In all due respect, thats a matter of personal opinion, and a rather simplistic approach that may serve YOU well but not others. You're right, some people have made mistakes by purchasing recently however others i dare say would have made smart purchases also.
The soft depression that we had to have
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In all due respect, thats a matter of personal opinion, and a rather simplistic approach that may serve YOU well but not others. You're right, some people have made mistakes by purchasing recently however others i dare say would have made smart purchases also.
Hi Evand,
most people dont have your economic credentials and therefor don't have a clue when it comes to such things as timing the market and that is why time in the market works better for them.
I think "time in the market" needs to have a disclaimer at the end saying "and preparation".
Time in the market has worked well for me, but preparation has allowed me to be ready to buy on a down market also (no financial troubles here).
I have seen countless examples of people "timing the market" and get it so wrong. If you are prepared and can deal with short to medium term losses, then this is what works. I don't think you can ultimately predict the actions of others and this is what timing the market really means.
Cheers.
So many people to reply to!
First I should point out that my post was a rebuttal to keith's post. He calls his approach "value investing" and mine "market timing" - but all I am doing is applying his approach to the current economic climate. his post is predicated on the assumption that housing will always and forever go up. I say that this is not the case. Look around. look at other countries. that argument doesn't hold a lot of water these days.
So you can't simply say "buy whatever you can afford now because it will go up in the long run". That isn't true. especially not if you are buying at inflated prices.
I see myself more as a "value investor" insofar as buying a ppor is an investment (i see that part of it as a secondary factor only). I am less concerned with the immediate, near term trends than I am with the long term trends. But this works backwards as well as forwards. Current prices need to be in line with long term historical trends or there is a good chance you are buying into a big ole bubble.
Now, looking at this chart:
it says to me that the growth in house prices in canberra from 2000-2008 has not been in line with historical trends. Even if you believe that house prices double every 10 years (i.e. 7.5-ish% annual growth) a 30% fall is in order. since there are strong signs that it will fall, it seems sensible to wait and see if this does happen. is this market timing? is this gambling? or is it common sense?
it's easy to be dogmatic about these sorts of things, but you have to consider all variables. the long term approach does not ALWAYS work out, especially if you are buying into a bubble (witness the Japanese stock market).
First I should point out that my post was a rebuttal to keith's post. He calls his approach "value investing" and mine "market timing" - but all I am doing is applying his approach to the current economic climate. his post is predicated on the assumption that housing will always and forever go up. I say that this is not the case. Look around. look at other countries. that argument doesn't hold a lot of water these days.
So you can't simply say "buy whatever you can afford now because it will go up in the long run". That isn't true. especially not if you are buying at inflated prices.
I see myself more as a "value investor" insofar as buying a ppor is an investment (i see that part of it as a secondary factor only). I am less concerned with the immediate, near term trends than I am with the long term trends. But this works backwards as well as forwards. Current prices need to be in line with long term historical trends or there is a good chance you are buying into a big ole bubble.
Now, looking at this chart:
it says to me that the growth in house prices in canberra from 2000-2008 has not been in line with historical trends. Even if you believe that house prices double every 10 years (i.e. 7.5-ish% annual growth) a 30% fall is in order. since there are strong signs that it will fall, it seems sensible to wait and see if this does happen. is this market timing? is this gambling? or is it common sense?
it's easy to be dogmatic about these sorts of things, but you have to consider all variables. the long term approach does not ALWAYS work out, especially if you are buying into a bubble (witness the Japanese stock market).
@ bill
as a matter of fact that describes me to a t. the only reason i look at a 400k house (look, not buy) is because i live in canberra. and if you want a 3 bedroom house in a safe part of town that doesn't require major work to be livable, you are basically looking at 400k+. Granted there are a lot more sub 400s out there now than there were 6 mos. ago, but that is the state of the canberra market. its absurd. these 400k houses aren't mansions by any stretch of the imagination--they are on the bottom end of livable.
Can i predict exactly with 100% accuracy what will happen in the market over the next couple of years? no, of course not. but that is no reason to adopt a fatalistic attitude and throw all my money into an investment, lock myself into a mortgage with the hopes that it all somehow works out ok. if i wanted to do that i would take my deposit down the local casino and play roulette.
there are guesses and then there are informed guesses based on an awareness of what is going on the world--locally and globally. someone who has been doing their homework will see that the risk of a sudden burst upwards in housing prices over the next 2-3 years is much, much, much less than a sudden drop down.
if prices were to burst up--well, so be it. to be honest i don't think canberra houses are worth it at current prices. if they go up more they are worth it even less. i will continue to rent and invest my money in other things until they either return to realistic, historically and economically supportable levels or until i find a job elsewhere. for me, waiting is a "win/don't lose" situation.
