What can $450,000 buy you?

What can $450,000 buy you?

More often than not, most first home buyers have around $450,000 available to them to make their first purchase. But what can you actually buy with that?

Lets investigate. Firstly, lets break it down. $450,000 requires approximately $50,000 in cash to make a purchase. I purposely budget over the normal 10% deposit amount, to factor in other fees relating to solicitors, and of course Pest and Building.

Now before we go into it, there are a few factors you must remember before taking this information into your own marketplace. Stamp Duty varies from State to State. For example, on a purchase worth $450,000 in NSW, you’ll require just under $17,000 on top of your deposit for Stamp Duty, transfer fee and Mortgage Registration Fee. In Victoria, you’ll require $23,500 if it is an investment, and $21,000 if you plan to live in it.

This is just a guide. Other factors include First Home Buyers Grants, which in NSW, would lower your fees payable to $400, but you must fit the criteria, to live in the property. Refer to your relevant State or Territory Guidelines and seek proper advice from your solicitor and broker.

Anyways, lets look at $450,000 and the types of properties that level will buy you.

Sydney

In Sydney, the bulk of property you can acquire for maximum $450,000 will be apartments, land or maybe at a stretch an older villa. Lets focus on the former, as land would still require you to build on it and that is an extra cost.

3/2-4 Tiara Place Granville

Sold for $393,000

3/2-4 Tiara Place Granville

A very stock standard, 2 bedroom apartment, in Sydney’s Western Suburbs. A ground floor apartment, it opens out onto a large outdoor terrace area, with one bathroom servicing both bedrooms, one car space in a quiet location.

Speaking of location, it’s just 10-15 minutes walk to Granville Station, a major transport hub with amenities, shops, popular restaurants and easy access to the CBD.

2 Bedroom Units in Granville have a median Rental Yield of 4.5%, and an average amount of demand. In this scenario, demand is calculated over visits per unit (on Real Estate Dot Com), which sits at 325 visits per unit.

Median Rent in the area is $390 per week, however I’d aim lower than that in this specific example, as there are a lot of newer apartments closer to the location which increases that amount.

Never the less, with 7.3% annual growth, its a good place to start in the Sydney Market, in a location that’s only 30 minutes from the CBD, and 5-10 minutes from Parramatta, unofficially Sydney’s CBD of the West.

This example shows a great location to pick up that’s often disregarded by investors and first home buyers. Parramatta is rapidly growing, with major businesses and Government Departments moving to Sydney’s West. A report by the Daily Telegraph mid 2014 estimated an “$8 Billion building explosion” to rapidly reshape the new CBD’s skyline.

If you’ve driven through the area recently, you’ll have spied the cranes and the major works occurring all around. These are key indicators of strong future growth.

Brisbane

Brisbane’s median price is lower than Sydney’s obviously, opening the door for more opportunities at a price mark of $450,000. For the sake of this exercise, I have two different examples, both vastly different opportunities.

Lets start away from the CBD.

1/61 Buckland Road Everton Hills

Sold for $430,000

1/61 Buckland Road Everton Hills

A Townhouse, only 3 years old could be on your wishlist if Brisbane was part of your search criteria.

Being only 3 years old, this Townhouse contains some luxury inclusions, spacious bedrooms and open plan living spaces opening out onto a spacious deck area.

This particular example provides lovely local amenities, with local parks close by, as well as the Bunyaville State Forest Park, for those who prefer longer and more scenic walks. McDowall State Primary School is very close as well, as well as the North West Private Hospital.

10 minutes walk will get you to Oxford Park Station, the gateway to the rest of Brisbane. Consistent services will get you to Brisbane Central in 20 minutes, hardly a long commute.

This example serves two purposes. A different style of investment. For some, this simply won’t achieve the same as perhaps the next example, but one particular demographic this will interest are locals, or soon to be locals. Renting it out for the short term with the view to move in. Having this mindset allows you to open up your search criteria to not just numbers and feasibility sums, but rather local amenities that you’d prefer around you.

Speaking of numbers and sums, rental yield sits around the 4.6% mark, however Rental Demand is rather high, with 800 visits per house (on Real Estate Dot Com).

The Median Rent is 418 per week, however this includes existing and older homes. By contrast, this particular Townhouse is achieving $440 per week currently.

Annual Growth is around the 1.7% per annum mark, however this is not the only telling sign. Brisbane is showing key indicators to being an upward climb, but play the market by ear and make your decisions carefully. Don’t buy expecting a Sydney-esque market boom.

