Those graphs make QLD look more and more appetizing.
How long till a correction hits the property market
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Those graphs make QLD look more and more appetizing.
Don't see a massive correction. Maybe a 10-12% dip over 24 months from late 2015/early 2016 before flattening. Anything after that is too hard to pick.
Where is that Hong Kong property correction people have been waiting for 10 years? Eh?
http://www.google.com.au/url?url=ht...EQFjAB&usg=AFQjCNGa2-7HRVAy_k1BGOa0q9yXomOHSQ
Where is that Hong Kong property correction people have been waiting for 10 years? Eh?
http://www.google.com.au/url?url=ht...EQFjAB&usg=AFQjCNGa2-7HRVAy_k1BGOa0q9yXomOHSQ
Last time I looked , a 10 -12 % dip would be fairly large in historical terms
Cliff
Oh ok, considering some holdings would have probably doubled in a few years if bought and timed well, one should be happy to wear that.
This is true. Fact is for any property owners, if a potential 10% drop worries you, or will put you under financial distress, you shouldn't be a property owner.
Whenever that drop does happen, we'll see the people that have overstretched themselves with the FHOG etc struggling and having to sell.
For investors, and me personally, a 10% drop would bring a shrug of the shoulders at best. If anything else, I'll be excited at the buying opportunities that are about to present themselves.
It wasn't long ago that HK property price dropped 61% from 1997 to 2003. It appears HK price is at new historical high again, and I will not be surprised if it has a major correction again.
http://triplecrisis.com/the-asian-housing-bubble-burst/
1997 is a very long time ago.
Also they were quite unusual incidents - 1997 was the Asian Financial Crisis, which can probably occur again. So I'd give you that.
But 2003 - hardly a useful metric - since that was the outbreak of SARS, which at the time everyone thought would be the end of human civilisation in Asia. I'd argue in the outbreak of SARS, HK would've hit the current peak much sooner.
Also they were quite unusual incidents - 1997 was the Asian Financial Crisis, which can probably occur again. So I'd give you that.
But 2003 - hardly a useful metric - since that was the outbreak of SARS, which at the time everyone thought would be the end of human civilisation in Asia. I'd argue in the outbreak of SARS, HK would've hit the current peak much sooner.
As an Aussie I'd be all over it if the market had another 61% pullback here in HK, only to have watched the prices double & triple over the past few years. Entry level market for a shoe box is definitely out of reach unless you have a spare 130+k AUD!
I think the biggest reason for a market pullback is when rates go up & people have extended themselves too far. Wonder how many are leveraging themselves on 90%+ LVR's & not factoring in rates going higher in the future. Currently my small portfolio sits neutral but for every 1% rise would cost me over 15k a year in pre-tax expenses.. Anything more than 2% higher & things become interesting!
For now though October is famous for a pullback in the market decided so Ive decided to sit on the sidelines for the next month & see if the AUD continues to go lower, there are always events going on in the world but right now too many for my liking at the same time... geopolitical tensions in Ukraine / Iraq involvement now with the Aus terror alert being raised to high / Ebola not contained / China slowing .. interesting times!
I think the biggest reason for a market pullback is when rates go up & people have extended themselves too far. Wonder how many are leveraging themselves on 90%+ LVR's & not factoring in rates going higher in the future. Currently my small portfolio sits neutral but for every 1% rise would cost me over 15k a year in pre-tax expenses.. Anything more than 2% higher & things become interesting!
For now though October is famous for a pullback in the market decided so Ive decided to sit on the sidelines for the next month & see if the AUD continues to go lower, there are always events going on in the world but right now too many for my liking at the same time... geopolitical tensions in Ukraine / Iraq involvement now with the Aus terror alert being raised to high / Ebola not contained / China slowing .. interesting times!
