Hi , first of all thanks everyone for all the wonderful information, opinions and shared in this forum. Learnt a lot from reading this. My wife and I are from Sydney and earning just above 200k annually. We got roughly 250k cash savings. Currently PPOR house in Edmondson Park, with 85% of the loan yet to pay. We bought that property 722k all up (including stamp duty) and now roughly worth 830-850k. My PPOR in EP is in a good location- 12 mins walk to the train, shopping centre and 5 mins walk to the park. However, there’s a high supply of dwellings in the area mostly in forms of apartments and terraces. We have always wanted to live in the Hills District (castle hill or cherrybrook). We like to move soon, although we can delay the move for 2 years - before my daughter starts school. Given that Sydney is possibly coming to slow/ neg growth period and fringes like EP could be affected, I feel it’s best to make a move now Here are my options, 1. Sell EP, rent in Hills for 1-2 years and buy when/if that market take a dip. I can rent a 1.5 mil house for $700-$800 weekly . 2. Rent out EP property for $600-$620, rent in the Hills. Then buy a townhouse/duplex for 1 mil odd.( Our borrowing capacity becomes only 800k if we keep our current property.) 3. Live in my current PPOR for next 2 years, and buy in the Hills in 2 years time What do you guys think is the best option ...
Hi! My thoughts - 1. EP will probably still might appreciate while FHBs are buying. I give it to the end of the year and maybe after that it will have run out of steam. The pluses are it is close to station, it's not far from Liverpool and relative to most of Sydney, it's still affordable. The minuses - its not the best area, (so people like yourselves want to move to other areas), there is a lot of land a bit further out (albeit it wont be as close to the station but that will bring the prices of existing homes down), local schools possibly don't have the best reputation, it must be a long commute into the city and elsewhere and who knows how the local property market will be like in a year's time. 2. On the other hand... Castle Hill and Cherrybrook are popular areas for parents to live and buy in. Nice presentable suburbs, quiet and green, feels very friendly and safe, nice houses, high performing government schools even for primary. Parents are happy to live there (even rent!) and send the kids to the government schools. These suburbs also will take a while to commute into the city but there are jobs in Parramatta and North Ryde and Bella Vista which you may take advantage of. Both these suburbs will benefit from the NWRL which is planned to open next year. I don't see these losing popularity anytime soon because of the train line anticipation and the schools (they may even boom more when the long awaited train line opens). These are "forever home"/Upgrader type suburbs - at least till the kids grow up anyway. I think if you can quietly buy while the Sydney market is retreating (ie. Right now), it's a good move. Ideally you would want to be a walk to rail and not near or under the powerlines nor on a busy road. Trying to get all this above in a house wont be easy though so you might have to consider a duplex or townhouse if you want to be near the trains without spending bucketloads of money. So anyway, my thoughts. Start to look now while things are quiet, ie. while the NWRL is still not operating. And think about selling EP a bit later this year. If you can hold into EP as an investment, that's fine, its close to station and not far from Liverpool and long term, it will probably do well, but it might retreat or flatline a bit later down the track. Graphs I did the other day on Cherrybrook and Castle Hill House prices from RP Data. Good luck!
If you do sell, you will miss out on any potential growth in EP (if there is any to come), and renting means you will be paying someone else's mortgage. You may not necessarily have to sell EP first, you should be able to use rental return for borrowing capacity purposes (does the $800k borrowing amount take that into account). By selling EP in the first instance, and renting elsewhere, you will really be paying off someone else's mortgage. Just comes down to personal preference, and also what you expect the market to do.
Option 3 for me. If in two years you want to stay where you are you can. Unless confident that your current property is likely to take a massive hit, I do not see the benefit to selling and renting. I would stay where I was and aggressively pay off my loan and then that gives you more options in the future. Always better to have more equity before you move again.
