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Units in this Orange block are cheap, but are they good value for money?

July 20, 2023

realestate.com.au

By Peter Holmes


It's the curious case of the Margaret Street units.



Properties in the three-storey block, north of the Orange CBD, are often on the market, and for the entry level buyer they represent a modest investment.

Particularly when compared to the city's median of $692,500 for houses and $475,500 for units.





A one-bedroom unit in the block at 124 Margaret Street sold on July 13, 2023 for $95,000, a figure pretty much unheard of in these parts.

It had been listed in April for $99,000.


The unit in Margaret Street. realestate.com.au

realestate.com.au



But when you scan back through sales in the block over the past 15 years it appears as if units in the Margaret Street block struggle to match growth elsewhere, and are often stuck around the $80,000-$100,000 mark (not all sold prices are listed by agents).


According to Domain the same unit sold for $80,000 in 2009, after six months on the market. In 2015 it also sold for $80,000.

A previous 124 Margaret Street sale. domain.com.au

A previous 124 Margaret Street sale. domain.com.au

A previous 124 Margaret Street sale. domain.com.au

A previous 124 Margaret Street sale. domain.com.au

The current 124 Margaret Street sale. domain.com.au

A previous 124 Margaret Street sale. domain.com.au

A previous 124 Margaret Street sale. domain.com.au

However in October 2021 a one-bedroom unit in the block sold for $125,000, and in September 2022 a one-bedroom apartment sold for $150,000. The latter had an updated kitchen and new carpet.




No-one would argue that the units on Margaret Street are upmarket. Or even midmarket.


There are no lifts, no garages, no balconies and no communal garden.


A room in the $95,000 unit. domain.com.au

But they are cheap.


So why the lack of growth?




The strata fee on the one-bedroom unit is $833 quarterly or $3,332 annually. This is $64.07 a week.


Council rates are $464 quarterly, or $1,856 annually. This is $35.70 a week.




The suggested rent in the listing was $160 to $180 a week.


With baseline outgoings of $99.77 per week for strata and rates, it would leave just $60 to $80 a week after expenses, which could blow out with other costs such as replacing carpet or fixtures or painting.




A $60 weekly return on a property costing $95,000 (without factoring in legals and fees) would represent an annual return of $3,120, or 3.2 percent.



This may have made some sort of financial sense in recent years, when mortgage rates were as low as 2.5 percent, but with typical mortgage rates in mid-2023 hovering around 5.5 to 6 percent, the only way out of a loss would be capital growth.




The other way of looking at it is that cheap or not, a renter wanting to have a permanent roof over their head may see value beyond money in buying such a property.



Sales history of the $95,000 unit. domain.com.au

And who knows what the future holds for Orange real estate?



There is said to be a decent sinking fund at the 124 Margaret Street unit block, but how that might be spent in coming years is unknown.

A listing for a unit last year stated: "Major renovations to the building have been proposed by the Strata committee."


A two-bedroom apartment in the block is also on the market, at $180,000.


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