The latest issue of the Mosman Daily (22nd Jan) wrote about an auction for a duplex within walking distance to the Balmoral Beach. Two things caught my attention. An expat bidded on the property. It was sold for $3.51M.
Apparently, 8 parties asked for the contract during the marketing campaign. 4 bidders rocked up and only 2 were bidding. It feels like the market is slowly thinning out.
Funny enough, the article did not talk about if the expat won the auction. I wonder if the expat argument is a concoction from the marketing saavy agents. To be perfectly frank, if an expat has made it, I won't be competing with them for a $3M+ property within the next 100 years. However, if an expat is coming home and is looking for a $1-2M house, he probably hasn't made it yet. Considering the current environment, would any expats really want to come home ? Just look at the latest AFR !!! There are not a lot of jobs out there at the moment.
Another bit of information that caught my interest was the property was last sold for $1.2M in 1991. The auction yielded the vendor 6.5% p.a. return. Considering it is tax free, not too shabby. However, if we ignore the special tax treatment, the return is only OK but not exceptional. Now imagine you had $1.2M in 1991 and you put it to work with a good fund manager, assuming 14% p.a. return, that sum would be worth $11M today. Even if you take into account of the taxes you have to pay, where would you rather put your money ? Admittedly, both the world markets and the Sydney property market have had their day in the sun. Still, where would you rather put your money ? A market that has already tanked and is higly liquid. Or a market that hasn't quite tanked and is very illiquid and there are a lot of fees to be paid on the way out ?
Nevertheless, I suppose most of us would not mind to be the winner of that auction. Having $3.5M to spare and can spend it however you want without regard to whether you need to make a return on that sum or not.
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