Not sure why that would be a bad thing? -- On topic: My opinion is option 1 is the most logical one if you think housing prices will flatline. You would get the benefits of maximum liquidity +borrowing power for a situation when you see a really good deal that ticks all your boxes, especially if you expect a lot of selling pressure to occur in the market. Option 2 is a stable option where you have a hedge against your prediction of the market remaining flat or even dipping, it also has two major perks: no transaction costs for selling the house - i.e. taxes and agent fees, and, having an offset you can park your money for a guaranteed interest rate return (e.g. 4%) I would still prefer option 1 in your situation as it seems you have no emotional attachment to EP as a place you will be living, you won't pay CG taxes for selling PPOR, and it is logical in a dipping market EP will not be a strong performer for investors. It will have low yields and there are a lot of new houses being built out there. I think your lazy option is the option 3, as your gut is telling you the market will flatline and option 3 is essentially the decision to make no decision. I would only go option 3 if it is not the best time/situation to do 1 or 2. Regardless of what you choose, don't get FOMO about not "owning" a house and "paying someone elses mortgage", as a good deal is a good deal and if the market is flat or dipping, then you are not missing out. In fact you are saving by having lower life overheads (assuming rent is less than an equivalent mortgage) while you wait for your opportunity.
What about option 4 - sell EP and buy in the Hills now? You should have enough deposit from the EP proceeds and $250k to buy a $1.5m home. The benefit of this is you're not second guessing the market. Its similar to Option 1, only you're not risking the market moving up in the meanwhile (although unlikely) and being priced out.
I would be hanging on in Edmondson Park. The town centre just went out for tender. 300 million job...
Thanks everyone for all your valuable opinions and thoughts!!! Thanks heaps for RP data @Gockie ! I too think that NWRL might create a mini-boom in the hills (although some believe it's already factored in), hence was thinking buying this year. Was really thinking about July Or Nov, Dec because I have noticed that's a slow season. Although, I never time the market when I buy good shares etc, I feel I have to time this because I don't have a great budget.
@Biz , Not sure where you got this info... As far as I know, EP town-centre now marketed as Ed Square is to be developed by Fraser. They have already started construction. TBH, I can see lots of supply in this area. NewBreeze is adding 600 more houses (full project adds 1300), and Fraser is adding 1800 more dwellings (town-houses and apartments). There are quite a few small developments adding house and apartments. All above are walking to the train and Town-center. Then there's of plenty more supply within few mins drive to train. Given this, I am not too sure of a strong growth in the area in the short-term. However, it has grown quite well so far.
Thanks for reminding about CGT! True about FOMO as well. Btw, although my gut feeling is that market will flat-line or go down, same gut-feeling got the market reading completely wrong back in end of 2014! ... I hope I got it right this time .
Yeah, 800k is with rental income included . If I change the loan-type on the EP proper to IO, I still can borrow only 890k for the new property. Banks seem to have really restricted the borrowing caps. I checked this on CBA online calculator and with a broker.
Actually, now you mention it, if you can buy from a desperate vendor late Nov or December you may well be able to save money. For July you'll find IP vendors listing as they want to move the capital gains into the next year. I don't think you'll find too many of these IP vendors for freestanding or duplex properties for Castle Hill or Cherrybrook though, but maybe there will be the odd townhouse. In any case, if a property has been on the market for a while, the vendor maybe more willing to negotiate. Still, don't compromise on buying near or under powerlines or busy roads as these factors won't change and you'll be stuck with living with that. Re: Townhouses - if you can find one with a great garden space, Castle Hill townhouses can be very spacious and livable. My sister had one an easy walk to the Castle Hill shops (and new rail), 3 bedrooms, kitchen with dining, living room, 2 car garage and maybe 150sqm of enclosed yard space (North and west facing). No common walls and bright and sunny - it really felt like a nice house. Unfortunately they sold early in the boom (got 27 offers on it after the first open). They could have got another quarter of a million if they held another year because their neighbour got that much and my sister's property was better because of the huge sunny garden. Preboom this sort of property could have been bought for a bit over 400k.
Edmondson Park graphs... median values are meaningless till 2014! The suburb is too new! Maybe you are right... perhaps no growth or a decline going forward. Seems a touch too expensive for FHBs, and you say more supply is coming.