Not if their belief turns out to be correct.
in my case we have a significant deposit and a rock solid job, so a tightening of loan criteria doesn't frighten me. if it gets to the point where they won't lend money to someone like me the market will really be in the toilet and i will be able to buy for cash.
as far as people blowing their deposits on useless things... well, that falls into the realm of personal choices and has nothing to do with the economics of the thing. if you are not disciplined enough to build and save a deposit you probably are not disciplined enough to buy anyway....
as a matter of fact that describes me to a t. the only reason i look at a 400k house (look, not buy) is because i live in canberra. and if you want a 3 bedroom house in a safe part of town that doesn't require major work to be livable, you are basically looking at 400k+. Granted there are a lot more sub 400s out there now than there were 6 mos. ago, but that is the state of the canberra market. its absurd. these 400k houses aren't mansions by any stretch of the imagination--they are on the bottom end of livable.
Can i predict exactly with 100% accuracy what will happen in the market over the next couple of years? no, of course not. but that is no reason to adopt a fatalistic attitude and throw all my money into an investment, lock myself into a mortgage with the hopes that it all somehow works out ok. if i wanted to do that i would take my deposit down the local casino and play roulette.
there are guesses and then there are informed guesses based on an awareness of what is going on the world--locally and globally. someone who has been doing their homework will see that the risk of a sudden burst upwards in housing prices over the next 2-3 years is much, much, much less than a sudden drop down.
if prices were to burst up--well, so be it. to be honest i don't think canberra houses are worth it at current prices. if they go up more they are worth it even less. i will continue to rent and invest my money in other things until they either return to realistic, historically and economically supportable levels or until i find a job elsewhere. for me, waiting is a "win/don't lose" situation.
Not if their belief turns out to be correct.
in my case we have a significant deposit and a rock solid job, so a tightening of loan criteria doesn't frighten me. if it gets to the point where they won't lend money to someone like me the market will really be in the toilet and i will be able to buy for cash.
as far as people blowing their deposits on useless things... well, that falls into the realm of personal choices and has nothing to do with the economics of the thing. if you are not disciplined enough to build and save a deposit you probably are not disciplined enough to buy anyway....
You can't compare other countries to Australia, unless you are getting same rental yields, interest rates are same etc.........
Unless all the variables are same, comparing other countries to Australia is meaningless.
Which other country can you get a rental return of 9%+ when the interest rate is 5.25% or below and also have negative gearing ?
I can find atleast 20 properties on the market today in Western Sydney which would return 9% yield in today's market while interest rates are going down at such a rapid pace....
I do agree that Canberra market is well overpriced which is why I dont own any properties in Canberra even though I live in Canberra.
And I am hoping too that prices in Canberra will drop due to the Gersian Report which outlines the cutting of IT contractors to half within 2 years....
But in my opinion western sydney is an excellent area to be investing in right now as you can find cashflow +ve properties without having to look very hard at all.........
This wont be the case for long IMO.
You've picked out a single line of my post The home has increased in value (by CPI or more), so they have a much more expensive home than they could have afforded 5 yrs earlier.. My post was a targeted response to a specific claim by WW which I though was worth debating.
Some here may have noticed my posting rate has fallen significantly lately. That's partly because there's to many of the same old debates by new people with no experience whinging about how hard it is to buy a home.
It's always been hard to buy a home. If it wasn't we'd all have a few of them. Ask your parents & grandparents if it was hard back then. Of course it's bloody hard - stop finding excuses not the do the hard yards.
If you want a response from me, then search my previous posts and find something that hasn't been debated ad nauseum.
Oh, and Consumer confidence figures were released today -
I agree that it is worth debating, which is why i commented on it. admittedly i am coming at it from a different angle than you are emphasizing certain aspects over others. i chose to comment on those aspects of your post that i disagree with rather than those that i agree with (namely that, as your mortgage payments (interest rates remaining relatively stable) will consume a relatively smaller portion of your discretionary income as time goes by).
please show me where i am whinging about how hard it is to buy a home. i am talking about value not difficulty. on the contrary you seem to be whinging about people being less than enthusiastic at the prospect of jumping headfirst into an overinflated market. As far as no experience... well mea culpa--that sort of goes hand in hand with being a FHB. that doesn't necessarily imply total ignorance however (nor does experience necessarily equate to knowledge)
you made a post, i posted my thoughts in response to it. not at you or even to you. i simply made a post just as you made a post. if you don't think my comments are worth responding to, by all means skip right by them. i don't understand why you are getting so emotional over this, but whatever floats your boat.
yes i saw that. however i do not think that the economic crisis is simply a matter of sentiment or confidence. one would do well to pay attention to business confidence as that is a fairly good indicator of how willing companies will be to take on additional debt and expand their businesses. that has plummeted. since consumer confidence is strongly related to employment, and employment is strongly related business growth.
