(Vic) Impact of FHB grants - are $600k properties now poor value?

Continuing on from my PPOR thread... looking for something in the Upwey/Tecoma/Belgrave area.

Whilst our budget is $800k, I'm eligible for the first home grant, so the idea of only paying $1.5k worth of taxes on a $600k home purchase is very enticing.

The median house price in these areas is around $660k or so, so the idea would be something in poor condition on a good block and renovate it.

Given the grant though, these $600k properties are a very hot item. I've seen some come on the market and go within 24-48 hours, and some of them are pretty average.

My question is - have these $600k properties become poor value? Is the FHB saving simply built right into the price (i.e. these are really $550k homes) and there is (comparatively) better value buying something all finished for $800k?

Or - would there be some value here given most FHBs wouldn't spend their entire budget to then live in something they'd need to renovate (but couldn't afford to)?

 

Hi Orion. I recently bought in this general area for PPOR with a similar budget.

We were also eligible for fhb concessions but wanted a unique/well located/sturdy/(hopefully) forever home without the nasty surprises and extra expenses that come with a fixer upper or renovator. We were already in negotiations when the new duty reductions were announced which would have given us a saving of $15k or so...but we had found “the one”
and had anticipated that these changes would ignite that segment of the market anyway ie. less than $750k.

For a knock down rebuild it is another story but even then buyers are not just paying land value prices. As you would have seen properties that are knockdown quality are going for the mid $500’s whereas vacant land is in the mid to high $200’s.

So to answer your question, from my observations of this market since the changes I would agree that there is not much value at the $600-$700k price range at the moment but you can get something really nice if you have that little bit extra.

pm me if you want to discuss at length. Happy to have a sticky beak on your behalf!

 

Whilst perhaps not answering your question, these are my thoughts on the FHB grant....

Wherever Government set the figure, is where there will be a race to reach - So as it stands currently, 600K is the figure that everything below is accelerating towards.

I hold the view that when the Government is dishing out the money, they have some say in what happens to it. And I personally think that 600K is too high.

If they set it lower say 500K, aside from saving a bucket load of cash, you can start to dictate where people go. If you are able to spend 600K, then you are not slumming it.

If you want the FHB grant, then you will spend a smaller amount of money, or buy further out, or buy smaller etc. It is good not to overcook the market, and also builds in a bit of protection from the inevitable rate rises (Whenever they occur).

Of course, where someone is building, then that should perhaps have a slightly higher than 500k limit (as it help the construction industry)

 

If blocks of land are going for $250K to $300K, as @au contraire pointed out, then wouldn't it make sense to build a property?

A quick look through the listings suggest that there isn't much that looks fantastic under $800K. This place is interesting, and I like this one, though it'll need a new kitchen at some point, but both are just over $800K.

Meanwhile this block, which is just up the road from the second house, was on the market for around $250K, which would leave a reasonable budget to put something up.

Also, would it be worth looking in the $600K plus range? If cheaper properties are being inflated to meet the the cutoff for FHB schemes, then more expensive stuff might be clustering just above it.

 

Thanks for your comments everyone. Yes, I agree, buying some land and building seems better value, although it's tricky with the blocks - there isn't much sales history and the blocks in the area can be differ widely, some of them slope really badly and constantly in the shadows (dark and cold - the house being in a bit of a 'ditch') and some with great views and lots of sun and so on.

I did see a nice block sell for $250k in Upwey 6 months ago and the owner is building a very nice 'older style' looking reproduction on it. Assuming a $400k build + $50k to landscape etc, for $700k-odd you could get something really special if you had the patience to wait for the right block to come along.

@au contraire is correct, the knock downs don't seem to be good value at all, I think some of the FHB's have watched too many shows like The Block!

@Graeme I agree, I'll look further into the $800k zone, there might be some clustering of better value in this range. That's a great way to describe it.

I just saw something strange - that block you linked had previously sold in Sept for $300k - I wonder if finance just fell through or if there is an issue with the block? It sounds great actually, its huge and lends itself to an easy looking subdivision (prima face).

 

@Orion I think that the Belgrave plot is probably a zombie listing that should have been taken down. It's listed as "under offer", and that's probably from September.

I agree that renovation projects tend to be overpriced. 33 Palermo Street in South Yarra has a guide price of $1.4 to $1.5 million according to its Statement of Information. I took a look around it a few weeks back, and it needs a lot of work, someone commented it was an awful lot of money for a block, but the comparable sales given were fully restored.

If it was me, I'd either target a restored property, such as 66 Kaola Street (I linked to it in my last post), which won't need a significant spend on it, or wait for a decent block of land, and build from scratch.

The Melbourne market looks to be slowing, so I'm not convinced that there's any need to rush in. Timing probably depends on your personal situation, though.

 

I would agree 100% with you in the inner and probably middle rings, however in these outer ring areas I think the ripple is still washing through, days on market for Upwey and surrounds is 14 or so, it's still quite warm.

A BA I chatted with use a service called 'Auction Fox' (or similar). They attend auctions and sell data on real results (given the REIV is so rubbery). They said there is a real drop off in the inner areas.

 

Agree that prices are still moving here however some vendors are starting to get a bit ahead of themselves so there has been some push back on occasion. See eg. 9 Darling Avenue Upwey Vic 3158 - House for Sale #127086918 - realestate.com.au

A bit of a tart up job listed at the start of December with only a two week campaign before auction which was swiftly passed in.

However anything that has a hint of value is snapped up in a heartbeat

 

have been following Upper Ferntree Gully to Belgrave quite closely, and there's definitely still some heat in that market.. supply is low and the number of people at the opens is insane (added to that is the trouble getting to some properties with limited parking up tight roads, feels like i'm walking along with a pilgrimage at times)

this flipper would've been on the market for no more than 10 days.. didn't get a chance to suss it out in person unfortunately.. small block for the area though.. 2 Hilltop Road Upper Ferntree Gully Vic 3156 - House for Sale #127184366 - realestate.com.au

 

Wow... thanks for the info from the ground. I wonder how much steam is left here?

Another year or two? The whole area still seems pretty good value for what you get (to me).

 

hah.. have been mentioning UFT, upwey, tecoma and belgrave a few times . I can still see some heat in 2018 price is very reasonable compared to other outer eastern suburbs

 

I know! Didn’t want to give your threads any traction until I secured something myself

 

Thanks Erorxxx - can you please point me to any threads you think are worth a look?

For what it's worth, with the thousands of homes in these areas, at all the various prices points and styles, I think there is more than enough for all of us at PropertyChat!