Bust and then what....????

I am seriously looking into selling up my IP in Sydney, and being cashed up to take advantage of sales in better areas for both Cash Flow and Capital Gain.

The main drawback is all the costs involved! Makes one wonder if selling up is a good idea or not. I wouldn't buy it myself at its current value, but it does pay for itself !! And once you sell it and buy again, all those costs do add up to a LOT of lost money.

More thought needed.... :confused:
 
abcdiamond
IMHO selling lesser properties makes sense, but you're right, you do bleed.
Maybe someone can venture alternatives on what to do where the yield is low in the circumstances you describe. Assuming of course that there is no way to enhance the use of the site.
 
Ken thanks for the market report.

q1. do you think that after a correction, prices will rise again and continue an upward trend ?

q2. do you really think interest rates will rise soon, especially as an election could be on the cards next year.

a 1% rise will add $5000 to my repayments per year. 2% 10,000

3% will sink me and the ship together. :/
 
Originally posted by always_learning
If I ask myself the question, "Should I sell up and cash out", I answer probably not! I honestly do expect a mild fall ( correction ) in current market value of my "blue ribbon" "growth" properties in Melbourne, I expect a 20% decline followed by 5 years of nothing, but that doesn't mean I will sell, it just is not worth the costs to sell ( I would sell however if I expected a 50% decline!). I want to see a growth in yeilds and the ability to buy more blue-ribbon properties in the future with acceptable yeilds!.
Click to expand...
Exactly! Even 20% fall doesn’t justify sell & re-buy costs.

Would I re-buy at todays prices? Nope... Oh well, maybe one in New Farm but not the rest.
 
I may be seeking stake holders in my properties, if things get tough before I would sell outright. i.e. offer a $100 per week stake to a friend to help control outflows. For each 1% rise I would find another stake holder. I then pay them out after a year or two when rates hopefully fall or they may prefer to maintain an interest in the property, subject to our agreement.
 
Thats right always learning. Thats pretty much what I did when I sold.
I realised I wouldnt buy my apartment again at the price it had reached so I figured if someone wants to offer me that price now who am I to say no.

I kind of see it a bit like your wealthy japanese example.

There are 10's of thousands of people sitting on exceptional paper profits. However only a small percentage will ever be able to convert this to real profits. Many will sit and wait for greater prices but as progressively less people are willing to pay the prices themselves, more start realising that its time to get out. There will not be a mass exodus but every day that another report comes out that median prices are falling or every week a house thats up for sale gets no offers another one person gets out. Once the consensus is that prices are falling there are fewer buyers and more sellers. At the end of it all, only a small handful will be able to realise these big profits.

I would like to say that if you are CF positive, safely geared and can afford to hold, you don't need to sell. I did and it was my decision. I may have been able to squeeze an extra 10 or 20K out of the market, but I figured a large profit is better than no profit at all and I've heard and seen too many situations like this to risk it.

I don't condemn anyone for holding if they bought a few years back for a long term investment and they can handle the ups and downs. Like I said before, I didn't set out to "trade" property but then I didnt expect 100% gain in a few years either so i felt i had no choice.

When you start hearing people agree that prices are high and that they wouldnt necesarily buy in certain areas, you have to start wondering, if investors, owner occupiers and FHB's arent buying WHO IS THEN? .
Sure, there will always be those who win lotto, arrive from another country with half a million dollars, or score a lucrative CEO position,or the Greater fool who gets conned into buying with little or no deposit, but these people do not make up or hold up the market.

The whole thing is starting to sound like a bit of a pyramid scheme to me.
 
The big ? is how fast would rates rise?

Rate rises would slow us down as property investors but it would also slow business spending and hurt home buyers.

I cant see rates going up more than 1% a year in the near future given the way the reserve bank treads softly lately.

bundy
 
What about PPOR's ?

For those of you predicting a crash and selling up, will you sell your ppor as well and rent for the low yields available currently?
Then buy back later on the recovery?

If not, why not?

Regards

Adrian See
 
Members

Investing in Property is as complex as trading shares. If someone can prove to me otherwise i will eat humble pie/

Alway's learning... Your question ... Would you buy your own properties again at today's prices..???

