Bottom of the Cycle

[TheAnalyst]

TheAnalyst, you have some very good points there, and most of them I won't argue. However 3 of them I feel I have enough experience in to add.

3. Market irrationality is HUGE driving force. Look at what happened to Babcock and Brown. What happened during the 4 or so slaughter days to make the price drop 50%? .... Nothing. No credit default, no downgrading, heck, not even the debt review - the $7.50 debt review wasn't triggered until the 3rd day (of course this could have caused the 4th day of falls)

What happened in the 2 (possibly more) recovery days? Not much the $750m deal happened during a falling day, and some vague news that B&B will be selling it's Wind Infrastructure.

So don't discount the fact that market irrationality can be a more powerful driving force than fundamentals.

4. The market is pricing in further interest rate rises. Don't count on interest rates being peaked yet. I'd say 1 more, 2 at absolute most, but I'm happy to concede to you that those movements are trivial.

HOWEVER, history shows that the highest period of defaults don't happen until 12-18 months after the peak of the interest rate cycles. Assume March was the last one. We're lookng at March 2009 to August 2009 for the height of forced sales - that may not coincide with the bottom of pricing, but it's worth thinking about.

5. Strong in WA - and I know you said your analysis was in WA. However, all markets are linked. NSW job creation was more than 30,000 under expectation, on the latest figures - they expected about 10k growth, and got 20k loss instead. Perth and Sydney have been competing for highest median house price for a couple years now. If Sydney falls, forget strong fundamentals in Perth, sentiment will drop as well.

Anyway. I'm clearly not as well versed in the WA market as you are, but I feel my points of view here should provide some food for thought.

Although I said it was my perception on WA market, as you said all market was linked. I believe Sydney is also at the bottom. I believe market setiment is the main driving force to the market. Those get-rich-quick investors just wanted out at any price.

We will see the rate. I believe no more increase.

 

[jaycee]

Whatpricemyhouse.com provded the statistical data. Whether you choose to accept it or not is up to you. At least it is a third party report.

1% - 2% - is that worth taking note off ?

 

[TheAnalyst]

TA,

Well, since you have been so polite about it:

a) If you'd like to engage in a discussion about r.e. , the Australian economy, financial markets, credit, or property law, choose a forum. Best three out of four falls...
b) If I could post photos, at this point I would be posting a picture of an **** and an elbow, suitably captioned to help you identify which is which.
c)Your command of the language and pithy turn of phrase would seem to suggest your nick may be an overstatement.



TF

I do not want to argue with you on anything. Until you got 10 properties under your belt, you could be so sarcastic(?). I said based on my experience in property investment. You talk out of thin air. You have no understanding the impact of possible abolishing WPA. I did not want to argue on these matters. It was your innocence and your earthquake comments.

 

[Token Funder]

i Do Not Want To Argue With You On Anything. Until You Got 10 Properties Under Your Belt, You Could Be So Sarcastic(?). I Said Based On My Experience In Property Investment. You Talk Out Of Thin Air. You Have No Understanding The Impact Of Possible Abolishing Wpa. I Did Not Want To Argue On These Matters. It Was Your Innocence And Your Earthquake Comments.

Q.E.D.

Tf

 

[Mike&Wendy]

I thought TF spoke a lot of sense and anyone that hides behind "Until You Got 10 Properties Under Your Belt" is a little Anal - I just noticed, she/he even has it in the middle of his handle!! TheAnalyst

Personally, I don't think we are anywhere near the bottom and to use a drop of 20k on a 500k house as evidence of said bottom is just ludicrous and shows Mr Anal has not been through a previous downturn.

Just my 20Ks worth.

Mike.

 

[Bill.L]

Hi all,

I'm agreeing with Sunfish here that predicting the price of a property within 2% is nigh on impossible.

I'd also like to know how anyone could possibly know this...

my property in a premier suburb of Canberra has actually gone up 2% in the last 6 months since April 2008.

(from Francesco)

I mean, doesn't "the last 6 months since April 2008" finish in October??

Am I in a time warp, or are we still in June 08 ???

bye

 

[Francesco]

Hi all,

I'm agreeing with Sunfish here that predicting the price of a property within 2% is nigh on impossible.

I'd also like to know how anyone could possibly know this...

(from Francesco)

I mean, doesn't "the last 6 months since April 2008" finish in October??

