Buying a small flat in Melbourne to live in summer months

[Neglected Garden]

Hello all, I've just joined and would be most appreciative if someone can point me in the right direction:

I'm a widower, 70M and still working. I may be retiring in 2-3 years time.

Based in northern Scotland. 

Dual UK/Aus citizen, born and bred in Victoria but have been in Scotland 40+ years.

I have kept up with friends and family in Australia and even made some new connections on my visits.

Of my two children, one lives in Melbourne and one near me here in Scotland. They both have kids, the one in Melbourne most recently.

I was visiting in December and staying in his spare room, which was fine ... but, I like my independence. When I retire I would like to spend at least 4 months a year in Melbourne, Dec-April. One of my siblings in Melbourne pointed me to a friend of hers who had returned from years in Japan and bought a bedsit/studio in East Melbourne which he occasionally lets out when he's not living there.

This kind of thing would suit me as a pied-a-terre in Melbourne. Prices seem affordable at around A$250k and at current exchange rates I could withdraw enough from my pension fund to buy such a place outright. (of course, there will be other costs) According to my pensions advisor here, I'm on track to have about £45k a year income when I retire.

House prices have fallen where I live and so, although I own my house outright, downsizing isn't really an option.

I would love to hear of

• anyone who's done something similar
• if there's a more appropriate forum for my questions
• any reliable consultancy who could advise on this situation
• a rich widow with a house in Melbourne who wouldn't mind spending half the year in Scotland -

[Marisawright]

25 minutes ago, Neglected Garden said:

• a rich widow with a house in Melbourne who wouldn't mind spending half the year in Scotland -

Hahahahah

As a dual citizen, it's going to be easy to travel back and forth, so that's one potential issue solved.

There's a real glut of studio apartments in the inner city areas due to over-development. If you're willing to live in the CBD itself or in Docklands, you can get something very cheap.  One word of warning:  be sure to ask questions about cladding (see more at the end of this post).

You would be classed as a foreign purchaser, however, (because you're not legally resident in Oz), so you'd have to apply to FIRB for permission, and then you'd be slugged a substantial surcharge on the purchase price.  Don't forget you'll also have to pay stamp duty and conveyancing fees.  So a purchase of A$250K would end up closer to $300k.

One thing to think about is home insurance.  If you're going to leave the studio empty for more than 6 months, you probably won't be able to get insurance.  That's not necessarily a huge problem, because if it's a strata unit, the building and fittings are all insured by the strata management company, so it's only your contents that won't be insured.   If you have basic furnishings and don't have a lot of personal possessions, you might not even think them worth insuring. 

However if you are worried about insurance, you can solve the problem by letting the studio out for most of the time you're not there.  You'd then be able to get landlord's insurance.  Letting would be useful extra income for you, too.

There are several AirBnB management services in Melbourne.  You could appoint one of them to manage letting out the studio.   I know nothing about them, but here's one I chose at random, which has some information that might be helpful:

https://madecomfy.com.au/airbnb-management/melbourne/

 

Cladding

Sometimes you'll see units which look suspiciously cheap.  It's probably because they have flammable cladding on the external walls, which needs replacing.   Many apartment owners have spent years fighting to try to get the original developers to pay for the removal, but very often, they're not successful and the apartment owners have to club together to pay for it -- and it costs thousands.  So it's very important to check up on this before buying.  

http://www.windsorlegal.com.au/flammable-cladding-a-must-read-for-all-purchasers-of-modern-units.html

 

Edited January 6 by Marisawright

[Neglected Garden]

Thanks for your reply. 

According to FIRB guidance note 1, July 2020, on page 3 "Exemptions", it says citizens do not require FIRB approvals even if they're not residents. Unless it's been changed in a more recent version.  https://acrobat.adobe.com/id/urn:aaid:sc:EU:26cf469b-5f35-495f-b877-dfab1f1ccb70

I think I'd try to keep valuable contents minimal enough to store at son's place while I'm away for long periods. I've also got 3 siblings in Melbourne as well as ones elsewhere in Victoria that probably still have stuff I dumped on them years ago.

[Marisawright]

9 hours ago, Neglected Garden said:

Thanks for your reply. 

