IF we do have a slow down in the near future. Many predict a correction to 2003 post boom prices or lower.But hear on the NSW east coast. We are still at 2003 prices. So what could we expect. No change to prices or maybe a smaller drop than those with over inflated prices.What are your thoughts on which states will suffer more.
Another slump question
- Thread starter devo76
- Start date
Difficult one to answer devo ..
NSW nearly fell into a recession a while back and has one of the lowest growth rates, just above Tasmania and SA.. These tough economic conditions along with the massive boom in syd/nsw pre 03 have caused a slump..
China may have a decent shake-up .. not totally out of the question.. e.g. with the largest company in the world now being a chinese company (petrochina) with a market cap of 1 TRILLION and P/E approaching 50 one has to wonder ... makes dot com bubble seem trivial ..
If this happens Syd, Perth, Brisbane stand to lose the most ..i mean this a total D&G scenario .. not something i expect ..but there is a chance.. US slowdown together with China downturn will hurt the same markets that benefitted the most...
I'm more interested in planning what I'm going to do to protect myself and get in position for the next boom, actually. No point worrying about the boom: if you're worried fix your rates and batten down the hatches. Me, I'm going to be looking for opportunities.
Go for the cheap IPs, I say. The overpaid yuppie class (of which I'm probably one, but getting old enough that I actually have skills people will pay for as opposed to just being paid for 'potential') will get whacked first in a recession. That means those spanking inner city apartments will go empty as people move back in with their parents. Rich people high on shares will suffer if the sharemarket goes down.
Young families, however, can't really move back in with parents and so will need continue to need accomodation.
Alex
Go for the cheap IPs, I say. The overpaid yuppie class (of which I'm probably one, but getting old enough that I actually have skills people will pay for as opposed to just being paid for 'potential') will get whacked first in a recession. That means those spanking inner city apartments will go empty as people move back in with their parents. Rich people high on shares will suffer if the sharemarket goes down.
Young families, however, can't really move back in with parents and so will need continue to need accomodation.
Alex
I think there is no point keeping your head in the sand about it. I feel unfortunately i have purchased my first IP in a possibly bad time. But i planned for the worst anyway. My IP is locked in at 7.2% for 5 years. And if i was to pay $50,000 of this it would make it CF neutral.. And with a sale soon of another asset. I should have my IP paid off in a year.So that should set me up for any bargains in 2008 or 2009.Thats my plan anyway. Just hope it happens this way.
Alex
I agree
Additionaly, cheaper properties will be a lot easier to rent and will have lower holding costs.
Cheers
None of my properties are still at 2003 prices, and 3 of them are in areas that are still booming.
The term "slow down" is key here; this means the stellar growth that a lot of people enjoyed early this century will end.
It will revert back to a slower, steadier rate, but growth nevertheless.
Don't sweat it Devo.
Affordability is still an issue in Mr.and Mrs.Thongville. Across Aus, the average homeowner in the average neighborhood is not able to keep trading up for too much longer, and a lot of the first home buyers are struggling (so we keep hearing).
So, my guess is that the majority of areas will go quiet, especially if another rate rise occurs. I don't think this will cause much of a price drop as most people are not having to sell, but there will be fewer buyers around.
The knock-on affect will be a slow-down in the building industry, Bunnings etc will take a hit, and possibly the bulk of retail, and then the recession will kick in and rates will drop again.
Incidentally Devo; is that sale of that asset you mentioned the "musclecar"?
You are me in a different computer. Scary.
Totally agree on all that you said.
So, does that mean you think the lower end in price will continue to move up Alex?
I believe it will; if affordability is such an issue as everyone keeps saying, then it will have to as many will have no choice but to buy cheapies.
Actually I think the lower end will move down a bit in the short and maybe even medium term. But right now I'm seeing the expensive end going up further, and the cheaper end going down. That means the GAP is increasing, and I don't believe that will last. So while in a recession both ends will fall, I think the lower end won't fall as much (partly because it's supported by better rental yields) and that when the next boom comes the cheaper end will rise more.
I'm game to buy and continue to buy, even though my earlier buys might fall. I'm looking to accumulate a bunch of properties to catch the next boom.
Alex
Prefer not to share numbers, but my property LVR is about 55%. I haven't bought any property for the last 2 years so I've just been letting the appreciation lower my LVR. Looking to buy my PPOR soon at 80% LVR, though, so that will kick it up a bit. After that, I'm going to look for cheap IPs again. The plan is to increase my LVR up to maybe 75% over the next 3 years. 75% would be about my sleep at night factor for the time being, because cashflow becomes a bigger issue as the portfolio grows. I bought my first one on 90% LVR but I can't afford to have my whole portfolio sitting at 90% LVR.
Alex
There wont be a slow down.
Everyone talking about this bad stuff - it just will not happen.