The growth since 2011 has been relatively steady but up-hill.

436 Ann Street Brisbane City

Sold for $365,000

436 Ann Street Brisbane City

Now, I promise, I didn’t select this apartment just for this reason, but I really love this apartment personally. Especially in Sydney, there are not many ‘Manhattan’ or New York Loft style apartments around, and when I saw they were around this price range in a CBD, I contemplated a Brisbane move.

Anyways, this is a newly renovated two bedroom apartment, and the largest in this building (aptly known as the Manhattan). The location speaks for itself. It’s in the heart of the city, walking distance to public transport (ferry, train and bus), as well as Queen Street Mall, China Town, restaurants and cafes. Did I mention there was a Woolworths behind the complex?

The complex is very well maintained, and managed by on site managers. It includes a gym, spa and sauna. Very nice.

Only downside perhaps, no car space, as is the norm in the inner CBD apartment complexes, but if you aren’t living in it, you’ll find that your tenant is likely to not be driving much anyway. Location is key.

It’s location is between Fortitude Valley, which has had it’s own large scale Urban Renewal or sorts over the past few years, and of course Brisbane City itself. Closest railway station? Central of course. Roma Street is still walkable as well.

Living options aside, lets look at the numbers. Rental yield in the CBD is at 5.8% per annum, which is a touch higher than the outlying suburbs.

Rental demand is average, with 197 visits per unit, however we can put this down to large supply. Having said that, anecdotal evidence suggests apartments like these priced correctly tend to rent out very quickly.

The Median Rent is around $610 per week, which considering the median price of $545,000, is rather nice and high. Growth is around 2.2% per annum as well, however much like Everton Hills, this has been a steady climb since 2011.

Melbourne

Last but definitely not least, lets look at the ever growing city of Melbourne. The Victorian Capital positions itself between Brisbane and Sydney. Melbourne has been experiencing a lot of new developments as of late, and lots of urban renewal in outlying greenfield suburbs much like Sydney. But lets see what $450,000 can buy you.

3403/241 City Road Southbank 

Sold for $420,000

Southbank

I was personally rather surprised to see apartments this close to the CBD still available in Melbourne, but that’s good news for the buyers.

If your curious as to where this apartment is, just as the suburb suggests, it is on the South Bank of the Yarra River, conveniently close to South Melbourne Markets, Clarendon Street Shops, Crown Casino, and just a hop over the river on the number of bridges, and you’ll be at Flinders Street Station, and a plethora of nightlife, restaurants, bars sporting venues and activities.

This is a unique facing, the two bedroom unit has views of the Dandenong Ranges, MCG and the CBD of Melbourne. Very rare to have the trifecta. High quality inclusions adorn this apartment, one of the more up market complexes in the area. Located on the 34th floor, you are assured privacy and quiet.

Don’t forget complex pool, gym, 24 hour concierge and more communal recreation facilities.

Personally, a fantastic location to actually live, if you work in Melbourne CBD.

Now, the numbers however look slightly less attractive. 2 bedroom units in Southbank have actually dropped by 1.3% on average, with a rental yield still at a healthy 5.3%. Rental Demand is low compared to other areas, with 130 visits per unit.

Looking however at the statistics, the 1.3% drop is misleading, as that statistic takes a five year compounding growth rate and splits it over the five years. In 2010, there was a dip in the median price, lasting till 2012, before steadily rising again without fail.

A major factor in this, is the high amounts of new development in stock in the CBD, however history and anecdotal evidence suggests that time often remedies these slumps.

Southbank’s numbers however mimic Melbourne CBD’s in terms of investment growth, the two markets often go hand in hand, so keep an eye on both.

Price a unit at the right level (this is key), and you’ll have no trouble renting this apartment out. Be conservative. Often low demand numbers are often skewed (examples are Schofields in NSW), where there are large numbers of rentals on the market, and unrealistic owners miscalculating their rentals and being stubborn with them, have their units sit for a long time on the market. Be competitive with pricing, increase the rental later if you need to.

Image Credit: ccdoh1 (Flickr)

Author

Michael Turner is a Property Development and Analytics Specialist operating in Sydney's Growth Centres and corridors. He is a Director of YPI, along with several roles at property development firms and agencies. He can often be heard on various radio mediums talking about Football and Property. You can find him on Twitter @mturnerypi or email him directly at m.turner@youngpropertyinvestor.com

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