The question is to open ended.. In my case YES.. And I have many.. I would buy say 80% of them. But that is me! Not LB , Bill, mikhaila... and so on.. My answer is yes , obviously I beleive the investments I HAVE will rise more in value than anything else I can spend my money on without major risk..or within MY risk levels..

All this talk about whether LB is a fool or has good reason's to brag about the way he see's the future, He is qualified to talk about his own not mine.

Most members have stayed away from making comment (with frustration ) the experienced & good ones know that we all hold the key to making money. I work hard on earning large gross returns due to making decisions.
I have some news for LB,,, MY next 5 purchases (THIS MONTH) will net me 50% gain ON each,,,,, over the next 12mths. BECAUSE he can not find them,,, they don't exist,,, Give us a break.
Yes the market has changed in some areas not all.
Just like shares. They both have massive way's of returning wealth... BUT WE NEED TO PICK THE GREAT ONES,, NOT THE AVERAGE ONES.. If we follow like sheep & take the average we stand to be average & maybe fall into LB'S flock.

Keep thinking about buying for a lot longer yet, but only say 5% of the market.. Which is the best part of it.

ocean
 
I dont think L.B. said that real-estate investing is for loosers or IP investment is stupid and can never work. What I think he is saying is that in today's market most IP investments just dont stack up to economic/financial logic.

Thanks Always Learning. you're right I never did and never would say this.
I have proven it works, but its true, there are times, ie when the popular opinion thinks it will never fail, that its more likely to.

Even if RE did grow at an average of 9% over the longer term, it would be pertinent to remember that if there have been years of 20% growth there must be years of levels that would make that 9% hold true

eg
1996 13%
1997 17%
1998 18%
1999 20%
2000 21%
2001 19%
2002 22%
2003 14%
2004 -25%
2005 -25%

Average growth rate = 9%
The longer it stayed above 9% the greater the fall would be if it is going to stick to its long term historical average.

You cant just say "oh thats good, we've had many years above the average growth rate, I guess from here it will just keep going at the average like before". Sorry, doesnt work like that. It will always "regress towards the mean".
 
They both have massive way's of returning wealth... BUT WE NEED TO PICK THE GREAT ONES,, NOT THE AVERAGE ONES.. If we follow like sheep & take the average we stand to be average & maybe fall into LB'S flock.

Thats gone over my head.

Like shares, picking the great ones is the tough part. 'Great' can be defined as a different property for every person. One mans junk kind of thing.
Unlike shares, the seller of a house knows the house better than the buyer (after having lived in, fixed up or rented out the place, so wouldnt they know the true value well enough to charge the best GREAT price.
Are the investors who have sold, less smart than the investors who have bought off them?
 
Last edited:
8 or so pages back,,, what was the reason's again that you will not get back in to the market right now,,

But for God's sake don't put it down again!

you used the words "average market " I am just saying we all don't buy in the average markets..

There is a better then average out there..

If you had an average place (the one you sold.. )

well i MIGHT OF SOLD IT AS WELL.

NOTHING WRONG with THE MOVE YOU MADE IS THERE?

But .. What's wrong with buying another?,,,, not average that is...
 
Final Comments

I'm too busy working on my latest project for the next few weeks (and have limited net access), so will be making this my final comment to this thread (figures on property prices since 1066 are still coming! - when I finish renoing & are prepared to commit the time).

L Bernham has stimulated a lot of good debate, however in my view and as I have witnessed & discussed with others in person, on this forum and in other mediums (and achieved myself), experienced property investors, a number of whom have commented on this thread, are out there achieving much higher and sustainable returns than L Bernham believes are possible in the current (or near future) market.

L Bernham, on the surface some of your points seem to have validity - when applied to small segments of the market, when taking the posts of others out of context or when using statistics out of context or more broadly than the market for which they are representative.

Selecting statistics to prove whatever you believe is easy, but the facts speak for themselves.

Choosing to ignore the facts (and statistics) that don't support your view is a very dangerous way to invest and is VERY dangerous to anyone's financial future.

L Bernham, all your property comments display your share market bias, your comments about economics to those of us who have studied and worked in the area show that you have a very limited understanding of current or past economic thought (pop-economics).

