Five reasons FHBs should avoid buying now

My guess- rents will rise fairly rapidly and consistently over the next couple of years, in fact this is already happening in all of my areas, this will increase yields for investors and also provide further justification for FHB's to move from renting to owning.

Rental increases will change the entire equation and I am confident that rents will not stagnate in the short term, at least where I am investing.

-Extrapolating your anecdotes onto the broader market when the statistics for the broader market are already available. Rents are dropping after inflation.

http://www.somersoft.com/forums/showthread.php?t=70321
 
I think it depends on the individuals tax bracket and savings.

Even if you have a reasonably negative view of the market if you are in the fortunate position of having a 100% deposit than I belive for most buying is a sue thing. You get 6.5% iterest in the bank and pay 40% marginal tax on it leaving you with less than the saving you will make in rent.

Clearly this is not a position many first home buyers are in certainly not me...

If you are taking a 90% mortgage than I dont think buying is good from a purely financial perspective there needs to be other reasons behind the decision which for some this may be the case. I agree with the common sentiment here that when buying, buying an investment makes more sense if you are buying with debt than buying your PPOR.

I reckon the buying decision lies somewhere in between a 100% mortgage and a 100% outright buy.

Certainly I can understand why people who own their homes outright say, why the hell would I sell even if there was the possibility that house prices were to drop 20% over 5 or 10 years. It makes little sense when the tax on the interest they will recieve leaves them gouged to the point of it not even covering the new expense of rent.

If you have an LVR of 80 or 90 then these decisions are then in play in my opinion.
 
I can not believe that any of you are even listening to what this hobo-jo character has to say. What a load of hog-wash!

Seriously! If you don't want to buy property, then don't buy property, but don't go pushing your own barrow onto others.

1.) false approx 35% more expensive not 100% more (atleast in the areas i own property. Western sydney, South west sydney)

2.) your opinion

3.) your opinion

4.) your opinion

5.) your opinion


More info on number 1.)

Figures used from one of my rentals.

Market value 380k
Rent 435 pw

LVR used 100% lend, stamp duty not paid because FHB, 7k used to cover purchasing costs.
$1200 council rates, $650 water rates, $600 insurance, $500 repairs, Interest rate 7.2%

380k * 0.072%
+ 1200 + 650 + 600 + 500

total P.A $30,310 or $582pw

which is $147 per week more to buy then rent.

Every single one of my properties were bought with a better return on investment than this. No, they are not all in Western Sydney either, Bluestorm.

Sure, innercity properties are going to have a low yield and are going to be expensive, but there are thousands upon thousands of properties in this country that are not located close to the CBD of your chosen city. Just face facts, if you are determined to buy something close to a CBD, then you are going to pay dearly for it. Otherwise, do what most everyone else does and purchase further out.
 
Cherry picking much?
It was a reply in kind to the same from Ridin-High (and lizzie earlier in the thread).

Sure, innercity properties are going to have a low yield and are going to be expensive, but there are thousands upon thousands of properties in this country that are not located close to the CBD of your chosen city. Just face facts, if you are determined to buy something close to a CBD, then you are going to pay dearly for it. Otherwise, do what most everyone else does and purchase further out.
It's not only inner city that has soared to ridiculous heights though. Regional and outer suburban areas are also at highs when measured against rents and local incomes, etc. If this was not the case then property would still be selling. Attached is a chart showing the number of property transfers in Victoria from the LTO (source). We're looking at the lowest number of transactions in 10+ years... and in my opinion this is just the start.
 

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It's not only inner city that has soared to ridiculous heights though. Regional and outer suburban areas are also at highs when measured against rents and local incomes, etc. If this was not the case then property would still be selling. Attached is a chart showing the number of property transfers in Victoria from the LTO (source). We're looking at the lowest number of transactions in 10+ years... and in my opinion this is just the start.

Your opinion is just that. An opinion! It is not fact!

Housing is different in every part of Australia. You might well be right that things are slow in Victoria, but Victoria is hardly the whole of Australia, is it? I'm betting that if we were to dissect those figures that we would find that properties in some parts of Victoria are doing just fine, while others (possibly Melbourne, didn't Melbourne go through a rise recently?) are stagnating/pulling back. All part of the cycle, my friend.
 
It was a reply in kind to the same from Ridin-High (and lizzie earlier in the thread).


It's not only inner city that has soared to ridiculous heights though. Regional and outer suburban areas are also at highs when measured against rents and local incomes, etc. If this was not the case then property would still be selling. Attached is a chart showing the number of property transfers in Victoria from the LTO (source). We're looking at the lowest number of transactions in 10+ years... and in my opinion this is just the start.

Not all regionals are that high. My area the last time I checked had an average house price of $240,000 give or take with a rental return above 5.5% and climbing.
Now combine two minimum wages of $35,000. That's $70,000 family income.
That gives you a approximat 3.5 family income requirement to buy a house.
All in a growing regional city with infrastructure and future job growth prospects blah blah blah. All on minimum wage. Not average.

