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PPOR in a tanking market

Discussion in 'General Property Chat' started by hammer, 22nd Feb, 2016.

  1. hammer

    hammer Well-Known Member

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    In Darwin and the market is tanking.

    My wife and I love it here and would like to settle.

    A townhouse we've been looking at has been slowly dropping in price and is now in the strike zone.

    It's gone from 500k to 400k. We reckon we can get it for 370k. At that price the repayments are less than rent.

    The numbers are great...now....the risk is that everything drops further, as I predict it will.

    What to do? Do I buy a nice PPOR and cop any further falls on the chin or keep renting and waiting for a better time to strike?

    Having a head vs heart battle here...
     
    Last edited: 22nd Feb, 2016
    Perthguy likes this.
  2. radson

    radson Well-Known Member

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    IMO, the one financial consideration that should give you pause when buying a place to establish a home has been removed.
     
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  3. MTR

    MTR Well-Known Member Premium Member

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    How long has this market been falling

    I am in Perth similar scenario, falling market.

    Markets that fall last longer than rising markets, as much as 6-7 years

    There is one angle I would look at for Primary residence in falling market, make sure you can somehow add value, ie renovation, future development.

    For me this would be my insurance policy

    MtR:)
     
  4. citystar

    citystar Well-Known Member

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    +1 vote for MTR. I'm a huge fan of renovating PPOR's to increase value which you can ask the banks to access as equity to then use as (tax deductible) deposit + purchase costs for the next IP. Plus if/when you sell for a higher value due to the reno as it's your PPOR it is tax effective due to CGT exemptions.
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Unless, the market is such that there will shortly be an abundance of rental vacancies and the price of renting drops considerably - like it has here in Perth.
     
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  6. hammer

    hammer Well-Known Member

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    No scope for renovations. The place is already done....that's a big reason as to why we like the place. It's also in the cbd which is ground zero for the market here. But the cbd means walking to work, beach and friends...


    This has happened here too. Rent is currently 450. Will go down to 400 next year. Repayments are 450. This I can handle.... If rents go down to 300 though.....
     
  7. barnes

    barnes Well-Known Member

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    Why does it matter? It's a PPOR. Even if it falls to zero you still live in it.
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    It probably doesn't really as long as situation does not change and don't need to sell.

    I suppose rules go out the door when its a primary residence, lifestyle is a priority.

    MTR:)
     
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  9. jpcashflow

    jpcashflow Well-Known Member Business Member

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    I have to agree with MTR and Barnes... if you have a PPOR and the market drops you don't need to rush to sell. As your PPOR is your home :).
    The only risk you have, is that if you would like to use that home as equity then you might be in trouble.
     
  10. astinus4

    astinus4 Member

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    Whereabouts is this? Just curious, not looking to gazump you.
     
  11. bumskins

    bumskins Well-Known Member

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    Doesn't if its your only property. It will however if you are going to try and grow a property portfolio?
     
  12. josh676

    josh676 Member

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    Interesting thread, just made an offer on a place that would be our PPOR for the next 3 years in Perth, but who knows how far the market has to fall here...
     
  13. barnes

    barnes Well-Known Member

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    I'm not using my PPOR for anything except living in it. I buy it in cash and it stays as a cash asset. A PPOR should be exempt from any risk whatsoever.
     
  14. hammer

    hammer Well-Known Member

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    Hi Josh676 what were your reasons for buying now? I understand Perth is in a similar situation...
     
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  15. ZachAnsel

    ZachAnsel Well-Known Member

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    We have similar situation, and we decided to keep renting for a while. Knowing that the price will be dropping means you can't release equity even though you do renovation. For me personally risk > reward.

    Then on the rental side, knowing more supply means the rental will be cheaper or more options to select better quality.

    Based on my experience, watch out the market closely. In our case, I can sense the market start to move after the rental price increase (or less supply on rental property). Learn the pattern of each property cycle to know where is the market at the moment.

    We end up buy ppor in the right time of the market, and price double within 4 years

    PS: dont get tempted to use ppor deposit to buy expensive toys. We almost fall into temptation..
     
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  16. josh676

    josh676 Member

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    I know that I will be leaving Perth in 2019, I will live in the property as a PPOR until then. No stamp duty as it is my first home and I get about 20 k in payments through my employer to buy a house.

    I'm looking at Medina, which is about 30 minutes from my work, and the cost of the loan is around the same as my rent... Looking at 3 BR places with 800 m land < 300k...

    I don't know how much longer the perth market will be in free fall, but I'm on the hunt for the right property at the right price.
     
    Last edited: 24th Feb, 2016
  17. hammer

    hammer Well-Known Member

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    Good answer.
     
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  18. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    In addition, the CGT exemption is forfeited, if the property is sold without a capital gain.
     
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  19. josh676

    josh676 Member

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    I hope so, they just accepted the offer.
     
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  20. Harry Marcus

    Harry Marcus Member

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    Hi all,

    Long time reader and first time poster... This thread is too close to home not to comment.

    I'm in a similar predicament, but based in Sydney. My wife and I have been looking on the Lower North Shore for the past 6 months but we're reluctant to jump in with the apparent overheating of the market.

    We're renting, with an IP in Parramatta. We're looking around the 1ml mark, which is either a nice 2bdr apt or not so nice 3bdr (Lane Cove has a townhouse appear within this range from time to time). We're veering towards waiting but with that said, cash in the back is basically going backwards with the saver interest rates at the moment.

    I'm curious to know - what would others do in this predicament? Would love any views on the topic... A tough decision we're certainly struggling with!
     
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