Property musings and economics 101.

You may recall a few weeks back I blogged about one of the units in our complex going back up for sale at a considerable increase over the initial price. The asking price at the time was 460k, a 16 per cent increase from the initial price of 395k a little over a year ago. At the time, I was quite chuffed, because I saw the listing as a possible indication of capital growth in our unit.

Unfortunately the property is still for sale and they've now dropped the asking price by 5k. See below for a screenshot of the listing.

I'm fairly novice at the property game, but around six weeks without an offer and a drop in price is not usually a really great sign. It seems that the vendor (who I think is probably still the developer, given the clauses in the contract about on selling before settlement) probably over valued the place a little.

Further examination of houses for sale in Franklin (see image below, click for a larger size) shows that there are three bedroom houses available for purchase for less than 460k. Perhaps it's not so surprising that the unit hasn't sold yet, given the obvious advantages the houses (and their land) have over the townhouse at a similar price.

However, it's also worth noting that all the three bedroom houses in a similar price range are under offer. I'm fairly hopeful that they'll go soon, and the unit in our complex will then be the most attractive (in terms of price at least) option in Franklin for a place with three bedrooms. Please note, I haven't really considered the two bedroom houses listed there as comparable properties - they're bloody tiny!

The length of time 7/56 Christina Stead St has been on the market may also reflect the general dip in the first home buyers market that was an inevitable result of phasing out the fist home buyers boost and rising interested rates. According to an article I read this morning on news.com.au, not only has there been a drop in the number of mortgages applied for recently, but the percentage of mortgages accounted for by first home owners has dropped from 28.2 per cent in May last year to 18.1 per cent in February this year.

It's all a bit of a balancing act really - the benefit of capital growth due to a strong market needs to be balanced against the increase in interest rates, and higher mortgage repayments. Fairly basic economics really, but something I'm still learning about now that I have a reason to maintain and interest about it.

Where this all comes back to me, as I mentioned in my initial post about unit 7, is that the price that this house go for may have an impact on how my unit is valued by the bank when we finally get a mortgage. If the house is valued at more than 80 per cent of our loan amount (we're aiming at 350k for reference) then we don't have to pay mortgage insurance. The ratio of the value of the property to the loan amount is one of my new favourite pieces of jargon about the property industry - the Loan Valuation Ratio, or LVR. According to my calculations, our property needs to be valued at approximately 440k to avoid mortgage insurance (i.e. 350/440 < .8).

So will someone please buy 7/56 Christina Stead Street already, for $440k or more. Please. You'll save me like $5k.

Franklin

Our new house is in the new suburb of Franklin in Canberra. For some reason the ACT Land Development Agency calls it Bridgewater at Franklin, but nobody else does. To check out the plans and location for Franklin, check out the suburb location maps here.

Last weekend, I had a look around the suburb to get a feel for it. The feeling that we mostly got, is that the place is incomplete. Maybe a quarter of the suburb has buildings in various stages of construction, but the rest is empty infrastructure. As you can see in the picture below, there are a lot of empty lots.

There's also quite a lot of construction going on, which made for interesting poking about.

I've always liked nosing about half built houses to see the frames and how they're set out. Its a trait I inherited from my father - I remember when I was younger and we used to go walking, he'd always want to go and have a look in any half built houses in our neighbourhood. I feel the urge even more strongly now that I'm investing in a house myself.

But more on that in a different post. Possibly about specific house stalking.

One other characteristic that dominates Franklin (apart from the empty streets and half built houses) is a system of drainage channels and ponds that runs through he heart of the suburb. Hopefully, this will eventually provide a nice focal point for the suburb and be a nice area to walk/run around.

There's also a couple of nice bridges over the run off area, which is actually quite nicely landscaped with a system of reeds and rock filtration areas. It's not really very clear fro the picture above, but apart from a bit of rubbish blown from the building site next door, it looks quite good.

The idea of building drainage areas and run offs like this is something that is common in Canberra, especially in the new suburbs. Even in the older suburbs like the inner north areas, there are systems of open drainage and flooding areas. Its not something I was used to - in Perth, where I've lived most of my life, the run off is quite minimal. I've always assumed its because the soil was a more porous sand there, but it probably also has as much to do with the planning and infrastructure.

There are permanent ponds as well, which have already been populated with ducks.

Ducks! on a building site!

Overall, the suburb is very much only half finished. I have a lot of optimism that it will be really nice when its finished, even if the houses are little boxes on the hillside (little boxes made of ticky tacky).