Investing in new suburbs versus established suburbs for CG

Discussion in 'What to buy' started by Invest2021, 2nd Oct, 2021.

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  1. Invest2021

    Invest2021 Active Member

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    One common message in investment books and hearing many property gurus is to stay away from new suburbs and land + house packages for investment purpose. There is unlimited supply of land and land scarcity is key for supply/demand gap, which fuels CG.

    But if you look at new suburbs in Western Sydney like Ponds, Marsden Park etc - all of them have returned at least 8%+ annualized return plus additional benefits of depreciation / low maintenance issue /etc over last 8 years ! I have attached screenshots showing median price growth from 2012 onwards. This matches and sometimes even higher than established suburbs like Hornsby / Castle Hill / Baulkham Hills.

    Is investing in new suburb really a bad strategy ?
     

    Attached Files:

  2. Kevbo

    Kevbo Well-Known Member

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    In hindsight there were some great opportunities with land and house package a couple of years back but I feel that the deals you can find in the market now hardly represent value when the construction costs/component are substantially higher than before. It is a bit like many off the plan apartment owners make significant gain if bought during 2010-2014 but after that good OTP deals are pretty much non-existent.
     
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  3. Trainee

    Trainee Well-Known Member

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    2012 being the start of the boom, those results are a little miseading. A downturn is where the differences appear.
     
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  4. Sackie

    Sackie Well-Known Member

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    I have stuck to established areas and ripple areas of value. Hasn't let me down yet.

    I would never want to be buying in areas where there are huge parcels of land available.

    Ultimately supply and demand rules above all else.
     
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  5. Hills123

    Hills123 Well-Known Member

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    I’ve bought both in Brisbane very recently - one in a new area and the other in a much more established area - hedged my risk there. But at the end, I feel you can make money in both (my opinion) - it will depend on timing and the type of asset you purchase I.e. both properties I bought were undervalued in their respective suburbs - didn’t matter if it was a new development area or established :)
     
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  6. Invest2021

    Invest2021 Active Member

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    Thank you everyone for sharing your views so far.

    Today's new suburbs (like Marsden Park, Riverstone, Box Hill, Leppington in Sydney region ; Point Cook in Melbourne ; Springfield in Brisbane) will become established suburbs in 10-15 years time.

    These new suburbs will also experience land scarcity at least in suburb pockets which are close to amenities / metro / schools. Depreciation benefits will be icing on the cake (highest tax bracket).

    $1.5-$1.6 budget in more established suburbs in Sydney region like Old kellyville, Baulkham hills, mt colah, avaco, terrigal etc will buy 20-40 years old properties, which will sell at land value in 15 years from now as building will deteriorate further.

    So, if the strategy is buy and hold for long term like 15 years - new suburbs theoretically looks more attractive. But I am not an experienced investor, so seeking views from experts here :)
     
  7. sash

    sash Well-Known Member

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    Initially...that is what I did...but if you invest in older properties and hold for over 5 years..you are bound to do a major reno..and if you happen to invest in more lower socio CF properties it will cost more over time. I am now getting rid of these...when you price in reno costs..it becomes very costly.

    Overtime I went towards House and Land in carefully selected locations. This is when the value of my portfolio exploded. I am now also planning to rebuild on some of the older stock as the land is valuable. The depreciation is now being used to offset Capital Gains.

     
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  8. Invest2021

    Invest2021 Active Member

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    Where you would buy House and Land now if you have $1.5mil to spend. Sydney region already had growth in Ponds, Marsden Park region. Would you look at similar outer suburbs in Brisbane and Melbourne?
     
  9. sash

    sash Well-Known Member

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    Is this an OO or investment? If an investment...no way gunga din.
     
  10. Invest2021

    Invest2021 Active Member

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    Investment
     
  11. sash

    sash Well-Known Member

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    Then you do not spend anywhere near that....PM me.....
     
  12. devank

    devank Well-Known Member

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    I don't know how claimed depreciation is dealt when we sell an IP.
    I thought whatever depreciation we claim are added to the sold price for the CGT calculations. But, your statement sounds the opposite.
     
    Last edited: 20th Oct, 2021
  13. sash

    sash Well-Known Member

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    Depreciation used to offset old. You are correct depreciation claim added back when new property is sold. But then there is time value of money. At that point will se one a year. So let's say you claim 60k in depreciation over 10 years. Discount by 50%. That is 30k added to income. Let's say you pay 40% tax that is 12k
     
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  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You will always be better off by claiming depreciation. You get the immediate stream of deductions for property you may never sell. And if you do, you are always at least 50% better off. In some cases the clawback doesnt occur. If the property is inherited for example the costbase for the beneficiary is the "costbase" , not the reduced costbase.
     
  15. San2018

    San2018 Well-Known Member

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    How about buying knock-down house at land value in established suburb and rebuild? I am not expert, just sharing an idea if it makes sense.
     
  16. MWI

    MWI Well-Known Member

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    Agree with most replies here. Years back you could invest 7kms from CBD in QLD in new estates, like I did in Carina QLD for example in year 2000, so timing is important, in addition the maintenance was much less on new properties, also claimed more depreciations so helped with holding costs, was a passive investor rather than active - just some reasons.
    There are many ways to invest into RE, as there are many pros and cons.
    This decision should be based on your personal financial circumstances your goals what you wish to achieve, your holding cost, etc.... like playing Monopoly game, some maybe average value but if you are able to hold many, then after some rents and time, you can buy a better RE (like hotel - meaning closer or more expensive etc...).
    You need to be clear on your investing strategy as there are many, many, many ways to invest into RE.
     
  17. craigc

    craigc Well-Known Member

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    ‘Almost always’ - consider someone holding in a non-taxable or minimal income year.

    Ie Depreciation is ‘wasted’ as reducing $0 tax by depreciation, to then be added back (even at 50%) in later years as part of CGT calcs.

    Agree in most circumstances you are better off to claim as posters above have mentioned.
     
  18. Piston_Broke

    Piston_Broke Well-Known Member

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    it's all about timing.
    A few years ago nobody was interested in Oran Park. Now it's up 30-40%.

    Harrington Parks's early days were the same, couldn't sell for the build cost + land, then 20%fast increase before the latest rise.

    Knowing the time is the hard part.
     
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  19. Invest2021

    Invest2021 Active Member

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    I was one of them :D My mortgage broker at that point of time suggested to invest in new land in Leppington / Austral / Oran park region but I was not convinced given lower social-demographic profile of the Liverpool region and unlimited land supply (something which all experts denounces )
     
  20. ecca15

    ecca15 Active Member

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