Let’s face a home truth – the elephant in the room – population

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“Boiling at Boisy” Tim Heavyside sells 21 Boisdale Street, Surrey Hills Under the Hammer $3,410,000, 7 bidders.

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Ferocious bidding on the right homes – despite this being the largest auction start to a year in Melbourne auction history – the market lapped it up, spat out a few and said ”feed me, feed me, give me more.”

At 6.00 pm the James Clearance Rate on Inner Melbourne Homes was close enough to 90% – yep 90% and that was on a Super Saturday (a big test).

James Bidderman was 2.6 bidders per auction, which means that whilst around 170 bought –  an incredible 270 didn’t  – and those 270 wounded underbidders will be back next week to fight it out, against a new wave of buyers; which in turn means the market will be going up, not down, ceteris paribus (all things being equal) over the next little while.

Absolutely no surprises – the market is strong and rising.

What else would you expect the Melbourne auction market to be doing?

No really, what else would you expect of the Melbourne auction market in the current environment.

Hands up if you are expecting the market to fall in the near future?

Can we ask why?

Not because we know for sure it won’t, we just want to know why you think the market will fall anytime soon?

Why will the market bake a different cake, whilst the market ingredients remain the same?

Demand=buyers=people=population is going up and not likely to stop, until change.

Supply=homes= is going down and not likely to change.

This is a Demand, Supply and Price Interaction outlined by economists a few centuries ago (stood the test of time), tweaked as it applies to Inner Melbourne Home Market today.

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Here are the major political parties increasing Demand/Buyers/Population policies. Google was the search function.

Liberal Party: We could not find a population policy among their key policies. Click here

Labour Party: We could not find a population policy among their top 100. Click here

At least they were attempting to address the housing issue.

Greens: We found a population policy – well, it’s a commentary. But let’s be fair – at least they recognise that population is an issue. Click here

One Nation: They do not appear to have an easy to find population policy – they do have a migration policy that states a zero net migration. Dick Smith supports this part – No, not the boat people and Muslim commentary – the population management policy of zero net migration and infrastructure. Click here

None of the above is designed to be a criticism of politicians, we believe most are sincere and trying and that is not our role at James Buyer Advocates, as we see it.

Anyway back to the Demand=Buyers=Population side of the Home Market.

We hear you – what about interest rates and income and debt?

Yes, they affect (mainly at the lower levels), but the real driver is population demand, mainly from overseas.

Our belief, at the higher level, is the Inner Melbourne market has moved through the phase of infinite demand and supply interactions to a more finite one.

Our belief, at the higher level, is the Inner Melbourne market is slowly moving away from income, debt and interest rates; to an asset wealth exchange.

In our opinion, assets not income are now beginning to steer the Inner Melbourne High End market.

Meaning the Inner Melbourne home-with-land market is moving to finite asset to asset transactions within any given time period and an increasing number of the interactions will only involve wealthy overseas investors, local intergenerational wealth and the occasional new-to-the-scene successful entrepreneur/very high salary earner – rather than banks, interest rates and anybody can buy a home.

Melbourne through the internationalism of its market, through Australia’s population and immigration policies (particularly the 2009 FIRB change) is in the process of becoming like Mumbai, New York, Inner London – where homes are exchanged on a different basis and with different players to mum and dad, rolling up to a bank, out to an auction and sign a contract, after they had a idea they wanted a nice house in Hawthorn last week.

Those days are well and truly gone for many and getting that way for others.

That is not to say that another GFC would not have a significant effect on the Inner Melbourne market, of course it would, as debt is still involved.

However, in our opinion, it would need to be as serious as that, for there to be a significant drop in prices.

Economic cataclysms are not that common and the buyers and sellers that recover best are usually the bricks’n’mortar asset rich anyway.

Our point – the logic of an Inner Melbourne homebuyer waiting for a meaningful drop in prices is, well, seemingly illogical to us.

