QLD Why Brisbane?

Agree - Brisbane is NOT one property market.
We have looked at the capital growth performance of every suburb in Greater Brisbane over the last 10 years. Whilst Brisbane "on average" has grown at 1.6% pa over the last 10 years, the best performing locations have grown between 50-60% (ie: 5-6% pa) and the worst performing locations have seen negative growth in the same period.
The median weekly rent growth over the last 10 years has also differed a lot when comparing several locations around Greater Brisbane. Some areas have seen rent increases of less than 10% whereas other areas have seen rent increases upward of 40% over the same period.
Every city would be similar - some areas will perform better than other areas on capital growth and rental growth over time. Both relate to supply and demand at a local level.

 

https://www.smh.com.au/business/com...y-head-office-interstate-20200915-p55vq2.html

 

Personal hypothesis is that people expect Brisbane to boom because its cheap compared to the other capital cities.

Unfortunately it's relatively cheaper for a few reasons...

1. It doesnt have the new migrant appeal that for some reason Sydney and Melbourne do

2. It doesn't have the number of company head offices and specialist roles of Sydney and Melbourne which means relatively fewer high paying jobs.

3. If one moves to Brisbane for lifestyle over career then they will likley try and commute from Sunshine or Gold Coast.

I do like Brisbane myself (I dont live there) but I think most of the hype seems to be centered around Brisbane being cheap so therefore it must be due to boom, as flawed as that argument seems to me.

 

SPOT ON! Couldn't say it better.
Also, sometimes tax incentives matter too, higher land tax threshholds. If one never plans to sell and buys long term why not spread investments around too.
Not one state in Australia consistently and uniformly rises or declines, just check this graph and then you can see it is good to diversify within markets within states within suburbs within streets even and so on... many markets within markets in AUS!

 

I did not create it so enjoy the link to the article and the graph:
What we can learn from Australia's median house prices from 1970-2016 - Homely

 

People who say there is yield in Brisbane are incorrect - anything within 15km of CBD will be highly negatively geared. The reality is that - Sydney and Melbourne still have majority of employment opportunities so those states will see most of the growth. The growth coming from Brisbane is because people consider it "affordable" and it is compared with VIC and NSW. But the markets are just so entirely different, for example apartments have almost always gone backwards or flatlined even within the CBD area due to supply - This is not the case in Melbourne and Sydney.

FYI - Brisbane Resident and prior Sydney Resident.

 

Sorry Pauline. I have to disagree with your statement. "anything within 15km of CBD will be highly negatively geared"
I can give you a real life purchase 7km Stafford.
House 3-1-2 of 600m2 block
Purchase for $600,000
LVR 80% is $480,000
Investor home loan rates 2.5%
Yearly interest base on $480,000 is $12,000
Rental $400 pw is Yearly $20,800
Allow $5000 for expenses
You are still ahead without depreciation.

Worst case is neutral gear. Best case is positive gear.

 

I’ve been burned buying in Brisbane...thought I would try to replicate my success buying unit in Sydney and Melbourne 300k, positive geared, sell at profit...

No. Gone down 20% Spring Hill
At least it’s a gorgeous city place very luxurious stunning views and positive geared. I really like it but my husband says we should just get rid of it as it’s not performing

I think I have a secret fantasy to live in Brisbane but it’s too hot and the cockroaches are too big and there’s not much exciting work opportunities. And the premier is crazy.

 

It doesn't work with units in Brisbane.
Sorry - you could of ask around the investor poster here who lives in Brisbane.

I am even hesitating with townhouse in Brisbane. It must be very particular / unique to buy townhouse.
PS I do own a townhouse in Brisbane too. I can say it did OK, no where near as good as house.

 

This is one of my pet peeves .

Growth of 50% to 60% over 10 years is NOT 5% to 6% pa.

It is more like 4% to 5% pa compounding (more accurately, 4.14% to 4.82%).

Growth of 5% to 6% pa compounding over 10 years would yield total growth 63% to 79% (more accurately, 62.89% to 79.08%).

As you would know, this is the whole basis of the well-known Rule of 72.

That is, for an asset to double in value (in other words total growth of 100%) over 10 years, one does not need growth of 10% pa.

One (only) needs compounding growth of 7.2% pa.

Sorry for the correction but I feel it is important for all the newbies on this site.

 

Calculations also tend to exclude entry and exit costs.....

 

That table is great, thank! Saving that for the property research file.

Our PPR buying and selling journey fits in with a few notable turning points in the Brisbane market.

We were very lucky with timing and the location of our first two PPR purchases - both inner city and had good growth. The first one spectacularly so. Admittedly though, it is probably difficult to match the timing of that one - one of the biggest leaps over a few years from 2000 to 2003 after a decade of very little growth in the 1990s.

We bought just before the first home owner grant came in, but the deal was too good to pass up and wait around for the grant. A lot of that $10k jump in Brisbane median in 2000 was probably after the grant came in. At the time, mortgage payments could often end up close to or even cheaper than rent.It would have been easy to buy and be positively geared. So buying a PPR was a bit of a no-brainer.

Husband and I bought a little post war in inner city Red Hill (border of Paddington) for a little less than the Brisbane median for that year. There was some flooding risk flagged on the lot. The neighbour said in 1974 the water didn't reach the floorboards. At the time it was not being considered such a risk any more in the minds of many including us, because of improvements to flood control such as drainage works in area and the work on dams since 1974 (at the time nobody expected the flooding that happened in 1974 could happen on a similar scale again).

3 years later in 2003 we had one child, one on way and husband working from home in his own business. It was getting too tight for space. We were lucky and scored a subject to sale contract on a large Ashgrovian with good bones, but kitchen and bathrooms dated and some really poor visual design choices (horrid 1980s brick in downstairs level, tiled over timber floors, pink exterior, different paint colours in all internal rooms). More than double the house, house overall better condition, and bigger block in a handy spot.