Not even this is enough to convince me, some guy talking about the level of debt in the community effecting house prices, no one being able to buy?, imagine that?
The 7:30 Report
http://www.abc.net.au/7.30/content/2007/s2084263.htm
I think he has just blown it all out of proportion, any comments.
Everyone talking about this bad stuff - it just will not happen.
Not even this is enough to convince me, some guy talking about the level of debt in the community effecting house prices, no one being able to buy?, imagine that?
The 7:30 Report
http://www.abc.net.au/7.30/content/2007/s2084263.htm
I think he has just blown it all out of proportion, any comments.
Sure is. Check it out
http://www.musclecarstables.com.au/details.php?id=112
Should sell soon. Had a lot of interest from all over the country and offers are getting close to what i want( North of $100,000). This will get my PPOR loan down very low and with it paid off in the next 12 to 18 months. That should put me in a good position to buy if bargains are out there. If not ill continue to pay of my IP via a offset account to bring it down to neutral or better.Looking at the maths $60,000 should just bring it into positive territory.
Oh, I wouldn't be TOO confident. Maybe some parts of the media has blown it out of proportion, but bad things DO happen. Recessions DO happen. The key is to be prepared for it.
Alex
Look, I am the eternal optimist, but I think we all need to keep the rose coloured glasses in the bottom drawer when it comes to investing.
Expect the best, but prepare for the worst is my motto, and after seeing what has happened over here in the last 2 years, anything can happen.
Having said that, I still believe that if you continue to always buy well selected property with the correct due diligence to research the area for long term cap gain, and keep the LVR at a safe level, then you will be protected from any sort of problems.
Alex,
Now I'm dead certain we're in the same wavelength when it comes to properties
Yes, we're both cheap!
Though I'm planning to spend much more on my PPOR than what I plan on spending on (individual) IPs.Alex
How prepared are we?
But how many ppl are prepared?, I mean if we do go into recession, job layoffs, renters moving in together, hard to get credit how long could it go on for?
I have started on my way from 1 to 10 properties and I am a bit worried that if we go like the US, UK and NZ things will go BAD. I'm OK now but if rents and growth flattern off I could have to hold these places for 20 years before I see a double in my asset value.
They will go cf neutral in about 4 years with current rental growth but in the mean time its costing me cash.
If there is a small drop in prices I may not be able to take advantage because banks are starting to tighten their credit standards and someone said loan interest rates could go above 10%!
But how many ppl are prepared?, I mean if we do go into recession, job layoffs, renters moving in together, hard to get credit how long could it go on for?
I have started on my way from 1 to 10 properties and I am a bit worried that if we go like the US, UK and NZ things will go BAD. I'm OK now but if rents and growth flattern off I could have to hold these places for 20 years before I see a double in my asset value.
They will go cf neutral in about 4 years with current rental growth but in the mean time its costing me cash.
If there is a small drop in prices I may not be able to take advantage because banks are starting to tighten their credit standards and someone said loan interest rates could go above 10%!
About as many as will get rich, I suspect. You'll notice very few people get rich (as a % of the population). The experience of the 90s suggests property can easily be flat or worse for 5-7 years. Actually, the more people who are UNprepared the better. I AM prepared, so the worse it gets the cheaper I can accumulate.
That's always the risk. If you buy near the top, and then experience falls in the early stages, it takes longer to recover.
1 to 10, I'm not sure I understand you. In your previous post you say you don't believe the market will go down, and now you're saying you ARE concerned it'll go down?
Mortgage rates are currently at 7.8% or so? I wouldn't be surprised if we had another 1% in RBA increases, and combined with the banks taking away their 'discounts', we could hit close to 10%. Rent increases would accelerate especially for cheaper properties, though.
That's where the preparation, cash buffers, savings habits, etc come in. You should budget for significant interest rate rises anyway. If it was easy to pick up properties in a down market everybody would do it, and it wouldn't be a down market.
If you're concerned, start saving, skilling up and increasing your income.
Alex
Well I dont understand either, may RE agents and investors I talk to say it will not go down, just slow down for a while, but I'm seeing more D&G stuff from the US and UK and even here (in the media) ppl are talking about the huge debt we got now and how it could effect us.
So I am trying to come to terms with what will happen.
I dont believe it will GO DOWN but I am worried that it might. This is not as easy as many ppl say it is.
I DO believe it'll go down. So what if it does? I'm certainly not worried about it. My LVR is low, my job is secure, my savings rate is high, and I'm researching the areas I want to buy in. What's the problem? It ALWAYS comes in cycles. We've had a great run for the last 7-10 years. Time for some pain. Especially for those who aren't prepared.
1 to 10, don't just worry about it, prepare for it. If you're prepared you won't have to worry about it.
A 10 year down market in property will make my fortune in the next boom. Assuming, of course, that property goes up over the long term (which personally I believe). If you don't, sell.
Alex
