Falling prices - what are your telltale signs?

[Property Meister]

so, its pretty safe to assume that the property market overall is a bit crappy

what are your telltale signs other then what agents, enzo and the media seem to love debating

is it;
falling asking prices
time taken to sell
auction prices/activity
properties selling within asking prices

admittedly
im keeping an eye on 1 bluechip suburb and one entry level suburb

the bluechip one, the asking prices have come down a lot and the really expensive ones are no longer on the market

the entry level one, the asking prices havent changed, seem to be selling exactly within ranges, the quick ones sell in 24 nours, the ones asking too much come down to realistic asking prices pretty quickly

frankly im not getting the vibe of a falling market (however its only based on 2 suburbs)

 

[Aaron_C]

Which suburbs are these?

 

[Jamie M]

A sign of a poorly performing market is when the REA's become proactive in selling. I've seen REA's in Canberra during boom times sit on their clients couch talking on their phone during the open house - rarely bothering to speak to anyone who's attended.

Cheers

Jamie

 

[RightValue]

I loook at sales.

Some recent ones.

bought 06/10 for $1.05m, sold 10/11 for $910k.
Bought 04/08 for $800k sold 09/11 for $827.5k
Bought 07/08 for $1.1m sold 11/11 for $1.15m
bought early/08 for $610k sold 09/11 for $650k
bought for $$227k in 04/08 selling for $255k in 10/11

Those that sold above purchase price show some pretty poor growth and after expenses are in reality loss making investments.

plus quite a few more including losses over the past year that I have forgotten.

Also turning up to value properties that have sold for $380k, knowing that mid 2010 I would have valued it at $420-$340k

Also seeing properties on the market for over a year with the asking price dropping from $680k to a sale price of $485k over the year.

A big one for me is when agents freely admit that the market is bad.

 

[Thesnowyforest]

Im bearish on property now.

Unless your ultra proactive aka Nathan.. Basically being a house mechanic, with no emotion whatso ever. pure numbers. The old buy and hold, be negatively geared and pray for capital gains and hold for 10 years is not going to produce results that people are used to based on historic returns..

Sentiment is powerful stuff imo.

Positive sentiment = thirst for debt. Euphoria..ahh arent we damn good. lol

Negative sentiment = people cant run fast enough from the bank. If only property could be shorted.

We had a property boom last time interest rates fell during GFC 1. I dont know if we will be so lucky this second time round.

Im looking to lock in profits, reduce ppor mortgage, improve lifestyle and move onto to other much more cost effective & liquid ways of making large profits.

 

[IFBB]

I dont really see it falling, but it has stagnated a bit. The areas i do see prices dropping are ones where they are just over-priced to begin with, like these vendors still think were in some property boom. Some examples of this are units being 30-50K more than every other in surrounding suburbs, yet being no better than the others with position, interior etc.

In some suburbs i have driven down a steets of a km or 2 and seen 10-15 businesses for lease (blue chip too). Its not an indicator on price, but it sure tells you how slow the economy is atm.

What are these sites where i can find out how much a property was listed for, and how much it sold for? Is it on re.com.au, or on others?

Thesnowyforest - You thinking the sharemarket?

 

[Tony3008]

I've been to a number of OFIs in Ballarat during the last couple of months. In each case it has been just me, or me and one other party. Big contrast with two years ago.

 

[VYBerlinaV8]

A sign of a poorly performing market is when the REA's become proactive in selling. I've seen REA's in Canberra during boom times sit on their clients couch talking on their phone during the open house - rarely bothering to speak to anyone who's attended.

Cheers

Jamie

To be fair, there are some blooody awful agents in Canberra. I've dealt with a few of them...

 

[Fifth]

I've been bearish on the Australian property market, particularly the Melbourne market, for a long time. I'm definitely seeing significant drops. Some suburbs haven't moved or have only gone down 5%, but others have gone down 20%+. I have to resist temptation and remind myself not to catch a falling knife.

Agents are desperate. I get calls months after an open for inspection asking me if I'm still interested. That sure didn't happen in boom times.

I'm seeing more places taken off the market and then put back on a few months later.

I'm seeing more 'under offers' fall through, presumably finance issues.

That said, there are still a lot of crazy prices flying about and a lot of happy sellers. Considering how over-inflated Melbourne's market was, this isn't a crash of apocalyptic proportions but rather a modest, healthy correction.

 

[vaughan]

Unless your ultra proactive aka Nathan.. Basically being a house mechanic, with no emotion whatso ever. pure numbers. The old buy and hold, be negatively geared and pray for capital gains and hold for 10 years is not going to produce results that people are used to based on historic returns..

I agree completely, but I think you're raising 2 different issues.

The second first: buying on numbers etc. You make it sound like it's bad.

