Considering where we are in the current property cycle,When is the best time to buy?
- Thread starter Aceyducey
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geoffw said:
Ahhhh...a great example of landbanking. Did you get your investment sense from your grandfather?
A lot of immigrants settled on the land on the outskirts of Sydney in the post war years. They needed land for market gardens as thats all they knew how to do and bought very cheap land out there. As Sydney has expanded the land value has increased incredibly and created a lot of rich families. Some have become reasonably large property developers starting by subdividing and developing their own land. By accident or design? Who knows.
How about the NSW government paying an obscene amount for land for the proposed Badgerys Creek Airport that never eventuated. Boy, did those guys clean up at the taxpayers expense. The finest form of landbanking.
As an afterthought, you could probably consider what McDonalds does with its franchisees properties another form of landbanking.
I bought my PPOR in '68 as somewhere to live. It wasn't easy as banks (or the bank officers), back then, were very aware "they were doing you a favour".
Not many years later it was obvious that my local area was the new commercial centre of our city. I live 100mtrs from the city's largest shopping centre, surrounded by commercial/light industrial but, in their wisdom, the council zones me as some sort of "buffer residential".
Am I a (thirty year) frustrated "landbanker"? Had I been aware that the "next" zoning plan would give no joy, would I have sold and moved on?
Possibly, but almost every commercial/government enterprise is within walking distance so I simply lived in the comfort zone. I guess what I'm saying is that predicting zoning aint easy so landbanking must have it's risks.
Thommo
Not many years later it was obvious that my local area was the new commercial centre of our city. I live 100mtrs from the city's largest shopping centre, surrounded by commercial/light industrial but, in their wisdom, the council zones me as some sort of "buffer residential".
Am I a (thirty year) frustrated "landbanker"? Had I been aware that the "next" zoning plan would give no joy, would I have sold and moved on?
Possibly, but almost every commercial/government enterprise is within walking distance so I simply lived in the comfort zone. I guess what I'm saying is that predicting zoning aint easy so landbanking must have it's risks.
Thommo
I wasn't even aware that my grandfather had done this until last year. My parents invested well- into business, and then into shares- but they only ever held a few investment properties which they sold off as dogs. One was a terrace in North Melbourne which they sold off many years before NM became trendy. It would be worth heaps now.likewow said:Ahhhh...a great example of landbanking. Did you get your investment sense from your grandfather?
My parents have never been keen on debt of any sort, so I didn't let them know about my later properties until it became inevible that they found out. It was only then I found out about my grandfather's landbanking.
"they only ever held a few investment properties which they sold off as dogs"
Are you saying that RE hasn't always been seen to be the most obvious way to wealth?
I'm taking a guess on time frames but certain businesses, then, were stand out winners. Owning a pub, a newsagent, a cab, a delivery run (bread, milk, papers etc) were all winners. Some, the news agents and cabbies in particular, thrived under government sponsored restrictive practices, but it was a golden age of small business. Far more productive than property.
But we are talking about a generation whose memory of the Great Depression and two wars were very real. Very few could feel confident at that time so most sought refuge in paid employment. I ask again: Is it likely that the (recent) past perormance will continue ad infinitum?
Thommo
Are you saying that RE hasn't always been seen to be the most obvious way to wealth?
I'm taking a guess on time frames but certain businesses, then, were stand out winners. Owning a pub, a newsagent, a cab, a delivery run (bread, milk, papers etc) were all winners. Some, the news agents and cabbies in particular, thrived under government sponsored restrictive practices, but it was a golden age of small business. Far more productive than property.
But we are talking about a generation whose memory of the Great Depression and two wars were very real. Very few could feel confident at that time so most sought refuge in paid employment. I ask again: Is it likely that the (recent) past perormance will continue ad infinitum?
Thommo
I'm in with the NOW crowd.
I agree with Kristine. I like to keep it simple and if the deal stacks up i.e. well located, minimum 5% yield, strong history of captial growth in the suburb then I'll do it. I also look at the total cost out of my own pocket over 5 years and the amount of equity I will have built up in the property. I assume a conservative growth rate of 3% for rural properties and 5% for city based properties. I buiilt myself a spreadsheet that does this and cant stress enough how usefull an exercise this was as it allwed me to understand all of the calcs involved fully. After I had built my first property spreadsheet I had a "moment of clarity".
I also like to look for a point of difference with the properties I go for, properties like this are always in demand.
If I can purchase 1 of these types of properties in the areas I look in every year - I will be doing very well in 10 years time.
Of course these properties are not easy to find.
