mrdobalina]

If you have a lazy million burning a hole in your pocket you could instead use it as a deposit on a nice Cip yielding 8% net with a similar capital growth trajectory and send the kids to a top of the line public school instead. The financial gains of that strategy over the one you are considering are likely to be stupendous over the next twenty or so years.

But living in the western suburbs is nice - just don't kid yourself about the financial benefits.

There are always trade-offs in the different strategies. What is better in the long run?:
1) blue chip ppor
2) 4 or 5 investment properties totally similar value, or
3) commercial property

The missus and I have had the tussle between public and private schooling for a while now...

 

[Rumplestiltskin]

It's pretty soft on for volume of sales in some of those areas at the moment.
The likes of Nedlands and Floreat seem to be struggling to move a lot of their stock, particularly Nedlands. Good opportunity for someone whose willing to take the plunge while rates are low.
I would rather be the one whose trying to get in at the minute, than the one whose being forced to get out.
Really nice the western suburbs, great schools both public and private and terrific lifestyle if you can afford it.

 

[MTR]

Yep, as I said time to jump in.

 

[HiEquity]

Financially, the answer is easy. Given all those options are likely to have similar capital growth prospects then the answer is the one with the highest yield. PPORs don't yield at all, RIPs yield a little bit and CIPs can yield well. But I'm biased towards CIPs.

But if this was just about the financial outlook we wouldn't be having this conversation. The real question is how much is the western suburb lifestyle worth to you in lost investment / income opportunities? Only you guys can answer that.

On the schools, it seems that differences in opinion on this subject are a common problem for families. At $25k per child per annum post tax around here I can see why!