Flashback to First Class Friday

As nice as it is to drool over the multi-million dollar homes of the rich and famous and clutch your pearls in shock at the amazing prices that are being asked, it is also reassuring to realise that the people buying and selling these homes are still subjected to the challenges of trying to move real estate (there are just a few more zeros on the end of their checks than you or I would most likely write). A few posts that I put up in the past are worth going back to and seeing what the outcome was.

The Liongate Estateliongate that I wrote about last month was up for sale for a cool $65 million. Coming fully furnished throughout it’s 23,000 square feet and featuring 11 bedrooms, 17 bathrooms and even it’s own panic room it’s an absolute steal at that price. Amazingly though, someone thought that was too expensive and decided to bargain with the vendor. Lucky they did because they were obviously a motivated seller and subsequently dropped the price by a whopping $19 million (that’s almost a 30% discount!). So the lucky purchaser picked up the property for $46 million and although heavily discounted, the owner has still made a nice little profit considering their original purchase price of 12.2M.

HPEarlier this year I wrote about Harry Potter actor Daniel Radcliffe putting his local Toorak penthouse up for sale. After owning it for 10 years and originally purchased when he was filming a movie in Australia as a teenager, he hoped to make a nice little $600k profit. After what would likely have been an expensive marketing campaign and also having moved his furniture out and getting the property professionally styled for sale he has recently pulled the property from the market. Rumor is he has another film project in the pipeline locally and might need to keep a place to unpack his carry-on luggage.

MJIf you’ve been saving your dollars for either of these previous gems, don’t be upset that they are now off the market. There are still two properties that you can pick up. Michael Jordan’s house that I wrote about in November 2013 is STILL on the market after failing to sell at auction last year (it may have been the $250k registration fee that put people off). Originally for sale at $29 million, you can now pick it up for $16 million!

2Or if you want to live beach side in Australia then you may recall the stunning Mandalay House that I wrote about in January 2014. $25 million is what the vendor originally wanted for this tropical paradise but now it’s being marketed as ‘price reduced’. Whilst no figure is being attached to this campaign I’m sure it will be enough of a saving to get that private helicopter that you can land in your front yard!

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The evils of Negative Gearing?

article_05082013Barely a day goes by in the media that there isn’t an article published discussing the challenges of the Australian housing market and how much prices have risen over recent years. The long held ‘Great Australian Dream’ of owning your own home is frequently trotted out to tug at the heart strings of TV viewers when trying to find a suitable scapegoat for sky high property prices. Throughout much of 2014, focus was being placed on foreign investors landing on our shores with suitcases full of money and pricing us locals out of the market. Currently the place for blame is on negative gearing. Whilst I’m happy to agree that negative gearing may have had some contribution to price rises, it’s important to take into account the huge amount for factors at play here. Although I’m no economist, it doesn’t take a genius to realise that the combination of negative gearing, foreign investment, historically low interest rates, ease of finance, ongoing agent under-quoting and the sense of urgency portrayed in the media all play a role. Not to mention the fact that almost 70% of Australians choose to live in capital cities and that there is only so much land available in these relatively tiny pockets of our enormous country. Geography and demographics certainly play a role.

Of course I’m biased…but while I do think that negative gearing has an important role to play in supporting investors and in turn the housing market in Australia, I agree with statements made regarding investors only investing in property simply for the tax advantages. To me, purely investing for the benefits of negative gearing is completely the wrong approach (although plenty do it). Following here are two videos worth a watch. The first is a clip from ‘The Project’ on Network 10 which aired last night and fired me up to write about this topic. Pay careful attention to the generalised statements and overall tone of the clip, it’s enough to make you go out and push the nearest property investor under a bus. The second clip by well known Australian property investing wunderkind Nathan Birch is intriguingly entitled Negative Gearing Sucks Balls. Nathan’s explanation about negative gearing and why people get caught out by it is spot on in my view. My thoughts? Negative gearing is a useful bonus for investors but certainly not a reason in itself to invest in property. Check out the clips below and make up your own mind!

Harry Potter lists his Melbourne home

Always a sucker for some celebrity real estate, I was interested to see something close to home. Actor Daniel Radcliffe purchased in the local blue-chip suburb of Toorak in 2005. Radcliffe’s parents reportedly spotted the apartment while looking at Australian property on the internet in London. The home was transferred to Radcliffe when he was 18, in 2007. The flat at 98B St Georges Road is expected to sell for about $2.5 million reflecting a respectable capital gain on the speculated $1.9 million the Radcliffes paid in January 2005. The three bedroom apartment is one of two in the development, occupying the complex’s entire upper level. The apartment is accessible by lift and has views of the city skyline, the Yarra river and Hogwarts.

The promotional video below gives an idea of the boy-wizard’s digs.

Daniel Radcliffe selling Toorak penthouse

Julia’s place goes under the hammer

A few weeks ago I posted about Julia Gillard’s house being on the market for sale. Well yesterday was auction day and I think our former Prime Minister would be pretty pleased. Considering the median house price for Altona is $560,000 the sale made it all the way to $921,000! Not a bad little earner considering that she purchased the place in 1998 for $140,000!

Invest in some political history.

art-gillard-620x349mainIn early August I published a post about our former Prime Minister Julia Gillard snapping up some new multi-million dollar digs in South Australia. Not surprisingly a few months later we hear that the PM’s former house in suburban Altona is now on the market. Our first female PM purchased her modest Altona home for $140,000 and now it’s expected to sell in excess of $600,000. Not surprisingly the internet listing has had a huge amount of hits with thousands logging on to have a look. The first open for inspections are occurring this weekend with the Auction scheduled for Saturday December 14th. So dust off your empty fruit bowl and get the cheque book ready, Julia and Tim’s love nest could be yours if the price is right!

You can also view the DOMAIN Video by clicking here.

Rental affordability

An interesting article was posted today in The Age regarding information that was recently made available by the Department of Human Services in Victoria looking at rental housing affordability. The article highlights that the figures indicate that rental affordability in what have been traditionally cheaper areas has decreased, particularly over the last 5 years or so. It is interesting to see that rental affordability is stated as constituting no more than 30 per cent of a weekly welfare payment. A few comments are raised regarding the difference between affordability in metropolitan and regional areas as well as some of the perceived influences over why this affordability is decreasing. I’d recommend having a read over the article to have a look at some of the comments people are making, I can’t say I agree with them all but always interesting to hear perspectives other than your own. If you would like to see the rental affordability for other areas in Victoria click on the image below to go to the interactive table where you can select individual municipalities.

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A word about rental guarantees

dt_off-the-plan_729-20121026154649765420-620x349There is an interesting article featured in The Age today looking at the potential pitfalls of rental guarantees for apartments purchased off the plan. Click here for the article. Melbourne has been in a boom time when it comes to the construction of new apartments (just look at Docklands over the last 10 years) and the article highlights that there are 25000 new units coming on the market in Melbourne in the next 12 months. What it importantly points out though is what can potentially happen to investors that purchase with a rental guarantee which is above the going market rent for the area and then the guarantee period expires leaving the investor with sometimes an enormous gap between their income and expenses.

It’s these sorts of ‘incentives’ that investors need to be aware of. OK, they may work in your favor if the time and the place is right but it’s important to ask yourself the question ‘why is this being offered?’. Always follow the dollar! (Some useful advice I was given years ago and it hasn’t failed me yet!). Interestingly the author highlights that people may find themselves ending up buying a financial product rather than a piece of real estate. Check it out and make up your own mind here.