Monday, April 25, 2011

Owners feel the pinch as prices stall

Owners feel the pinch as prices stall

Shane Wright Economics Editor, The West Australian April 24, 2011, 8:30 am

Owners feel the pinch as prices stall
Tens of thousands of Perth homeowners who bought property at the top of the boom before the global financial crisis are facing big losses as the market goes through its worst period in almost two decades.

Special analysis of median house and land prices across the city reveals that people who bought at the peak of the market in late 2007 and early 2008 hoping to see their investment grow now hold "negative equity". Once inflation is taken into account, a person who bought a median-priced block of land in Perth three years ago is at least $48,000 worse off, while someone who bought a median-priced house is down by almost $25,000.

The median price of a house sold in Perth grew 162 per cent between early 2002 and the end of 2010, while the median price of a residential block of land rose 182 per cent.

But all that growth was up to the peak of the market in late 2007.

Since then, the median price of a house has lifted just 3.2 per cent to $480,000, while for land it has fallen 9.4 per cent to $240,000.However, this does not take into account movements in the inflation rate.Between 2007 and 2010, overall prices in Perth have risen 8.7 per cent.

If house prices had kept pace with inflation, the median price would now be $505,000.

For someone who borrowed all the value of a median-priced home in Perth, that translates into a loss so far of $25,000 coupled with interest repayments of $75,000 over the past three years.

It is worse for people who have bought land.

If residential land had kept pace with inflation, an average block in Perth would now cost $288,000. That translates into a loss of $48,000, given the current median price.
It's the worst performance by the Perth market over three years since the early 1990s when median house prices fell.

Wednesday, April 20, 2011

Sunk In Sorrento

37 Seaward Loop
Bought 11-09-2007 for $2,175,000 

*** Update November 2011 This property is now listed as "Offers from $1.990 million" WOW!! Down from $3.5 million & still no takers ***

Advertised as "Desperate Sale all offers by May 13th 2011 Considered"
(Still Wants over $2.68 Mil?)
This property was bought by professional home renovator & property Flipper Sasha de Bretton to live in for 12 months & then sell & make a $1 million dollar profit.{TAX FREE} Or that was the plan on paper.
{See her web page:}

However 4 years later she is stuck with a property she cannot shift (Has been for sale for 3 years)
No doubt Sasha has been successful with this strategy in the past but even this
"Professional Renovator / Flipper" is going to get smoked in this market!
Bought for $2.175m &spent $200K renovations plus other costs = $2.5 mil 
She brags on her website that it is valued at $3.5mil to $3.7mil but in the end is only able to advertise it for $3.0 mil when she lists it for sale 12 months after renovating it. 

Still not a bad profit however between buying it & listing it for sale the housing market changed. No longer could speculators flip property for massive profits.

Sasha has been holding $2.5 mil debt on this property for close to 4 years. However if her strategy  worked all she intended to do was flip it in under 12 months!! 

So now  the interest on this has cost her $700K Plus!! 
Yes she has had a house to live in but she could have rented a house just like this in Sorrento for under $150K for the same period.
So her actual holding / speculation cost has been over $500,000 This is why she needs $2.68mil to try and break even. 

On top of the interest bill she has had to fork out for advertising etc for 3 years of marketing the property.

Original owner First Advertised this house for sale 23-05-2007 for $2,500,000.

Property then Bought by Sasha (Current owner) 
11th September 11-09-2007 for $2,175,000
(Sasha has then spent Approx $200K Spent on renovations)

Sasha First lists this house for sale 20-07-2008  as "EOI"
{Listed 3 months trying to get $3.5mil price. Clearly nobody willing to pay target price of $3.5 mil Plus?}
Price wanted advertised 18-10-2008 $3,000,000 
{Interest rates in 2008 were 9.5% & the GFC has just hit so price reduced}

Price reduced to attract buyers 10-01-2009 $2,990,000  

(Another 3 months pass lets reduce it $10K that will pull in the buyers?)
Further Price reduction 28-03-2009 $2.59 mil to $2.89 mil (Still No Takers)
20-02-2010 Advertised as "EOI"
(No takers so property rested for a few months.)

Back on the market 6-03-2011 $2,680,000 

Now November the price has been reduces to $1.990 million

So what do I think this property is worth in this market?
Sorry but I would not pay more than $1,500,000 not in today's market

So why do I think this property will only sell for $1.50 mil. ? 

Follow this Link & watch 2nd last video story on Sashas web page, look at the "Cost Saving" techniques like a "GRANITE TRANSFORMATION" in the kitchens & Bathrooms instead of doing it properly & replacing the tops completely. Remember she only intended to "FLIP" the house in 12 months all it had to do was look like a Million Dollars. Makes you wonder what other shortcuts have been taken to achieve a  maximum return?


37 Seaward Loop, Sorrento, WA 6020 
 37 Seaward Loop, Sorrento, WA 6020

Monday, April 18, 2011

Woodvale Train Wreck

7 Parkwood Ave 

Bought for $860,000 Oct 2007 
Owners spent $100,000+ Renovations
Currently for sale for $799,000 

Never go wrong buying quality?
 Look at the history of this house

Owners can expect to take a "Haircut" of $200,000 
Over 3.5years this works out to a loss of 
$5,000 Per Month (Brilliant!!)

Sold 12-05-2001 $322,000

Sold 17-02-2006 $612,000 
*up 90% in 5 years remember property should only double in 10 years?*
Sold 22-10-2007 $860,000
*up another 40% in 20 months remember property should only double in 10 years?*

Total Rise in 6.5 years?= 167%

So even if you subscribe to property "SPRUIKERS" hype that property should double every 10 years this house should only be $644,000 today !!! 

In 2007 these owners should have only paid $531,000 NOT $860,000

Forget about adding the $100k for renovations because this is already factored into the property always doubles equation.Spruikers overlook this expenditure when the say property doubles they forget to deduct this cost?  Because remember every house gets remodelled / extended / renovated  etc.

BTW there is nothing wrong with this house in fact it is great we would buy it tomorrow but we would never pay more than $650,000 !! 

Why? Property ONLY doubles every 10 years even with renovations & extensions etc!!

If you are buying property as a "Investment" treat it like a hard nosed investor would!!

7 Parkwood Avenue, Woodvale, WA 6026

7 Parkwood Avenue, Woodvale, WA 60267 Parkwood Avenue, Woodvale, WA 60267 Parkwood Avenue, Woodvale, WA 60267 Parkwood Avenue, Woodvale, WA 60267 Parkwood Avenue, Woodvale, WA 60267 Parkwood Avenue, Woodvale, WA 6026