Why will prices drop when the government and the opposition have no obvious focus on demand=buyers=population policies except full steam ahead –  meaning more and more population (read more and more buyers, read more and more demand)?

That is the demand side.

50 Hunter Malvern, Jack (OMG with beard) Bongiorno, $3,470,000, 3 bidders

Big crowds everywhere, 50 Hunter , $3,470,000, 3 bidders

On the supply side it’s also just as simple.

Land and Infrastructure – they are not making it any more.

There will be no long lasting significant increase in supply in Inner Melbourne (ever again).

In fact we are losing more and more land to make more and more apartments.

As well, many buyers (local and overseas) are buying and holding and not selling – further reducing supply.

Many of these apartments are being bought by buyers on no stamp duty – so no contributions to infrastructure in the form of new taxes.

And whilst it was a bit of a joke, they are not making anymore infrastructure – it’s actually unfortunately sort of true (governments are not focussing on keeping pace anyway – they are more concerned about welfare and refugees, than new railways and regional living and immigration control).

We are not looking to suggest there should be specific changes on anything, that is for our leaders, whom we support.

All we are trying to do is outline the real issues – the real situations – so as our buying clients can make informed decisions going forward.

Noticed the increased traffic lately?  

That is demand=buyers=population increase and supply=land & infrastructure decrease.

So back to the question we ask our clients/buyers – why do you think prices on good quality homes in Inner Melbourne will fall any time soon – unless there is a major change in …….. something?

Is waiting a good strategy?

Is buy-now a better strategy (if it’s the right home long term)?

Unless you see a major change in population policies, such as immigration and/or a big push to regional infrastructure or ….. something else we can’t see now, then, in our opinion at James, good homes with land will continue to rise and rise and rise in price, in the longer term future (yes of course with hiccups along the way)…….. and interest rates……Mmmm – not sure what affect they might have………. some yes……….but………. that may be history, the game may have changed?

Macro Change – will it come?

Our leaders current assessment is business wealth, turnover, profits, trade and so on is of greater community importance than owning your own home, village atmosphere, culture and so on.

They may be right, maybe its a pipe dream – personally we feel sad about that.

There is talk around the Inner Melbourne home buying market edges like monetary policy tweaking, but there is silence, a vacuum of policy about immigration and population (the real drivers) – and many buyers are just hoping things will be different, so they are not speaking up – population increase is the elephant in the room.

Hope is great, but it is action that changes things.

Are there any signs of action and change coming on a macro level?

If the Melbourne market was Canberra and buyers were kangaroos, there would be some calls for a cull – eg their would be noise in an attempt to reduce the problem – if there was going to be widespread action and change.

If the Melbourne market was the environment, many would be up in arms protesting about overgrazing and looking for strategies for change – there would be noise if there was going to be widespread action and change.

There is no noise on population issues – there will be no change in demand without you hearing the noise.

The macro noise is not there.

So Micro Change – yes you – you still have options.

1) Lie in the foetal position and give up on buying a good home.

2) Keep thinking the same ingredients will bake that different cake for you – knowing that almost every quality home has between 3 and 7 bidders up against you – and that number is increasing and your opposition is becoming better resourced (they are being forced to).

3) Or act now – do something about it – engage with a different idea in a different way – you need to make it happen. You may need to understand there is no magical wand coming from above. Maybe get some professional assistance – just a thought.

James Buyer Advocates – 5 from 5 this February month so far (for normal people/buyers) – but we were very, very picky on which properties we went after.

Suggestion to get you rolling on the MICRO.

Consider making an immediate mindset change in dealing with the population and home buying issue.

Consider moving away from focussing on saving money in the deal and buying cheap to focussing on doing what you need to do ($ prudently of course) to secure a good long term home (for you), that will last you 10-15 years and longer.

Your solutions may well be micro (you) – as macro ones simply ain’t happening anytime soon.

I’m Mal James and I’m with James Buyer Advocates.