Plenty more regionals like this.
 
It's not only inner city that has soared to ridiculous heights though. Regional and outer suburban areas are also at highs when measured against rents and local incomes, etc.
hobo mate
Market sentiment has changed and this is what you see in your chart.

You'll also see lower medians nationwide as buyers snap up the cheapest properties available. This doesn't mean that prices have fallen or that the more expensive properties aren't selling.

On Saturday I listed a property in Sydney'd North West and it sold in 1 day for the full asking price (had 2 acceptable offers).
http://www.realestate.com.au/property-townhouse-nsw-quakers+hill-107376936

Properties do sell and there is still a lot of activity at the affordable price ranges but there are less buyers at the higher price brackets so if a property isn't selling the vendor becomes negotiable and we have a price softening affecting the top suburbs.

This softening doesn't mean that prices will fall much because there is no downwards pressure from interest rates and if a property isn't achieving the expected price, vendors tend to take it off the market. I know a case where 3 properties were listed on a particular street and 2 of them were withdrawn.
So your chart would have picked up the 1 which was sold but you wouldn't know that there is no more stock available because the other 2 properties were withdrawn.

I hope this helps clear things up
 
BV, all these anecdotal stories don't add up to much. I have 3 family members selling or sold recently, one sold in Adelaide after the first open inspection receiving 4 offers (the one they took was in the advertised range, sub $350k), another selling in QLD for around $300k (best offer has been around $250k, has been listed since before floods, not yet sold) and another who have had their house on the market for a couple of months in regional Victoria with very little interest. What does that tell me? Not much, neither does your story about the 3 properties in the one street or the house you recently sold.

Some vendors may be pulling their properties off the market at this point, but this is more than being matched by new properties coming onto the market as can be seen if you look at SQMs stock on market data (http://sqmresearch.com.au/graph_stock_on_market.php?national=1&t=1). If this downturn lasts longer than the few months some seem to think it will then we will likely see a lot of that stock come back onto the market at a later stage.

There have been plenty of examples of houses selling for lower prices than they did in the past and RPData's hedonic home value index is showing price falls (this is not simply a "median price" index).

I think we can agree that national loans data showing the slowest growth in 30+ years is a little more than "market sentiment"...
 
I have a friend who is a lawyer specialising in property/conveyancing. She contacted me yesterday to do some marketing/search engine optimisation on her website as she said her enquiries and work load has fallen through the floor.

She does a lot of work for a big property marketing business marketing and selling on behalf to investors and she said that has dropped right off as well. She is a bit worried.

As hobo says a few good results here and there does not make a strong property market. All indicators are pointing downward.
 
When a property sells in one day its usually under priced. You need some resistance to the price.

Not necessarily so......

We sold a couple of months ago. We were hoping we would get $660K or above. Prices haven't fallen, but lot of houses seem to be on the market, so things are selling slowly in this area. That is my take on it anyway.

We had no pressure to sell, so we listed it for near $700K. Had lots of lookers, a couple of second inspections and after four weeks it ended up going for just over our target price.

Had we simply asked the end price, it would also have sold, perhaps the first day too.

But I do agree that we would have always wondered "could we have got more?" but I also have seen what just happened with our sale so many times, that I know it is silly to second guess yourself, especially if you have a good idea of a house's worth.

So many times, I have seen houses sit priced way too high, only to sell for a more reasonable price, or even less as the vendor gets desperate to sell.
 
When a property sells in one day its usually under priced. You need some resistance to the price.

It could be underpriced or it could be popular because of unique features.

This property has a big yard compared to others in the complex and also had approval for the rear fence removal so the yard could have been made even bigger.
 
BV, What does that tell me? Not much, neither does your story about the 3 properties in the one street or the house you recently sold.

What it does tell you is that there are different markets and IMO those markets which are investor driven eg parts of SA QLD, WA, are likely to correct further but markets where FHB's are looking to buy and where there is severe rental shortage will keep moving.

Many buyers stopped looking because of the media talk about market corrections so it is market sentiment affecting sales atm but when people see that prices aren't going through the floor they will come back in big numbers and prices will take off again.

IMHO
 
I guess we'll have to wait and see. What sort of timeframe do you put on that happening BV (e.g. when do you think we'll see rising prices again)?

Unconventional Economist goes through a variety of corrections seen globally over the last few years in an attempt to gauge what we might see here in Australia: http://macrobusiness.com.au/2011/05/crash-testing/

Interesting reading.
 
yes, they go stale if overpriced at listing. And then they are even harder to sell at the correct price. They can sit on the market a long time = over priced.

Conversely, sell in one day = under priced.

So many times, I have seen houses sit priced way too high, only to sell for a more reasonable price, or even less as the vendor gets desperate to sell.
 
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