Is anyone worried by the dropping lending rates?

[SYDB]

Yes, but you chop and change on a regular basis SydneySide Bear. A few weeks ago you said this on CreditCrunch...



So a few weeks ago you were planning to mortgage yourself to the hilt because you though prices were going to the moon, and now you're telling everyone to run for the hills because prices are going to crash.

Shadow, that is simply not fair. Alot has changed in the last few weeks, in the main:

- Changes to the FIRB rules, which I have been crowing about as a huge cause of price inflation
- Increased IR rise expectations given continued strong resource sector data (which I do not believe to be indicative of longer term supply side issues that will emerge in China)
- The quickly shifting and rising political fallout associated with rising prices - the number of articles in the MSM about this is surging and it could prove a real issue at this years election. See today's article by Charles Purcell as a prime example and the 163 comments to boot:

http://www.smh.com.au/opinion/politics/rising-wave-of-voter-anger-over-housing-20100426-tmma.html

I think the position I had previously was one of distress and certainly a feeling of having missed the boat after I attended an auction about a month back. It was a feeling of despondence. I'm sure I'm not the only one who has had that feeling post auction.

But we must constant re-assess in the face of a situation that changes by the day. I believe you were once a property bear Shadow - or at least that Wulfie was once a property bull. Either way, I'm not ashamed to change my views as circumstances change. I actually find that more credible than people who always say buy, buy, buy, or sell, sell, sell - and generally with a vested interest either way. I'm honestly trying to figure out the best move and have been on both sides, bull and bear, recently.

My questions re: regulation of property advice remain unanswered.

Peace

SYDB

 

[Shadow]

Shadow, that is simply not fair. Alot has changed in the last few weeks, in the main:

- Changes to the FIRB rules, which I have been crowing about as a huge cause of price inflation
- Increased IR rise expectations given continued strong resource sector data (which I do not believe to be indicative of longer term supply side issues that will emerge in China)
- The quickly shifting and rising political fallout associated with rising prices - the number of articles in the MSM about this is surging and it could prove a real issue at this years election. See today's article by Charles Purcell as a prime example and the 163 comments to boot:

http://www.smh.com.au/opinion/politics/rising-wave-of-voter-anger-over-housing-20100426-tmma.html

I think the position I had previously was one of distress and certainly a feeling of having missed the boat after I attended an auction about a month back. It was a feeling of despondence. I'm sure I'm not the only one who has had that feeling post auction.

But we must constant re-assess in the face of a situation that changes by the day. I believe you were once a property bear Shadow - or at least that Wulfie was once a property bull. Either way, I'm not ashamed to change my views as circumstances change. I actually find that more credible than people who always say buy, buy, buy, or sell, sell, sell - and generally with a vested interest either way. I'm honestly trying to figure out the best move and have been on both sides, bull and bear, recently.

My questions re: regulation of property advice remain unanswered.

Peace

SYDB

OK, fair enough, but it just seems that you went from bear to buyer and back to bear pretty quickly. As for the changes you mentioned, well the announced FIRB change is just tinkering at the edges. The removal of the price limit has not been touched, and basically all the foreign buyers need to do now is get a rubber stamp for the purchase. There is nothing that actually reduces their ability to buy. This is just the governments way of measuring the numbers of foreign buyers and appearing to be doing something.

Interest rates will rise if the economy is strong. House prices tend to rise when interest rates are rising. Interest rates rose from 2002 to 2008, and house prices rose the whole time, apart from 2008 when sentiment changed due to gloomer scaremongering about the forthcoming double digit unemployment and worst recession since 1930. If it ever looks like property prices are going to crash then interest rates will be slashed and the FHOG boost will reappear.

 

[SYDB]

Why? What's parts of the 'sell' side equation are you referring to? Agents giving advise to whom? Buyers, sellers?

In the main:

- Buyers agents and;
- Property investor guru types who run seminars/websites/go on "Your Money You Call" and advise people on what they think they should do with their money

Both of these people should be acting in the best interests of their clients and a fiduciary duty should be the standard. They should be licensed and subject to certain requirements, as per financial planners - I use financial planners as the model as it is very, very equivalent the type of advice they are dishing out - only RE is not considered a "financial product" under the corps act, hence there is no requirement for the above mentioned "advisers".

The effects of any poor advice can however be more devastating than bad share investments, given the degree of leverage required to purchase home and investment properties.

To a lesser degree:

- REA's. I've had REA's tell me a place will worth "a million bucks" (asking is 700K) in 5 years time. This equates to financial advice and should be illegal. I know better than to listen, not all do......as we found out for example with the Storm financial planning collapse......