According to FIRB guidance note 1, July 2020, on page 3 "Exemptions", it says citizens do not require FIRB approvals even if they're not residents. Unless it's been changed in a more recent version.  https://acrobat.adobe.com/id/urn:aaid:sc:EU:26cf469b-5f35-495f-b877-dfab1f1ccb70

I think I'd try to keep valuable contents minimal enough to store at son's place while I'm away for long periods. I've also got 3 siblings in Melbourne as well as ones elsewhere in Victoria that probably still have stuff I dumped on them years ago.

Oops, I missed that bit. Good news!  

If you're in Melbourne for only 3-4 months at a time, I imagine most of your valuables would stay in your UK home anyway.

[Ausvisitor]

10 hours ago, Neglected Garden said:

Prices seem affordable at around A$250k and at current exchange rates I could withdraw enough from my pension fund to buy such a place outright. (of course, there will be other costs) According to my pensions advisor here, I'm on track to have about £45k a year income when I retire.

 

You've probably thought about this, but to be able to withdraw $250k from your UK pension fund it will need to be worth at least 500k GBP (otherwise the 25% you can withdraw tax free won't be enough to fund $250k purchase - unless you have other savings to tip up the withdrawal).

The other thing to bear in mind is that if you take 125k GBP out of your pension it will affect the notional annual annuity value by about 10-11K GBP which will reduce your 45k a year to 35k

These numbers are still good for living on (assuming you don't have huge other debts) but you need to do the maths on whether or not this is sensible for you.

Worth noting that many of the Melbourne apartments are cheap but have exorbitant strata fees which often add about $350 a month in fees. This is around $4k a year, once you add in power and other utility costs you will be around $5k a year. 

You may well find that renting a cheap Airbnb, whilst more expensive, may not be million miles from this number and you'd still have the extra 10k GBP in pension each year that you hadn't used on buying a property.

After 40 years in the UK you probably have the view that property always increases in price (and that's basically true for houses in Melbourne too) but it isn't the case for apartments near the city, these seem to lose money each year 

[Neglected Garden]

Thanks, I do have over £500k and am still working and contributing to both employer-contribution pension and private pension. There is also the UK state pension, small as it is.

As mentioned in my OP, I'm under no illusion that prices keep going up - they have gone down precipitously where I live, and I've also been keeping an eye on Melbourne prices for many years. I don't envisage an investment property but somewhere familiar that I could come to and occasionally let as an AirBnB to offset costs.

I've rented AirBnBs in Melbourne myself in the past with my late wife and we found that prices and availability can fluctuate widely.

[Parley]

Pick out a few suburbs you fancy and then have a look at www.realestate.com.au to get a feel for prices.

[Ausvisitor]

1 hour ago, Parley said:

Pick out a few suburbs you fancy and then have a look at www.realestate.com.au to get a feel for prices.

With the caveat that for some reason Australian Estate Agents / Realtors seem to hate to publish a for sale price. It's infuriating as one of the things (in fact the most important thing) about buying a property is knowing it's within your budget

[Neglected Garden]

6 hours ago, Ausvisitor said:

With the caveat that for some reason Australian Estate Agents / Realtors seem to hate to publish a for sale price. It's infuriating as one of the things (in fact the most important thing) about buying a property is knowing it's within your budget

With the odd exception, they don't seem to have this inhibition with studio flats. As noted elsewhere the demand is relatively low, they don't appreciate in value much if at all, or even decline.

[Ausvisitor]

We bought a small one in the CBD to live in so we could easily walk to work (and we only needed one bedroom). 

It meant we didn't need to move anything over from the UK and saves $30-$35k in rent each year (so will be cost neutral in 8-9 years)

[Neglected Garden]

5 minutes ago, Ausvisitor said:

We bought a small one in the CBD to live in so we could easily walk to work (and we only needed one bedroom). 

It meant we didn't need to move anything over from the UK and saves $30-$35k in rent each year (so will be cost neutral in 8-9 years)

Thank you. That's exactly the kind of experience I'm interested in hearing about. Is this now (or was) your permanent dwelling? (i.e you don't/didn't let it out in between times or anything)

[Ausvisitor]

We live in it full time. I guess you'd call it our permanent residence but our main house is still in the UK

[Marisawright]

12 hours ago, Neglected Garden said:

With the odd exception, they don't seem to have this inhibition with studio flats. As noted elsewhere the demand is relatively low, they don't appreciate in value much if at all, or even decline.

