DOOM GLOOM and the END of LIFE as we KNOW it

[Bill.L]

Hi all,

OK, the title is a little catchy to gain the attention of all the recent tro.../ new people with a negative bias that have joined this forum.

I am not sure if this is the right category, but there is a point.

How does this new influx of "caution" influence your investing habits???

I could start a poll, but my views on them are "less than positive".

I'll go first.

This new negativity has made me research harder, looking at trends/data/occurances that I may have overlooked. I am probably now MORE bullish on the investment opportunities ahead than I would otherwise have been. (I too read the newspaper)

I believe that the rate of change is accelerating, and for every new problem (say peak oil) the solutions will be upon us quicker than most imagine.

This opens up investment opportunities that many may overlook if only thinking of the negatives of the current situation. I consider that outer suburban property may be a very good investment at the right price, just like it has been for the last 30+ years.

Opinions??

bye

 

[Dazz]

I don't share the gloomy outlook at all Bill.

The assets that we invest in, attract tenants who are loaded with funds, generate heaps more every day, are willing and able to pay a decent rent, are locked into long term contracts and are therefore underpinning the capital growth seen by the assets as going great guns, have been for years now and there is no tunnel of gloom to speak of.....forecast is for many years of growth and rental increases to come.

She's all apples from my end of the paddock.

 

[Mike&Wendy]

I believe that cycles repeat and the last time we saw a position like today was around 1989. I'll look to buy in about 4 years.

Mike.

 

[Bill.L]

Hi Dazz,

And I thought you were selling up at a loss, going bankrupt and retreating to your little corner after the 'evidence' provided by some that the end of the investment world was here.

Well you said so in another thread.

bye

 

[joeExpat]

There's good reasons behind the doom and gloom. I expect a substantial pull back in values in Australia over the next couple of years, most people buying property now will be behind for a long time. The prices just don't make sense, and returns are rubbish - the concept of 'holding cost' seems acceptable and standard - what the?!
It's a bubble. I've partially sold up, would sell everything if not for tax.

 

[investor_eddie]

I still plan on buying my first IP as soon as I am capable of holding it for the long term. Doom and gloom doesn't bother me.

 

[units4me]

A large dip in prices will happen, the skill/luck is picking when and acting on it.

My guess is within the next 3 yrs.

 

[BayView]

Price retractions in property have been around since day one, and always will be.

The reasons why it occurs vary a little each time. At the moment we are faced with too little supply, but rates are going up, so who knows how much retraction there will be.

The question is; how will you handle it?, because there are people who will be making money regardless after it starts.

The influx of doom and gloomers on this site has not affected my investment habits in a negative way at all, except to say that for the first time in my life I will look more at timing the market, rather than simply buying when I could afford to like I have done so far for the last 20 odd years.

So, thank-you YM, HG, Scamp and others; you've improved my strategies!

The next 2 years will be a great time to be buying if what the say does happen; there will cheaper properties around, more pressure on rents as the o/o's disappear as well as the over-leveraged investors who bought at the wrong time.

The combined result should be cheaper properties with good rent returns, and few buyers - time to go shopping.

 

[stumunro]

I think there's plenty of affordable property for it to continue to be a good investment.. and then a few years from now the now expensive stuff will look good value again.

And this matches my strategy perfectly, locate affordable properties with decent amenities and a good demand, as often as I can.

 

[evand]

Looking at the investing world through rose coloured glasses is more dangerous than taking heed of storm clouds gathering in the property market in my opinion.

As has been witnessed recently on the forum quite a few times with buyers being caught out by having to decide whether to hold on to a money draining investment or sell into a slow market with possible negative equity.

There is no choice at the moment but to negative gear in an uncertain market, which in my opinion is crazy in an investing sense. I think the market will be flat/negative for quite a few years yet as seen in the 90s but who knows for sure.

I see doom & gloom as necessary risk management and I wont buy when i see signs like the present.

Also, i dont buy the argument that its a 'buyers market'. If you're buying oranges and theres an oversupply, thats a buyers market.

But houses have yields (income) and its still so low at the moment that i still don't agree its a buyers market for investors.

How can it be a buyers market when gross income is about 4%-5% below what it costs to hold the investment and add about another 2% cost for the property and it becomes a big money hole no cap growth to make up for it.

Why not wait a couple years or wait till the signs and/or yield are better?

As for whether all the D&G has changed my outlook on property investing, the answer is no. I have always waited for close to the ideal situation (to me) to buy investment property and we are nowhere near that yet.

 

[stumunro]

Why not wait a couple years or wait till the signs and/or yield are better?

I think this is a common sentiment, and I think leads to pent up demand during high interest rate periods, which is why I feel that the tipping point for places like Sydney and now Brissy & Melb will be lower interest rates / increased wages. I don't think yeilds are all that bad in places, Sydney is definitely improving in this area, but for alot of people renting is still significantly cheaper. Apart from all that I take every property I look at with it's own merit. Since 2005 I've seen increases of on average 10% for Sydney & 13% Brisbane in my properties, to me the performance have been for different reasons then purely macro.