Cheers

SYDB

 

[andrew_de_a]

I see your point but I don't think it is a major problem. If you have had or are having issues you can quite easily go to Consumer Affairs department in your state.

I think people need to take a certain amount of responsibilty for their own actions.

 

[Intrinsic_Value]

Sydb,
at the end of the day its YOUR decision.
You must make a decision with regards to your own financial situation.
If you feel that property is signficantly over valued, then you should be happy to rent, and allocate that money to other productive uses.
Just because the market doesnt move in the short term in accordance with your views, doesnt make you right or wrong.

Having the correct valuation of intrinsic value will. And this will be determined over time.

In your other post you mentioned something about the last 3 weeks having an impact.
I can tell you that the underlying intrinsic value has NOT changed within the last three weeks.

So either you are not calculating the intrinsic value correctly, or you are being unduely influenced by Mr Market.

 

[Bigtone]

Sydb Mate,


Don't think property investing is for you. You can't apply strict financial criteria when so many emotional and basic need factors are also involved. It is not like a stock you dump when the yield goes bad or growth drops.

Everyone needs a place to live and people have links in a community like schools, work, sporting clubs etc, add the high cost of getting in and out of the market and it is clear most people will stay where they are regardless of peak and troughs in market. Also 50% plus in some suburbs own house outright so why would they sell if rates when up or they were unemployed etc, today or tomorrows property value is pretty much irrelevant until they sell.

Having said that why don't you just buy something (PPOR) and get into the market, you have proven you can't time the market neither can your former hero's so just buy something you can comfortably afford now and trade up later as your property and incomes grow.

Invest in stocks or something else but just get a a PPOR under the belt now. Personally I still think Syd offers good buying and I have some offers on a couple of places there atm.

There is a massive difference between academic and real life smarts, if Keen was so clever he would be a multi multi millionaire rather than selling his home at pretty much the worst time in the last 10 years.


Good luck

BT

 

[Token Funder]

Sydb Mate,


Don't think property investing is for you. You can't apply strict financial criteria when so many emotional and basic need factors are also involved. It is not like a stock you dump when the yield goes bad or growth drops.
*snip*

The difference between an investor and a chump is that the former makes decisions on "strict financial criteria", the latter doesn't. Though it is true to say an investor still has to form views as to the inputs whilst dealing with a range of uncertainties, it's still about the numbers.

 

[BayView]

Andrew, I can easily purchase. I am a FHB, have a deposit saved, and am approved for purchase price above the average home price. I simply see property well above intrinsic value at the moment and I believe this will change by years end.

The thing about this statement is that you are using an investor's brain within your purchase journey.

For more than 90% of all home buyers, this is not the case.

They are buying with their heart; where the school is for their future kids, where the park is, where the shops are, where the train line is to get to work, where the freeway is for the same reason, where the hospital is and so on.

All of this has to fit into their buying budget. They are not thinking about the "intrinsic value" as you are.

They are not even here on this forum. This is significant. The people here on this forum represent maybe .01% of the population at most.

I personally know no-one in my whole web of acquaintances and friends who comes on here.

Therefore; what you are saying has very little relevance in what decides how the majority of people buy.

A house's intrinsic value has almost bugger-all to do with what it sells for in the majority of cases.

Only us investors give a rat's about a house's value.

Normal home buyers will still buy an over-priced house, and try to pay a bit less for it so they can brag what a bargain they got. But they didn't really get a bargain - the intrinsic value wasn't there, was it? We investors know better...

So, even though you are pre-approved, have a deposit and all that; you are gunna wait for the "right time to buy", for when the intrinsic value is correct?

What makes you the expert on intrinsic value?

I have bought and sold over a dozen joints, and I am no expert, but geez we've done well even though being ignorant.

Good luck then, and we'll ask you in 10 years time how your (property) investing career is goin'.

I'm tipping you will still be priced out of the market then, and waiting for the intrinsic value to correct itself.

 

[SYDB]

You could be right Marc. No one really knows I guess. Maybe I will be priced out in 10 years, or maybe I'll be able to buy a house for 10-20% cheaper than I can now in 6 months............or maybe a zillion different things could happen. I'm happy staying out and saving more for the time being, we shall see what the future holds!

You're right I am taking an investors mentality into the purchase of a PPOR, it's just the way I think.

All the best

SYDB

 

[tobe]

Wouldnt you be better off just buying an investement property now, one that does provide good value? that way you could at least hege your bets. The diference in the property market is there isnt just one market, why dont you buy in an undervalued suburb, or another city, or even state? That way, if the PPOR market your looking at does lose value, you can still take up the oportunity, if it doesnt, you will hopefully ahve built up some equity to help afford the higher prices with your astute purchase?