Do you have a small budget but still want to get into the property market? Well the good news is there’s still options out there.
If you live in Australia’s capital cities in 2015 with a $100,000 budget it may buy you:
- A car space
- A beach or boat shed
- A permanent cabin/van in a caravan park
The fact is median housing prices in our major metropolitan hubs are now far beyond a cool $100,000 – add another zero and you are in the market for a well-located starter home in Sydney.
The last time Sydney’s median house price was below $100,000 was in 1986, ($98,325 to be precise), Melbourne and Canberra were below $100K in 1987 ($89,500 and $90,125 respectively), Brisbane in 1989 ($96,000), Adelaide in 1990 ($97,200), Perth in 1991 ($99,500) and Hobart in 1992 with a median house price of $95,825, according to state and federal land value data.
What’s available in 2015 for $100,000?
What are the pros and cons of these super cheapies? Are they for everyone? If not, who do they suit?
Conduct a national search on realestate.com.au setting a maximum of $100,000 – and no other criteria – and you’ll see pages of possibilities, most of it vacant land.
Sift through the listings and you soon see a trend.
Regional Tasmania, South Australia and Queensland currently have the most pickings for someone on a teeny budget.
As you’d expect the homes generally need some TLC and are located in remote areas, which include outback mining service town Dysart in the Sunshine State; George Town, 35 minutes’ drive from Launceston, and McCracken in SA, about 100km south of Adelaide, when we searched on July 28. The money often buys you three bedrooms and a generously-sized suburban block.
Regional Tasmania, South Australia and Queensland currently have the most pickings for someone on a teeny budget.
And even if you want to buy in Sydney but can’t afford its lofty prices, buy 400km to the southwest where, at the time of writing, there was a two-bedroom unit just shy of the NSW-Victoria border for just over $100,000.
Is it the right option?
Maybe, but not for everyone and not without a few parameters, cautions Richard Wakelin, Director, Wakelin Property Advisory in Melbourne.
Wakelin agrees a search of realestate.com.au finds many properties under $100,000.
“Typically they are houses in remote parts of Australia, or one-bedroom studio units in high-rise blocks in a capital city,” he says.
“One can even buy a title for stand-alone car park space and many of these sell for five figures and if you’re buying a property as a home for less than $100,000 and it meets your lifestyle needs, then good luck to you.”
However, if your aim is to make money from buying property, you should tread very carefully before selecting these ‘cheapies’, Wakelin says.
“Investors earn a return in two ways – through capital growth and through rental income – and a property’s return is generally skewed towards one or the other.
“Capital growth is the most important feature. A strong rate of capital growth – say 7% a year – can result in a property doubling in value in 10 years. In contrast properties with high rental yields may give you good cash flow, but they won’t increase your wealth.”
Wakelin says low-priced properties always exhibit low capital growth: “That is why they are cheap.”
“Invest your $100,000 in them and the property is unlikely to go up in price very much. Meanwhile you may earn a high yield, possibly up to 10%, but once you’ve paid the mortgage and other expenses it doesn’t leave you much of a return.”
Low-priced properties always exhibit low capital growth.
Justin Alpar, Principal Advocate, Your Property Advocate in Brisbane says there are pros and cons of properties under $100,000 today:
Pros:
- Affordable
- Lower risk of investment as the price point is low
- Can provide excellent rental yields
Cons:
- Can be more difficult to get finance due to some being very small apartment sizes
- Often in outer suburbs or remote locations
- Generally situated in lower capital growth areas
A buyer typically sacrifices location and capital growth potential when buying such a low-priced home, Alpar says.
Milly Brigden, Co Founder of Property Is adds these further ticks and crosses:
Pros:
- Gets you a foot on the ladder
- Can quickly grow in value if nearby rail, mines or infrastructure is planned
- Can make ideal homes for renovator investors
Cons:
- Can be high-risk if local regional jobs are lost
- Population may be static or shrinking, which limits rent growth
- May not suit a risk-adverse buyer
The benefits are lower cost of entry into the property market and often good rental yields.
“Is it for everyone? No, it may suit someone with a lump sum that wishes to invest in property and receive strong rental yields,” Alpar says.
Buyers who want a lifestyle change and can work remotely or find work in the cheapie’s local region may benefit from such a low-priced property purchase if looking for a property to owner occupy.
“The property may be in a remote or far away city/town so the buyer will need to do their homework on the area and local market.
“Who it will work for is someone who is priced out of market in highly unaffordable cities or potentially someone looking for a cheap holiday house in a remote location.”
Bridgen says thorough research is essential. “If conducted investors can gain if something special is occurring in the area,” she says.
“If a rail link or mine is opened, the town will transform and property values will rise with it.”
But she stresses many super cheap properties are not ‘set and forget’ properties. “I would not recommend these to anyone risk adverse or who does not have a very thorough understanding of the property investment market.”
Caroline James