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  1. #1
    Join Date
    Jul 2017
    Posts
    287

    Default Land sections in Melbourne suburbs

    FYI,

    https://www.facebook.com/watch/?v=696744557435750

    For anyone who isn't on Facebook the link is to a news item on 7 News re. financial stricken land owners panic selling sections and losing tens of thousands of dollars in the process. Plummeting values is the issue where blocks worth say $400K in 2017 are now worth $350K and banks forcing the hand of the owner to stump up with more deposit etc. One owner was told they needed to find $110K and face daily penalties = 1000 blocks up for sale.

    cheers,

    Donna
    Last edited by donna; 22-05-2019 at 04:02 PM.

  2. #2
    Join Date
    Aug 2003
    Posts
    7,666

    Default

    So is this something that could happen in NZ?

    cheers,

    Donna
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  3. #3

    Default

    that's a story about poor choices... the fact it is property is secondary.


    In reality the property value dropped by $50k (12.5%) so the hysterical use in the article of the term 'prices plummeted' is a beat up.

  4. #4
    Join Date
    Jul 2017
    Posts
    287

    Default

    Quote Originally Posted by Don't believe the Hype View Post

    In reality the property value dropped by $50k (12.5%) so the hysterical use in the article of the term 'prices plummeted' is a beat up.
    The financial circumstances of the buyer will determine which number they will choose to focus on.

    1) In reality, the property value dropped by 12.5%. An 100% cash buyer would likely focus on this number as their equity value has also dropped by 12.5%.

    2) Also in reality, most buyers would need to use mortgage financing, so the impact on their equity value is important. The initial equity value of A$40,000 dropped by 125%, and thus would be in negative equity. If the buyer is unable to raise the necessary additional funds to settle the purchase, that 125% loss would be realised / crystallised. In this case, you could say that the equity value "plummeted".
    Last edited by Chris W; 22-05-2019 at 06:41 PM.

  5. #5
    Join Date
    Feb 2013
    Posts
    354

    Default

    Could it happen here, where were you in 2008-9 Donna?. There were sections that were selling for 100K less in Sth Auckland.
    So yes it could happen here.

  6. #6

    Default

    Quote Originally Posted by Chris W View Post
    The financial circumstances of the buyer will determine which number they will choose to focus on.

    1) In reality, the property value dropped by 12.5%. An 100% cash buyer would likely focus on this number as their equity value has also dropped by 12.5%.

    2) Also in reality, most buyers would need to use mortgage financing, so the impact on their equity value is important. The initial equity value of A$40,000 dropped by 125%, and thus would be in negative equity. If the buyer is unable to raise the necessary additional funds to settle the purchase, that 125% loss would be realised / crystallised. In this case, you could say that the equity value "plummeted".
    All valid points but from my memory (i didn't relook at the article) what was said to have plummeted was the land value - not the individuals equity so I call a beat up.

    It could also be said that sections bought retail like this are likely to be inflated in the same way as new development apartments are often inflated. This is only ever a problem if the market stops rising as paying too much for a new development over a period of time is forgotten as prices rise beyond the premium paid. When things level off or dip the retail pricing of new developments and subdivisions is more obvious. Could it be that these sections were inflated by 12.5%?

  7. #7

    Default

    Quote Originally Posted by BlueSky View Post
    Could it happen here, where were you in 2008-9 Donna?. There were sections that were selling for 100K less in Sth Auckland.
    So yes it could happen here.
    Its not just sections, off the plan has similar issues given the time between contract and settlement. If the market changes or the banks rules change the purchaser can be caught out.

    When the market goes cold while you hear many stories of people losing their shirts it is a fantastic time to be in the market. I for one love this market as it allows for those with negotiation skills to really create value for themselves.

  8. #8
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,344

    Default

    DBTH, about 10 secs into that video the guy says "Land crisis".


    And wow, $20k stamp duty on a $400k section!
    Last edited by Davo36; 23-05-2019 at 08:49 PM.
    Squadly dinky do!

  9. #9

    Default

    Quote Originally Posted by Davo36 View Post
    DBTH, about 10 secs into that video the guy says "Land crisis".


    And wow, $20k stamp duty on a $400k section!
    Right - land crisis not equity plummeting and while this story is about settling on land. It is also an issue for off the plan builds as the banking environment and value of the finished product can change dramatically between contract and settlement.

    $20k on stamps... the below link is the victorian Stamp duty calculator it shows that for an investment property bought for $1million you would pay $55k in stamp duty. Then there is annual land tax.

    We pay $400/fortnight in land tax.

  10. #10
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,344

    Default

    Wow, the lucky country aye?
    Squadly dinky do!


 

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