Financial Review (Sat)

From: Gidget .

Did anyone read the Financial Review on Saturday? There was an article expousing doom and gloom for property investors and predicting a dramatic fall in property prices in the next 1 to 2 years. My husband and I are looking to buy our first investment property and now we're getting worried! If it is likely there will be a slump, should we consider holding off for a while? I've heard that if you buy to hold the property long term you won't lose in the long-run, but I'm still concerned about the possibility of not being able to get a tenant (evidently vacancy rates are high in Melbourne at the moment)because loads of investors are buying.

Any ideas???

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Reply: 1
From: Robert Forward

Hi Gidget

The Sydney Weekend Herald also had a HUGE spread on the property BOOM. The paper was telling stories of people walking away from auctions in tears cause the house they could have purchased last month was now out of reach for them. Boo hoo...

Doh, that was a bit cynical of me....

People are now getting upset that they can't upgrade there lifestyle to where they think there status should be, so they are jumping in head over heels to get anything they can now (before it's to late, haha). In my mind (not advise) the market has got a while to go yet before a correction, who knows a correction may only bring it back to the level house prices currently are. Wait a sec, I'll check with my crystal ball (got to rub the dust off of it first though, otherwise it might cloud my viewing)....

If however, you find a good deal go for it, it's just at the moment good deals are hard to find. Sydney investors now are struggling to get a 4% return on their property investments, and this doesn't take into account the FACT of raising vacancy rates and an easing on market rental rates.

Gidget, I'm not telling you not to go out there and buy a property, what I will say though is if you find one make sure you do your due diligence and if it turns up with good figures then go for it.

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Reply: 2
From: Colin Mills

Did I ever read it! I could have written it! It basically said the same thing as my post (Rents have collapsed in Sydney)on Friday. Higher vacancies coupled with falling rents means a price correction is coming next year.
I was down in Sydney on the weekend and my agent was telling me about the shortage of listings. Obviously lower supply with renewed demand leads to price increases. (All the mugs who sold out before the Olympics must be kicking themselves) The SMH piece on Saturday mentioned auction clearance rates at 83% and auctions listings down 20% compared to 1999. I believe this is a new leg-up, but only a brief one, and prices will continue to rise in Sydney. I also agree with Max Raine in the SMH (of Raine and Horne) who tips a very strong 4 months. I'd suggest extending that into the rest of the summer (the election should slow things down) but come next year down she goes! If prices jump 20% in Sydney, based on my current rent, I'd be getting just 2.5% GROSS rental return p.a.
On the other hand in Brisbane for inner-city property I should be getting around 4.5% return. Furthermore, I anticipate a 20% price increase over the next 12 months but without the price correction. Therefore my hard earned dollars are going into the Brisbane Wilston/Windsor market. (Not that I'd ever sell my Sydney property)
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Reply: 2.1
From: Sergey Golovin


"... We have the baby boomers pumping the economy with their rushed/forced investment plans pre retirement..."

Also I think that "Boat people" (The Expatriates) with their families and friends are coming back. Living all those falling apart and neglected colonies behind. It is also puts a bit of pressure on the market as well. May be not much but still. I also think that that wave has more or less passed – few colonies with white people in charge still left in Africa and this about it.

We can see massive restructuring in world economy as well – talking about super powers and reallocation of recourses (capital) for all sorts of purposes.

But yes baby boomers they are the "killers". The are the once who within working very hard…
But then again it is hard to blame them. If they will not take care themselves, government won’t do much about it either.

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Reply: 2.1.1
From: Anonymous

Sergey...sorry but I have no idea what the #@!} you are talking - especially in the context of this thread.
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From: Scott Marshall

Don't forget, interest rates are still low, and the US was talking a drop today. No correction for a while I reckon.
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From: Sergey Golovin

Lets chew it up for Anon.

What do we have on plate today in terms of pressure (Market forces)?

1.Baby boomers – yes

2.Non English speaking immigrants coming into the country – yes

3.English speaking immigrants (we call expatriates), coming back home after their adventures expeditions into the colonies – yes

4.Low interest rate – yes

5.Overexcited market – yes

6.International market changing the boundaries (Cold war, Berlin wall, etc.) - yes.
Talking about the business not the cold war it self, Anon.
Do not get carried away – the war is over.
It is time to hand the guns over back to the authorities.

7.GST (Pre GST, post GST, FHOG, etc) - yes.

What else is there pushing the price up?

Common Anon pick up the pace. Give us a hint. It is a collective effort. Everyone contribute bit.

What do you think Anon?

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From: Synth Boy

First off - I an't no expert here - I'm a novice.

From what I see in the world - Europe and USA are sliding. They have been cutting interest rates and its still sliding. That can't be good.

Here, we have the land of Oz. Not sliding, showing small growth. Its actually sticking its head slightly above the world "pack". Thus why aren't seeing the flow on of interest cuts like we usually do.


Inflation. Its a dirty word. Make money easily available and people go crazy. Hmmm...looks like that now in Melbourne doesn't it? Put more money in there hands and what happens to our economy - it gets a little wobbly.

One factor that we haven't seen yet appear but will have an impact I think shortly - unemployment. If your from Melbourne - how many big companies have you seen close ?

Like I said - I'm no expert. I'd like to know what others think.

My personal opinion is that there is a amssive bubble about to burst....we are looking around for it - but we can't see it.....probably because we are all sitting on it.

Watch your fall ! :)

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