With studio flats, the lowest-prices ones are often student accommodation or hotel accommodation.  If they are, you may not be allowed to live in them (or may be allowed to live in them for only a few weeks each year).  

[InnerVoice]

20 hours ago, Ausvisitor said:

With the caveat that for some reason Australian Estate Agents / Realtors seem to hate to publish a for sale price. It's infuriating as one of the things (in fact the most important thing) about buying a property is knowing it's within your budget

I find this infuriating too. Generally, I won't look at properties that don't include a price. It's just a cheap estate agent trick to get your details so they can get you on their mailing list. It seems to be something they do in the major cities more than regional areas. For example, there always seems to be a lot more listings in Brisbane which don't have a price than on the Sunshine Coast. I prefer Realestate.com over Domain.com because it has a search feature feature that allows you to exclude properties which don't include a price.

13 hours ago, Ausvisitor said:

We bought a small one in the CBD to live in so we could easily walk to work (and we only needed one bedroom). 

It meant we didn't need to move anything over from the UK and saves $30-$35k in rent each year (so will be cost neutral in 8-9 years)

I thought in one of your earlier posts, when you were living in Sydney, that you mentioned you had school age children?

[Ausvisitor]

No when we got the visa we had a 18 year old, by the time we got here they were 20 and at uni in the UK, I think the bit about the school age kid might have been to do with the application. If we had been accepted a month earlier they would have been 17 but as it ticked passed their 18th birthday it brought another raft of paperwork to prove their dependence on us.

They've finished uni now and work in the UK, but still has PR (at least for another year) should they want to make the move.

[Neglected Garden]

I've just reviewed my finances and it seems I could afford a little more. I would prefer a 1br flat where the bedroom is separate rather than a bedsit/studio, if possible. 

Further narrowing it down, somewhere on the CBD margins - East Melbourne, Jolimont, Docklands, Southbank or no more than a block or two from the CBD in N & W Melb, Carlton, Fitzroy. I haven't seen any available actual CBD places that I would like to stay in, but wouldn't rule it out altogether.

My country trips would mostly be to Ballarat area, and SW and NE Vic mainly. In the city, my son lives in inner/mid-western suburb and siblings in the inner/mid south and east suburbs

So I'll take a closer look at what's available centrally that gives me easy access to transport to those areas.

In recent past visits I've done pretty well by getting the train out and renting a car from regional centres like Geelong, Wangaratta and Albury.

The other thing is that my main hobby is playing music and I've made many contacts in Aus, at home in Scotland and around the world from playing in pubs, festival jams/sessions, private gatherings  etc and I have a pretty clear idea , from recent experience, of where I can do that in Melbourne and further afield.

I'm due back down in Melbourne in April/May for a couple of weeks for an auntie's 90th so will try to continue my research on the ground then. Any tips of good people to talk to,  whether professionals, or amateurs with recent experience,  would be most welcome. Marisa's  link to "Made Comfy" provided much food for thought as to how I might offset costs somewhat and what sort of place would suit me best.

[Ausvisitor]

North Melbourne and West Melbourne (just north of the CBD) by Flagstaff Gardens are both good well connected areas. 

Easy walk into the CBD, plenty of trams, buses and trains too.

Also being close to the CBD the prices are on the lower end for units (but high for houses - there aren't many of these)

I live here and certainly prefer the apartment stock over this side of town rather than the Jolimont area (which tends to be older). That said I get from my house to the MCG (Jolimont station basically) in about 20 minutes most days for trips to the stadium

[Neglected Garden]

1 hour ago, Ausvisitor said:

North Melbourne and West Melbourne (just north of the CBD) by Flagstaff Gardens are both good well connected areas. 

Easy walk into the CBD, plenty of trams, buses and trains too.

Also being close to the CBD the prices are on the lower end for units (but high for houses - there aren't many of these)

I live here and certainly prefer the apartment stock over this side of town rather than the Jolimont area (which tends to be older). That said I get from my house to the MCG (Jolimont station basically) in about 20 minutes most days for trips to the stadium

Yes, I was thinking of that area too because I've been staying near Vic Market on recent visits anyway, and also handy for the 220 bus which goes right by my son's place.