where do you come from? i have moved around quite a bit (and hence am a bit old for a FHB) but with the exception of NYC, units haven't been a standard so far as I have seen (have lived in japan, hawaii, ny, calif, mass, now here)
but in any event, i dont know why this is being brought to the level of "entitlement"--i dont think i said anywhere that anyone was entitled to anything. my point--and it is a fairly simple one--is that prices have bubbled and are now ridiculously overpriced. at least where i live--individual performance will vary.
but i don't have to compare australia to other countries (that was simply in reference to the myth of ever increasing housing prices). in the graph above i am comparing canberra to canberra. if we accept what i think is an optimistic goal of prices doubling every 10 years, then the median house price in canberra should be about 300k, more or less.
what contributed to the massive run up in house prices? did canberra suddenly become an amazingly wonderful place to live? did houses become so much nicer? or was there a lot of money out there chasing up limited supply? my bet is on the last option. and now that that money is starting to dry up i suspect that prices will come down.
it just so happens that these circumstances mirror those of other countries--easy credit led to a housing boom. but we dont need to look abroad to come to that conclusion
I have lived in Canberra for like 12 years now. I will be delighted if the value of properties in Canberra went down by 40% specially in the Gungahlin area which in my view is the most overpriced area in Canberra.
In 2003-2004, you could have bought houses a 3 bedroom house for $260-280K easily in Gungahlin area with approx 500-600m2 land. But now the prices are ridiculous.
I think the biggest contributor is the fact that Canberra has the highest paid average income in Australia which has driven prices up to this extent.
Queanbeyan is also another overpriced area in my opinion, I was looking at buying a 2 bedroom Townhouse with garage in queanbeyan around 3 years ago at $140K. Unfortunately I didnot buy it at the time as I did not think there was much value in Queanbeyan however that townhouse is now worth $270-300K which is ridiculous.
I think the biggest contributor to downturn for Canberra's resi market would be more people leaving due to less jobs here. Canberra has lots of government jobs and there are massive job cuts coming up in IT contracting and also Government in general which will make people look elsewhere for jobs hence creating less demand which should bring prices down to some extent........
if i were single, sure. or even just married. but you try to put 2 young boys and a married couple into a 1 br and mass murder will be only days away!
btw, a search of 1 bedroom units in canberra at allhomes shows... zero results. 15 or so listings in queanbeyan though.
but again, this is not an issue of entitlement. i have the money to buy--even at these prices--but i dont see it as good value yet. another 10% down and it will be marginally acceptable. 20% down and i will be able to buy without regrets.
by the way, my current rent is less than 1/2 of what it would cost me to buy a house in my current neighborhood. another disincentive...
agreed on all counts. i cant believe the prices they are asking for the new developments when you can get a house with twice as much land across the street for the same price or less.
rudd keeps promising that his "razor gang" will be making real cuts in the near future but so far rudd has had serious problems keeping his promises.
canberra has a long way to fall before it gets back to "normal" prices but, as you say, people are relatively well off and have fairly secure employment so who knows... in any case i cant see much on the horizon to push prices up...
Urchin,
I found 41 Canberra - 26 Queanbeyan
One bedroom units for sale on allhomes..
Example http://www.allhomes.com.au/ah/ah0073?slid=167232642
Geoff
I found 41 Canberra - 26 Queanbeyan
One bedroom units for sale on allhomes..
Example http://www.allhomes.com.au/ah/ah0073?slid=167232642
Geoff
Urchin,
My mistake in missing the post about the challenge for a one bedroom for $150,000. Why not $170,000 for a 2 beddie, thou you would have had to buy all 4 units..
http://www.allhomes.com.au/ah/ah0073?slid=167262521
Geoff
My mistake in missing the post about the challenge for a one bedroom for $150,000. Why not $170,000 for a 2 beddie, thou you would have had to buy all 4 units..
http://www.allhomes.com.au/ah/ah0073?slid=167262521
Geoff
It would appear that property markets around the country are in a serious decline at this point. I would estimate that the rate of decline is as high as 2% per month right now (even higher in Perth and SE Qld). It remains to be seen if the economy can turn around, if employment can hold up and if interest rates can stop the 'rot'. However, if it does not turn around, specufesters are going down at a rapid rate. PI's with 60% LVG will have lost everything within 20 months. PI's with 70% LVG will have lost everything with 15 months. And specufestors with 80% LVG will have lost everything within 10 months. Specufestors or OO's with 90% LVG or more may well be in negative equity already !
Perhaps highly leveraged PI's should consider lowering their gearing ratio's for their own survival, which I suspect many are doing already. I am sure Bill and the other bulls will disagree.
Perhaps highly leveraged PI's should consider lowering their gearing ratio's for their own survival, which I suspect many are doing already. I am sure Bill and the other bulls will disagree.
This is the best crisis I have ever had. Cash flow has increased, I dont have to sell so I dont really care about the equity position. Dont know what the future holds, but so far it's all looking really good. Keep up the bad news.
