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How to buy property for under $500,000
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How to buy property for under $500,000 04 MAR 2014 11:15 AM | Filed Under: Property
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The property market is hot and $500,000 doesn't stretch as far as it used to. But, if you know where to look, there are still some great investment opportunities for buyers on a limited budget. Sydney has been leading the price charge, with house values up about 12% in the year to December 2013, according to property analysts Residex. Meanwhile, in Melbourne house values rose by about 8% and in Perth they went up 9%. So the key question amid all this price escalation and surging competition, is can you still sensibly invest in property for $500,000? Founder of Destiny Financial Solutions, Margaret Lomas says that while buyer frenzy has created an overheated market where there’s a danger of paying above intrinsic market value, there are still good areas to buy in. “In situations like these, the buyer interest usually waves out to affordable markets which have yet to have such a frenzy and we are already seeing this impacting on both the central coast of New South Wales and the south coast, most notably in Wollongong and surrounding suburbs,” says Lomas. “I see pressure in the $350 – $450k price ranges in these areas in the coming 18 months.” Wollongong has seen solid price growth over the last year, with some well-located three and four bedroom houses now selling at prices that might rival Sydney. However, there are both houses and units available up to the $450,000 level, which appear to have strong tenant opportunities as the population grows.
Lomas also thinks the middle ring of Brisbane, which is generally between 10 and 20 kilometres, should start seeing more interest in the $350 - $500k range, including Nundah, Upper Mount Gravatt and Wynnum. “These areas have been sitting a little flat for a few years and Brisbane as a whole will, I think, be the star performer of 2014,” says Lomas. Nundah is an interesting prospect because it’s so close to town and offers a good variety of property types, from colonial cottages to modern townhouses and boutique apartments. Director of Hotspotting.com.au Terry Ryder agrees there are good targets around the Brisbane area, including Logan City and Redcliffe. Logan City has been highlighted for its potential growth because it’s well positioned between Brisbane and the Gold Coast. Buyer interest increased last year and in the 12 months to December, house prices there spiked by 6%, according to Australian Property Monitors.
Image: Steve Christo
Are you seeing growth potential? While scouting locations is important, simply finding property that offers the possibility of future growth is a smart way to buy. Ryder says to focus on affordable property that you can potentially add value to. For example, you could buy an apartment in a rising area of Sydney such as the Westmead precinct or the City of Canterbury. Another option is to buy a house to rent as a passive investment in an affordable suburb in Brisbane, Melbourne or Adelaide. Acquiring two cheaper properties in growing towns is another way to go, says Ryder. “Buy two properties in regional centres which have diverse economies, growing populations and plenty of properties in the $200,000s,” he says. “Examples of good targets are Ballarat and Bendigo in Victoria, Dubbo and Tamworth in New South Wales and Rockhampton and Toowoomba in Queensland.” Ryder also suggests Casey, Dandenong or Brimbank in Melbourne and the greater area of Onkaparinga in the south of Adelaide for affordable prospects.
Simplify your strategy Principal at Smartline Personal Mortgage Advisers, Kevin Lee says the $500,000 limit can get you a cash-flow positive investment in Australia, as long as you research the suburb and market before buying. He says to be wary of naive investors and some buyers’ agents who are competing against each other and pushing up prices beyond intrinsic values. “I stand by my well worn strategy of buying investment properties where 80% of the market can afford to rent them,” says Lee. “And that’s why I encourage my clients to invest in residential property in the middle to lower end of the property market – that’s the 80%. “It’s simple really. You have less chance of your property being vacant for long periods of time. And an empty investment property is pretty much like an empty promise – heartbreaking.” Lee says if you do your research, you can secure a unit or townhouse in an outer suburb of an east coast capital city that could work hard for your money.
Don’t forget Melbourne Melbourne’s median house price was $610,000 in the December quarter of 2013 but this shouldn’t deter prospective investors because around 30% of all houses in Melbourne sold for less than $400,000, according to RP Data. The suburbs with the majority of these sales were in growth areas such as Pakenham, Frankston, Craigieburn, Hoppers Crossing, Werribee, Sunbury and Carrum Downs. RP Data’s Victoria housing market specialist, Robert Larocca, says it’s rare to find a house under $400,000 within 10 kilometre radius of the CBD, however within 15 kilometres there are opportunities.
“It is interesting to note that there are a number of suburbs within 15 kilometre radius of the CBD where more than 50% of sales were below $400,000,” says Larocca. “These are Sunshine West, Sunshine North, Broadmeadows, Ardeer and Tullamarine. “Glenroy, Reservoir, Fawkner and Sunshine also have reasonable proportions of sales for under $400,000.”
Read more: What's in store for property auctions in 2014? Are foreign investors really crowding Sydney? Tweet
This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
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This article appeared in the Commonwealth Bank website, March 4, 2014