NSW Orange, NSW

Euro why dont they get a bit more creative with the colour schemes??. Black roof, black bricks, black windows, black garage door ....

 

You’re suggesting we build a NZ house ? Ie all black?

 

Meanwhile, in Orange

 

So a quick update. Had another dual occ handed over to an investor client on Monday in Orange and the granny flat has been tenanted already at $240 per week. The 4 bedroom house is on the market at $435 with multiple inspections booked for this weekend ... if it gets $435 (and the tenancy manager believes it will) that's a $675 combined return.

Purchase Price was 550K ( they got the last deal at this price...land costs have since increased by @20K so more recent sales have been @ 570K) . I'm extremely pleased with these results. Things are coming along nicely in Orange

 

I’ve been reading a few good news stories about Orange lately. Supposedly 5th highest capital growth in Australia for year ended May.

We're one of Australia's top five areas for housing price rises | Graphs

Hoping things continue and everyone with IPs in the area do well in the next few years

 

What is the point here? Theres a fair bit of truth in that comment

 

That's certainly your prerogative to say so...

There's a fair bit of truth in this comment - 10% + growth in the last 12 months, and 8% + rental growth in the last 12 months. I think he got it badly wrong.

 

This is true. The easy reach from Sydney bit is a stretch, the drive over the mountains with traffic lights, changing limits and traffic is interminable....a tunnel would be a game changer

On the other side of the coin, coastal dwellers will find it freezing cold, take last Sunday for example 2c while is was 15c in Sydney...most will be shocked at the climate.

The new developments are all characterless, but central orange does have some of highest concentration of federation homes that I’ve ever seen. Food and wine, no problem.

 

@euro73 wondering why a 3br + 1br rather than a duplex - 2 + 2 or 3 + 3. do the numbers stack up better? Or Easier to get approvals? Or.....?

 

Duplex is not dual occ. Its 2 properties on individual titles meaning 2 sets of council rates , 2 sets of insurances, etc.

With granny flats, no approval needed in NSW. Provided the land is 600M2 + , and the granny flat is 60M2 or less, they are considered "complying" so a private certifier signs off. This is where NSW is well ahead of other states and why dual occ in larger regionals is proving to work so well.

When you look at the numbers ( and feel free to jump online and look for yourself, or call any of the local agents in town and ask for yourself) we are delivering 2 sets of rental incomes for not much more than other builders in town are delivering a single 4 bedder for. If you were to buy a new 4 bedder house and land package today from a local project builder you'd be spending @500K or thereabouts . Some are going for mid 500's. A granny flat would cost you at least 120K to add to that later on. Our deals are priced between 570-580K so we feel that we are well under replacement or market value already, and then we are getting $665-675 combined rent with full new build depreciation on top of that.... the numbers are awesome!

Land releases are getting smaller in Orange and Bathurst - like everywhere else I guess - and prices are climbing as well.... so in future as land gets smaller but dearer we may need to revert to a different design to try and maintain sub 600K prices which continue to deliver 7-9K CF+ yields. We shall see.... But for now, this package, in this design, is proving extremely popular with my clients and with tenants.

We only do 20 or so per year, in order to ensure we don't cannibalise the rental yields.

They roll into the market one at a time or two at a time, in order to ensure we don't cannibalise the rental yields.

You can hold several of these and stay under the NSW land tax threshold, meaning that 100% of your surplus cash is yours.

When you look at any other locations or states, these things are just not available.
Sure you can do dual occ in many places. And sure you can avoid aggregate land tax in QLD by using trusts and separating assets into "baskets" , but then you lose 1/2 the cash flow because the neg gearing is useless in those structures, and worse ..... much worse- the rents will be cannibalised within a couple of years because 1000 or 2000 of them will have been built within 10 minutes of each other by then.

The aim of my game is to deliver cash cows that can help pay off debt and later, help deal with P&I repayments. Being in places where everyone else operates and everyone else is cannibalising is just not where I want to be ....

I operate where others do not.
I deliver price points others do not.
I deliver yields others do not.

It was that way during the NRAS years. And its exactly the same way now with dual occ's .

Several PC members have purchased them - feel free to start a thread asking them whether they are happy .....

 

Maybe things are changing as people have been talking about Bathurst and Orange lately, I haven't checked myself but when I went out there last year Orange and Bathurst had vacancies over 5 percent and prices were flat.
I think they took a hit when Electrolux closed down and some mining projects finished. I don't know how vulnerable these places are in this regard.
However of late I've heard news that people in the medical profession were moving to Orange and that Orange was becoming quite diverse in their economy.
If you asked me last year where my money would go I would have gone Newcastle but now this market is said to be in a mature part of the property cycle and perhaps Orange is in the right part of this cycle.
One thing about Orange, say compared to Newcastle suburbs is that for 400k you get a much better quality house. They have really good sporting facilities with numerous indoor centres including having the only indoor tennis centre in NSW and indoor basketball etc.

 

Prices started taking off 2nd half of 2017. Growth has exceeded 11% for the past 12 months.

Treechangers and young families are driving it, mainly. The population is growing at over 1% per annum. Over 200 new homes are being built there annually yet rents are increasing and vacancy rates are falling.

The vacancy rate sits at 1.36%
Rents are up @ 8% in the past 12 months and will keep climbing...
Price growth has exceeded 11% in the past 12 months and if the prices of the new land releases are a guide, that trend is only going to continue to keep going...

The hospital is also transforming Orange. Besides the big upgrade a couple of years back, lots of specialty services are moving there. Orange is becoming the Westmead of regional NSW

The University is also ramping up its medical curriculum as well. Home

Younger population is driving cool bars, cafes, restaurants..and people have money.
Drive into the town centre. The shops are all open. Nothing is boarded up or closing down or derelict. Its a vibrant high street and a vibrant town centre . So yes, Orange is doing very well thanks very much.

