July Market Outlook
CoreLogic National housing Update July 2017
7 Factors That Influence a Home Buyer’s Decision by CoreLogic
Stamp duty and first home owner grant changes in effect across Australia
The difference between owner-occupier and investment interest rates
Adelaide July 2017
Brisbane July 2017
Cairns July 2017
Canberra July 2017
Darwin July 2017
Gold Coast July 2017
Melbourne July 2017
Newcastle July 2017
Perth July 2017
Regional NSW July 2017
Regional NT July 2017
Regional QLD July 2017
Regional VIC July 2017
South West WA July 2017
Sydney July 2017
Tasmania July 2017
Wollongong July 2017
CoreLogic QLD housing Update July 2017
CoreLogic SA housing Update July 2017
CoreLogic VIC housing Update July 2017
CoreLogic WA housing Update July 2017
Should you rent out your home on Airbnb?
How to calculate the cost of buying a home in Australia
Mortgage myth buster: things you need to know about mortgages
Regional VIC July 2017
The month in review: Regional VIC
By Herron Todd White
Amid the ongoing affordability debate this is an extremely worthwhile exercise to showcase that in a regional centre such as Ballarat you really can still get some great property for your lazy five hundred grand.
This article will tackle the question in a few ways. We will answer the following questions:
1. Can a family of four or five move to Ballarat and purchase a property in which they can live with relative ease and comfort for $500,000?
2. How would you best invest this amount in the area assuming you have a small… and perhaps slightly larger risk appetite?
Firstly to the family. Ballarat as a market has property which ranges from Victorian to modern dwellings and everything in between and we argue strongly that you can purchase at most points along the spectrum for $500,000.
The above property is at 427 Doveton Street North, Soldiers Hill. It sold for $510,000 in April this year (source: RP Data). The property has a land area of 552 square metres. It was built circa 1915 and has been renovated and extended to a good standard in the past seven to ten years. It contains 4-bedrooms, 2-bathrooms and open plan living areas. Externally the property features double garage and outdoor living areas. From a location perspective the property is about 800 metres to the middle of town and the main train station, 1.1 kilometres to Lake Wendouree and within 100 metres of schools and a very friendly neighbourhood café and pub. One of the first points made when our office saw the sale was that you could move the family in next week and have a very comfortable Ballarat life.
The medium to long term capital gain prospects for the above property are also very good as it ticks all the boxes. It is a property for which there is a limited supply, in a very good location, close to lifestyle amenities, the CBD and public transport.
The above property is at 2 Canadian Springs Drive, Canadian. It sold for $465,000 in March this year (source: RP Data). The property has a land area of 787 square metres. It was built circa 2008 and has been maintained to a good standard. It contains 4-bedrooms, study, 2-bathrooms and open plan living areas. Externally the property features double garage, workshop and outdoor living areas. From a location perspective the property is about 2.8 kilometres to the middle of town and the main train station, 500 metres to local parks and within 1.38 kilometres of schools, neighbourhood cafés and pubs.
Again, when we discussed this sale in the office similar sentiments were expressed. While the location and period appeal of this property are inferior to that of the Doveton Street North example, the house size and land size are significantly larger.
The capital growth prospects of the property however are significantly limited as the property is in a market where there is continuous supply. This decreases scarcity which detracts from capital growth.
An investor with a low risk appetite could purchase two smaller period dwellings with 2- or 3-bedrooms, which would have been last updated in the 1980s or 1990s. We would advise you to purchase them in Ballarat Central, Soldiers Hill, Black Hill, Ballarat East or Golden Point. The two dwellings would provide a rental return of around $600 per week or 6.25% per annum on your $500,000 investment. Additionally these dwellings would have very strong capital growth prospects.
An investor with a slightly higher risk appetite could purchase a period dwelling in one of the above mentioned suburbs on an allotment of 500 to 700 square metres for circa $300,000. They could undertake a renovation that would cost in the vicinity of $200,000 and finish with a property that they could sell for $550,000 to $600,000. This property would also have very good long term capital growth prospects and as such a buy, renovate and hold in the medium term strategy could also be valid. In this strategy a rental return around 5% per annum could be garnered.
As you can see, with a bit of know-how and a dash of risk, that lazy $500,000 can be put to work with some strong results in the Ballarat area.