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After five solid weeks of on and off market reporting it seems clear where the market is at in 2017 – so we will take a break from reporting same ‘ol same ‘ol, as there is lots of work to do for James Buyer Advocate clients (on and off market).  

We will check back with you at our next James Market News on March 18th.

Chin Up, not trying to be negative, just assessing the real issues – looking for and finding solutions – then acting on them!

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James Insight: Inner East Bidderman was 4 bidders per auction – 50% above the Inner Melbourne average. For every one that bought, three missed out.

Big Auction for Glen Coutinho at 25 Myrtle Canterbury - powered onto the market at $3,400,000 and sold under the hammer for an undisclosed amount above that. 6 bidders

Big Auction for Glen Coutinho at 25 Myrtle, – powered onto the market at $3,400,000 and sold under the hammer for an undisclosed amount above that. 6 bidders.

Hawthorn, 43 Connell Street (Andrew Gibbons) – Under the Hammer $2,455,000, 6 bidders

, 7a Marshall Avenue (Hamish Tostevin) – Under the Hammer $3,155,000, 5 bidders

, 44 Currajong Avenue – Passed In $2,800,000, 0 bidders

Canterbury, 25 Myrtle Road (Glen Couthinho) – Under the Hammer Undisclosed, 6 bidders

Camberwell, 17 St Johns Avenue (Jonathon O’Donoghue) – Under the Hammer $2,412,000, 6 bidders

Camberwell, 14 Waterloo Street – Passed In $5,000,000, 0 bidders

Hawthorn, 59 Mason Street (Andrew McCann) – Under the Hammer $2,410,000, 3 bidders

Hawthorn East, 18 St Helens Road (Steven Abbott) – Under the Hammer $3,560,000, 3 bidders

Surrey Hills, 21 Boisdale Street (Tim Heavyside) – Under the Hammer $3,410,000, 7 bidders

Click here for full James auction reports

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James Insight: Pass-Ins were the go in Bayside, look at all the Bought After’s below. Hey, how about Ollie Bruce’s result at Page Street – it was $14,000 per square metre and there was a rumour around (uncorroborated) that may have been the third property the buyer had bought in recent times.

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Oliver Bruce sells 115 Page Street, Albert Park, Under the Hammer $4,735,000, 3 bidders.

Albert Park, 34 Richardson Street (David Wood) – Under the Hammer $1,801,000, 3 bidders

, 7 Carpenter Street (David Hart) – After Auction $2,375,000, 3 bidders

Albert Park, 115 Page Street (Oliver Bruce) – Under the Hammer $4,735,000, 3 bidders

Balaclava, 10 Grosvenor Street (Josh Stirling) – After Auction $1,690,000, 1 bidder

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Sandringham, 26 Park Avenue (Robin Parker) – After Auction Undisclosed, 1 bidder

, 53 Bridge Street (Robin Parker) – After Auction $3,325,000, 3 bidders

Brighton East, 28 Binnie Street – Passed In $3,750,000, 0 bidders

St Kilda West, 27 Loch Street (Michael Paproth) – After Auction over $4,200,000, 2 bidders

Brighton, 1 Dawson Avenue (David Hart) – After Auction $3,150,000, 2 bidders

Click here for full auction reports

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James Insight: Stonnington is only just starting to warm up and the real action is still away from the auction scene. A couple of cases of Power Lifting afterwards –  Michael Armstrong having no bidders under the hammer at 15 Sutherland Road, but then 4 bidders presented themselves afterwards and 2 of them fought it out to around $500,000 over the pass-in price –  and the G-E-R-A-L-D,  Gerald Delany also produced a $500,000 (approx) post-auction Power Lift at 13 Struan, .

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Nathan Waterson sells 5 Davis Aveune, South Yarra, Under the Hammer $2,710,000, 2 bidders.

