where is the bargains in Perth

DeanoC said:
Why would you rent a home 70kms away from the CBD?
Click to expand...
Why would you rent a place in the Northern suburbs and then drive 70Kms to work in Kwinana ? :D
Most of the industrial area is now concentrated in the Coogee - Rockingham - Maddington triangle and driving distance from Joondalup or Mandurah to work would be about the same. By renting in Rockingham - Mandurah area you can avoid the city traffic and save an hour stuck in traffic and $100+ a week in rent. ;)

Last quarter has seen an 8.5% hit to median price and rental yields average about 3.5% which is not great when the median is a bit under 375k I think.

Nice area to live in, just dont know if its a great area to invest in at the moment.
Click to expand...

The 8.5 % hit is exactly the reason its a good place to invest. The Northern suburbs have already been pushed up by FHBs to the point where you could almost buy 2 houses in Mandurah for the price of one in Currambine or Kinross.
Your median for Mandurah is skewed by the $1M+ canal properties. You can still buy some nice older brick houses on large blocks in walking distance to shops, train station, industrial area or the foreshore for around $250K or at least $100K less then a similar place in Queens Rocks or Mindarie.

And did I mention the new industrial complex in Pinjarra is ready to take off as soon as the Freeway extension is completed next month ? :D
 
Mandurah property

Living in Mandurah and owning an IP as well, we have been watching the market closely over the past 12 months. The drop in reported median price is definitely affected by the canal homes which have come back significantly. Also the area south of Halls head - 4x2 family homes, has had a major setback, up to 100k in the last 12 months and there are some nice houses at near or below replacement cost. Many other areas are taking a long time to move eg have been watching a couple of near new villas in the centre of town for 2 months - but price not budging.
The freeway is expected to open in July but I think this has well and truely been costed in. Of potential more impact is the new entrance road to the freeway which will be completed in 12 months time which will give a dual lane road direct from near the train station to the freeway, thus boosting property values around the train station area and between there and the foreshore.
From an investment perspective, good yields are hard to get unless you get a bargin which there are a few to be found with good research. Ausprop's 5% is at the high end. Short term capital growth is going to suffer from the amount of new 4x2 stock on the market in the outer areas, though long term I still think Mandurah is a sea change that many in WA are attracted to and it has good infrastructure to support it and I will continue to invest here.

Mike
 
mjinwa said:
Ausprop's 5% is at the high end. Short term capital growth is going to suffer from the amount of new 4x2 stock on the market in the outer areas, though long term I still think Mandurah is a sea change that many in WA are attracted to and it has good infrastructure to support it and I will continue to invest here.

Mike
Click to expand...

nice little summary. that new approach road is not widely known about.

I disagree 5% is high tho. Near new villas in the centre are about $300k and you will get $280 a week all day long...ok 4.85% then!
 
What about Warick inferstructure of a David jones going in there prices are reasonable. Osbourne park, tuart hill. just a few of the top oif my head.:)
 
DeanoC said:
http://www.businessspectator.com.au...o-run--T8T77?OpenDocument&src=is&cat=property

Seems as if certain areas in Mandurah are really feeling the pinch a bit
Click to expand...

The apartments are feeling the pinch but not as much as anyone who paid $3M for a canal property 2 -3 years ago and id forced to sell it now at half price to cover his debts. :D

Anyone who bought before 2005 is probably still sitting on some nice profits. I was looking at some nice display mansions just over the old bridge back in 2001 and the builder wanted to rent them back for up to 2 years, back then you could get one for about the same price as you would now pay for the worst 3x1 in Balga or Mirrabooka.
 
Ocean Reef Perth

See my post in the Where to Buy forum re: Ocean Reef, Perth. Prices still quite good considering it's a beachside suburb. I'd say with Ocean views 4bedder you may get one for around $800,000? However without views there are some great bargains see REIWA web site: http://reiwa.com.au/
 
Last edited:
HiEquity said:
What you can control is the yield you purchase at. If you buy premium properties as IPs you are buying a low yield which you have to fund out of your pocket. You are paying over and over again for these properties. That will seriously diminish your ability to buy more property and it is the size of the total portfolio that creates the wealth when the next boom comes along.
Click to expand...

Hi HiEquity and everyone on this thread. Firstly I agree that this is a fantastic thread and I want to get it back to the topic on bargins.

I think we can all agree that good +ve cash flow is important but I'm finding "realistic" yields to achieve +ve cash flow near on impossible to achieve.