The $500,000 price point in the Bendigo residential market will buy you a new or near new quality home within any new outer estate in the region. Alternatively it will buy you a more modest property within a one to two kilometre radius of the CBD. Examples are summarized in the following table.
66 McIvor Forest Drive, Junortoun – Sold for $477,000 in May 2017.
Circa 2000 brick veneer 4-bed, 2-bath 2-car garage on a 1,200 square metre block. Located approximately seven kilometres by road from the CBD.
99 Hargreaves Street, Bendigo – Sold for $462,000 in March 2017.
Fully renovated c. 1890 weatherboard dwelling containing 3-bed, 2-bath and carport. Located within one kilometre of the CBD.
In the current market the best way to invest $500,000 in residential property would be properties within areas as close to the CBD as possible. These properties have historically delivered the best capital growth. Areas within Bendigo proper and Quarry Hill are good examples of such locations. Rental returns on the two are approximately equal.
With improvements in the market and tightening supply, $500,000 continues to buy a reasonable 4-bedroom dwelling with ancillary pool and shed but recent gains in the market mean that better quality houses in standard residential areas are now pushing into the mid $500,000s up to $600,000 if the purchaser is looking for a pool or shed along with a better quality residence in the more sought after areas of Echuca and Moama. Rental yields for dwellings of this nature tend to top out at around 5% with $500 per week historically not being seen as achievable but strong demand now making it commonplace.
The lazy half million would see you purchasing a property towards the top end of Horsham’s residential market in a well sought after location with river frontage or in a less sought after location with ancillary improvements such as a pool and sheds. The median house price in Horsham is around $245,000 with approximately 60% of Horsham’s residential sales being within the $200,000 to $400,000 price bracket. Overall Horsham’s residential values have remained steady however the volume of sales occurring is slightly lower than this time 12 months ago.
Horsham’s rental market has remained steady over the past 12 months with a good balance between supply and demand. Rentals range from $195 per week for a 2-bedroom unit to $450 per week for a newly constructed 4-bedroom dwelling.
When posed with this question in previous years, our recommendation has been to buy two houses, each at $250,000. However it is now almost impossible to find a reasonable standard home in Mildura for $250,000. Selling prices of 3-bedroom dwellings, especially those in a better part of town, are now starting at around $275,000, and so this strategy is now beyond our reach.
For this year’s recommendation, we would suggest looking for a complex of most likely three or possibly four residential units. $500,000 should buy a complex built in the late 1980s or 1990s and of a reasonable standard. The main attraction will be the gross rental return of over 6%. The key is to find a complex which will be appealing to tenants, so look for reasonable size living areas and secure car parking, preferably in a west side or central location.
The advantage of buying an entire complex rather than some units in a larger complex is the ability to control the management and co-ordinate any upgrading without the need to involve an Owners Corporation. Not only will this save money, it will also simplify management.
In the past we have often observed that the downside of the higher rental return from unit complexes has been limited capital gain, however this seems to now be less significant, with recent sales showing that values of better standard complexes have increased at similar levels to detached dwellings. The higher interest in residential unit complexes is driven by buyers seeking consistent, annuity style returns.
Some of these buyers would have historically focused on small commercial investment properties, however higher vacancy rates, particularly for commercial properties in the sub $500,000 price bracket, are a deterrent. Residential rents have also increased more rapidly than commercial units in the past few years.
Within close proximity to Warrnambool’s CBD, $500,000 will buy a good quality, 3-bedroom townhouse or alternatively an older, period style dwelling requiring renovation. Moving away from central Warrnambool $500,000 will buy a recently constructed 4-bedroom dwelling on an above average lot size (approximately 800 square metres or over) within a relatively new residential subdivision.
When comparing this figure to Warrnambool’s median house price of sub $350,000, it could be considered too expensive. However at this price range we are talking about a smaller portion of the market. This buyer is willing to spend the money to either be located within central Warrnambool or to acquire a good quality, 4-bedroom home within one of the newly development subdivisions.
With rentals ranging from $450 to $550 per week and a slight increase over the past 12 month period, Central Warrnambool’s property market is performing best at present. This growth is expected to continue in the short term due to the limited supply of central properties and increasing demand to be located within close proximity of the CBD.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.