 

This is a very interesting point and something that I'm weighing up right now. The question I'm looking at is are NSW major regional towns a better prospect then a capital city like Adelaide because it's in NSW and you can still get to Sydney if you need to?

 

Couldn’t say . All I know is that Orange is going really well

 

potentially
it's an interesting phenomenon that is happening in Victoria as well.
People moving out to more affordable towns that are still within reach of melbourne / sydney
I don't live in Melbourne but I can easily drive there for the weekend to catch up with friends and family
I definitively think that a town like Adelaide is better than most regional NSW towns but people place a lot of weight on being within driving distance to loved ones.
Whilst the prices are high in melbourne and sydney people wont have an issue paying half a million for a place in a regional as it seems comparatively cheap.
I think with ever increasing population Adelaide will always be in demand and it has tight geographical constraints so I think the regionals in NSW and VIc outperforming it may just be a cyclical thing
ie after the melbourne and sydney boom the regionals get good growth for a couple of years, then the party is over for another decade

 

Yeah maybe... but I think there's a clear trend forming.

Firstly, this is the first generation of baby boomers who are cashing out of Sydney and Melbourne and seachanging /treechanging with big amounts of cash in their pockets - and they aren't moving to Adelaide from Sydney or Melbourne. They are moving to Geelong or Shepparton or Bendigo or Ballarat if they leave Melbourne - or Port Macquarie or Shellharbour or Orange or Mudgee or Bathurst if they leave Sydney...... or they are heading north to the Noosa sun. But thats always happened so its nothing new. Whats new is the regional migration.

Add to that , this is the first post war generation that has large percentages of its members who are priced out of home ownership in Sydney and Melbourne , who are also treechanging and seachanging

Its only small numbers, but that's all it needs to be. 1% population growth in Sydney or Melbourne (50-60K per year ) was enough to drive prices up for years. So why isn't it plausible that it's going to do the same in places with much much lower median price points, where debt to income ratios arent near 6 x yet? And especially when lots of the participants /buyers are cash buyers - ie the baby boomer retirees.

So I dont think this is going to turn out to be a short trend. I think the amount of new construction combined with falling vacancy rates and massive uptick in school enrolments tells us this is something more structurally permanent.

But even if it is... I'll have dual incomes that pay down my property and handle P&I easily.



Regarding this comment....

It is premised on an assumption that previous growth cycles will repeat, and that regional growth must therefore be a statistical anomaly. That was a reasonable argument until about mid /late 2015, when the credit environment was uber'd. For all we know, as it stands today, Sydney and Melbourne could be 20 years away from another cycle. changes to borrowing capacity is a complete game changer. I dont think its sunk in for people just how much its going to change growth cycles for both cities , moving forward. Median prices in both cities are already well over APRA's preferred DTI ratio of 6 x income

The party isnt growth anymore... its debt reduction. if people still think growth cycles are the main game- they are going to be sorely disappointed about how unattended their "party" turns out to be ....

This comment also ignores the reality of IO quotas and the fact that they force P&I onto most investors after 5 years, blowing out holding costs by 50%. This is even more game changing - because it means that even if you can get the money to buy , holding will still present significant cash flow challenges for all but the highest earners or those with the yields required to manage the increases.

Anyway, I guess we shall see... the regulatory stuff may be reversed one day. We all hope that will happen eventually..... But as it stands right here, right now - for this credit environment I like cash flow and reinvesting it for debt reduction. And I can get it in spades in larger NSW regionals with dual occ's, at an affordable price that provides 2 rental incomes and chunky annual surpluses, allowing me to pay down a bunch of non deductible debt over the first 5 IO years, and then allowing me to continue to hold P&I. My worst case is that I still end up with a healthy income stream in retirement even if there's no material growth for 15 or 20 years because of the APRA changes .

The fact Orange is outperforming on all counts is just fantastic.... makes it ( Orange I mean ) all the sweeter - excuse the pun

 

Thanks for this post, really enjoyed reading it and makes sense. Demographic knowledge is very important for investment methodology. Reading up on notable demographers and futurists can help people make decisions.
I wonder where this places Adelaide as last I read they were losing more people than gaining yet current sentiment seems more positive now.
As for Hobart many commentators feel that it's strong showing has been sentiment based and being driven by the baby boomers. I thought maybe people were trying to escape the heat during summer.

 

Cities like Adelaide and Perth both have property prices that would accommodate some really decent growth before debt to income ratios hit 6 or 7 x median income... so from that perspective they certainly have the room to grow.

Perth's set for rapid population growth over the coming 10-20 years but poor old Adelaide just doesn't seem to attract much migration or population growth.... its a funny one. They just never seem to get any momentum going.

So I can see Perth starting to do well in the coming years because population growth and relative affordability will work together well, there .... and if Lithium becomes a big thing, Perth might be a boom town again in a couple of years . who knows? But I just dont know about Adelaide, or what might trigger money to flow there.

I have said for a couple of years now that I do think that money will increasingly flow to less expensive cities and regionals as Sydney and Melbourne becomes a no go for investors ... and I still think thats a fair chance of happening. The sharemarket isnt going to appeal to everyone... so if investors who prefer property are frozen out of big east coast markets and don't like regionals, that really only leaves Adelaide and Perth and Darwin . So I guess Adelaide has a good chance of catching some momentum from that even if its population doesn't grow much... that's really probably its best hope unless migration picks up or the SA economy takes off... but whats going to trigger that?

What it really needs is for President Xi Jinping to visit , drink some of its wine and tour some of its beaches , and then tourism would explode... and all the cashed up baby boomers would pour money in and turn everything into Air BnB. rents would surge. prices would surge. It would be Hobart all over again!