Long term PPOR in Sydney vs IP in Brisbane

Just a warning though. If you pull equity to buy a PPOR, that borrowed money is not tax deductible. But do it the other way... i.e. pull equity from your PPOR for an IP and that money can be tax deductible.

Ps. What if SE Qld actually doesn't perform? I.e. It only keeps doing 3% growth per year for the next 5 years? There is a very large over supply of apartments in Brisbane. The CFO of my company has 2 apartments in Brisbane (bought 2012 and 2013) and they are both still at significant losses to what she bought them for. But she had the ssme for a Hurstville apartment but she made a gain on that. Said she put all three on the market at the same time... she sold the Sydney one but couldn't get a buyer for the 2 Brisbane ones! In hindsight she would have really preferred to keep the Sydney one out of the 3....

She also had a really bad tenant in one of her Brisbane places but if she loses a tenant she reckons it's very hard to get another one. So.... not sure SE Qld is all that it's made out to be. Sydney and Melbourne are much safer bets imo even though they have already boomed. At least the rental demand is there. Maybe buying the Sydney PPOR isn't a terrible plan...

Now the market is cooling it might be a good chance to buy a good Sydney property at a reasonable price.

 

Hi Gockie,

I know you have been on the other Brisbane threads and should have more knowledge and about the Brisbane markets then what you are demonstrating above. Brisbane is not one market but is highly dependent on property type and location. Anyone who bought a unit in the last few years is likely to be from overseas or interstate (like your CFO) and unfortunately got stitched up because everyone could see the oversupply coming. Houses have outperformed units here for years and will continue to do so. The unit oversupply is not affecting houses in good owner occ areas. Yes it's possible Brisbane won't grow radically but in that scenario it is just as likely sydney will decrease by 10-15% so you would be better placed in Brisbane getting moderate growth then in Sydney making going backwards.

 

I'm thinking growth isn't assured though in Brisbane and I think owning a PPOR in a good area (a place they want to live) is a priority for families. OP currently owns in Sydney anyway so their current place may go up, down or sideways. But they are looking to buy in to a "better area" - I've owned in Sydney since 2005 and the first 4 years Sydney market did nothing. But I've gone from having as a PPOR a basic 250k unit to something like a 2.5mill house in that time. And the great thing? PPORs are not subject to CGT. Thus it's a great place to store wealth. Just don't overspend on a PPOR so that the repayments are crippling.

And while my CFO didn't make great decisions, her struggle to get tenants will affect everybody who invests in Brisbane. With the apartment overbuilding there are a lot of options for tenants. But vacancy rates for Sydney are reasonable and you generally won't find it takes more than a few weeks renting out a home here in Sydney (tighter rental market) whereas the Brisbane experience is quite different. And while 15% growth is ok... Sydney basically doubled over the last 5 years. Will Brisnane do the same? I'm sceptical.

I tend to think (long term) a home in the Northern suburbs or the Hills area of Sydney will hold its value well. It's desirable. Its not too far out. My general rule is to try to buy closer into the city as your budget allows, taking into account access to transport and amenities. In addition the OP has a priority on schools and that's important to them. And to be honest, that's a normal thing that people around here do. Buy a starter and then move to where the better public schools are, raise the family there.

It gives peace of mind that people are trying to give their kids a good start and its nice to live in an area where so many people have that mindset. Later on (cashed up) Sydneysiders can move to the coast or Brisbane if they choose to....

This is the truth....

 

+1

Fully paid PPOR is the first thing to do in any cases unless you have somewhere you can live without paying a rent since rent and mortgage interest on PPOR is not tax deductible.

 

Hey Richard... rereading your original post. I agree. Buy the Hills/Northern district PPOR now. Rent it out for up to 6 years. Then move in. My sister basically did that. They traded up from a townhouse in Castle Hill to a house in Castle Hill. Since she was on maternity leave when they bought, (2012) they rented out the new PPOR for a year and stayed in the townhouse. It was not boom times so they took their time to buy something really good. They bought a property with really large flat land (with very good depth and a wide frontage) on a quiet street with a really great house.... Then.... it boomed!!!! In any case... now they have their house in the Hills. Kids are doing really well. Can't complain!

I've got another sister with a house and family in the Hills too (Cherrybrook). Its another very popular spot for parents with school kids.... and the trains are coming very soon....

 

Agree that properties are selling but still stand by with my earlier comment about it not being a runaway train at the moment and seeing some good reductions for homes which I personally think the vendors and real estate agents are being too optimistic as they are asking for similar prices which can fetch you a home in the Northern Beaches.

I live in the area and been doing a bit of window shopping but playing the waiting game for the time being.

 

Agree... the OP should take their time... My sister in Castle Hill took ages to buy. But they eventually bought extremely well. But they rejected so many homes in their search.

When buying this PPOR the buyer should remember that it could be their home for 20 years. So they should get it right at the time of purchase. Stamp duty is basically the equivalent of someone's full annual salary so you don't want to be regretting your purchase.