Finally your comments about property are so biased towards the apartment market in limited regions of the country that they show you are an inexperienced investor in this form of asset class.

You did make an OK return on your sole investment apartment - which in the middle of the greatest property boom seen in recent Australian history does not speak particularly highly for your ability to pick property.

Despite this, you still feel your understanding of the market is good enough to predict the future of the entire Australian property market, and dismiss the opinions of some of the most experienced investors in Australia (I am not including myself in this group - but there are a number on this forum) - perhaps you should get a job as a consultant to the government on the property market!

I'd suggest you spend more time researching the property market and understanding it in a broader sense without your assumptions and pre-conceptions before making another venture.

As they say about the share market, listen to it and it will tell you what it is doing..(and I KNOW you'll take this last comment out of context - it's the behaviour you've exhibited continually in this, and other threads :) )

Listen to the entire property market, not just the Apartment Market in Melbourne & Brisbane. If you mind is open to the possibilities you'll realise there are many more opportunities than you currently can see.

Cheers,

Aceyducey
 
Sorry LB

But one quote in your last post relly reflects your true ignorance of property investing.

You state

"Unlike shares, the seller of a house knows the house better than the buyer (after having lived in, fixed up or rented out the place, so wouldnt they know the true value well enough to charge the best GREAT price.
Are the investors who have sold, less smart than the investors who have bought off them"

This is basically BS...

If you take this to it's logical conclusion , then no one would every sell a property that could be perceived as a good property investment , because the sellor knows the property better.

This takes no account in the fact that maybe the Purchaser know the Market better than the Vendor.

I bought 11 properties a year ago that have collectively doubled in price over the last year, and are returning over ten percent on thier purchase price The majority of the agents ( let alone the vendors thought I was a little bit silly . I recently talked to one about current valuations and he lamented the fact that he hadn't seen it coming ... and hadn't bought any himself )

I have recently bought five properties in another area where I expect simialar result. I maybe wrong, but these properties also pay for themselves. The latest one was purchased off the selling agent . I'll be intersted to see what he thinks of his decision in another twelve months .

The market has already moved 5-10 % since I started buying about 2 months ago , but is still only around levels it was ten years ago.

I'll be happy to tell you what happened in a years time.

see change
 
Looking at LB''s figures to show how a 9% average return givesca negative for 2004 & 2005, I compared the same years for Brisbane and came up with a positive senario, so things are looking good afer all !
eg.....LB's Figures...Brisbane
1996.... 13.0%...... 0.97%
1997.... 17.0%...... 3.84%
1998.... 18.0%...... 2.70%
1999.... 20.0%..... -0.21%
2000.... 21.0%.....15.69%
2001.... 19.0%..... 20.05%
2002.... 22.0%.....15.00%
2003.... 14.0%.....11.50% estimated
2004....-25.0%.....11.50% estimated
2005....-25.0%.....11.50% estimated

Average growth rate =
............9.4%........9.3%

I've also just looked at Sydney rates and come up with a positive for 2004 & 2005 athough not as high as Brisbane.

Obviously we are using different base figures, mine came from the Navra web site I think, not sure now as I looked at the figures a few days ago.

As Aceyducey says, "Different Markets".
 
Re: Final Comments

Acey and See_Change,

You are saying that LB, is simply considering a very limited market ( inner city appartment), highlighting the dangers in that market and mistakingly suggesting this applies to all markets in Australia?

My take on both of you are that you are experienced and capable investors who have spent much more than average amounts of time, studying, building your skills and following thru
on your IP investments. You have and will reap the rewards of your efforts!

In otherwords you guys are special, the average IP investor is not you, the average IP investor probably is not representive of this site. The average IP investor isn't you!

I suggest that the average IP investor buying into today's market, buying into markets which everyone else is buying and by the law of "supply and demand mixed in with mania" paying too much! Are you claiming the bulk of IP investors buying today are buying excellent investments, suported by strong fundamentals and should expect excellent capital gains in the short to medium term?

