Five reasons FHBs should avoid buying now

[InnerWestie]

-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

Hence the line 'at least where I am investing'...Funnily enough, as I mentioned in the linked thread this info is irrelevant to me (and many others on SS), I am enjoying uprecedented rent increases in inner Sydney at the moment and have been since the GFC.

Relying on median data is a fools game, I have little interest in average national data as this info can be either positively or negatively deceptive.

Using one's own investment sphere and network is a far more reliable source in my opinion.

Over-reliance on average data, leads to average investments and I have no intention of being an average investor.

 

[MrCrumbpacker]

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

To me that looks reasonable, but it would depend what the rental return was, any chance of letting us know what a property like that would net.

 

[Aaron Sice]

i'd rather go in a little cool on price and move it ASAP than go in hot and have it go stale.

 

[lizzie]

i'd rather go in a little cool on price and move it ASAP than go in hot and have it go stale.

spot on ... and it only takes two people to desire the property to start a bidding war.

as you pointed out - hobojo - clusters of anecdotes do not the full picture make, but if you only specifically interested in the bottom left hand corner then you do not allow yourself to get overwhelmed by what the rest is doing.

it has been said time and again - because it is blatantly true - australia is NOT one market. even a city is NOT one market. even a suburb is NOT one market. to lob everything in together and claim this is what the entire market is doing is foolish and misleading.

granted - sentiment is down. my desire to spend on doodads is very low (and that is unusual for me) and i have plenty of cash in the bank - but - i don't believe it is because people are "struggling" cash-wise. i believe it is more people, such as myself, just feel the emotional need to belt tighten.

 

[BV]

To me that looks reasonable, but it would depend what the rental return was, any chance of letting us know what a property like that would net.

Currently market rent is $370/week
maybe you could get a little more

 

[BV]

Then it was under priced.

IMO it was priced correctly.
If I had priced it a bit higher I would have had to lower it to meet the market.
The bigger yard is only useful to some people and I can't wait 6 months to find someone who's willing to pay a bit extra for it.

Unit 12 which is on the same side sold for $318K.
Mine also has ensuite and is in better condition but both t/houses are of the same age. so $20K extra I think is a fair price to pay.

 

[wylie]

IMO it was priced correctly.
If I had priced it a bit higher I would have had to lower it to meet the market.
The bigger yard is only useful to some people and I can't wait 6 months to find someone who's willing to pay a bit extra for it.

Unit 12 which is on the same side sold for $318K.
Mine also has ensuite and is in better condition but both t/houses are of the same age. so $20K extra I think is a fair price to pay.

Evand can say it was priced incorrectly, but you know your property Bill, just as I knew our property .

 

[freddie]

"1. Renting is around half the cost of buying"

It has always been that way.

"2. Falling prices will continue"

That prediction has been constant for the last 10 years.

"3. You may quickly outgrow your first home"

It has always been that way.

"4. Ownership ain't all it's cracked up to be"

It has always been that way.

"5. Living at home/renting = Freedom"

It has always been that way.

So, why is it better to avoid buying now than it was any time in the past?

 

[hobo-jo]

1. No it hasn't, infact it was only 2 years ago that the gap was signficantly smaller in some areas due to interest rates being around 2% lower and prices not having risen much since.

2. We haven't had falling prices for the last 10 years, so that hasn't been a constant as you claim.

3. True, but the financial burden to buy is much higher now hence buying something that you may only be suitable for a couple of years doesn't make sense like it might have when prices were rising ridiculously.

4/5. As I said in the OP, some points are subjective.

 

[zed_kid]

"1. Renting is around half the cost of buying"

It has always been that way.

"2. Falling prices will continue"

That prediction has been constant for the last 10 years.

"3. You may quickly outgrow your first home"

It has always been that way.

"4. Ownership ain't all it's cracked up to be"

It has always been that way.

"5. Living at home/renting = Freedom"

It has always been that way.

So, why is it better to avoid buying now than it was any time in the past?

Even ‘Blind’ Freddie can see that buying RE is a good idea? lol

 

[zed_kid]

1. No it hasn't, infact it was only 2 years ago that the gap was signficantly smaller in some areas due to interest rates being around 2% lower and prices not having risen much since.

Nice work picking the time of GFC and super low IR rates to prove your point

 

[hobo-jo]

Nice work picking the time of GFC and super low IR rates to prove your point

There are plenty of other times where buying hasn't been as expensive vs renting as it is now. I just picked the most recent as an example.

 

[freddie]

1. No it hasn't, infact it was only 2 years ago that the gap was signficantly smaller in some areas due to interest rates being around 2% lower and prices not having risen much since.

You have cherry picked a few months in some areas. Before the GFC rate cuts the difference between buying and rent was even greateer than it is now. I'm talking history. At a National level, mortgage rates have always exceeded rents - usually about double. Stapledon's report confirms it.

2. We haven't had falling prices for the last 10 years, so that hasn't been a constant as you claim.

The constant has been the CLAIM of falling prices. Jenman was predicting a crash in 2001 and such predictions have been constant ever since.

3. True, but the financial burden to buy is much higher now hence buying something that you may only be suitable for a couple of years doesn't make sense like it might have when prices were rising ridiculously.

4/5. As I said in the OP, some points are subjective.

There have been times in the past when the financial burden to buy was greater than it is now including around 2007/8 and around 1989/90.

All 5 of your reasons could have been cited at almost any time in history. You would never have become a home owner using your philosophy.

 

[Property Meister]

Nice work picking the time of GFC and super low IR rates to prove your point

so? you said that rents have always been the half of repayments, and then when someone mentions a specific and recent period of time, it becomes invalid?

 

[zed_kid]

so? you said that rents have always been the half of repayments, and then when someone mentions a specific and recent period of time, it becomes invalid?

Not invalid, just a bad data set. A lot of unusual stuff was going on during the GFC.

 

[hobo-jo]

At a National level, mortgage rates have always exceeded rents - usually about double. Stapledon's report confirms it.

Got a link to the report?

A few years in the 1990s that were far from double...

Yields:

Rates:

 

[freddie]

SVRs exceeded yields for all the years of your chart from 1988. I didn't say it was always double. It was triple in 1989 and 1990 and more than double in 1988, 1991, 2008. It was double in 2000, 2006 and 2007. It was nearly double in 1992/3, 1995/6, 2001, 2004/5.
There's nothing unusual about the current ratio of SVR to yield.