Re : Northern Beaches... Personally my opinion is that it's not well connected to the rest of Sydney and you have to take buses to get anywhere and the roads don't cope. So that's a turn off. I would personally do North Shore, but not Northern Beaches.

 

It doesn't matter what Sydney did over the last 5 years for someone buying today , in fact it's a negative if anything because it's reached the end of its growth cycle and now values are likely to retract. And no unit oversupply will not affect everyone, I rented my 4 bedroom house 5km from the city in feb for 20% higher than the year before . If you're trying to rent a dog box investor grade unit in an oversupplied suburb that's a whole different story.

The truth is that net migration , investment/infrastructure and employment are all increasing nicely in Brisbane and property values for the right product in the right suburb are very likely to do the same. As for cgt the counterpoint to that is the negative gearing benefits of an ip.

 

While buying an IP or two or three wasn't such a problem before, now lending is becoming a lot tougher and at the end of the day, if you only have the money to buy either IP or PPOR, I'd say PPOR wins.
There are no guarantees a Brisbane IP will do better than a house in Sydney. And if the OP really wants the PPOR a couple of years down the track but has to liquidate the IP to do it, the buying and selling costs might make it a waste of time.

Yes there is a risk Sydney properties will go down or nowhere in the short term, but it will be their home and if the outlook is for 20 years or so... then there's no time like now to buy. Prices have stopped being frothy but I think people still want to live and buy in the Sydney Northern Districts and Hills.
For me... houses where I live rose (peaked) in 2007. Then 2008 the prices stagnated. (We bought in 2008). Then the prices started rising again 2009-2010. Prices once again stagnated. Then from 2013 it's just been going up the whole time.... it might stop but it might still be 2-3% gains. Which is still significant when you take into account the house values....

 

Hey Gockie what app is that?

 

RPData Pro, (and from there go into the Trends section).

 

For 900k try les than 5km

 

I think he'd be much safer buying in Brisbane perhaps the Gold Coast in a particular location but I'm not sure I'd be recommended to go outside of Brisbane it's too risky from what I've seen of cycles. I've lived in other parts of Queensland so I keep an eye on what's going on and I just see them as being a little bit more volatile. They are all very small cities if you can even call them that Brisbane just has more diverse demand and if he can get in a desirable position it's going to be a much more secure investment considering he's worried about comparing to what Sydney to what Sydney may or may not not do. Sydney is a very strong city overall historically (in a lull just now) . I don't think he wants to be comparing regional Queensland to that over the long term.

 

You would struggle to get a house in a good street on decent land size less than 5km from the city for $900k!

 

True for large land. I was thinking standard land size.

 

Even for smaller land size would be tough to find much less than 5km for that price . What suburbs are you thinking ?

 

Red hill. Norman park. There's a few possibilities.
For something with land that you can actually add an additional granny flat to or something like that it's going to get pretty tough within 5 km but if you want a standard house on a block size common for the area you can find things. What about 23 Devon street Red hill I haven't researched the property thoroughly but at face value seem to be a good deal considering it's two flats.
You might get a granny flat on 18 Lincoln Street Wilston $750k but I can I haven't researched this property I'm just pulling out examples.
But yes Patrick if by decent land you mean a larger than average block then 5 kilometres you won't find it.

 

Your ma

that red hill one looked like good buying !

 

Hi @RichardN. Another reason to move here. The population is well educated and (relative to other parts of Sydney) we tend to live healthy lifestyles in the Northern Districts. I think its all linked together, green neighbourhoods, good education, good jobs, good health, general happiness and friendliness and community spirit. The neighbours tend to be nice.

What's not to love?

 

Thanks everyone for your valuable insights and suggestions.

Patrick, I agree with your view on property cycles and buying IP in Brisbane make sense now but trying to balance the investment journey with kids future by renting for now, buy IP in Sydney with the view to convert to PPOR in future.

Now doing the next level of research, I have one IP worth of 800K and PPOR worth of 750 K in West. For tax deductions point of view and to keep it simple with the paper work, I bought all properties on my name. If I convert current PPOR to IP and buy one more IP in Sydney north/Hill, I’ll end up having 3 IPs and paying huge land tax. I am considering moving current PPOR into my wife’s name but still I might be paying ~ 8K land tax.

I am also thinking to sell current PPOR worth of $750 K and buy in Brisbane with the long term view and reduce the exposure to Sydney market but not sure if I’ll be wasting my time and buy/sell expenses.

Properties and land values are below.

Current IP - 341K

Current PPOR which will turn into IP in near future- 334K

Expecting to buy IP with the intention to convert to PPOR in next 5 years - ~675K

@Gockie , Thanks for all your responses. Any thoughts on the best place to buy for my future PPOR with the view that area is closer to the top non selective high schools as a backup if my kids doesn't make to selective schools. My budget at the moment is 1.2M with ~700 SQM land size. My little one will be going to Kindy next year and elder daughter is in year 1 at the moment. Throughout their primary, we are planning to rent in Balkham hills.