Long term PPOR in Sydney vs IP in Brisbane

Need your thoughts pls…

I live in Sydney west PPOR at the moment and planning to move to North/ Hill district in search for better schools from next year. I have decided to rent out for next 3-4 years at least as it doesn’t make sense to buy 1.2 M+ property and live there for obvious reasons (low yields and non-deducible losses).

Until yesterday, I was thinking to buy IP in Brisbane for around 500K plus. And then look at buying the PPOR in Sydney north/ Hills district after 5 years or so but I am realizing is that I may not be able to buy since I’ll exhaust my serviceability and also prices in Sydney North might outgrow compare to the CG in Brisbane minus buying/ selling costs. And also in long run, let’s say in next 10 years, I believe Sydney north/Hills district prices will be out of reach for me as I believe they will outgrow compare to any other suburbs Australia. With the approach of buying IP in Sydney north and convert it as PPOR in 5-10 years time, I believe I not missing my prop. Investment journey as whatever I buy in north works like an IP.

My current borrowing capacity is 900K and possibly by selling my current PPOR (worth 750K), I should be able to buy property in Sydney north. If I buy Brisbane IP now, I think I can’t buy a property in Sydney north unless I sell new Brisbane IP in next 2 years which doesn’t make sense as I am losing all buying/ selling costs.

Since my end goal is to move to Sydney north/ Hills in long term, I am scared of missing boat.

In a nut shell, I am struggling to decide whether to wait Sydney market to come down and buy in North vs buy IP in Brisbane now and expect that it will outgrow Sydney north market in long term.

Appreciate your suggestions/comments on this. Pls ask any details if I missed to share.

Many thanks.

 

welcome to PC @RichardN,

"And also in long run, let’s say in next 10 years, I believe Sydney north/Hills district prices will be out of reach for me as I believe they will outgrow compare to any other suburbs Australia.",

why?

if you could work out a definitely answer to the above, you will know what is the best for yourself.

 

If you can afford to buy a PPOR where you want to live, why not do that now and invest some time after you've settled in?

 

Hi @RichardN

I think you are on the right track in your comparison of the two options. If you trade one property for another in Sydney - you are doing it in the same market.

Definitely important to consider the impact of owning an IP interstate on your borrowing capacity.

 

Land scarcity, population increase, people in premium areas can afford to spend and push the prices up etc.

I am thinking to sell now and buy after 12-18 months.
Sorry I didn't understand how does it impacts the borrowing capacity if I own an interstate IP.

 

I'd look to buy your PPOR within the next 24 months....starting now.

 

Because I am worried about achieving the financial freedom if I am not in IP game.

 

I wouldn't worry too much about the hills area being a run away train at the moment because I am seeing more price reductions but of course who knows what may happen in 5 years time.

 

I would buy ppor now and rent it out for a few years so you still get some deductions etc and the bonus of cheaper rent. I went down the path of rentvesring but bought in areas I don’t really want to live. Due to the APRA changes I have hit a serviceability wall so will realistically have to sell to buy in an area I want. This means more tax and more stamp duty. I personally wish I had bought a house for myself originally and rented it out with the plan of moving in down the track.

 

Given the current lending environment, need to consider the impact of IP loan on your future owner occupier property purchase.

Also consider putting cash toward an IP vs preserving cash for next owner occupier property and tax deductibility issues that come with it

 

Ian has articulated this really well.

People do get attracted to the idea of 'rentvesting' - but its not for everybody

 

Simply speaking Sydney appears to be in reverse and Brisbane is just starting its growth cycle . For $900k you could buy a nice house on good land size less than 10km to the cbd and I believe you will have better capital growth then Sydney over the next 3-5years .

 

It's a common theme.... people moving from Sydney's west or south west to Sydney's North or Hills district for schools.

 

Thanks Patrick but the problem is that if I buy Brisbane IP now, I will not be able buy Sydney one for next few years unless I sell something which is not ideal due to buying/selling expenses. And also once Sydney starts going up, I believe it will outperform Brisbane and will be out of reach for me when I try to move into these premium suburbs in future. Honestly I am not comfortable to keep money and wait for downturn in Sydney. By the time Sydney reaches the bottom, it may be 4+ years but not sure what is the best option instead of holding money and waiting for Sydney downturn.

 

Northwest train link is likely to open mid next year. you could be better off buying before that. I feel that could trigger a mini-boom in Hills

 

Said boom already happened I’d say?

 

Sydney may not go up again for another 10 years plus. If you buy in Brisbane you would be betting on growth of say 20-30% over the next 5 years and then sell and hope that Sydney has dropped 5-15% over that period. It is quite possible however obviously no guaranteed .

 

There are minor reductions still most properties are selling; its just taking more time now as compared to say last year.
Hills and Sydney North are aspirational suburbs specially for young families looking for good public schools. There will always be good demand

 

Hi Richard,

I would recommend looking in Queensland (not only Brisbane), because I think there are a lot of good opportunities throughout QLD that are poised for growth in the next 4-5 years. Prices are reasonable there and much more affordable in comparison to NSW and Melb prices. I know of many families and individuals who are moving up there for the sunny weather, it is less busy.

Once you find some capital growth in QLD, you could consider using that equity to buying the PPOR where you want.

 

Completely agree. People would much rather send their kids to schools in this area rather than in the west or south west.

Homes are still selling (its just a lot more subdued - the froth has gone) and I think the rail line will be a strong support for house prices in the Hills in the future. Plus, it's quite green, good looking suburbs, nice gardens, (I'd even call the Hills district the "Garden Shire"). You have roads, (M2, M7), shopping, schools... house proud people... just a nice area.