Home truths - don't buy there

[plusnq]

Gato, are you saying that the northside suburbs will always be more expensive than Ipswich? If so, I agree with you. But whether a suburb 'does as well' is a matter of %, not absolute value. So say a northside house is $500k, and Ipswich is $250k now. In 10 years, the northside house is $1m and the Ipswich house is $500k. Which one has 'done better'?
Alex

Hi Alex

Whilst basically the percentage argument over the long term is true, the distribution of returns is also important for those reinvesting their equity. 7% compound pa is different to seven years of flat returns and then three years of 25% when you are compounding your equity with borrowings.

Cheers

Shane

 

[alexlee]

Whilst basically the percentage argument over the long term is true, the distribution of returns is also important for those reinvesting their equity. 7% compound pa is different to seven years of flat returns and then three years of 25% when you are compounding your equity with borrowings.

Shane, are you saying that some areas are more likely to get these 25% spikes (presumably followed by flat periods), and that you can do better buying just prior to these spikes? I don't know how to time purchases, so I just assume a 7% long term return.
Alex

 

[plusnq]

Shane, are you saying that some areas are more likely to get these 25% spikes (presumably followed by flat periods), and that you can do better buying just prior to these spikes? I don't know how to time purchases, so I just assume a 7% long term return.
Alex

No. I am saying that a property that demonstrates more consistent returns is better if you are compounding equity....than one which has more sporadic returns.

Cheers

Shane

 

[Bon]

Mt. Isa has low rental returns? A 3 bedroom house a friend of mine just moved into is $420/week.... the owners of a 3 bedroom unit I was staying in wanted $450/week, then $550/week after I moved out.... finding accomodation up here to rent is very hard and not cheap at all!

If you were to buy a house with view of renting it out, I don't think it would be too hard to get a yield of at least 5-6%.... However, long term... I sure as hell wouldn't buy here! All is very merry while the copper and commodity prices are high, but what about when they come down and people start getting laid off? Eventually, I figure Mt. Isa to be a ghost town.

 

[Jackie1966]

If you throw a dart on the map of Australia, you will see that just about everything went up in the last boom .... No doubt, everything will go up again, in the next boom (be it 7, 10 or 12 years). You've just got to be prepared to ride the wave of negativity and doom and gloom (and pay the mortgage). The current market gives the papers something to write about and people something to talk about.

I believe, in time, any real estate purchase is a good investment. It just takes time.

For what it's worth, I think it's a great time to be an investor. What with interest rates going up, it just means we're going to have to put up rents to cover our costs (which, no doubt, is the reason why "they" are predicting a 40% increase in rents over the next few years). A lot of buyers will drop out of the market because of interest rate increases which means that housing prices will drop (supply and demand) which will make properties more affordable. In time (maybe 2 or 3 years), the rates will come back down, the herd mentality will take over and people will start buying again which will force the prices back up. So, for an investor, their properties will be rented at a great price while times are a bit glum, however, the values will get pushed up when the interest rates drop. Investors really can't lose, can they? Maybe I'm an optomist but I really can't understand why anyone would worry about this guy's report. Sure, on paper, things may not look ideal, however, in a boom, everything will go up.

Jacqueline