An Acquisition in Melbourne

I seldom buy off plan apartments. But I made an exception in Melbourne and Brisbane, simply because the price to income ratio was much lower than the UK or Singapore. The average household income in Brisbane and Melbourne is around AUD120k. My townhouse in Tingalpa was AUD400k. That's 3.33x. It has 3 bedrooms, 2 baths and 1 car park. 

https://www.google.com.sg/maps/place/Tingalpa+QLD,+Australia/@-27.4734678,153.0941058,13z/data=!3m1!4b1!4m2!3m1!1s0x6b915ea4f54aed73:0x502a35af3de9b30

Tingalpa is 13km from Brisbane's CBD. Historically, that area grew by 4.5km per annum in the last 20 years. The walk score is not very high, because you need a car to get around. It takes around 19 minutes to drive to the CBD. There are cafes and supermarkets around 200 - 400m away. The market value for this property is around AUD350 - 375k now. I'm collecting AUD435 of rent per week, which works out to 5.7% of gross rent. Net yield is roughly 4.7%. This house is cashflow positive.

My Melbourne apartment is in St Kilda, just a short 1.2 km walk (20 minutes) from the beach. I have a sea view from my balcony. The size of my apartment is close to 800 sf, has 2 bedrooms, 2 baths and 1 parking lot. I paid AUD635k for it. That's 5.3x of household income. 

https://www.google.com.sg/maps/place/St+Kilda+VIC+3182,+Australia/@-37.8644196,144.9732238,15z/data=!3m1!4b1!4m2!3m1!1s0x6ad6686866392389:0x5045675218cdae0

St Kilda is 7.4km from the CBD and is assessable via a 15 minute tram ride via the Alma station. The Walk Score is over 85. It is surrounded by many cafes and restaurants. The place is extremely trendy. Needless to say the prices of St Kilda has shot up. The market value is roughly around 650 - 700k. I'm expecting a rent of around 600 per week. this works out to 4.9% gross yield. the net yield is around 4.2%. This investment is cashflow neutral. But capital gains is expected to be very good. St Kilda has traditionally grown by 5.5% per annum. I'm expecting around 6% return per annum excluding rent because I've bought it below the suburb's median.

Why did I not buy in Singapore? In fact I did buy something in Paya Lebar / Geylang two years ago. My net yield is around 4.7%. It has been giving me positive cashflow, which is not a common thing in Singapore. I'm waiting for collective sale because the plot ratio is so high and the land is greatly underutilised.

The average household income in Singapore is SGD113k. The average HDB is 450k. That's 3.98x. So HDB IS affordable thanks to the government's highly successful public housing policy. But the average private dwelling is 1.2m. That's 10.6x of household income. It takes a household 10.6 years to pay for a private dwelling (including landed). It's very unaffordable. 

I chose Melbourne because I find it cheaper than in London. The average household income in London is GBP54k. The average house is GBP530k. That's 9.8x. SO London, outside of zone 1, is slightly more affordable than Singapore, but still in a bubble territory. 

Outside of London is a different story. North of England, a house in Manchester costs GBP175k. I should know because I'm about to buy a 3000sf land with a 1000sf house on it. It's freehold and 10 minutes WALK to the CBD. The average household income in Manchester / Birmingham is GBP38k.  That's around 4.6x and is very affordable indeed. I could get a 6.5% gross yield and 4.5% net yield for a house. That's unheard of in Singapore since 1980s.