 

[lizzie]

recent years have made me look at the downside a lot closer (and make sure it's covered) ... not because of the d&g's but because of personal experience.

 

[natmarie73]

I'm not a doom and gloomer either - I think there is a lot of money to be made by doing a bit of research and looking at where the money is going. Like Bill said, you may need to change your strategy and challenge your mindset, but the opportunities are certainly there for those who are willling to keep an open mind and take on some risk.

 

[evand]

Thats all very vague Nat. Can you elaborate?

Taking on risk, challenging your mindset and changing your strategy does not compensate for a dud property market which could lose you not a small amount of money. I'm not into losing money or even risking losing money.

I'm not a doom and gloomer either - I think there is a lot of money to be made by doing a bit of research and looking at where the money is going. Like Bill said, you may need to change your strategy and challenge your mindset, but the opportunities are certainly there for those who are willling to keep an open mind and take on some risk.

 

[sash]

This is just the normal part of the cycle. The Doom and Gloom is now very pervasive in most people's minds....the reports today indicate that housing finance and new building starts are down in the order of 5%. There is a silver lining and that is rents...I see rents jumping in every capital city. They have been far too low. My rents are moving at 10%-20% per annum.

I still feel that we will hit rock bottom around Sept./Oct. 2008 this year. In my mind it is now more important to ensure the cash flow, Offsets (I note that LOCs are risky) are in place to take advantage of the opportunities.

Now is the time to hold on and not sell......time will tell but it is usually now that people panick and sell. Which with the hindsight of history is the worst time.
Be prepared to jump in once there is talk of rate cuts.

 

[natmarie73]

Yes I intentionally kept it vague because I don't want to say "you can make a lot of money doing a, b, c if you are willing to take on a bit of risk" and then have someone lose money and blame it on me.

Basically, my opinion is that investors need to adapt to changing conditions, not just do what they have always done and expect to keep making money hand over fist with no risk.

In my case it is getting out of my comfort zone, finding out where the big money is going/being made and investing there (after doing a substantial amount of research of course).

I have always been a risk taker though, so my strategies and outlook may be different from yours, and I am always willing to change and adapt my strategies in line with changing conditions.

If you believe that the entire Australian property market is a "dud" then you need to invest elsewhere. I personally do not believe such a thing - there are areas which are doing very well and which I believe will continue to do well, but which come with specific risks. These are the areas where I will invest. If you are not willing to risk losing money, then you have to accept the limitations that entails.

 

[evand]

Nat,

I have done very well from years in business and investing in property and the stockmarket, but thanks for the advice, I also, don't mind a bit of risk. But i'm also a realist and my number on priority is to to protect my substantial capital.

The only area of the property market of late that has been doing well is the upper end when the stockmarket and especially the resource sectors bounding along.

Since that has gone south (tho the resource sector has come back a bit), that sector of the property market has dropped off as well.

And if some tin pot mining town is having a growth spurt, i'm not going to put my money there because when the music stops there will no growth for a couple of hundred years at least. Not my cup of tea.

You posts are mindest/strategy centric rather then how you are dealing with the property market downturn in practical terms.

I'll accept your vagueness for exactly what it is.

oh..and by the way, if i think the property market is a dud at present then I DO invest elsewhere.

Heres some specifics for you. My own business, the stock market and have recently dumped close to half a mill in Rabobanks Raboplus 8% on call cash account. Niiiice......

 

[ArJay]

I'm with the rest of the crowd here that think values will stagnate for at least a couple years now.

The affordability factor alone is a reason enough...there may be a lack of housing stock but if no one can physically pay for it then the market has to slow.

Will still be looking at buying tho, just will have to have strong value adders to make up for lack of CG...

R

 

[handyandy]

I see the D&G'ers type attitude as a normal part of the cycle.

With the polarising affect of forums for the like minded, the entry of D&G'ers on this forum it confirms for me that this is now the active part of the cycle. Mind you our last purchase in Sydney was 2002 as beyond this time the returns were insufficient for my criteria.

Let D&G'ers go forth and spread the word high and low as opportunities will be around the corner.(in a year or 3)

Cheers

 

[WinstonWolfe]

I don't think of property in terms of $ values anymore.
I think of it in terms of debt serviceability because 99% of people have to borrow to buy.

I don't see a lot of spare debt serviceability out there.
Why?
Cos I don't see wages moving faster than gdp, let alone cpi. And certainly not if Rudd has anything to do with it.
In Brisbane you have a median around 465k. Who wants to put their hand up and say when the median is going to reach 600k while the availability of funds internationally has taken a serious hit and is likely to be more expensive and uncertain for years to come.

Are there any bulls here who owned property in the 70s? let alone 90s?

Check the latest ABS housing finance figures. It's a pretty clear trend this year. Though no skin off my nose if bottom pickers want to catch falling knives.