Malvern, 5 Shaftesbury Avenue (Damian Davis) – Under the Hammer $3,210,000, 4 bidders

South Yarra, 5 Davis Aveune (Nathan Waterson) – Under the Hammer $2,710,000, 2 bidders

Malvern, 50 Hunter Street (John Bongiorno) – Under the Hammer $3,470,000, 3 bidders

Armadale, 15 Sutherland Road (Michael Armstrong) – Bought After over $3,000,000, 0 bidders

Toorak, 13 Struan Street (Gerald Delany) – After Auction Above $5,000,000, 1 bidder

South Yarra, 15 Clowes Street (Mark Konishi) – Under the Hammer $4,246,000, 3 bidders

Click here for full auction reports

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The Big Fact (or Bug Fact if you’re from NZ) looking for a home in Melbourne.

FACT: 82% of homes over $4,000,000 are NOT sold under the hammer.

Why is this such an important fact?

Well, we talked about population issues above and here is how we at James, in part, address those issues for our buying clients.

Many buyers think it’s just a matter of turning up at the Saturday Auction Slaughterhouse and taking whatever comes.

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It doesn’t have to be like that.

Yes, it can be and sometimes it has to be – but 4 times out of 5 it isn’t – unless you want it to be.

FALLACY: Buying off market is not about just buying cheaply, if it was, then there would be a very limited off market.

FACTS: Buying off market is about a wider range, more time to consider, inspections to suit you (no crowds) and privacy and yes, sometimes better prices and sometimes not.

FACTS: Off markets are also about traps for new players, agent smokes and mirrors and time wasting for the uninformed.

FACT: However, overall off markets, privates and EOIs are not just another way to buy and sell – at the it is the most common way to buy and sell.

Why you say? Why would anybody sell off market?

FACTS: Better prices, privacy, quick result, opportunistic, don’t want opens, better timing, more exposure (yes more in some cases due to time)………..

FALLACY: Oh that’s all baloney Mal – everybody sells under the hammer at auction.

FACT: No worries, but that is not true. 82% of homes over $4,000,000 are not sold under the hammer and a fair number of those are off markets.

FACT: You won’t hear about this in the mainstream media.

FACT: Why not? No advertising money in Off Markets.

I was interviewed last week by the mainstream media and we talked about Off Markets – not one word, I repeat not one word was mentioned in their article about Off Markets.

Maybe watch this short 30 second video – it really happens – this is real.

Gina Off Market

If you want to discuss the experience of OFF MARKETS give Gina a ring on 0457 835 255.

FACT: If you have a home to sell, then we are looking for these James buying clients:

Albert Park, Middle Park: Bigger land, family home – $5m

Armadale: Good home with land – $4m

Brighton with court:  $6m

Brighton in Sussex St area: $5m

and surrounds: Renovator $2.5m

Hampton: Family home, near schools, no reno, mid $2m

Hawthorn, Canterbury, Kew: 1000 sqm $4.5m

Princes Hill, Carlton: Family home $4m

Surrey Hills: Family home, good block, early $3m’s

Toorak: Family home $7m to $10m

If have you a home that fits any of the above descriptions please contact Gina on 0457 835 255 or Rhi in our office on 9804 3133.

If you are thinking of selling and are prepared to get a Sec 32 organised, then we will come and inspect and if suitable, bring buying clients.

You can have a selling agent or deal with us direct. If you deal with us direct, you need to clearly understand that we are working for the buyer.

If we are referred by a selling agent to your home, we only work through the selling agent, we do not then deal direct with you, under those circumstances.

We can recommend a selling agent if you are not sure and want their expert representation.

FACT: We find the best deals are the ones that work for all parties.

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Whilst we buy at TOP END only, we acknowledge that younger Melbourne homebuyers are doing it tough.

MACRO:

  • No population policies, meaning large scale uncontrolled immigration into certain Inner Melbourne areas;
  • Negative gearing which means I can buy a $1 million home at $20,000 per annum before tax, whilst a younger homebuyer needs to earn 4 times that at $80,000 before tax to buy the same $1 million home. And we oldies have surplus cash/assets and the youngies don’t.

