Investor's dilemma... is the property market 20% overvalued at the moment?

[see_change]

Steve

I would not be selling shares :

"When share prices rise above the underlying values that justify the price'

Share prices fluctuate above and below their justifiable valuation.

The fluctuation in prices have as much to do with emotions as genuine value. Currently many shares would be priced below their valuation but until the market starts moving up , you'd be game to buy at the present .

If you sold "when share prices rise above the underlying values that justify the price" you would be missing out on every stock boom , because during the booms , the prices are always higher than justified, but it is the emotions that drive it there.

see change

 

[coolstyle]

Sorry to spoil the fun in shares ... but Is the property market 20% overvalued?

I don't have time to scan my memory or famous quotes in good books by 'experts' right now ... so I'll make a judgement myself..

I think everyone agrees we are either at the edge of a cliff (of a boom), going to plateau for 2-8 years, or rise at a rate less than or equal to inflation.
- Generally speaking - I do agree with this.

There will always be exceptions where more emotional purchases come into play ... such as popular new area's which were once 'slums', some beachside suburbs, and the 'well marketed' inner city/ city fringe apartment market, etc ... which will fluctuate more than average movements as more emotion is involved.

My gut feel is to stay away from these area's while we are close to a boom - unless of course the area is fundamentally undervalued (contrasting to other areas in the capital city).

By 'fundamentally', i mean rental vs loan payments, neighbouring suburbs, or historical outperformance of a particular location.

Where am I looking to buy? .. I'm sticking to what I think is a reasonably low risk approach of purchasing large block (600+ sqr mtr) within 10-11km's from the city, and for sub 200k.
--> I realise this will limit me to some area's with bad reputation for quality of living, but I think this is the best long term approach, particularly considering I'm paying careful attention to generic potential such as parkland, upcoming/ wealthy neighbouring suburbs, transport (public & ease of car access), nice quiet street with the appearance of less than average condition house.

... ran out of time ... but please guys .. criticise my hypothesis of the market (and my plan) if you can find any holes in this.
--> note - I am a beginner and this will be my first purchase.

** Also .. I must make the point that there seem to be an increased number fo rental properties available for a cheap buck on the market ! .... around $150 for 2 bed apartment in Fairfield 400 mtrs from station?.. sounds like the asset values will react to this oversupply (or perception of).

Cheers,
Coolstyle

PS: My take on the stockmarket?
--> If I was not holding my cash for a deposit, I would invest in +5% yield consistent performers such as ANZ, NAB, even AXA .. ..
Apart from this sector - I think generally the market has about 3 years to reach a solid boom, then it will drop off and the property market will begin to gain momentum again.
- I still see a lot of good property area's which seem out of sinc with the rest of the market ...

 

[steven]

Originally posted by Mikhaila
Hi Steven,

I’ll try to be short as I don’t want to start a discussion about when to buy or sell shares. I just want to make couple of comments.

1. I didn’t make any suggestion when to buy/sell shares, but just expressed my view how it actually works in reality.
2. Theoretic knowledge is great. It does not work too well in real life way too often.
3. What you say in your original post is not quite the same what you are saying in your second (may be I misunderstood the first posting)
4. If one can reliably predict when a given investment market peaked/bottomed, this is like having a crystal ball. There are countless methods of doing the predictions, many of them complex mathematical models. So, giving and believing in advices like you quoted above “When to sell/buy shares” is naïve at least.

Last thing, there is well known saying in share market “buy higher highs and sell lower lows”. If this phrase taken out of context or blindly applied by novice investors it may be dangerous, but generally speaking it is true and wise suggestion. Unfortunately, majority does just the opposite and loose money.

Cheers

Its not rocket science, when the share market peaks it is followed by a decline or a crash, followed by investment in R Estate.
Now if you choose to invest in the stockmarket at its peak thats up to you, but this will have no bearing on the outcome or the principles of the economic clock,
so to answer Hobbos Question, what happens when the share market peaks, (REAL ESTATE INVESTMENT)
Regards Steven.

 

[bundy1964]

Originally posted by coolstyle
Sorry to spoil the fun in shares ... but Is the property market 20% overvalued?

Hi coolstyle

Property market is supply and demand, lifestyle choices and emotion.

There is no more beaches being built near the cities so supply is low and demand is high, so that = high prices.

Inner city appartments are being built still, vacancy rates could be a problem from oversupply, so that should = stable or declining prices.

A place in the suburbs is all about location location. Near CBD, shops, transport, services, entertainment and employment it will hold or improve value.

My lifestlyle choice is for a large block, within easy reach of the city with shops close by. If I moved I would like all of that and to be on a main rd location with a shopfront.

Emotional buyers will always drive prices up and motivated vendors will sell undervalued. You just have to know when to walk away when the price is over your valuation.

So in short the answer is yes and no.

bundy

 

[mmerlin]

Originally posted by JumJones
Yeah, this follows Steve Navras method of calculating what the max price you should be payin for a particular property is ..