I remember a thread from see_change a while back about not picking your bottom or something.............sounds like good advice to me
I agree with Kristine. I like to keep it simple and if the deal stacks up i.e. well located, minimum 5% yield, strong history of captial growth in the suburb then I'll do it. I also look at the total cost out of my own pocket over 5 years and the amount of equity I will have built up in the property. I assume a conservative growth rate of 3% for rural properties and 5% for city based properties. I buiilt myself a spreadsheet that does this and cant stress enough how usefull an exercise this was as it allwed me to understand all of the calcs involved fully. After I had built my first property spreadsheet I had a "moment of clarity".
I also like to look for a point of difference with the properties I go for, properties like this are always in demand.
If I can purchase 1 of these types of properties in the areas I look in every year - I will be doing very well in 10 years time.
Of course these properties are not easy to find.
I remember a thread from see_change a while back about not picking your bottom or something.............sounds like good advice to me
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I'm in with the NOW crowd as well. I totally agree with Duncan_m. Also, provided one keeps to their established 'rule set' for purchasing properties, why not? As everyone keeps saying, there is no crystal ball.
Cheers all.
Juggernaut
the_captain said:I'm in with the NOW crowd.
SNIP.....
well located, minimum 5% yield, strong history of captial growth in the suburb then I'll do it
Do you think the fact that you can achieve minimum 5% yield after the recent price boom means capital growth has in the past and probably will be pretty ordinary in the future for that particular property.
Regional areas that were acheiving 10%+ before the boom would be at 5% gross yield, with city properties at 2-3% due to high growth. Regional areas that have boomed are going nowhere for the next 5-10 years as investor demand has disapeared due to low yields and they get back to the familiar scenario of very little demand, and hence no growth. Remember the reason regional areas boomed was caused by investor driven demand chasing high yields, not theyre gone....no more growth.
At this stage of the game (cycle) you really cant have good yield AND good capital growth. A couple of years ago it was possible but very rarely now.
Also, has anyone considered the fact that buying at this time with the three negatives i mentioned previously:
1..Low yields.
2..Increasing rates.
3..No forward growth.
might adversely affect their equity/serviceability position for borrowing when the real bargains appear in a few years. Its the major reason that i think buying now will slow down your financial goals rather than speeding them up.
The next 5 years are going to be a vastly different investing environment to the previous 5 years. Much tougher and you'll need every edge you can get.
The previous 5 years have produced a lot of genuises and the next 5 will make quite a few dunces. Nothing surer, because they think its always the same. As the fundies like to say 'previous performance is no indication of future perormance'. Aint that the truth!
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juggernaut said:I'm in with the NOW crowd as well. I totally agree with Duncan_m. Also, provided one keeps to their established 'rule set' for purchasing properties, why not? As everyone keeps saying, there is no crystal ball.
Cheers all.
Juggernaut
Hi Juggernaut,
If you know what youre doing, crystal balls have nothing to with it. If you look backwards, you can see the same property cycle scenario repeating and will again looking forward.
Ive seen two major property price booms and in some circles i am considered a beginner
What im saying is dont buy just for the sake of buying.
Not so LikeWow.....(for the record) I'v been a $#%^& genius since birth!!!likewow said:
It doesn't take a genius to appreciate the value of such information, hence IMO....man who go in without looking over shoulder first, fall flat on face???!!!likewow said:
You can never be too smart, but you can always be too stupid!!!!
Cheers,
Jo
Monopoly said:Not so LikeWow.....(for the record) I'v been a $#%^& genius since birth!!!
It doesn't take a genius to appreciate the value of such information, hence IMO....man who go in without looking over shoulder first, fall flat on face???!!!
You can never be too smart, but you can always be too stupid!!!!
Cheers,
Jo
Wow! Youre so profound..
Best Time To Buy ??
What was this post all about.....when is the best time to buy??
When I can afford to buy I buy...always have done...
To put my money where my mouth is I have bought 5 this calender year.
Means nothing...mainly vacant land...most don't settle till next year due to lack of titles...so what?
Too many opinions and speculation on what the market did in the past...what it SHOULD do, and when...in the future....time waits for no man...
So I guess for me it will always be NOW if I can afford to buy..
KPH
What was this post all about.....when is the best time to buy??
When I can afford to buy I buy...always have done...
To put my money where my mouth is I have bought 5 this calender year.
Means nothing...mainly vacant land...most don't settle till next year due to lack of titles...so what?
Too many opinions and speculation on what the market did in the past...what it SHOULD do, and when...in the future....time waits for no man...
So I guess for me it will always be NOW if I can afford to buy..
KPH
Yes Astro summed it up.
Of course I have my criteria on what property I buy....but am not always in a position to be able to buy it.
Its as simple as that...when I am in a financial position to buy, I buy.
There is always a property out there worth buying....at anytime.
The only thing stopping me is affordability.