Yes it is , and often in the past when people get nervous about shares they look for safer alternatives like , govt bonds , term deposits and property
Cliff
Hey Cliff, yeah thats the plan should nervousness hit the market & the likeliehood of AUD going lower. Potentially a window of opportunity to get into the market saving me thousands in exhange rate transfer with the bonus of increased serviceabilty to open up my buying options which is quite restricted at present
"This is true. Fact is for any property owners, if a potential 10% drop worries you, or will put you under financial distress, you shouldn't be a property owner. Whenever that drop does happen, we'll see the people that have overstretched themselves with the FHOG etc struggling and having to sell."
Thats exactly right. Thats why is important to buy well and definetly not in a boom where you are paying inflated prices. Its the people who buy in booms and pay too much that when IR go up and prices eventually level off or dip they start hating property and have to sell. Then the smart investors just wait like sharks to snap up the really good deals
"For investors, and me personally, a 10% drop would bring a shrug of the shoulders at best. If anything else, I'll be excited at the buying opportunities that are about to present themselves."
Echo what I said above. Me personally, i love down markets becasue i know i always buy under market value and never in a peak of a boom. So when the market dips not only do I not feel affected but I love the bargins... I feel its like a shopping spree!! And lets not start on the shift of negotiating power..
Thats exactly right. Thats why is important to buy well and definetly not in a boom where you are paying inflated prices. Its the people who buy in booms and pay too much that when IR go up and prices eventually level off or dip they start hating property and have to sell. Then the smart investors just wait like sharks to snap up the really good deals
"For investors, and me personally, a 10% drop would bring a shrug of the shoulders at best. If anything else, I'll be excited at the buying opportunities that are about to present themselves."
Echo what I said above. Me personally, i love down markets becasue i know i always buy under market value and never in a peak of a boom. So when the market dips not only do I not feel affected but I love the bargins... I feel its like a shopping spree!!
And lets not start on the shift of negotiating power..
A 10% drop is very mild, wouldn?t even call it a correction. 30-60% drops, that?s more like it.
As prices drop a crash sorts of feeds on itself as investors equity they planned to use evaporates, banks get worried and stop lending, and would be buyers hold back waiting for further falls.
Unlike a stock market crash a property crash takes many years to unfold, sellers take a long time to accept the new reality but eventually they do.
As prices drop a crash sorts of feeds on itself as investors equity they planned to use evaporates, banks get worried and stop lending, and would be buyers hold back waiting for further falls.
Unlike a stock market crash a property crash takes many years to unfold, sellers take a long time to accept the new reality but eventually they do.
Can't see that sort of correction happening Joe. I can't recall the figures but understand that 1/3 of property is owned outright so has no lending associated with it. I think the rest was 1/3 PPOR paying a mortgage and 1/3 IP with mortgage but could be corrected.
Also, the RBA did a servicability check recently and concluded that those holding property mortgages are those most able to service them. i.e. Affluent Gen Xers in high paying jobs. The systemic risk delta was quite low.
All in all, I think Sydney property will continue to run up for another 3-5 years albeit at a progressively lower pace. In time it will have to plateau, but by then we're talking a median comfortably over $1M.
My parents' place in Castle Hill just went up $250K in the last 12 months now the train station next to the council chambers has started being built. I think their place is now worth around $1.5M. Very average 70s joints around the corner are selling for that much with multiple parties interested.
I consider financing costs the biggest risk to mitigate against so have also just locked away $2M of my loans at 4.99% for five years. That's a fantastic rate and in five years time my debt will be a lot lower, my rents a lot higher and my salaried income a lot higher not to mention the property values themselves. So, for me, there is no longer any servicing risk. I guarantee I'm not alone in eliminating that risk either...
Cheers,
Michael
Also, the RBA did a servicability check recently and concluded that those holding property mortgages are those most able to service them. i.e. Affluent Gen Xers in high paying jobs. The systemic risk delta was quite low.
All in all, I think Sydney property will continue to run up for another 3-5 years albeit at a progressively lower pace. In time it will have to plateau, but by then we're talking a median comfortably over $1M.
My parents' place in Castle Hill just went up $250K in the last 12 months now the train station next to the council chambers has started being built. I think their place is now worth around $1.5M. Very average 70s joints around the corner are selling for that much with multiple parties interested.
