VIC Melbourne: does it still make sense to buy in new estates?

Hey guys,

I know a lot of people made money on H&L here in Melbourne. The reason for the poll is that this strategy doesn`t make sense to me anymore, however I am conscious that I don`t have much experience on this topic as I didn`t see many cycles and I can potentially be wrong.

Let`s grab an example: Estate Westwood, middle of nowhere, no railway station closeby, far from the highway, they are selling 12.5x21 at $280k. Building will cost at least 230k, total of $500k. Cheap or expensive? I think it is expensive as the land component is pretty small + you are in the middle of nowhere.

Let`s page the gurus on this topic.
@sash @Connor

 

When you compare it to Sydney it is cheap...for me its a no...I am tight arse...so no....

As for 230k to build turney...not correct maybe a very small 2 storey (17-18sq)....I can get a small single on it for 195k...no probs but only 16.5sq

 

Maybe you are right.

Do u see value for a built product?
As others say, try saving costs on the build.

 

I can see in Melbourne in particular that you can buy a 400m2 block for around $300K and yes most people are paying $230K for the build (=$530K) If you consider how much that is in todays market for a 4bed 2 bath 2car outer suburb that is probably the market rate with no equity in your pocket once finished building.
However for some investors who would like to capitalise on negative gearing plus the added benefits of depreciation schedule would find this a good strategy as the estate sells more stages of land and increases in value. This is a good strategy if you have bought land in the first 5 stages of development.( I do not consider negative gearing a investment strategy but some high earners like it)
I would also suggest that in the current market, these outer suburbs would only appeal to owner occupiers with kids who want to live in a brand new home. Otherwise the young professional couple could live a little closer to the city for about the same money.
For future prospects I would think that the planning minister would introduce funding to jobs and transport in the outer regions as more and more of the population soaks up supply.

 

How about you buy a 350 sq mt block between 210k to 230k and as another 220k for the build. End value 430k to 450k and the end value is about 500k, will be rented for 450 to 460 per week.

Or even better. 450 sq mt for 175k and add another 230k for build with 450k as end value and 430 per week as rental.

However, you habe to move out.

Regards

 

Not sure about the 450/175k unless it is in the middle of nowhere. Let`s say Atherstone in Melton. What about you buy a 600m2 land with an house already built 16mt frontage 300mt from the railway station (already built), schools and shops?

14 Brennan Street, Melton South, Vic 3338 - Property Details

 

What`s about 700m2 @ $320k or if you want to walk a bit more 600m2 @$286k
https://www.realestate.com.au/sold/property-house-vic-melton+south-1249085584
3 Iris Court, Melton South, Vic 3338 - Property Details

 

If a suburbs has potential, i dont consider it in the middle of nowhere.
But for this one, it does seems to have potential. However, have you figured the holding costs?
When do you plan to build?
Will it be a knockdown and rebuild even for the existing one or tou can rerain the existing one.
I would base my buying decision on these factors.

Regards

 

These are 6 month old examples.
Markets have changed drastically since then.

Regards

 

I am not saying that H&L are bad just that there will be a point when they are not viable anymore.
When I say in the middle of nowhere I mean those new suburbs will take 5/10 years before getting up and running. See Mernda.

Now talking about Melton for example, is it better to buy a well positioned old house with development potential or go new on a smaller lot?

Let`s grab an example of just sold:

10 Bass Court, Melton South, Vic 3338 - Property Details
680m2 $30k new kitchen and bathroom final cost $410k

 

These really aren't in the Atherstone estate though. These are in Melton South which has gone up quite a lot in the past year.

 

Hmmm, best time to buy in Mernda was 2015-16. Now the numbers dont make sense. So what you are saying is correct. However, when numbers stop working, you start moving out or target other markets.

Example, in 2015-16, point cook gave the best return.
In 2016, the target shifted to werribee. So you have to move further out.
In 2017, wyndham vale probably gave the best return.

Similarly in north, you could have started with Craigeiburn, then mickleham, then rockbank/ Mernda and finally melton and sometime in 2016-17, suburbs like wollert and epping which were newly being developed.

The returns were truely amazing. If you can still target a small home in a suburb like wollert (23 k's from cbd, within 500 mts to a km to freeway) in a price mark of 450k to 470k, you would still be laughing. There are a lot of people selling land for profit in such areas. If you are a cashed up buyer, you are still looking at 50k to 70k worth of profit once you finish your build.

Similarly, everyone has a strategy to follow in which they are comfortable with. Buy large land and holding is also one of them but you are banking on future growth rather than any value addition or immediate equity.

Rrgards

 

Price points have shifted drastically over the last 2-3 years in pretty much all of Melb's H&L markets. Land prices have sky-rocketed and builders have followed suit increasing their prices also.
Does it still make sense? Well from what I'm seeing there is still opportunity to make decent $$ in the market...but now more than ever you need to be on the ball with your research, and be well versed in land prices and building costs. The days of rocking up to any new estate, choosing a block and waiting for significant growth are gone.

Guess what I'm saying is... If you know what you're doing, you can still make good $$ with H&L.