When looking to buy your next investment is it better to buy close to the CBD or is it better to buy a new development that is cheaper further out?
Ryan: All right. So Joshua’s asking, “As a first time buyer in Newcastle, would it be better to fork out more for a property in the CBD or for a new development further out, which would significantly reduce mortgage and maybe be more profitable?”
Ben: Oh, that’s such a hard question to answer. Like, again, when I say I think something, I don’t think anything. I just follow the data. So I was looking at the Herron Todd White Month in Review Report. You can find it for free online by Goggling HTW Month in Review Report.
And I had a look at the property clock for Newcastle, and according to this month’s clock, Newcastle is at top of market. So that doesn’t mean there’s not great buying opportunities still in Newcastle. It just means that the majority of the good buying opportunities are gone.
If you’re buying and holding these for the long term as a place to live in, then that’s a different situation. You should still be strategic and think about it. My personal preference, knowing what I now know, is I only buy walking distance to the beach or as close to the CBD as I can afford.
So that is because those areas, historically, perform a lot better, and that’s where the high income earners are, and that’s where the capital gains have been in the last five years in Sydney and Melbourne.
Ryan: Yeah, I’ve been out of Newcastle … I lived in Newcastle for a while and was a rep around that area, and I remember seeing a lot of the new developments going up. Like, at the time it was Fletcher, was a new development, like at the back of Jesmond, sort of that sort of way. But I don’t know what’s happening there at the moment.
But I do know that when you’re buying like these new development, house and land package, sort of things, you need to be really careful, because they can be overpriced compared to the market.
So if you are seriously considering this, then I would suggest going out and actually looking at, like let’s say you’re looking at purchasing a house and land package for a four bedroom house, out a new development in Newcastle.
Go and have a look at list existing properties in the surrounding area. Maybe it’s not going to be in the exact suburb, but maybe suburbs next to it, and see what they’re selling for, and see what this new builds going to cost you and try and work out is this property overpriced compared to what I could purchase on the market?
Because if you can find a fairly new four bedroom house that’s $50,000 cheaper if you buy existing and you don’t have to go through the whole building process, then that could be something to consider as well. So you just need to be careful of that. Sometimes they are overpriced.
And you also need to be careful that like how much of the surrounding area is going to be developed in the future as well, so you’re talking 10 to 15 years and you’re buying in the small development pocket at the moment, but in 10 years time, the suburbs around it are all going to have new build properties and people are going to want to live there because the houses are 10 years newer, then that can affect your capital growth as well. So you just need to be careful.
Hey guys, I hope that you enjoyed the answer to this question, which came from our live Q&A episode with Ben on YouTube.
We will be doing more of these in the future. If you want to check out Ben, then he is offering free strategy sessions to On Property listeners. To find out more about that, go to onproperty.com.au/session and you can see all the details over there.
That’s it for today and until next time, stay positive.