Effects of Recession on Property

G'day All
i am looking into buying an investment property for the first time and being a complete novice to all the in's and out's of property investment and economics i have been wondering what the likely effects of another recession could have on the property market.

i would be interested to know what effects recession’s of the past have had on:
- interest rates
- property values/sales prices
- rental returns
- trends in people buying vs renting
- property for sale / for rent demand
- trends in what types of property are in demand and those that may be vacant for long periods.

my personal circumstances are:
25yo, single with a secure well paid job, so im not too worried if there is another recession.
looking to buy in either perth, fremantle or mandura areas at around the $550k mark, for a long term investment.

basically i am trying to find out when the best time to buy is, and what type of property may get the best results (of course that is what everyone wants to know :eek:)

any advise is appreciated
 
History shows that the best time to buy is when you have a deposit.
I couldn't agree more...don't let the noise interfere with your investing program.

You have to be able to handle dropping rates (via recessions) as well as increasing rates (via inflation) at any given time so plan ahead for shocks with a buffer and don't lose the job...;)
 
and when everyone else seems to be selling. Read the papers - when they are all property doom and gloom is the time to start seriously looking
... that is unless we are looking at the potential for a 1 in 100 year event such is the case John Edwards of Residex has suggested. If that was the case buying doom and gloom could still just be the start of the downturn we are to see.

We are in uncharted territory in more ways than 1. Given that, the tricks that have worked in the past may not work on this occasion.
 
Tell that to those who bought Sydney property in 2003.
What is wrong with this view is that it fails to understand that in a typical cycle of say 7 years, is that for 5 of those years the market either flatlines, falls slightly, or grows slightly (i.e. basically goes nowhere). It is only perhaps for 2 of those years that the really big numbers for growth really happens.

The other thing is that most people are really bad at trying to 'time' the market. That's why RE is very forgiving if you hold for a full cycle even if you did buy at the peak of the market.
 
What is wrong with this view is that it fails to understand that in a typical cycle of say 7 years, is that for 5 of those years the market either flatlines, falls slightly, or grows slightly (i.e. basically goes nowhere). It is only perhaps for 2 of those years that the really big numbers for growth really happens.
The 7 year cycle is a myth. Sydney prices are about the same now in 2011 as they were in 2003. That's nearly 9 years and prices are still at the same level. What do they say, property doubles every 7-10 years, is that it? Sydney prices need to double next year then for your 'cycle' to be anywhere near true!
 
The 7 year cycle is a myth. Sydney prices are about the same now in 2011 as they were in 2003. That's nearly 9 years and prices are still at the same level. What do they say, property doubles every 7-10 years, is that it? Sydney prices need to double next year then for your 'cycle' to be anywhere near true!
Thats bollocks, my sister inlaw bought in november 2009 for $327,000. I know for a fact. I negotiated the price. They could sell for between $430-450,000 now. 35- 40% in2.5 years:confused:
 
Umm... because I can't go back in time...?

Seriously, though, I suspect market softening will have a bit of momentum, and bargain hunters should consider that.
Har Har. I meant why didn't people buy back then, when the doom and gloom was first spreading. I'd say its because people expected it to go on for a bit, which in turn cements the gloom and doom. What is the trigger to know that the depth of despair in the market marks the turning point and hence a good time to buy? Bit of a rhetorical question, as of course it is impossible to pick the bottom (or top) of a market with any great accuracy, but I'm just wondering how people here quantify that we are actually getting close.
 
If you want to buy a property, it would be wise to save 20% deposit and avoid LMI. Gearing anything 20:1 is silly, including property.

If you want another property after doing satisfactory research, then buy it. If you don't want one after your research, then don't buy it.

It's a pretty simple black and white formula that most people like to grey up a little.
 
I think that as we enter a recession, property prices will fall. unemployment will start to rise again, and will cost of living pressures, vendors will need to reduce their expectations in order to sell.

The other factor I think that will come into play are the baby boomers. With the share market now crashing for a second time close to boomer retirement, there may be baby boomers who need to sell up property in order to fund retirement, as share portfolios, and super funds take another battering. So there will be more property stock on the market.

I just don't see how property can avoid a substantial correction.
 
I think that as we enter a recession, property prices will fall. unemployment will start to rise again, and will cost of living pressures, vendors will need to reduce their expectations in order to sell.

The other factor I think that will come into play are the baby boomers. With the share market now crashing for a second time close to boomer retirement, there may be baby boomers who need to sell up property in order to fund retirement, as share portfolios, and super funds take another battering. So there will be more property stock on the market.

I just don't see how property can avoid a substantial correction.
Or - maybe the baby boomers get sick of the sharemarket, sell out of that and put their money into real estate instead - it's something my father did and I'm sure he's not the only one.
 
Or - maybe the baby boomers get sick of the sharemarket, sell out of that and put their money into real estate instead - it's something my father did and I'm sure he's not the only one.
Problem is most boomers would have taken the wild ride down again on the market, so are less capitalised.
Two big crashes for boomers 3 years apart, with many retiring this decade. I'm just thinking some will sell up the odd IP here and there to fund retirement now. Could be a drag on the property market.
 
Top