MICRO:

  • No education for younger homebuyers of what they need to do, as it becomes obvious that they are not going to get MACRO help.

JAMES MICRO PLAN – Education of Younger Homebuyers on what each of you can do to address the Home issues.

  1. Money Bin Competition to raise general awareness, that there are solutions on a MICRO level (the politicians won’t be helping you any time soon).
  2. Deeper Discussions within James Market News, specifically what those solutions look like for you on a MICRO level.
  3. Later in the year, a James Rating App or Website – that will help younger homebuyers practically on a DIY basis make good decisions when searching for/buying a home.

With that in mind we set up the The James Money Bin Competition and this week we announce the first James Money Bin competition winner.  Congratulations to Michael Keogh!

Michael’s essay submission was chosen as our first winner because it was so relatable and SO GOOD.

He mentions specific suburbs and prices, and gives helpful tips to other young home buyers alike.

This week Mal presented Michael with a cheque of $1,000. The shaking hands was a bit over the top.

For your chance to be to our next winner, head to The James Money Bin Competition page for more details.

Capture Mal giving Michael cheque thimbnail

Click on the photo to view the video on James Buyer Advocates Facebook page.

Michael’s winning essay:

So you find yourself in your mid-late 20’s, you start to settle down a little. You’ve found the one – maybe you’ve popped the big question, maybe you haven’t.

You’ve studied hard – got yourself those great school marks, worked your way through uni, had a couple of odd jobs here and there, secured the grad job and worked hard for a couple years to find yourself still pretty solidly at the bottom of the career ladder, but feeling more confident you know how to make the right steps to start its ascent.

Kids will come, but not yet – hey, you’re still in your 20’s…just…and you want to be financially secure before you start a family!

And besides, you’ve enjoyed your 20’s, but you’re not ready to give up those Sunday morning smashed avocados on toast for trips to IKEA to fill out the nursery just yet!

You enjoyed your 20’s, maybe a little too much. Is there such a thing? Took a gap year, maybe two. Went on uni exchange. Spent many an evening buying rounds of drinks with mates till the sun started to rise again.

Every time you read the news they talk about housing affordability and how tough it is for first home buyers, you have a little money saved but not enough – I mean who can piece together a quarter mil in their 20’s for a deposit and still live a life worth sharing on instagram? –

Besides, you hear Myanmar is the new must go to place in Asia!

Unfortunately, the parents can’t bail you out with a nice juicy deposit – they have their retirement to plan for, and besides, shouldn’t they get to enjoy all the travel they missed out on by raising you?

So what do you do? Your aspirational, you and your partner have solid city jobs and a small deposit. But it feels like the only avenue to you is an inner city apartment or a house out in Werribee…. sigh, it feels unfair.

That’s ok – I’ve been there. I’m still largely there. But I’ve at least had James twisting my ear now for long enough that I think I get it. And hopefully I can help you get it too.

Before we get into the nitty gritty – let me give you a couple of must’s to keep in mind.

Must remember no 1:

You need to change your mindset.

Yeah I know housing is expensive. Yeah I know its 1,000 times disposable income or whatever it is now. But until you change your mindset from “woe is me, life is unfair” to “what can I do” – you will never be able to look at it logically and make the decisions you need to make for you and your family over the long term.

Must remember no 2:

This isn’t a 5 year plan. This isn’t even a 10 year plan. This is a life plan. I know it sounds ridiculous. I mean – do you even know what the balance of your super is at the moment? Who cares right? That’s to think about when your 40.  And things will happen that won’t go to plan. You can never be fully prepared for the things life will throw at you. But you need to make a decision with a longer term horizon in mind. Trust me – James has shown how transaction costs alone can make this a relevant consideration.

Must remember no 3:

You hate finance? I get that. I’m lucky. I like numbers, but it’s not for everyone. But man…if you could just get yourself to really understand the magic of compounding….It’ll change your life. And I promise it won’t make you money obsessed. There’s nothing wrong with wanting a financially secure life and having decision making flexibility. It’s liberating.