Am I in a time warp, or are we still in June 08 ???

bye

Hi BL

Whatpricemyhouse.com monitors quarter by quarter of median price change in the suburb. When they report to May 2008, I would accept that is believable if they have on-going access to sales data up to the month for the suburb.

A comparable set of data for cross comparison is from my most recent API June 2008 issue, which reports that the median price for the same suburb is $970k and the median 12 monthly growth is 18% with annual growth over 10 years of 12.8%.

Taken altogether, the cumulative thrust of all these stats is that in the immediate past period of G&D, the growth in a good suburb is still in demand and appears maintained. My point is that such growth-type suburbs are still out there whether in Canberra or Sydney (in developer's, MW backyard).

 

[Francesco]

(from Francesco)

I mean, doesn't "the last 6 months since April 2008" finish in October??

Am I in a time warp, or are we still in June 08 ???

bye

Just noticed that it was my typo that caused the misunderstanding. The report was not a forecast into the future; it was reporting for the quarter just past, ie 6 months period to April 2008. Thanks BL for pointing that out.

 

[quoll]

Having a sarcasm font would remove so much angst from this forum

There is the sarcastic smiley


The hard part is most people think that everyone else will realise the tone they are saying things in!

This really only works for me with my wife.

Cheers
quoll

 

[quoll]

This is a straight question, Francesco. How do you know property has gone up 2%? I have trouble valuing (in my own mind) my properties much better than +- 10%. Mine are all unique though and price would depend on finding the person who likes that sort of property when it's on the market.

My valuation varies 2% every Saturday when I look at the paper.

Valuation are such a vague, fluid, movable, wrong, incorrect, guess that it really sucks when BANKS use them.

I agree with Sunfish, +-10% or maybe 5% increments but it's so easy to go in and offer 20% under asking price and end up getting it for 10% less.

Most valuations aren't worth the time it takes to hear them. You have to put a -10% to +10% error factor on any valuation, maybe we need a new thread to determine the standard deviation for a valuation?

Cheers
quoll

 

[Sunfish]

I checked out Whatpricemyhouse.com and it just seems to be a referral to a local RE who will give me a value if I tell him what I want to do, buy or sell.

Not much credibility to me.

 

[Highlygeared]

From a shoe leather perspective, Im noticing stable/increasing listings for property on sale, numerous properties dropping their prices that would have been secured a year ago, rents moderating and supply of rental properties up - could be just winter, who knows.

Put it this way, its not loloking good and this has just started. We're closer to the head than we are to teh tail, and that's if we look at it in an orderly fashion. any further 'shocks' to the system and/or sentiment will trigger more drastic reactions. I still think the downturn will last years, not months.

Could be a good time to pick up some bargains but timing the bottom wise, almost impossible to pick.

The question on whether to wait or buy is simpler I feel than the question of whether to sell or hold. Sure I'm a buy and holder but I'm starting to think whether it would be prudent to take some of your profits.

 

[Sunfish]

Picking bottoms is for optimists. While that is a noble trait, it can get one into trouble when investing. Like in a duel where the optimist will fire too soon and miss, it is dangerous to your financial health to pull the trigger too soon.

The reason I bring this up is because I'm looking at charts of stocks on my watch-lists and BHP is the only "mum n dad quality" stock which has recovered well from Jan 22 lows. There are a number of speccies which have done well though, but they're notoriously hard to pick. You may recall there was a lot of chatter here about "buying on the dip" at the time. I recommended caution then and I hope you thought carefully before buying.

Stuff you will have regretted (to varying degrees) include:

All four pillar banks
AMP
Babcock n Brown
Macquarie Bank
Commonwealth Property Office Fund (Why is that on MY list?)
Centro Properties
Woolworths
Hervey Norman
Rams
Hedley Leisure
Lend Lease
ABC Learning
Allco Finance
Primary Health

A lot of these have suffered badly.

The up side is hard to find, BHP as I said and it's twin RIO, and some producing miners but even they are struggling.

Lihir (up a bit)
Newcrest (down 10%)
AGL (up a bit)
ERA (OK but volatile)
Mincor (holding it's own)
RIO (as for BHP)
Woodside and Santos (have done well but they are in oil/gas)

Calling they bottom in property could be as disappointing as it was for stocks.

BTW I'm coming to the conclusion that property investors should watch share markets because the cycles are much shorter and you experience periods where fundamentals are tossed out the window and you wonder if you are the only sane investor out there. You do learn to look at them but not to bet the farm on them.

