So I signed the contract for my first IP 1 month ago, and save any slip ups at settlement, its all gone pretty smoothly.
Yay me!
And thanks to all the people who have answered my questions and contributed to the forum in general - the knowledge base has been better than any of the books I've read
Its not my first imvolvement with property (my wife owns an IP and we also have a PPOR) but its the first time I've approached buying with an investor mindset. Location, capital growth, land content, yield, offer price in the face of strong competition (and a rapidly moiving market) were given careful consideration.
I was really happy when the vendors signed on the dotted line.
Less happy when interest rates went up a week later. Still, I exepected it.
Had a bit of a frown when the subprime crisis broke the news the following week.
The reasons why Melbourne is currently in an upswing hadn't fundamentally changed, however, and the market remains strong. High net migration, under supply of housing, strong economy, low unemployment, very low vacancy rates. I strongly believe these will be the force that will cary Melbourne (and likely the east coast) through the next housing upswing. I also believe that long term property will continue to do well.
BUT
...but in the medium term I am seeing alot of things aligning to make the bust that will follow a rather nasty one. Let me paint the picture
1) Every boom has a element of over zealousness in its final days. Over supply in some market segments, borrowing too much, etc, etc. The inevitable correction follows. This is expected.
2) There is already a high level or mortgage stress. After the next (current) boom this will increase and servicability will be even lower.
3) Some of the easy credit we have enjoyed to date is unwinding (already discussed in other threads). It will take several months for the effect of this to filter through. There will be a larger premium on top of official interest rates.
4) The last year of the baby boom generation was in 1961. Not just Australia but in much of the western world. The highest spending age is 47yo on average. That makes 2008 the last big spending year in much of the western world before the level of consumption starts decreasing. Regardless of whether spending is debt or savings funded, at some age people just stop needing new stuff. Governments may try and stimulate demand by lowering interest rates, but with official rates so low already, this may be quite limited. ---> Recession.
All these things line up in about 2009. It cant be good for prices.
Now I'm no high-browed economist and I'm sure that some people will find any number of flaws in my arguement. I wont even try and estimate how much property will fall (if at all) - but I think it will (fall) some / remain stagnant longer than average. My gut feeling is that if you don't get in on the ground floor for this upswing, buying late could be very dangerous. I'll also be reducing debt and improving servicability from now on. Won't buy another until the clouds clear.
Opinions?
~Dis
Yay me!
And thanks to all the people who have answered my questions and contributed to the forum in general - the knowledge base has been better than any of the books I've read
Its not my first imvolvement with property (my wife owns an IP and we also have a PPOR) but its the first time I've approached buying with an investor mindset. Location, capital growth, land content, yield, offer price in the face of strong competition (and a rapidly moiving market) were given careful consideration.
I was really happy when the vendors signed on the dotted line.
Less happy when interest rates went up a week later. Still, I exepected it.
Had a bit of a frown when the subprime crisis broke the news the following week.
The reasons why Melbourne is currently in an upswing hadn't fundamentally changed, however, and the market remains strong. High net migration, under supply of housing, strong economy, low unemployment, very low vacancy rates. I strongly believe these will be the force that will cary Melbourne (and likely the east coast) through the next housing upswing. I also believe that long term property will continue to do well.
BUT
...but in the medium term I am seeing alot of things aligning to make the bust that will follow a rather nasty one. Let me paint the picture
1) Every boom has a element of over zealousness in its final days. Over supply in some market segments, borrowing too much, etc, etc. The inevitable correction follows. This is expected.
2) There is already a high level or mortgage stress. After the next (current) boom this will increase and servicability will be even lower.
3) Some of the easy credit we have enjoyed to date is unwinding (already discussed in other threads). It will take several months for the effect of this to filter through. There will be a larger premium on top of official interest rates.
4) The last year of the baby boom generation was in 1961. Not just Australia but in much of the western world. The highest spending age is 47yo on average. That makes 2008 the last big spending year in much of the western world before the level of consumption starts decreasing. Regardless of whether spending is debt or savings funded, at some age people just stop needing new stuff. Governments may try and stimulate demand by lowering interest rates, but with official rates so low already, this may be quite limited. ---> Recession.
All these things line up in about 2009. It cant be good for prices.
Now I'm no high-browed economist and I'm sure that some people will find any number of flaws in my arguement. I wont even try and estimate how much property will fall (if at all) - but I think it will (fall) some / remain stagnant longer than average. My gut feeling is that if you don't get in on the ground floor for this upswing, buying late could be very dangerous. I'll also be reducing debt and improving servicability from now on. Won't buy another until the clouds clear.
Opinions?
~Dis
