astonmartinv8

Hello All,

I am after some advice from those in Perth about whether I should go ahead with a house build or sell the plot of land I own.

The plot is in the Princeton estate, Stirling. It is 0.2km from the highway and doesn't have a water view, but it is a good large, non-corner plot.

First I should say that the 590sqm / 18m frontage plot value has increased from $AUD395K to $AUD520K in one year. We should make $AUD80K after tax.

I have planning permission for a 404sqm floor area 4-bed two-storey home - Atrium Lexington (just about to sign contract).

The house we have specified is 4 beds, 3 baths, very high quality tiling and fittings throughout (especially the ensuite). Granite worktops and bottom step, reverse cycle aircon and we will add a high quality pool.

All told, our total expected worse-case all-in cost including the land is $AUD1.1M to build the house. It'll take 12-15 months to complete.

I know I would be signing a contract to build at the top of the house builders market, when the house selling market is tightening.

The estate agents says if the house was completed now, we would get $AUD1.3M.

It's a tough one, I could sell the land and be pig sick if I lost the profit (it would give us a really good start in Oz) or, it might be a total headache for 18 months, then have made us nothing or just a little bit - then a big fat mortgage to welcome us to Oz!

I should mention I would be overseeing the first 9 months of the build from the UK.

What should we do? Build or sell the land and walk away.

Thanks in advance,

Marcus.

GinaUK

That bit of your post sounds like a recipe for disaster - "overseeing" a build from 9,000 miles away ....

As for the rest: presumably you will need a house to live in when you move to Perth? Therefore, ignoring the "overseeing the build from the UK" bit for a minute: why sell this one and then buy another one when you arrive?

Gina

astonmartinv8

Hi GinaUK,

I am really looking for advice from those on the ground in Perth as to whether I should sell the land and pocket the profit or build a house on the land.

I know it will be difficult (but not impossible) to oversee the build from the UK (this has been discussed at length before).

Yes I will need a house to live in when I get to Perth, however, my plan would not be to live in this house long term. I would probably sell-up in any case and buy in a more up-and-coming area.

It is really a case of being lucky when buying the land (though not as lucky as many before us), and wanting to make the righ decision on how we move forward from here.

Thanks,

Marcus.

ohippy

depends how much money you want to make. Generally prices have cooled at the minute and houses and land taking a while to sell, although I don't know that area at all.

julesandco

It is a dilema.

Princeton is a very nice 'fast growing' estate. Most houses on here are V expensive and high quality.

We are building down south with a major builder (not your one, but friends of ours are) and the build process is a bit of a nightmare. IN the last 9 weeks, our builder has spent 4 days on site. This is with us driving past every day putting MAJOR pressure on them when they are not on site, working.

If you do want to build, be prepared for a 2 year slog - they''ll promise you less, they're probably lying! It's a lot of stress from here; trying to organise it all from the UK would be even more of a headache.

It's whether you want to live in Princeton. If you sell the land, you probably won't be able to buy an 'comparable' existing property there when you eventually move out. If you really love the area, I'd hang on in there and build. If however, you would consider other suburbs and aren't that fussed about Princeton, I'd sell the land and pick up a bargain from an urgent seller. You could pick up something VERY nice for less than a mil if you chose the suburb wisely.....

I guess you've seen this already from thr REIWA site: http://www.reiwa.com.au/res/res-subu...er=P#topofpage

There was something on the news the other night about problems with subsidence in a neighbouring suburb due to the removal of water from land beneath Princeton - don't think that will ultimately affect you as it is a 'posher' sub division. May be worth a little research though.

Good luck with whateveryou decide to do.

Jules x

iPom

If you build and sell immediately, won't you be taxed?

steve99

Interesting dilema Marcus!

1st thing that spring to mind is $1.3M for only a 590sqm block in a non established suburb/new estate sounds a lot of money to me.
And 2yrs of stress to only make $200K also sounds a pretty bum deal.

I think personally I would sit on the land and see what the market does, and look at selling it in a years time in the hope (and likelyhood) that its gone up another 10%+. And would invest the other $700K in 2 or 3 well positioned renovateable apartments. With the view to selling them on after a year+ of ownership (and the reno's) with the likelyhood of making 20% plus on each of them.