Just don’t try and ram it down the throats of your mates down at Brunswick baths on a hot Saturday arvo.

But you already know this right? That’s why you’ve been diligent. You put away 15% of your after tax earnings every pay. Put it in index funds or that management fund your dad told you to set up when you were 18. That’s how you have that small pot of a deposit that isn’t enough for the 20% anymore where you actually want to buy!

Must remember no 4:

You didn’t study economics? That’s fine. It’s so basic it isn’t funny. Forget interest rates. Forget the economy. Forget inflation or Trump and impact of trade and all that other business that fills words on a page on the AFR.

Just remember these 5 things:

  1. Melbourne’s population is growing. By a lot. Every year. This will increase the demand for shelter.
  2. You can always build new apartments anywhere in the city. Or, you can always add new plots of land to build new houses on the outskirts of a city. This will increase the supply of shelter at a total level. HOWEVER, this doesn’t define the entire market!
  3. You can’t create any new 3-4 bedroom houses on a standalone plot of land with a small-medium backyard for the kids to play with privacy and safety, in a nice neighbourhood, close to the city, where all the cool cafes are within walking distance, close to the good schools that you will probably want your kids to go to one day and close to a tram or a train that can get you in and out of work with pretty minimal fuss.
  4. Most people, probably you one day, if not already, if given the choice – would pay extra for that house near all the good amenities on its own block of land. Who knows, some developer might even want to turn it into apartments or townhouses one day so that more than just one family can get to experience the value of amenities that you came to cherish and love.
  5. So given that the population is going up and those standalone houses near all the good amenities that you aspire to one day living in, will probably be the same thing that future people aspire to one day also get to live in, there’s a fair chance that those houses will become harder and harder to get yourself a piece of. Over the long term anyway – and hey, remember what we said about must No. 2?

Ok, ok Michael – thanks for the pep talk, I get it. I want in. I’m motivated. What do I do?

Well guess what are the three things you have that can get you an advantage over all those oldies with those beautiful $$’s of equity squirrelled away in their houses?

Time, Energy & not needing those shelter comforts right now today.

There are no kid’s soccer games on Saturday mornings for you.

No board meetings or fly in, fly outs to Sydney to woo some potential client (maybe there are?). Even if there are, you’re young – you have boundless energy. Just sleep less.

Do you need a butler’s pantry in your current living arrangements? I doubt it. Do you even know how to cook? You may want one in the house you buy. But you may not need one today (I’ll get to that).

This gives you three things right now that can give you a huge advantage:

  • Use your time & energy to firstly define what you want for a house. Not for today – Plan for what you will want as a 45 year old, (hopefully) happily married with a couple of beautiful children after a decade of career success.
  • Use that same time and energy to become an EXPERT in what you defined above (I mean how many things do we really need to be happy? Think Maslow’s hierarchy – shelter is one of life’s key areas – may as well give it the time it deserves).
    1. Use those Saturday mornings to go to every open house that meets your criteria. Do it before you get finance approval – just for research.
    2. Use realestate.com.au and develop a spread sheet of every sale in those streets for the last six months.
    3. Go to auctions. Get comfortable feeling uncomfortable.
    4. Guess what you think the house will sell for. Be surprised how wrong you got it. Spot when houses sold for less than you thought they would. Ask yourself why. Good reason or a good price? Same when they sell for more. It can actually be a pretty fun way to spend a Saturday morning. You’ll surprise yourself.
  • Do your numbers. Figure out how much you can borrow. Factor in LMI if you don’t have the deposit (buy right and it can be worth it), or if your parents can guarantor even better.

Now, here’s where the change in strategy comes in play. What is your rent today?

Probably something like a two bed apartment in St Kilda for $400 a week? Cause you like the lifestyle that St Kilda offers young professionals like you right? You don’t want to move just yet though? That’s Great! Stay there for a couple more years and keep renting! Enjoy those smashed avocados on Sunday morning.