Checkout his website for details, but the gist of it is basing the price on what you can rent that particular property out for and multiplying that into the three/five/whatever year average yield for the suburb the property is in.

I think its a fairly general equation - tying down the yeild % and rental return requires a bit of give and take so the purchase price is gunna be +- x%

Thanks for the reference JumJones. I hadn't read Navra's site and they have some interesting articles there.

The one you are referring to is
www.navra.com.au/media/291002.html

<Quote>

Navra Investments says investors should obtain a three to five-year median rent for the area they are considering.

Assuming the yield in the suburb is 5 per cent on a rent of $250 a week, then dividing the rent by the yield as a percentage and then multiplying by 52 gives the real value of the property. In this case $260,000.

“Property should only be purchased up to this value if you wish to achieve real capital growth in the short to medium term,” Navra says.

</Quote>


This all sounds good, but does anyone know where these kinds of figures published?
i.e. for a particular suburb...
- 3 to 5 year Median Rents
- the "Yield" of that suburb (I suppose average per year?)

Thanks to everyone who has added to this thread, it's great to hear people's perspectives.

mmerlin

 

[steven]

Originally posted by coolstyle
Sorry to spoil the fun in shares ... but Is the property market 20% overvalued?

I don't have time to scan my memory or famous quotes in good books by 'experts' right now ... so I'll make a judgement myself..

... ran out of time ... but please guys .. criticise my hypothesis of the market (and my plan) if you can find any holes in this.
--> note - I am a beginner and this will be my first purchase.

Cheers,
Coolstyle

Coolstyle, as you are new to investing i would not jump into making a decision just yet,
there is a lot of info on this forum to be found, read as much of it as you can, Ask questions, listen to the answers, read everything regarding investing you can get your hands on, then you will be able to make an informed judgement, based on knowledge, and then you will know when and where to make your first purchase, with confidence. Good Luck.
Regards Steven.

 

[Mikhaila]

Originally posted by steven
Its not rocket science, when the share market peaks it is followed by a decline or a crash, followed by investment in R Estate.
...,
so to answer Hobbos Question, what happens when the share market peaks, (REAL ESTATE INVESTMENT)
Regards Steven.

Almost agree with the above. It should say "what happens when the share market crashes, (REAL ESTATE INVESTMENT)" I am glad you changed/corrected your point of view so soon. The post I replied to was totally different to what you saying now.

from my understanding of the investment cycle, when the share market peaks, investors look towards the realestate market,
and after a major share market collapse, investors then look towards investing in a rising share market,

 

[steven]

Originally posted by Mikhaila
Almost agree with the above. It should say "what happens when the share market crashes, (REAL ESTATE INVESTMENT)" I am glad you changed/corrected your point of view so soon. The post I replied to was totally different to what you saying now.

You have to be joking, Do i have to spoon feed you again,
read my first post and second post, then read it again slowly, then read it again out loud to yourself,
I have not changed or corected anything,
Now just becouse you failed to grasp my point, do not accuse me of changing my post.
I did not feel the need to insert decline or crash after the word peak in my first post, I assumed anyone with a brain would know that after a peak there is a decline/crash. But not you,
So DID include the word decline/crash in my later post just for YOUR benefit, becouse you have special needs.

 

[Mikhaila]

No I am not joking and there is no reason to be abusive. It makes you an idiot.

I did not feel the need to insert decline or crash after the word peak in my first post

Well I inserted it for you. Here it is :

from my understanding of the investment cycle, when the share market peaks then declines/crashes, investors look towards the realestate market,
and after a major share market collapse, investors then look towards investing in a rising share market,

How does it sound now? It is pure nonsense unless you want to insert/omit something else.

If you feel the need to save the face, just say it was a typo.

 

[Aceyducey]

Originally posted by steven
So DID include the word decline/crash in my later post just for YOUR benefit, becouse you have special needs.

Steven,

Conduct unbecoming a gentleman.

You destroy your credibility with posts like this.

I will assume you are new to the web and have not learnt nettiquette as yet.

I suggest you visit this guide: http://pixel.cs.vt.edu/class1/spinners/InternetSpeak/nettiquette.html and review it (particularly the second last point, which says in part:

'Be courteous and respect other people.'

Also review: http://www.albion.com/netiquette/

Cheers,

Aceyducey

 

[steven]

Originally posted by Mikhaila
No I am not joking and there is no reason to be abusive. It makes you an idiot.


Well I inserted it for you. Here it is :

How does it sound now? It is pure nonsense unless you want to insert/omit something else.

If you feel the need to save the face, just say it was a typo.