The other alternative would be to not commit so much to the build itself and look at putting on a lesser spec'd house at say $350K which would give you an outlay of around $750K and hope to sell at just under a Million.


Whatever you decide I think getting a great deal sorted from the UK in the 9months is a big ask.

astonmartinv8

Firstly, many thanks for your views, very helpful.

In terms of building then selling on, you need to live in the house for three months, then I understand you are free from CGT liability. If I sell the land after one year of signing contract (after February 16th), then 50% less CGT applies.

The one thing that I am sensing from the responses so far more than anything else is the actual headache of getting the job done, even if we were actually there, let alone in Blighty! Human nature says "out of sight out of mind" or maybe "off-site, out of mind" and having had experience of trying to get things done on the finance and planning side from the UK, I am leaning towards selling and maybe investing elsewhere or keeping the land until we get there in early 2008. Age old questions applies - what is going to happen with prices??! (Don't worry about answering, there been enough discussion!!)

The plot could prove an interesting purchase to someone who wanted to pick up the general design / planning permission and move forward with it with the builder. They would save months of hassle time, but I am unsure if the builder would be helpful.

Anyway, any other points of view welcome.

Best regards,

Marcus.

phillip&sharon

A lot of people seem to be using major companies for there build and it looks like they have to much work that they can not cope with as they are never on site. Would it not have been easier to find your own contractor's for each trade and project manage the build yourselve.

phillip.

CDT

Just a thought. Perhaps a total non-starter but if you decided to commence building before you went out there, could you maybe come to some agreement with another BE member already there to oversee the building work, and keep you updated.

astonmartinv8

Hi there,

Phillip - I think that is a good point. I was up there regularly on weekdays, albeit in late November / early December and I was surprised how few people working there seemed to be. Also, I was surprised how little things seemed to have changed since I was last there in February. It was a bit like Blighty - ie dead in the suburbs in the week.

CDT - I would have this one covered. My old next door neighbour from Blighty lives in Iluka now and has said he will keep an eye on things if we proceed.

To be honest, what worries me most is the demand upon builders and their capability. If they are taking two years or more to build, that is plain daft, especially as you effectively have double living costs at this time if you are financing the build. The latest WA housing report from ANZ bank indicates there will be a 3-month surplus of housing in late 2008, rather than a shortage as there is now. It may be that builder capacity, delivery times and pricing all free up more then.

More views welcome.

Best regards,

Marcus.

julesandco

I don't think so, no. Not with moving to a 'foreign' country and not understanding the laws governing the building trade. I think if we were to engauge each trade individually, there would be even more scope for rip-off and mis-information.

At the end of the day, part of the fee for these building companies is the project management aspect and they are away of the pitfalls and the regulations far more than us 'wet behind the ears' poms. We've had our fair share of people taking adantage of our naivety. We are not even supposed to visit the site now without a blue card (for health and safety). Project Managing yourself is a minefield. WA is Licensing city remember! You would just not get the trades people. Why would they be prepared to do a few days labouring for you when they get guaranteed work through the major builders week after week? It just wouldn't happen. Even the major builders have trouble in sourcing and keeping trades people.

Couple this with setting up and running a new business as part of our visa requirement and three kids under 10 to re-home and settle and I think the answer would be no, it's not easier to project manage a build yourself.

Jules.

julesandco

Our understanding was you had to keep the land (or property) for a year and one day (if it's the only property in your name) to be exempt from CGT. You may be wise to look into this. Get advice from an accountant.

Do you have your PR? We're on a temp visa and have to get FIRB and are unable to sell without developing (or have to sell to an Aussie..... there are rules!).

Jules.

astonmartinv8

Jules,

We have BN/136 visa's - permitted to remain in Australia indefinitely - granted 7th October 2005, must not arrive after 7th October 2010 (we travelled to validate the visa in Feb 2006). I assume we are OK to sell freely.

I would be interested to understand the period over which the eligibility for CGT relief is calculated. Is it between the date of contract signing or the date of completion and the date of disposal?

Best regards,

Marcus.