Buying in Melbourne now, it is really that silly?

Funny though.... you can make money in regional centres too...... its all about the timing

 

@MTR just watch that the bumps don't rattle your confidence.

 

I would sell out of regionals
I have done this twice, jump in a rise, sell prior to peak.
That was 10 years ago now, have not jumped into regionals since

Steve MCK got rich buying in regionals when he started investing

 

Isn't land tax for a land value of $400k just $575? How did you arrive at $1975?

Land Tax calculator

 

Given that many are predicting Melbourne to be the most populated city in Australia and with the constant immigration there, from long term point of view it is a great play.

 

No, I definitely don't think it's silly to buy now. Even though the general trend is flat or slowly downwards, I still think there's growth to be had in certain pockets of Melbourne, particularly those that are near infrastructure, i.e. transport, schools, shops, eateries, parks, etc. and where councils are investing a lot in development. I've been looking a lot in the SE suburbs and prices there are still strong.

The good thing about the current environment is that you can take your time without FOMO. Personally, I'd just do the research and keep an eye out for something you think is good value then pull the trigger. Yes, you MAY be able to get something at a better price if you wait another 12 months but you may not. As someone else mentioned, nobody knows when the bottom of the trough will be. It could be today, it could be in 2 years' time. Either way, most people are predicting the slump to just be a slump rather than a crash and only for ~2 years, so if you can ride it out, you should end up on top.

 

While I agree that there is still huge demand for Sydney and Melbourne, the finance is not there support growth and it's going to get worst before it gets better. I would not invest in the two cities until affordability improves. This could means any or combine of 3 conditions needs to happen;

1 wage rise significantly
2 price to drop much lower than now
3 easier to get finance.

Tier 2 cities does not have this issue. Brisbane and Perth is at its most affordable in the recent history thanks to a flat price and record low interest rate so the upward potential is much greater.
Queensland is recorded better economy, faster population growth and lower vacancy rates so it's possibly the one to watch.

 

I’m currently buying PPOR in Melbourne 1.2million plus.... but thought it was a safe decision to sell a IP at a great price... this way both transactions happen at a similar time and protects us financially if market does drop

 

It's a sliding (upwards) scale (it's not 2x $575). There was $800k of land in my example.

 

That makes sense
Primary residence = different rules

 

Don't quite get this..

Making an assumption here

Sell IP for 600k buy PPOR for 1.2M

Melbourne declines 10% over x period IP value would now be 540k (60k drop) but PPOR is now valued at 1.08M (120k drop)... The % is still the same however you have lost 2x as much in dollar terms compared to holding the IP and not buying the PPOR.

Having the PPOR means that you are living in it (we all need somewhere to live) however it hasn't protected you from the marketing declining.

Say if instead you keep the 600k IP and buy a 600k IP and market drops 10% still they are both worth 540k however you have income on one (IP) and no income on the other. So really this would protect the family a bit more.

Obviously I don't know your personal finances and there is a cost/benefit in lifestyle living in a 1.2M place compared to 600k however the IP protects you more financially than the PPOR.

If your argument is that you would sell the IP when market declines you could make the same argument with the PPOR however if it was rather than taking on additional risk with keeping IP and buying PPOR then different scenario as it is a risk management strategy rather than a financial protection from a market dropping.

 

Cheers for the reply, my decision was made on lifestyle and overall debt.

Selling one of least performing IPs at now a great price, will give me the opportunity to pump a lot of extra cash into my personal offset account, by doing this allowing me to pay off my own ppor in a short time frame... and while enjoying a comfortable stress free lifestyle.

Depending on how the market looks then I will reinvest again at a later stage and all debt will be tax deductible

 

It's worth mentioning the various percentiles of the market.

e.g. right now it's only the top 2x 1/10ths of the market that are dropping. The bottom 4/10ths are still booming, 9%+ growth YTD.

 

Based on history, the average boom comes at least once every 10 years. When did Brisbane last boom again? You are still not sure that it will boom this year or next year so you want 5 years as safety margin?

For all we know Brisbane is just another Adelaide, slow and steady snail place growth or maybe it'll FINALLY boom next year. Will be interesting to see.

 

While there are markets with in market they all have strong connections to each other. Moving forward, that 9% growth might already have slowed down and stopped. Imho, trying to catch the last bit of CG is too much risk.

 

not unequivocally. A lot of people want and use their PPOR to make money via CG later down the track. I dont have the stats but Id guess by far the majority sell their PPORs and that too med term or sooner. The reason is that personal circumstances change frequently and sometimes substantially enough to warrant the sale.

 

it makes sense on paper ( I guess the above view points might be from a property guru, initial MY).

if a person only invests in Syd & Melbourne, then it makes sense.

 

other factors play out in Germany not just PPOR, negative population growth for one...

 

I agree, if part of your strategy is only in SYD and MEL and you can afford to accumulate...nobody can pick the bottom or the top, all the time....

 

So you taking up my offer?