Mikhaila, It was not a typo, this is the point i have been making all along, you are splitting hairs over two words, Decline & Crash.

and you have failed once again in your perception of everything i have said, as I said befor read my posts, then read them again,
You are missing the point, the point is, i did not feel the need to type decline or crash after the word peak,in my first post as i assumed everyone knows after a peak there is a decline,
dont complicate the issue by inserting words in to my quotes, this will confuse you even more,

 

[steven]

Originally posted by Aceyducey
Steven,

Conduct unbecoming a gentleman.

You destroy your credibility with posts like this.

I will assume you are new to the web and have not learnt nettiquette as yet.

I suggest you visit this guide: http://pixel.cs.vt.edu/class1/spinners/InternetSpeak/nettiquette.html and review it (particularly the second last point, which says in part:

'Be courteous and respect other people.'

Also review: http://www.albion.com/netiquette/

Cheers,

Aceyducey

Aceyducey, I would like to point out to you that I am allways courteous and show respect towards other people,
and I take offence to your post that i do not,
and I would like to add that your interpretation of the words I used "special needs" is wrong,
(special needs as in, to add decline or crash after the word peak)which is the whole point of this silly stupid debate,
You assumed wrong, and flamed me becouse of your asumption.
so may i suggest you get all the facts correct before you hand out the nettiquette Tips.
Kind Regards Steven

 

[XBenX]

ouch - I didnt know being abusive makes you an idjiot ?

I better watch out.... I too suffer the same fustration as Steven w/ ppl who choose to not join the dots....

 

[Aceyducey]

Originally posted by XBenX
I better watch out.... I too suffer the same fustration as Steven w/ ppl who choose to not join the dots....

XBenX,

I too have this infliction, but I am getting better at understanding that other people don't necessarily see things the same way I do and it doesn't imply any limitation on their part, simply that I should communicate better.

Communication is a tricky business & not worth getting hot under the collar about - my hat's off to Mikhaila for keeping his cool.

Steven, on rereading your post, perhaps I misunderstood ' special needs' which does have very definite connotations in dealing with people with disabilities - however you did use 'spoon-fed' and the general tone of your post leaves me still recommending those netiquette guides for you.

Cheers,

Aceyducey

 

[steven]

Originally posted by Aceyducey
XBenX,

I too have this infliction, but I am getting better at understanding that other people don't necessarily see things the same way I do and it doesn't imply any limitation on their part, simply that I should communicate better.

Communication is a tricky business & not worth getting hot under the collar about - my hat's off to Mikhaila for keeping his cool.

Steven, on rereading your post, perhaps I misunderstood ' special needs' which does have very definite connotations in dealing with people with disabilities - however you did use 'spoon-fed' and the general tone of your post leaves me still recommending those netiquette guides for you.

Cheers,

Aceyducey

Aceyducey, glad to hear you have reread the posts, and now realise you may have misunderstood what I said,

I would be very interested to hear how you feel the word spoon fed requires specific attention from you, yet you failed to make any comment on the word Idiot as posted by Mikhalia,
maybe you overlooked that bit, as it conflicts with the argument you are trying to make,
Regards Steven.

 

[Mikhaila]

May I suggest we just let it go . It’s silly and not worth it really. The posts are all here and it is very clear who said what, why and when. Also it is clear who had a point and who didn’t. Fortunately it is in black and white and unambiguous at all. So, how about taking a deep breath and letting it go

 

[Aceyducey]

Steven,

You misunderstand, I'm not making an argument, I'm pointing out that courtesy is the key to credibility online, and your courtesy has been lacking.

What does it matter whether others have behaved badly, it still would be no reason to respond badly.

Cheers,

Aceyducey

 

[steven]

Originally posted by Mikhaila
May I suggest we just let it go . It’s silly and not worth it really. The posts are all here and it is very clear who said what, why and when. Also it is clear who had a point and who didn’t. Fortunately it is in black and white and unambiguous at all. So, how about taking a deep breath and letting it go

Mikhalia I could not agree more,
I for one am sick of this petty stupid topic, and i am not proud of my contribution to the bickering. nothing of value came from it, lets move on.

Regards Steven.

 

[HermanZ]

Plse forgive my rudeness but I come from NZ and am only of average intelligence (special needs methinks).
May I make the following points.
1. Youse jokers have just ruined a reasonable post.
2. Most of us lurkers fear being made a pratt, with the world watching. Hence--we dont post
3. This is my 3rd post if you jump all over me Ill go back to Lurking.

Regards
HermanZ

 

[astroboy]

C'mon guys, lighten up. It's a public forum some degree of critisism is to be expected and its not the end of the world.

After all if someone has a go at you, that is only *their opinion*, no reason to believe they are correct, bite back if you want or take the approach AceyDucey did. Who says those who jumped on you have any idea anyway ?

I'm not saying anyone is right or wrong, everyone included. I'm not here to judge.

Discusssion is good and i guess critisism is part of that, just don't be afraid to throw your 2 cents worth in, someone may try to shoot you down in flames but dozens of others may silently agree with you and (you never know) others still may go, 'hey, I see it now!'

astroboy