Selling a property in Auckland to buy 2 x in WGTN

[bobbyt]

Hi,
New to PI but long time reader of this forum. I have a 2 bedroom house Xlease in Manurewa, Auckland with mortgage of 195k - purchased in 2012. Estimate sell price now 465k to 475k minimum. Rented to tenants.
Purchased a 3beddy in Lower Hutt, Belmont for 380k Dec 2015. I estimate this to be now worth at least $430-440

I think my Auckland rental has just about reached its max value. Taking into account, location, Xlease and only a 2bedroom.
I'm thinking of selling the Auckland property and purchasing 2 x in Lower Hutt as rentals - decent areas.

I plan to use the profits from Auckland sale as deposit 20% for new purchases. Purchase Price for Lower Hutt 470-500k each.
I estimate it would be cashflow neutral at worst.

Am I being silly?
Would appreciate comments

Thanks

[Don't believe the Hype]

What you're talking about it increasing leverage - taking profit from sale then using as deposit on next properties - leveraging those new purchases. You need to assess for yourself if increasing leverage at this point of the cycle is a risk you're prepared to take.

are you asking if selling Auckland property and buying Wellington will deliver you a better outcome? - no one here can tell you unfortunately... There are many pro Auckland people who believe Auckland will always be the better bet but that's an opinion - there is data to suggest that Wellington tracks Auckland very closely over the longer term and Wellington is lagging the spike in Auckland so if you use charts and history to predict the future you could mount a case for more gain in Wellington

if you're looking to time the market then to answer your question on are you being silly, yes I personally think you're being silly!

Property should be bought on fundamentals with clear objectives... Not on a speculative gain.

[Bobsyouruncle]

You'll regret it in 10 years. Keep the Auckland one and just use the equity.

[Don't believe the Hype]

You'll regret it in 10 years. Keep the Auckland one and just use the equity.

Maybe im selling myself short... I can predict the future... Pro Auckland no. 1

[Bobsyouruncle]

I don't follow you hype? He's already in Auckland so why sell it? Just use the equity. Especially as his property is so far below the median his gains going forward are likely to be very good.

[bobbyt]

I'd hate to sell it and regret it later which is my hesitation. I'd like to upgrade to a 3beddy in Auckland but I wouldn't be able to afford it and I don't particularly want to purchase in Auckland at this stage of cycle. Lower Hutt market is starting to take off and I think my money us better invested here.
Failing that I will justc sit tight and wait for next cycle...

[Don't believe the Hype]

Sensitive on a Sunday morning bob... The hype around one direction on property prices is my concern... '10 years you'll regret it' - maybe ... Maybe not... There has been huge growth in Auckland - you seem to be certain that will continue... I'm not so sure but I would't be so arrogant as to claim I know one way or the other.

Things might continue. They could go backwards or there is a chance you might see a few years - even a decade of price stagnation which in real terms would mean going backwards...

[Eugene]

Sensitive on a Sunday morning bob... The hype around one direction on property prices is my concern... '10 years you'll regret it' - maybe ... Maybe not... There has been huge growth in Auckland - you seem to be certain that will continue... I'm not so sure but I would't be so arrogant as to claim I know one way or the other.

Things might continue. They could go backwards or there is a chance you might see a few years - even a decade of price stagnation which in real terms would mean going backwards...

Wellington has just come out of eight years of stagnation

[Eugene]

What you're talking about it increasing leverage - taking profit from sale then using as deposit on next properties - leveraging those new purchases. You need to assess for yourself if increasing leverage at this point of the cycle is a risk you're prepared to take.

are you asking if selling Auckland property and buying Wellington will deliver you a better outcome? - no one here can tell you unfortunately... There are many pro Auckland people who believe Auckland will always be the better bet but that's an opinion - there is data to suggest that Wellington tracks Auckland very closely over the longer term and Wellington is lagging the spike in Auckland so if you use charts and history to predict the future you could mount a case for more gain in Wellington

if you're looking to time the market then to answer your question on are you being silly, yes I personally think you're being silly!

Property should be bought on fundamentals with clear objectives... Not on a speculative gain.

Wellington had a perfect storm of negatives:
The 2007 - 2009 correction
The Christchurch earthquakes put fear in our hearts
Insurance premiums increased for a while
John Key told a chamber of commerce group that Wellington was dying - such a swipe from he in power didn't help confidence
Green mayor helped put the kaibosh on NZTA second Mt Vic tunnel etc, at least initially

Whether it will track Auckland closely who knows, but I am not sure it matters; there is a large pool of highly paid young renters, and even moderate price gains does a lot for confidence

[Bobsyouruncle]

Not sensitive just didn't understand you. I am happy to "rely" on 100 years of growth history to say it is fairly safe to say house prices will continue to rise. And the largest city is a good place to own them :-)

[Don't believe the Hype]

I'm not taking a position either way on where prices will be in 10 years because as I've said many times I don't own a crystal ball... You're spruiking certainty... I'm just saying our friend here looking for some opinions needs a balanced view.

My recent observations are that the tide is ever so slightly turning away from the biggest city:
- congested roads causing people to reassess if that big city is worth the premium
- employers realizing they have to pay premium wages to attract talent so starting to review alternative locations for their operations...

IF employers vacate so will their workforce creating a supply side increase and a reduction in demand that may be enough to halt the rises...

Add that to the ongoing push from the press that a bubble has formed - true or not - people believe what they read causing caution and reluctance to purchase.

[Bobsyouruncle]

Won't move the beaches or the weather etc. though hype. And you'll never get enough businesses moving away to make a dent in the population.

[Don't believe the Hype]

I guess we'll know in 10 hrs bob

[Bobsyouruncle]

Indeed, we could both be wrong. (I assume you mean 10 years?)

[Don't believe the Hype]

Damn auto correct - yrs... Yes Years!