Seriously, when I look at a strategy that relies on future capital growth to cover all buying, holding and selling costs plus profit, using negative gearing to ease the pain, I wonder what drugs everybody has been taking. (I just had the devious thought that there'd be more and safer money in selling the drug than buying the property: then I realised that's what the "make money in real estate" companies are doing.)

The trick is that if the cg+ng gig works, it works B-I-G like the jackpot on the pokies. We hear about the jackpots, not about the misses.

I think that strategies that add value, increase yields and allow extended holding will be the bread and butter.

I haven't met Nathan, only know what I've read here on the forums. But I imagine that he's doing the numbers and doing them well.

 

[Property Meister]

for those properties that have actually fallen 20% from true value, not advertised value,

im surprised, they havent been snapped up by savvy investors or people who have been priced out???

say Toorak for an example,
if something was worth $5mill, but you couldnt afford it, if the price dropped to $4m and thats all you could afford, wouldnt you buy your dream chateau in a heartbeat?? I mean, when the market does recover, then its worth $5m, and you've made your $1m instantly (on the assumption it wasnt overpriced in the first place)

 

[vaughan]

for those properties that have actually fallen 20% from true value, not advertised value,

im surprised, they havent been snapped up by savvy investors or people who have been priced out???

say Toorak for an example,
if something was worth $5mill, but you couldnt afford it, if the price dropped to $4m and thats all you could afford, wouldnt you buy your dream chateau in a heartbeat?? I mean, when the market does recover, then its worth $5m, and you've made your $1m instantly (on the assumption it wasnt overpriced in the first place)

In Sydney the good properties are selling. I have bought recently and am looking to buy again, just waiting until after the new year frenzy dies down.

I wouldn't buy in Victoria though, I think that market still has a way to fall and vendors are in denial about it.

 

[Aaron_C]

Because there's simply not many buyers at the $5m+ range...the extreme top end like that always experiences the highest falls for that reason. But - when things are good, they go up the most in absolute value. It's just the risk-reward paradigm being played out.

 

[Fifth]

for those properties that have actually fallen 20% from true value, not advertised value,

im surprised, they havent been snapped up by savvy investors or people who have been priced out???

say Toorak for an example,
if something was worth $5mill, but you couldnt afford it, if the price dropped to $4m and thats all you could afford, wouldnt you buy your dream chateau in a heartbeat?? I mean, when the market does recover, then its worth $5m, and you've made your $1m instantly (on the assumption it wasnt overpriced in the first place)

The true value is what buyers are prepared to pay. A property isn't necessarily a bargain simply because it's being offered at 20% below its peak value. If such were the case, wouldn't all the 'savvy investors' be rushing up to the Gold Coast?

In terms of those priced out, many still are still priced out, especially with tightened lending.

I believe Melbourne has further to fall and the best case scenario, from a seller's perspective, is a long period of stagnation. From an investment perspective, buying a negatively geared property, which most Melbourne IPs are, at this point in time is not particularly savvy. There are, as always, exceptions.

Because there's simply not many buyers at the $5m+ range...the extreme top end like that always experiences the highest falls for that reason. But - when things are good, they go up the most in absolute value. It's just the risk-reward paradigm being played out.

^What he said.

 

[Thesnowyforest]

IFBB,

Yeh i'm all about the sharemarket. Long and short.

Volatility can equal some huge profits if you understand the game.

I will never be negatively geared again.

Keen on the Nathan way purely to build positive cash flow.

But the selection process and the plan for that approach has to be spot on as well.

 

[HomePage]

fI mean, when the market does recover, then its worth $5m, and you've made your $1m instantly (on the assumption it wasnt overpriced in the first place)

Indeed!

(and the dish ran away with the 10 character minimum spoon)

 

[Aaron_C]

If you want fast, volatile profits just go into FX.

 

[DavidMc]

I'd agree the majority of Melbourne is not much chop.

There will be however be some good performers within Melbourne Metro area.

I've just bought in QLD, plenty of activity up there in the right spots. Houses are selling within 2-3 weeks of listing in Gladstone for example, and the boom hasn't even started up there yet.

 

[Deltaberry]

Saw a Toorak house the other day asking for $5m+. Assuming it's just $5m, you can probably command around $8-9m later as it was commanding these prices in mid-10 (I inspected a lot of these with a friend during that time). If you can afford the $4m interest and principal repayments for a few years, you could make a few mil tax free after a few years.

 

[Property Meister]

Saw a Toorak house the other day asking for $5m+. Assuming it's just $5m, you can probably command around $8-9m later as it was commanding these prices in mid-10 (I inspected a lot of these with a friend during that time). If you can afford the $4m interest and principal repayments for a few years, you could make a few mil tax free after a few years.

is that all