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What price a view?

Discussion in 'Real Estate' started by Jacque, 16th Jun, 2007.

  1. Jacque

    Jacque Team InvestEd

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    Had an auction today for a client that ended up selling for way over expectations to another buyer. $190K over independent valuation, to be precise. The end result was two emotionally charged buyers fighting it out, much to the amusement of those of us who'd been left behind some $150K earlier :) :D

    The client, though disappointed to have missed out, was happy, however, that he hadn't overpaid or made the costly mistake of not doing enough due diligence. The search continues :D

    It was an interesting sale, though, in an area of Sydney where harbour view units don't come up very often (especially this time of year). They're not easy properties to put a value on, simply due to their scarcity and the nature of buyers who "fall in love" with the view and pay up up and away. It was gorgeous with full harbour bridge and opera house vistas, despite being two streets back from waterfront. When researching this particular area in the past, we've discovered that this type of view (open and unobstructed) can add anywhere between $80-140K value. It was convenient, for purposes of comparable sales, then, to discover that an identical unit in similar condition in this very same building sold late last year for $300K LESS than this unit. $300K is quite a sum to pay for a Sydney harbour view hence the surprise at the result at this auction. The agent could hardly contain her excitement and my guess is the vendor will be taking his family out for a big steak dinner somewhere tonight in celebration!!

    So for those of you who think the LNS area of Sydney is quiet, the buyers with fat chequebooks are saying otherwise- especially when it comes to harbour views :D
     
  2. salsa

    salsa Well-Known Member

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    Hi Jaque, can you clarify 190K over the valuation of how much ?
    I have always had to pay premium price, and to-date have always glad looking back that I did offer at the upper limit to secure them. I think for rare-to-find premium real estates the extra bit you are paying now will come to nothing 10 years down the track and people who missed out would wish they had bought with that "high" price then.
    My 2 c.
     
  3. handyandy

    handyandy Well-Known Member

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    Hi Jacque

    Interesting observation.

    I would certainly agree that anything with a view certainly has a premium, but then again, when looking in these areas I pretty well ignore anything that doesn't have a view.;)

    Presently we are looking around (not very hard:eek:) for the exact view you mention, namely, a harbour view. To achieve the view I have been peruesing high rise type apartments and just don't see the value.

    Generally they are very small for the price (1mil+) the strata fees are horrendous ($2500+ pq) and the rents achievable are less than 5% gross.

    Mind you I really have to fix in my mind what I am really looking for, apartment wise, althought I have a fairly clear idea on the type of view I want.

    Sharyn's reaction, today, was that she would rather buy another house with a view and it actually makes sense, as you can find 5%+ gross with less outgoings. From the outgoing aspect the figures stack up slightly better and even the CG should be better with the land content. I just don't want the maintenance:eek:

    The other thing I was hoping to achieve with the apartment is to have executive rental so that I can actually use it at different times (my real motivation :eek:) This would be rather impractical to achieve with a house. So I am just a pile of contradictions:eek: that need to find another investment.

    Cheers
     
  4. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Jacque, do you know if the buyer purchased as PPOR ?

    I know I am prepared to pay extra if it's something the family likes as we pick up pace in our PPOR search. Not sure what the final price was but $190K could be a relatively small % of purchase price for a determined PPOR buyer. A lot for me however regardless :eek: :eek: :eek:

    Very different to IP purchase strategy I know ...
     
  5. Balboa

    Balboa Member

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    Yep these harbour views are terrif--looking out ATM- Only prob is I can make myself miserable worrittin about someone buildin summit to block it when I have paid the premium for it--I had absolute waterfront- twas an apartment -agree strata fees were horrendous-sold to return to a house with harbour views again ( forgot -I actually still part own another smaller waterfront apartment) - however I am working towards the absolute waterfront house again- trouble is I am scared of those damned water pirates coming ashore-- and invading my place-P.S and I am only half joking with this post!
     
  6. Jacque

    Jacque Team InvestEd

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    $190K worked out to be 25% of the total price so quite a hefty hike.

    Here to Learn,

    I understand and empathise where you're coming from in regards to purchasing one's PPOR (which this well appeared to be, judging from the party accompanying the successful couple) and it's quite common for buyers to pay a bit more to secure their dream. But, to an investor, for a paltry 2.9% yield amongst other reasons, this unit simply didn't stack up.

    Handy,

    I think you should do whatever Sharyn wants :D
    Happy wife=Happy life!!!
     
  7. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Unless investor is banking on substantial CG. This is where the real WEALTH comes from. ;)
     
  8. Jacque

    Jacque Team InvestEd

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    This is true, however, the cg does need to be substantial (in this case, the growth would need to exceed 6% p/a just to keep above the cash loss rate before tax) in this case.

    For the investor, borrowing the funds required for this unit of approx $800K (costs inc) @ 7.25% IO variable rate over a 25 yr loan period, the interest alone per week amounts to $1115. Add to this your strata costs and rates, PM fees, maintenance, allow for 4 weeks vacancy p/a and insurance then the total outgoings come to approximately $1275. Take away your $405 p/wk rent and you're out of pocket (before tax) the princely sum of $870 p/wk or $45240 p/a.
    Obviously, negative gearing and depreciation etc is going to lighten the load on your cashflow, but it's still a huge loss to be compensated for, particularly if you consider the impact on your serviceability for further investments down the track.

    Don't get me wrong- I believe the real wealth ultimately lies in capital growth, but not at all costs....