Residex predicts doom and gloom (well, this month anyway!)

[DavidMc]

Hi Guys,

I did a little future value thingo on the Residex website, and you know what, I got a little scared!

Check this out:

Address - Carrum Downs VIC 3201
Property Type - houses
Your Estimated Value - $225,000
Estimated Value in 5 years' time - $190,000

Address - Narre Warren South VIC 3805
Property Type - houses
Your Estimated Value - $285,000
Estimated Value in 5 years' time - $270,000

Address - Berwick VIC 3806
Property Type - units
Your Estimated Value - $258,000
Estimated Value in 5 years' time - $250,000

Now, because I didn't buy all of these yesterday the entire portfolio is slightly cashflow positive (after tax breaks). I've had some good growth in the past few years which let me duplicate.

With more education and experience I'm now focused on adding a bit of high growth stuff inner city. I bought in these areas as this is where I grew up, and I knew the prices inside out which removed any chance of overpaying - which I percieved to be my biggest risk at the time. They also provided good yeilds at time of purchase plus an excellent short term outlook.

I must say, these Residex things are all over the place. I did the same results 6 months back and it was all looking very rosy with an average of 7% growth all round! I really don't know what to think about these things...

I'm now wondering if my 'money' is better somewhere else (i.e sell and buy a 'higher quality' asset). What do we all think? No reason to panic?


Cheers,

David.

[Rixter]

David,

Was your reason behind buying them to fit into a Long Term buy and Hold statregy? If so whats the problem? If not and you do sell you're going to behind on the selling costs & taxes is applicable anyway.

At the end of the day those figures are just crystal ball stuff anyway.

Remember long term holding deminishes risks

Hope this helps

[perky29]

Where is the link on the residex website for the future value snapshot? About 8 months ago they took that away - unless you found it under "cached" pages on google - in which case the predictions would be over 9 months old most likely.....

[fatboy4]

I was reading an old thread the other day that included Residex predictions for Scarborough (Bris). 2001 or 2002 predicting modest growth 5%/ annum type stuff...Slightly out :o

[Michael Yardney]

It is interesting that all the areas you have mentioned are all outer ring suburbs that had some huge increases in values a few years ago whenmany young familes moved in using the first home owner's grant.

I would suggest that some of the prices achieved in those areas, especially Carrum Downs- went up too high they were well oover the top.

Now values have steadied and in fact fallen.

There is little to push them up over the enxt few years as young amilies will have difficulty keeping up their mortagge payments. Especially if interest rates go up.

[DavidMc]

It is interesting that all the areas you have mentioned are all outer ring suburbs that had some huge increases in values a few years ago whenmany young familes moved in using the first home owner's grant.

I would suggest that some of the prices achieved in those areas, especially Carrum Downs- went up too high they were well oover the top.

Now values have steadied and in fact fallen.

There is little to push them up over the enxt few years as young amilies will have difficulty keeping up their mortagge payments. Especially if interest rates go up.

Thank you for your reply Michael. I agree. I can't really see the demographic that live in that area paying much more than the current prices for a while yet. I've had a great run so far but I'm thinking I'm in for a nice long flat. BTW I went to your October seminar with Bill Z and thought you were both great, so thank you.

I'm sure over the next 12-20 years I will still do OK however I'm thinking my money will be better elsewhere during the next 5-7. Will my money minus all of the transactions costs (CGT etc) be better elsewhere... maybe/maybe not...

My parents had a house in Cranbourne North and it had zero growth during the entire time we owned it (6-7 years? more?).

Certainly for my next purchase I'll be going the inner stuff. Should I sell up... I dunno. I'll sit on it. If I did I'd consider doing it myself.

Thanks Rixter for the reminder of my original strategy. I like to think I'm long term but I'm probably too impatient for that to happen!

perky29, I used a cached page but I pretty confident it's running off the current data (verified against some data from their latest top 100 report).

[DavidMc]

One saving grace for those (and all other) areas could be a baby boomers mad rush to grab a few properties in time for retirement.

[luckyone]

perky29, I used a cached page but I pretty confident it's running off the current data (verified against some data from their latest top 100 report).

Can you put the link on here anyway for the rest of us?

[DavidMc]

Can you put the link on here anyway for the rest of us?

Normally I'd do this no worries, however I'm thinking Residex might take it down if it suddenly got a lot of hits. PM me and I'll PM it to anyone who is interested.

[Twitch]

Here's their very recent graph of Melbourne expected price movements. Their predictions are way down on what they were just a few months ago.

I'm just not sure what has changed in Melb/Victoria that makes them so much more pessimistic now????

And it's not just house prices that look bad. They also predict Melbourne yields to steadily get worse (!!!!) and interest rates to hit 9% by 2008.

Has Residex been taken over by BIS I wonder :p

[House_Keeper]

If residex projections are so volatile, then why would you rely on them? :confused:

If the current prediction is optimistic, then you purchase a property to hold long-term based on that info, then next year the prediction is pessimistic, where does that leave you?

Wouldn't it be better to make your own assessment instead?

[DavidMc]

If residex projections are so volatile, then why would you rely on them? :confused:

If the current prediction is optimistic, then you purchase a property to hold long-term based on that info, then next year the prediction is pessimistic, where does that leave you?

Wouldn't it be better to make your own assessment instead?

Definatley. Residex doesn't make up 100% of my assessment. It makes up a portion of it. So does this forum, hence the post. Still though, I do place some weight on their predictions and now that theirs aligns with mine (see earlier posts from Michael and I) it's been vexing me.

I haven't done the maths as yet but the plan may be to leave them alone and continue on the path. They certainly aren't at this stage preventing me from moving forward as I don't have any lazy equity in them that will disappear in the event that prices do go down. It's already been extracted and waiting in new loans ready for use! The only thing I have is the administration of them.

[DavidMc]

If the current prediction is optimistic, then you purchase a property to hold long-term based on that info, then next year the prediction is pessimistic, where does that leave you?

Brilliant question! Thank you.