The real estate ads I see are mostly for quite new houses. My house here was 27 years old when I bought it, and I thought that was new, but I get the impression that's not the case in Australia, and older houses are less desirable.
If this is the case, how can a property be an investment? Something doesn't add up for me.
Does it depend whether it's a brick or timber build?
What is the actual situation regarding your property as an investment?
(Planning on Point Cook/Sanctuary Lakes, Melbourne.)
Hi Spock...
The property market in Aus is very different to that of the UK and there is a lot to consider if buying for investment it seems. The property tax when you buy a house is very high in Victoria going to 6% above A$115K.
The issue of brick or timber is also different here and only the very old Victorian houses are all brick. The brick you see here is only a veneer outershell anyway.
Like all property for investment the tenants are the real issue and in my view here the returns don't seem that good and your still have CGT when you sell. Some of the best investment for long term here is land and there is a lot more of that in the outersuburbs than you will find in the UK..... however thats long term.....
You need to get out here and investigate carefully before you jump in thats my advice for what its worth... good luck
Thanks Roger, but I haven't made myself clear. I don't want to rent it out, I want to live in it. However, my house here is appreciating, and is an investment towards my retirement. I don't want this to be lost because houses in Australia don't sell well after 20 years.
Hi again Spock.....
Sorry misunderstood....but you have no worries on that score any house here is appreciating in price particularly in the inner suburbs. Australians are used to their own style, naturally, and the type of building does not seem to matter much. Keep an eye on the websites for property and you will see the average prices. Altough one very different thing here is that nearly every house in an area is different and because of that it is hard to get a fix on how good the price is. Due to this you often see houses go to Auction much more often than in the UK.
Iam sure you will have no problem in finding a great place to live ...don't worry the land any house is on is always worth more than the house anyway! Good luck in your search!
Roger..
The issue of brick or timber is also different here and only the very old Victorian houses are all brick. The brick you see here is only a veneer outershell anyway.
Ahhh, spoken with all the assurance of a recent arrival with limited experience and no knowlege on which to base your generalisations.
I can assure you that MY house is built with double brick external walls. single brick internal walls and a tile roof. My neighbours house is the same, in fact every house in our street has the same construction. None of us live in a Victorian house, old. new or middle aged. Roger, you are probably the only veneer outershell I know :)
As a general rule, in most parts of Australia, land appreciates and buildings depreciate. Here in Perth as a rule of thumb, you could go by land appreciating at 8-10% pa and buildings depreciating at 4% pa. Of course recently things have been a little overheated with land going up at 30% pa.
Unless houses are regularly modernised and updated, they soon become outdated and their value drops. With a house about 20yrs old and in need of modernisation, it is usually cheaper to knock it down and start again.
A friend recently got quotes to extend their 70's built house adding a new living area, a home theatre, another bedroom and redo the kitchen and bathrooms. It was cheaper by $40K to knock the whole house down and build a new 5 bedroom / 3 bathroom double brick and tile house from scratch.
Cheers
Bob in Bull Creek (with a brick s/house or two)
Like all property for investment the tenants are the real issue and in my view here the returns don't seem that good and your still have CGT when you sell. Some of the best investment for long term here is land and there is a lot more of that in the outersuburbs than you will find in the UK..... however thats long term.....
G'day
I think you're missing a big part of the deal here. Because the cost of interest on an investment is tax deductible, you can effectively get an investment that gives you capital growth, some income and a substantial tax reduction. Even without putting a tenant in, buying an investment property and leaving it empty can give a good return.
The tax deductibility of interest on investing can change the mathematics quite considerably. As a highly simplified example, assume buying a property for $300K. Interest costs are $21K/yr, keep it for 2 yrs then sell it for $300K *1.1 * 1.1 = $363K. CGT is $63K * 0.5 80.45 = $14.17. Therefore an outlay of $42k, you make $48K after tax profit and have your tax bill cut by $19K a total benefit of $67K in two years. Of course if you also picked up a few grand in rent payments as well, then you're further in front. But either way, tennants are a very minor part of the picture.
With any investment decision, I would recommend speaking to a suitably qualified accountant or financial planner to get advice suited to you own situation rather than rely on general comments made here, no matter how right I am :)
I find it difficult getting my head round this in comparison with the UK. I find it incredible that houses aren't expected to last longer than 20-30 yrs. If I buy my house now, this means I'll be needing to rebuild it just about when I retire.
How does anyone afford to do this? Why doesn't anyone build to last?
After 20 yrs here, I expect to change the central heating and put a new kitchen or bathroom in, not bulldoze the house.
I guess what I'm after is the angle that makes all this sound reasonable - it must BE reasonable because everyone over there does it. But even given that the land is the main investment, I can't see why spending so much money on replacing a house would be acceptable, when it could have been built better in the first place.
This really is a culture shock to me, and it's important to know the mind-set for real estate, or else it's too much of a risk to commit everything I have to it.
Bob, or anyone, can you tell me your view/approach to dealing with a depreciating house?
I find it difficult getting my head round this in comparison with the UK. I find it incredible that houses aren't expected to last longer than 20-30 yrs. If I buy my house now, this means I'll be needing to rebuild it just about when I retire.
G'day
Not only are things very different here compared to the UK, there are also massive differences between all the various Australian states. My knowlege is mainly based in the way things are done in WA, especially Perth. I have also briefly lived and worked in Adelaide, Melbourne, Canberra, Sydney and Brisbane, so I know enough about those places to know that they are different, not only from Perth, but from each other.
Obviously, when you live in terraced house in the UK or Paddington in Sydney, or Fitzroy in Melbourne, knocking it down and rebuilding it is not an option. However with a single storey detached dwelling, which is the norm here in Perth - demolition and rebuilding is an option. There are a number of reasons for doing this, the first is cost. Re-doing a kitchen or bathroom every few years is normally okay, but if you want to have the latest "fashion" with home cinema's and massive open plan kitchen with informal living areas - as I said earlier, it can be cheaper to do a rebuild rather than add on to an existing house layout.
The other thing, especially here in Perth, is the Government are moving towards higher density living, instead of everybody having over 1,000 square metres, block sizes are getting smaller. Many areas especially those nearer the city find that the value of the land has risen so significantly that you can make a handsome profit by demolishing your house and building two houses on the block, then live in one (the best) and sell the other. Or sell both and move further out into the suburbs living mortgage free and probably with a major injection of cash into your accounts.