So when I can...I do.
KPH
Of course I have my criteria on what property I buy....but am not always in a position to be able to buy it.
Its as simple as that...when I am in a financial position to buy, I buy.
There is always a property out there worth buying....at anytime.
The only thing stopping me is affordability.
So when I can...I do.
KPH
I cant understand the concept of 'buying when i can afford to buy'. What does that have to do with sound, fundamental investing principles? Or dont they apply?
I could buy 5 IPs today if i wanted and i could find 5 pretty average deals (crap yield, low future growth...etc..) but i know in the future there will be 5 outstanding deals, so why buy now. I am not going to use up my equity/serviceabilty on pretty average deals and i aint buying for depreciation/tax advantages.
Is it a case of 'im a property investor so i have to buy property now'?
Whats even more astounding is first time investors buying now, why? Whats the rush when all indicators for the property market are negative, i dont get it.
For every 'time in the market' success story there would be an equal or better 'timing the market' success story, so i dont buy that one.
Please enlighten me guys.
And the silence is deafening from the 'in 1, 2 & 3 year' voters. Its ok to speak up against general opinion, after all this is a forum.
I could buy 5 IPs today if i wanted and i could find 5 pretty average deals (crap yield, low future growth...etc..) but i know in the future there will be 5 outstanding deals, so why buy now. I am not going to use up my equity/serviceabilty on pretty average deals and i aint buying for depreciation/tax advantages.
Is it a case of 'im a property investor so i have to buy property now'?
Whats even more astounding is first time investors buying now, why? Whats the rush when all indicators for the property market are negative, i dont get it.
For every 'time in the market' success story there would be an equal or better 'timing the market' success story, so i dont buy that one.
Please enlighten me guys.
And the silence is deafening from the 'in 1, 2 & 3 year' voters. Its ok to speak up against general opinion, after all this is a forum.
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You are doing such a good job Likewow! Ha Ha.
Actually I'm with you. I think time in the market will correct all mistakes but mistakes actually don't have to be made. Of course we can learn from our mistakes and the person who doesn't make any mistakes is doing nothing, but we need to minimise mistakes especially expensive ones.
The buy now people must think they can buy below the market or something because buying at the market now may not be such a great idea unless you believe we've hit the bottom.
My feeling is buying into the bottom of the cycle is hard to spot so the the start of an upswing or a high yield equal or above interest rates is the ultimate.
Like you I could buy now and always look for a deal, but cant find anything satisfactory at the moment. Although in areas where prices are falling things are starting to look better.
MJK
Actually I'm with you. I think time in the market will correct all mistakes but mistakes actually don't have to be made. Of course we can learn from our mistakes and the person who doesn't make any mistakes is doing nothing, but we need to minimise mistakes especially expensive ones.
The buy now people must think they can buy below the market or something because buying at the market now may not be such a great idea unless you believe we've hit the bottom.
My feeling is buying into the bottom of the cycle is hard to spot so the the start of an upswing or a high yield equal or above interest rates is the ultimate.
Like you I could buy now and always look for a deal, but cant find anything satisfactory at the moment. Although in areas where prices are falling things are starting to look better.
MJK
MJK said:
All true MJK,
Maybe our buying criteria is a lot tougher than others, but if people are serious long term investors it has to be.
Even buying below the market still delivers crap yields in a historical comparison and ive yet to see a reason for buying now based on sound investment fundamentals. (ie: non emotional or personal)
btw: I just thought of another great Mr Buffett saying:
"The market is purely a mechanism for transferring wealth from the impatient to the patient"
He was talking about the share market there but that could be applied to all investing i'd say, especially in a not so good property market.
I voted in 3 or more years.....
I believe prices will fall over the next 3 years.
I remember when I started out back in 1995, a $85k 2 bed unit on beach rd in Parkdale was alot of money for a newly married couple. Houses in Aspendale were $130k. Now they are $350k.
And my income has not really gone up all that much in that time. In fact its the same, as my wife now does not work to look after the kids.
I would hate to be a first home buyer now having to come up with a large deposit or a huge home loan.
So I still reckon we have a bit more to go before house prices are equitable with incomes. When interest rates rise again, you will see further falls in property prices.
I believe prices will fall over the next 3 years.
I remember when I started out back in 1995, a $85k 2 bed unit on beach rd in Parkdale was alot of money for a newly married couple. Houses in Aspendale were $130k. Now they are $350k.
And my income has not really gone up all that much in that time. In fact its the same, as my wife now does not work to look after the kids.
I would hate to be a first home buyer now having to come up with a large deposit or a huge home loan.
So I still reckon we have a bit more to go before house prices are equitable with incomes. When interest rates rise again, you will see further falls in property prices.