I consider financing costs the biggest risk to mitigate against so have also just locked away $2M of my loans at 4.99% for five years. That's a fantastic rate and in five years time my debt will be a lot lower, my rents a lot higher and my salaried income a lot higher not to mention the property values themselves. So, for me, there is no longer any servicing risk. I guarantee I'm not alone in eliminating that risk either...
Cheers,
Michael
I think you may be right Michael, with the condition that there is no external catalyst which could cause panic in the markets.. As mentioned, there are just so many uncertainties at the moment in the global political and economic landscape (Ukraine/Iraq/Syria/Ebola/China etc) that who knows what could happen in 3 weeks, in 3 months or 3 years!
I have been attending Sydney auctions most weekends with my brother who sold his 1 bed unit in Cammeray in March, and has been outbid week in week out by ridiculous bids, usually $200-$300k over the asking price. We?re talking tiny 2-3 bedroom houses on 400sqm with asking price of $1m going for $1.3m..
With regards to fixing current loans, I?m planning on doing the exact same on all of my loans that are not already fixed.. Attended an auction on Saturday of an apartment in the same block of one of mine in Kensington, and watched an ?an investor? buy a 38sqm 1 bed unit for $485k. I bought last year for $376k.. It?s all timing!!
I have been attending Sydney auctions most weekends with my brother who sold his 1 bed unit in Cammeray in March, and has been outbid week in week out by ridiculous bids, usually $200-$300k over the asking price. We?re talking tiny 2-3 bedroom houses on 400sqm with asking price of $1m going for $1.3m..
With regards to fixing current loans, I?m planning on doing the exact same on all of my loans that are not already fixed.. Attended an auction on Saturday of an apartment in the same block of one of mine in Kensington, and watched an ?an investor? buy a 38sqm 1 bed unit for $485k. I bought last year for $376k.. It?s all timing!!
Haha prices are not going to pull back 61% in HK. People have been waiting for that since 2006. And since 1999 in Australia.
A lower AUD would support higher Australian house prices.
Hey Deltaberry, agree prices won't pull back like that ever again.. if i had the funds to buy here a couple years ago i would have but didn't have the residency status or the funds back then.. 130k+ just for a deposit to get in the market here I think is crazy when i can use those funds for 2 places in Aus with future tax benefits! Although in saying that i believe there is no CGT charges here if held for 3 years.
Any somersofters got a spare 105 million (819HKmillion) for the most expensive place in the world? Btw if your not going to live in it then you'll only need to come up a 50% deposit! Pocket change for some of u
http://www.luxurystnd.com/buy-the-worlds-most-expensive-home-in-hong-kong-for-105-67-million/
Decided my hard earned cash is better invested back home in Aus, opportunity is starting to present itself, the 4 cent drop in AUD will at least cover the stamp duty charges.. hoping it can go a few cents lower in the next couple months.. knowing my luck it will go back to 95cents & i'll then instead be drinking at the bar downstairs!
Only an amature attempts to time when a bull market will end.
"A bull market will continue until it doesn't."
The above statement might sound foolish, but its one of the wisest trading sayings.
There is plenty of money to be made in a bull market and in nearly all cases the best returns are seen in the final stages.
So how does an intelligent property investor cope with this? (Given that property is illiquid). In my opinion its a some form of combination of the following:
(a) gradually selling off property
(b) reduce LVR's massively during the upswing, to take advantage of future weakness (when it comes).
Given my focus on velocity of returns I personally prefer (a)
But that's just me.
and what about the other opportunity costs of holding?
Especially if negatively geared?
And at a minimum against the 'risk free' rate of return (think term deposits).
Do a few equations on this an the loss in velocity of returns can be significant.
This little fact is actually beautiful to assist in the sustained nature of the bull market.
The market is adjusting to the factoring in a lower interest rates for longer.
Sea change people must understand one underlying medium term factor that has been positive for property for the last 40 something years.
A secular decline in interest rates.
This will not repeat over the next 40 years, as interest rates are now so low.
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