But will you still want to live in that in 10 years? Probably not. So let’s not pay $550k for that apartment when you are going to have to sell it in five years anyway.

What about the fringe mansion? Well you don’t really want to move out there anyway do you? Not yet, you like your lifestyle. Probably not even when kids come along. It’s a long way from work and all your friends and family. So why pay $650k for that when you won’t really want to stay there long term anyway.

But what about Mordialloc? You grew up bayside. You love the water, hence why you live in St Kilda. Your family are close by in Sandringham.

You certainly know the market pretty well now. You’ve been out and about at auctions for three months on almost every street in the suburb! You’re an expert.

So what about that run down 600m2 block down in Mordialloc on Chute St that you saw sell for in July for $988k?  Sure it was old inside and needed a reno down the track but the bones of the house were nice right? Or the old but well looked after weatherboard on Brownfield that was walking distance to the park?

Or let’s say your family are a little more East. You’ve been renting out Malvern way in that two bed apartment for $400 a week. What about Clayton? A nice solid brick home wedged right between the train line and the university? You could certainly find a fixer-upper around that $1m mark.

Family are further North and you’ve been enjoying that Brunswick lifestyle? Lucky you! Kingsbury is a leafy suburb, 14km from the city with a tram line running next to it with nice blocks of 500m+ and quiet suburbs. Next door to the university, some nice schools Macleod side and within easy reach of your old locals in Northcote. You can pick up a great house for $700k out that way.

So why not buy that future house now, sublet your apartment to a mate for a couple months (get approval from the landlord of course!), move into the new place for a couple months – put some elbow grease into a few basic renovations / tidying up. This then qualifies you for the home being your primary place of residence (read: tax free capital gains), then move back to your digs in St Kilda / Malvern / Brunswick for a couple of years. Pay your $400 a week in rent, get the help of a tenant in your place paying the extra $100+ a week in rent that you don’t yet need or value. And when that family does decide to start growing in size – you have a house ready to move into, a chunk of the mortgage paid down and within the area you wanted to grow old in and a house ready for a bigger reno once you have a few career wins on the board and can make it how you envisioned it.

Have a bigger risk appetite and happy to sacrifice hard to pay down a mortgage? Go harder, rent that $400 Malvern apartment and buy the $1.5m Victorian or Edwardian down the road and use the rental difference to help chip down that mortgage to a level where you can move in and comfortably meet the repayments as the owner occupier.

I know it’s not that sexy. And it’s a little delayed gratification with a dose of long term planning. But making that “beautiful” decision can be the difference between comfort and struggle down the track. Isn’t that worth thinking ahead a little for?

Michael Keogh

His situation:

  • 30 years old
  • Made the pretty average decision of the first place I bought was as a 20 year old: a two bed apartment on the outskirts of the city. I then complained the price didn’t move for seven years and it was the worst thing I ever did.
  • Got lucky because it was in Sydney and literally everything rose over the last three years in Sydney.
  • I now rent a small apartment in St Kilda and love it here at this stage in my life.
  • I sold the apartment last year and rolled it into a four bed house on 550m in Kingsbury as a long term exposure to the Melb market. 14km’s north of the city next to La Trobe Uni. It is on a lovely leafy street, two minutes walk from the tram and five minutes from the university with a nice backyard, solid brick exterior that has been well looked after but in need of being made a little more modern at some point. Purchased in Dec ’16 for $687k.
  • Currently looking to buy my long term future home in Wollongong, NSW (the South coast where my family and friends still reside). It will likely cost about $700k which I made sure I had capacity for both purchases.
  • Plan to move in within 5-7 years with my fiancé once the mortgage is paid down a little and we have hopefully started a family.
  • Thanks for all your advice and info James – while I may not have the perfect strategy you have opened my eyes and forever improved the decision making I would have otherwise made.

YMHBG2

 

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