Sold first home quickly with multiple offers, for more than double what we paid 3 years before! So our home value increase exceeded the already substantial growth in the Brisbane median over that time. With very little improvement and very little money invested - just interior repainting, superficial makeover in bathroom and polishing floors (one of our first attempts at DIY, and it was not a top job).

In 2010 my research was making me concerned about cost to renovate to Ashgrove standards. We were in a convenient, but not premium location in the area, which would have meant it was easy to over capitalise if we renovated. We knew our boys would eventually be going to high school in next door suburb The Gap, which had a median substantially less than Ashgrove. Cost of middle class living was skyrocketing, particularly insurances, electricity. So we seriously considered selling and looking to buy in The Gap.

Missed out on one house that I still think about as the one that got away because it sold completely unconditional the day it listed. Was a bit disheartening, as the transition was looking likely to be more difficult than the previous shift. We had circumstances that make it difficult to transition by selling and then renting before buying next home. The cost and risk of bridging finance terrified me.

We had an opportunity to buy a house from a colleague in 2011. He was considering retiring in a year, and plans included selling his home. It ticked a lot our boxes and he had options for interim accommodation if he sold before retirement. Had a mutually agreeable price if he could sell without an agent involved. So I listed our 2nd home for sale. Quickly found two families that met my target market (experienced renovators who had DIY skills, finished renovating homes in their current areas, had kids, and wanted to move into area because of our fantastic catchments). Was happy with the price they were willing to pay.

But then we got caught up in the 2011 crunch on lending by banks. The market did a rapid about face. Brisbane seemed to be on the brink of another boom before it hit. Lots of increased interest from interstate investors finding the overheated southern markets a bit much. But then measures that seemed to focus on cooling those overheated markets hit Brisbane badly just as it was getting some steam. Some who bought just before this peak, struggled to sell for what they bought for if they needed to sell within a few years.

Both families interested in buying our house had been to their banks before starting their hunt and had been told they could get bridging finance. But when they went to get final approval, banks changed their policies and they had to sell first.

Both potential purchasers ended up taking over 6 months to sell because the markets where they were had flatlined. By the time they came back to us, the timing was really bad for us to attempt a shift for a variety of factors, including missing out on my colleague's house. My colleague suddenly decided to fast track retirement plans due to health scare, and listed and sold his home just weeks before potential purchasers of our house were then in a position to give us an unconditional contract.

So we temporarily shelved the moving plans. By 2016 we were getting to decision crunch time with our Ashgrovian needing big renovations or risk deterioration in the future. We had done a few minor renovations including one bathroom. Costs to renvoate to standard for area were alarming. Ashgrovians are gorgeous, but those high ceilings, VJs and large spaces cost a lot to pay others to renovate. We didn't have the expertise to do it to the standards it needed in our suburb with DIY.

I also had increasing concerns about broader economic issues and long term health of economy: the rapid outpacing of house prices from pay increases, cost of living for middle class still fast outpacing official inflation, private debt levels soaring. Rumours of potential large scale redundancies in my government workplace in about 5 years time and public forward budget estimates gave some weight to rumours. I didn't want to take on more debt to finish renovations, instead wanted to decrease debt and increase my super contributions.

Was able to sell myself fairly quickly for more than the top estimates some local real estate agents were giving us. Selling price in 2016 was close to double what we had paid for it in 2003, which was more aligned with overall median increases in Brisbane.

We did end up having to suck it up with an interim short term shift into a furnished rental to make it happen. I think it took me 6 months to recover from the stress of the transition this time. I hate moving and I hate renting even more.

Current house is smaller than 2nd home, but larger leafy backyard and convenience of boys being so close to school and friends is a big positive. Now debt free and have done a few small improvements paying as we go rather than borrowing for it. Saving up for the bigger improvements.

Now I am working from home and oldest boy mostly doing uni from home instead of mostly from campus due to COVID. Internal space is feeling a little tight again! But current environment is making me more debt and risk averse to fast track an extension or backyard studio. Might try and make do for a while as we build our savings.

 

Purchase in keperra for $500k and rent for $430/week. Highly negatively geared in the current rate climate? What you smoking I want some?

 

Also does not take into account market conditions, when you enter or if/when you exit the market.

Property Markets work in cycles, so if you buy when market starts turning south, your returns and capital will go the same way

 

In 2011 the then state Premier, bless her socks, thought it would be helpful to everyone concerned to double the rate of stamp duty on property purchases for Owner Occupiers. My elderly mother was trying to sell her family home to downsize and not only had the economy taken a nosedive, but buyers had to cough up twice as much state stamp duty as they would have earlier in the year.

 

Stamp duty and land tax is the biggest static tax of all.
Time to get rid of such non-efficient tax.
If you can't move it - you get hit with it multiple times.

 

Why Brisbane? Climate

 

Sorry wrong. Another example bought Feb 2018 with a 12% deposit $582k, 530pw rent. 9.5km CBD. Positive by $4k a year after deprecation.
Friends with recently bought properties all positive within 8km (Stafford heights/Holland park)

 

A lot of people love to talk that down however saying it's "unbearably humid".. however that is mostly December to April - I guess when the tourists (on any normal year) decide to visit

Latest ABS unemployment figures are favourable for Brisbane, falling significantly since the last quarter.

 

Fair call ... I don't disagree at all
The yields in the inner 15km ring do not always create a negatively geared position - it depends on the quality/size of the house and the tenant demand for the product as well as the finance structure. A lower LVR with current interest rates (for example) can be neutrally or even positively geared.