 

[Sunder]

You experience periods where fundamentals are tossed out the window and you wonder if you are the only sane investor out there.

VALUE Company
P/E ratio 3.76
P/B ratio 1.08
P/E Growth ratio 0.84
Dividend yield 8.4%
Franking 50.0%
Tax adjusted dividend yield 5.6%
Dividend stability 100.0%

Would you want to buy a company like that?

Seems like a pretty damn good buy hey?

... Actually, it's BNB, and people are still dumping their stocks

 

[TheAnalyst]

I thought TF spoke a lot of sense and anyone that hides behind "Until You Got 10 Properties Under Your Belt" is a little Anal - I just noticed, she/he even has it in the middle of his handle!! TheAnalyst

Personally, I don't think we are anywhere near the bottom and to use a drop of 20k on a 500k house as evidence of said bottom is just ludicrous and shows Mr Anal has not been through a previous downturn.

Just my 20Ks worth.

Mike.

I donot know which one is Mr Anal or Ms Anal. Maybe both.

I believe you are the real loser! Otherwise you would not have said that -- how the labor governmetn realted to the earthquake made sense.

In all my words, I said it was my personal perception based on my experience. I have never tried to make you believe or not. You could choose to ignore my post and sleep with Ms Anal and make small Anal, rather than attack me without reason.

The house they bought was originall $550k. The previous owner wanted out because of divoice and sold to them at $500k.

Mr Anal or Ms Anal, you have no any idea about property investment.

Go to work out how Mr Anal and Ms Anal can work out small anal.

 

[Sunfish]

Sunder. It is interesting that you highlight a passage of my post which explains WHY I would not be attracted to BNB, and then propose it as an investment.

Should you search the archives where we were discussing other fallen "Angels" over some time, you will find many who were using historic earnings to say that were "oversold". Recent history has shown such optimism to be misplaced.

Now I'm NOT saying BNB won't/can't come good. But if they do, it will be without me. I have developed an aversion to gambling.

 

[Pom]

I donot know which one is Mr Anal or Ms Anal. Maybe both.

I believe you are the real loser! Otherwise you would not have said that -- how the labor governmetn realted to the earthquake made sense.

In all my words, I said it was my personal perception based on my experience. I have never tried to make you believe or not. You could choose to ignore my post and sleep with Ms Anal and make small Anal, rather than attack me without reason.

The house they bought was originall $550k. The previous owner wanted out because of divoice and sold to them at $500k.

Mr Anal or Ms Anal, you have no any idea about property investment.

Go to work out how Mr Anal and Ms Anal can work out small anal.

Yo, Anal - ist, you are wrong but thanks for your two cents worth and the giggle!

Do try to play nicely with the other children to avoid such poor threads in future.

 

[plusnq]

Hi Mods

This thread is getting a bit too personal and although amusing at times probably isn't reflecting well on members of the forum. Can we consider closing or editing it?

Thx

Shane

 

[Mike&Wendy]

I donot know which one is Mr Anal or Ms Anal. Maybe both.

I believe you are the real loser! Otherwise you would not have said that -- how the labor governmetn realted to the earthquake made sense.

In all my words, I said it was my personal perception based on my experience. I have never tried to make you believe or not. You could choose to ignore my post and sleep with Ms Anal and make small Anal, rather than attack me without reason.

The house they bought was originall $550k. The previous owner wanted out because of divoice and sold to them at $500k.

Mr Anal or Ms Anal, you have no any idea about property investment.

Go to work out how Mr Anal and Ms Anal can work out small anal.

So, are you stating that a 20K drop (insert 50K if you wish) on a 500K property is an indication that we have bottomed out?

Mike.

 

[WBG Redcliffe]

tough question, people need places to live and houses are currently selling below replacement cost, so it can't go on forever. but then as they say the market can stay irrational for longer than you can stay solvent.

FWIW i think BIS may have a point with rentals endign up more than debt servicing on a home. somehting has to give/break eventually, I see significant upside potential for rents (and I'm not just talking a measley 20 or 50 bucks a week), particularly as they are so cheap relative to the cost of replacing the asset that is being leased.

Hi Ausprop,

Are you saying that yeilds are likely to pass current interest rates before the price of property moves? With interest rates at 9% you would need a rental yeild of about 11% on loan to see + CF property. (I think)