For example, a townhouse, metro 5 - 8km, (2/1/1) for $380k built in 90s. Factoring in building depreciation of $5k and all costs CR/WR/Ins/Strata/ etc., to get +ve cash flow I'm looking at a rental of $650/wk!!!

I can't realistically see anyone paying that not now or in 5 years. Paying $300-$350wk (4.6% yield) is more realistic. But at this real, the property will be -ve geared when factoring costs (and after build dep).

Alternatively, I can't see how people buying properties in new suburbs like Success at $300k can expect to rent them for $500/wk to get +ve cash flow.

Investors today have NO CHOICE but to go -ve gearing. Not that I want to, but I still do it because I am confident of the CG in 5 years.

And given a choice between a
a. "do nothing" strategy vs.
b. "-$100/wk -ve cash flow (-ve gearing) in metro" vs.
c. "+$10/wk +ve cash flow in schemes (defence housing etc.)",

I'd always go for -ve gearing metro due to the CG potential/risk.

I really feel +ve cash flow discussions were for those of you baby boomers who were lucky enough to get metro properties for $100k to $200k that you now rent for $400/wk.

I don't know if those of you in these forums agree with me on this logic?
 
Last edited:
yorke said:
The apartments are feeling the pinch but not as much as anyone who paid $3M for a canal property 2 -3 years ago and id forced to sell it now at half price to cover his debts. :D
Click to expand...

my mate has one of theae places and he reckons values have recovered back to previous highs...dunno if he is dreaming or not?
 
clackers said:
I don't know if those of you in these forums agree with me on this logic?
Click to expand...

Hi Clackers

Welcome to the forum! I do and don't agree with you. I agree it is easier for people with equity / cash behind them but there is nothing new in that - money makes money. But our last purchase last year was in Karratha at an 11% gross yield so I don't agree you can't get positive cash flow. There is some nice office space in Perth around the 7-8% nett mark ATM and those yields are higher in other capitals. There are many properties for sale today that make you money from day one (and you don't have to limit yourself to Australia either...) but they aren't considered "safe" by some people's definition.

For me, safety comes with the cashflow - when I purchase I can decide whether the property will make or lose money. IME whether the property is a big CG winner or loser is far more difficult to predict and it all evens out in the long term anyway - a rising tide floats all boats and I am a long term investor. So now I focus on what I can control and very important there is the yield I buy at. Just have to widen the definition of what constitutes "property investing" to include those properties that make money.

I'm no baby boomer but the thing about those high yield houses back then was that everyone thought they were high risk. Same goes for bank shares earlier this year. The trick is to buy high yields because other people think the risk is high when in reality it isn't. There is plenty on the market today that fits that definition...
 
Last edited:
hi HiEquity

Thanks again for your reply.

Your two examples: Karratha and Office space only reaffirms my point that +ve cash flow residential properties in metro areas are hard to come by and no longer realistic. Office space investments come with a wrath of different issues of its own and its outside the scope for early PIs.

Either that or you can't give away examples of metro high yields on this forum as its a trade secret (which I understand).

But I do have a serious question. You alluded to the fact that CG is often available in the long term (my apologies if I've misunderstood). Do you think a metro IP in Perth today is ever going to be terrible investment despite the fact that yields are currently low?

My logic in being prepared to swallow the -ve gearing for 3 to 5 years is:
a. Perth/WA is booming (thanks to Gorgon)
b. Metro perth prices are a lot lower than our eastern states cousins. (ie I can still buy within 5 to 10km a townhouse or house+land for sub$350-$400k)
c. Townhouses and House+Land are generally 'safer' than apartments for future CG.
d. Reduction in FHOG ensures a steady supply of tenants
e. Being a metro investment, demand for future tenants will come from students, new migrants and white-collar, not just reginal workers, low income families and/or FIFO
 
personally I wouldnt go back to neg geared investments but its horses for courses. As McKnight says, the property market goes sideways or down for about 66% of the time, if you are losing money on top of that then its a tough gig.
 
Hi Clackers

Ausprop said it all really. Losing money while the market is going nowhere never feels good. Even if it's in a tax effective way... So I guess my point is that if metro RIPs aren't available at decent yields then.......... don't buy them! Buy something that does yield well instead. The fact that metro RIPs are low yield tells you no more than that it is a low yield - it is not a clue to future growth, or capital protection or anything at all really other than it will cost a packet to own. Why would you go for the certainty of losing so much money, with no guarantees at all on CGs?

I am also interested in your comment that you think only metro RIPs are appropriate for a new PI. I disagree with this but it depends a bit on your situation. If you have very low cash upfront then you will need maximum leverage and RIPs will give you that at least with the highest LVRs around.