See_Change I remember part of your strategy (correct me if I am wrong) is to buy in areas that are undervalued but supported by strong rental returns, that you expect to improve in the short to medium time frame, once capital gains are made, sell a number of properties and roll the profits into a few of the remaining properties, with the target of having a number of IP's with low debt and excellent cash flow. If I am wrong correct me, but thus you strategy includes selling when you thing the capital gains have been made and strong growth is not expected in the future. I think a great plan!

What is the difference between you and L.B ? Simply you will sell and invest the gains into existing IP's and L.B. will sell and invest the money into shares or other investment class.

If I made 100% in a couple of years on an flat in Brissy, I would be saying...have I got all the growth reasonable to expect from this investment in the next 5 years? Could I sell and reinvest the money in another investment with a better 5 year outlook? Now I think L.B. would more profitably spend his time looking to purchase outstanding IP's in alternative areas and/or looking at areas/markets which have an undersupply of housing (demand) and developing some properties to meet that demand. But this is my opinion!
 
AL

I agree with pretty well everythink you say .


I think your point about the average investor not making good buys at the momment is completly correct.

I'd add is that the aim of this forum is to educate people NOT TO BE AVERAGE. You don't need to be .

Where most seem to disagree with LB is his tendancy to extrapolate from one specific instance, namely inner city units and apply that to the whole realestate market. I believe this point has been made several times.

I believe that the down turn in inner city units is a leading indicator of a more generalised down turn , but because the property market moves a lot slower that the share market , some areas of the property market have only just started moving up and still to move significanly in the current cycle.

I do invest in the share market, though because of the prolonged down turn I havn't owned any since sept 12, 2001. From a technical point of view the ASX has bottomed, so I have NO PROBLEMS WHAT SO EVER with any one currently investing in shares at the current stage . The true contrarians are now buying . At some stage I will be buying shares ...maybe even fairly soon. ( once I fill in the paper work and get my super fund registerd with Commsec ... )

But

While I still see opportunities to buy properties which I believe ( IMHO ) will almost Double in value in the next one - two years, using 100% OPM (I believe that a 50% increase will happen fairly quickly, the doubling is a bonus ) while they almost pay for themselves. I will take them.

With the leverage advantages that are available in a fast moving property market I'd be a mug if I didn't at least look and keep an open mind. That is something that LB seems to be unable to do.

To me that is the difference between us.

see change
 
We have seen great increases in property over the last 20 years .. but that also has to do with inflation .. does any one have the growth of property minus inflation .. I am sure we would have negative years after inflation .. and with inflation being a lot lower then it has been in previous years the % of growth I am sure will be a lot less.
 
Bust and Then What???

Dear members,

Will someone please share with me what are the usual indicators of an impending market correction, that were last seen towards the end of the 1994 and the 1988 market peaks before the market correction actually set in? What is the usual time lag between the appearance of these indicators and the actual market correction taking place?

How many of these indicators are already happening in Australia, right now as we are discussing in this forum? What are the threshold signs and critical factors to consider for an impending market correction?

To the best of my knowledge, both the 1989 and 1995 market corrections were actually triggered by the RBA's interest rate increase, isn't it? Will it not happen again this time? When will the RBA be "forced" to act again this time to cool down the present hot housing market, beside its usual market warnings and talking down of the market? Are there some good and reliable indicators signalling the RBA's impending actions in the past that we can use to accurately predict the RBA's impending actions this time round?.... I am much concerned and find it alarming that many of the Australian bank economists have changed over their views significantly "overnight" on the interest rate trend over a period of one month between July and August 2003 period, when the "forecasted" interest rate cut scenario is now being replaced with an impending interest rate increase by the end of this year, isn't it?

While I may not fully agree with L Bernham's actual market assessment, I think it is better for myself to be cautious as an overseas investor as I may not fully comprehend the Australian property market peculiarities, despite my own research work. To a certain extent, I do agree with L Berstein that there are presently some indicators of a housing "bubble" taking place in the Australian property market such as the increasing non-affordability of first time home owners to buy their homes despite the present housing grant, everybody in the street seems to be talking about investing in property nowsaday and becoming investment gurus themselves etc.

Looking forward to learning from and to be further educated by my seniors and the more experienced investors in this forum.

Thank you very much.

Regards
Kenkoh2000
 

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