Overpaying - off to the races?

Discussion in 'Property Market Economics' started by ms420, 13th Nov, 2019.

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  1. ms420

    ms420 Well-Known Member

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    Dust has barely settled and people (IO/ OO) are betting on the house again. Some recent examples where I think there is overpayment:

    2.1M for 5/3/2 in West Pennant Hills for 834 Sqm (no pool)
    https://www.realestate.com.au/sold/property-house-nsw-west+pennant+hills-132195446

    New house on 834sqm so if the quality of the build was say 500k, is the land worth 1.6M?

    1.73M for 5/3/3 in Kellyville for 751sqm (with pool)
    https://www.realestate.com.au/sold/property-house-nsw-kellyville-132039870

    With the sparking pool and backyard entertainment and yard, and may be above average house. Together if this is worth 400M (given the age), is the land worth 1.33M?

    Agreed that loans are cheaper and increased borrowing capacity thanks to government intervention. Still is it worth overpaying this much?

    What am I missing? Please post in your replies.
     
  2. Someguy

    Someguy Well-Known Member

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    What is overpaying now might just be seen as a bargain after another rate cut or two
     
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  3. hash_investor

    hash_investor Well-Known Member

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    yeah what exactly is over paying?
     
  4. Trainee

    Trainee Well-Known Member

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    Wont be fhbs tho. Probably people who sold for 1, 1.5. So big deposit. With low good stock, maybe they just make a emotional offer.

    You cant purely price it on land and build. If you bought and built there would be holding costs etc. plus all the effort. If you buy land, build and sell, you would expect a profit in anything other than a bad market?

    what price ‘home’? What would you have paid for those houses, op?
     
    Last edited: 13th Nov, 2019
  5. Kid hustlr

    Kid hustlr Well-Known Member

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    Can you really build the first house for 500k?
     
  6. Trainee

    Trainee Well-Known Member

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    If you
    Waited until 2017 because it was rising and too expensive,
    Waited during 2017-2019 because it was falling and you thought it was still above value,
    Still waiting now that its come back and people are overpaying.

    How realistic is your definition of value? What if no one agrees with you?
     
  7. Trainee

    Trainee Well-Known Member

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    Serious thought exercise. Imagine you started 5 years earlier around the GFC. Would you have bought? Dont reflexively say yes only based on hindsight. Think about the market then. Think about what looked like was going to happen. US and European banks literally going bankrupt. Shares dropping in Australia. Property market was slow (but not dead).

    Would have have done differently compared to 2017-2019? Why?
     
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  8. Kangabanga

    Kangabanga Well-Known Member

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    Comin from hong kong with bagfuls of cash ;)
     
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  9. icic

    icic Well-Known Member

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    I think the building, pool and landscaping cost is definitely more than you think. Adding 200-300k to your building figure for today's building price.
     
  10. Speede

    Speede Well-Known Member

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    The west pennant hills house is not a $500,000 build ...do some research how much things cost.
     
  11. ms420

    ms420 Well-Known Member

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    Thanks for your thoughts all. Thought the $500k was comfortably going to cover the construction costs...

    I did buy in Qld in 2016 but not Sydney as I couldn’t afford it. Good or not. Ended up having my IP before PPOR (some day). I am not looking for agreement to make my move- may be some of you got me wrong there.

    Just was checking if you guys that the samples I included over fairly priced or over.
     
  12. Trainee

    Trainee Well-Known Member

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    you seem to define fairly priced at replacement cost. But you also underestimate replacement cost.

    if you have been using your fairly priced idea as a buy signal and have never hit it in the last couple of years, how useful is it?
     
  13. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    A Young Man waiting for the price of real estate to come down:
    [​IMG]
     
  14. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Were the properties purchased at auction?

    Over vs under paying are very elusive concepts, and if you purchase at auction - I would even argue that if you purchase an on-market property - you are paying market price at that moment in time.

    Expensive perhaps, but not over priced.

    Love the Alan Fox picture above too! Perfect.
     
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  15. Kid hustlr

    Kid hustlr Well-Known Member

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    I agree with this, you could go to an auction and watch something go 500k over reserve and think 'oh that's over valued' but the fact is theres another buyer who would have paid almost the same. The mkt dictated that's where value was
     
  16. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    ....yes, and who sets the reserve anyway? The vendor does! Who made the vendor an expert at valuing property? ....let alone their own property!
     
  17. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    My friend told me many years ago: if you buy at auction, you are only ever paying $5k over market (ie the value of one bid).
     
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