I guess what I'm trying to suggest is not to get suckered into "premium residential property" just for the sake of it. If you do need to go for RIPs because of the leverage they give you then try and go for the highest yield within that constraint (which is why I mentioned Karratha - not sure what is wrong exactly with Karratha?). The perception of risk there is the same as what used to apply for metro RIPs - this is just a perception after all and such things go in and out of fashion. All I know is that a RIP in Karratha will make me money while one in Perth will lose me money. And I can buy an awful lot more property in Karratha as a result. So if CGs do happen to come along then I have a decent exposure. The perception that maybe Karratha will have lower CGs than Perth has no basis for proof that I can think of.

Also, in the last boom Armadale went up as much as Claremont so don't believe the hype about "superior" CGs in premium suburbs. Even if they do occur they certainly won't overcome the cashflow losses you incur while waiting either... and the lower exposure your serviceability troubles will give you.

So on your serious question, I have no idea about whether CGs in Perth will be good or not. I no longer invest on the basis of trying to guess such things...
 
Hi HiEquity and Ausprop

Both your strong stance on -ve gearing has really got me thinking. I'm a great Warren Buffett and Margaret Lomas fan, but when it comes to following their principles, I'm often very weak :(.

When I first came on this forum I was inspired by this thread and its associated threads: http://www.somersoft.com/forums/showthread.php?t=57859

I noticed neither of you congratulated her on her purchase :) when she blatantly stated it would be -ve cf which I admire. However, I can't help but feel that she is so happy, and I want to be in that position too without much delay as too many properties have slipped by me already because I haven't taken the plunge. I feel that although its -ve geared, Dianella is a "less risky" proposition for a 1st IP rather than Armadale or Karatha - despite the -ve gearing. I'd go so far to say that Kim5 will be a very happy camper in 2 years as it'll most likely be +ve cf then whilst I'm still searching for my ideal +ve cf property.

As for Karatha, its not that I have anything against that suburb, but I just don't see myself/close friends/family ever moving there other than if work forced them to (and so far that hasn't happened - for most they'd rather FIFO). This is in contrast to other metros in Melb/Syd/Brisb where people do go to often. And if it doesn't pass the "even I'd move there" test, then I place it as a risky RIP and the yields are being "propped" up by the mining story (which again is risk as its not an industry I'm familiar with). Even if I saw reports that gov't proposed infrastructure is high, I still would not be convinced as it would take time for schools, shops, entertainment, etc to be established.

BTW, I don't place Armadale in the same league as Karatha. By my definition, Karatha is a "country/regional town". Armadale is metro (and by eastern states standards not very far). So I definitely agree with you that prospects should be considered in Armadale over Cottesloe - but so does everybody. Hence, I'd argue tho that its impossible to find +ve cf properties in Armadale too that aren't in need of good capex (thereby making it -ve cf).

Sorry if I'm wishy washy. But I my original problem problem remains with my crappy choices of:
a. Do nothing
b. -ve cf in near metro (<10km) - Kim5
c. +ve cf in far metro (>10km),
d. +ve cf in regional or
e. +ve cf other investment types (office, shares etc.)
 
clackers said:
But I my original problem problem remains with my crappy choices of:
Click to expand...

Amongst all the junk I imagine there is a property for sale out there at the moment in each one of those categories that, if purchased, would significantly increase your wealth. The difficulty is in finding it and that is the trick that separates the seriously wealthy from the rest of us. And a bit of luck as well of course... aka being in the right place at the right time.

If you think your choices are crappy then they are. The choices have always looked the same from where I stand - everything with a high yield always "looked" high risk even when it wasn't. And vice versa for some low yield properties that looked low risk at the time. High and low yield properties are still for sale today - you'll have to choose your poison!

And yes, if all else fails, doing something is usually better than nothing...
 
Could someone explain why Vic Park, East Vic Park, Burswood, Carlilse and Rivervale are good areas to buy at the moment but Lathlain (smack bang in the middle) is not considered a good place to buy.
 
You must log in or register to reply here.

Similar threads

S
If you had $150k to invest..
2
Replies
36
Views
6K
hugh72
H
J
Where to buy in Perth?
2 3
Replies
44
Views
7K
Rixter
Rixter
E
Timing the market or buy when you can ?
Replies
12
Views
2K
C-mac
C
S
Where to buy next IP in Perth WA
2
Replies
22
Views
5K
z611143
z611143
A
Where to buy 2nd Investment Property?
2
Replies
30
Views
6K
Rixter
Rixter
Back
Top