Is our understanding about property and the market so tabloid based?

[tcocaro]

Do we, and when I say we, I mean you me and the rest of Australia lack such basic understanding of the economy that our decisions are based solely on reading the headlines of the daily telegraph or worse a current affair?

What exactly am I eluding too? Ok try and remember back, waayyy back say to December last year (ummm yes 3-4 months ago) what were the headlines? Housing affordability, price rises around the country rising, the start of the new boom etc etc.

Now? The collapse of civilization as we know it, the collapse of the financial sector, share market nosedive and everyone has stopped buying property… stopped buying property altogether??? apparently we have all elected to live in free imaginary little castles sprinkled with fairy dust and located on a nice green hill overlooking a river made of chocolate and marshmellows…. PLEASE!! Think people.

I am not trying to portray myself as the all knowing, all seeing eye but surely we can question things a little more than we are.

If people are selling up because they believe such idiotic trash as the article I read recently stating prices in sydney will drop as much as 30%.... ummmmm ok then please email me your details as I will love to purchase your property for only a 25% reduction in price…. Arnt I such a nice guy?

30%??? Oh please so the average home of 500k odd would be $150k less? i.e. $350k? in a nutshell if this was to happen basically we will be in an economic crisis bigger than we have ever seen in history. Banks would have lost their security and make a loss on every single repossession, this will lead to a run on major banks for savings and complete the self full filling of the finance sector collapsing which would the lend to a much broader economic depression so on so on.. i.e. Armageddon.

Orrrrrr the much less exciting realistic reality that we will see a slight dampening of prices (with the exception of Perth) i.e. little growth or a small 1-2% drop in some areas (e.g. the western suburbs in sydney) followed by strong price growth in the following years.

But that’s not very exciting news is it.. basically reporting on reality? Rather than, somehow linking bear sterns collapse with the fortunes of your 4 bedroom house in the burbs?

The problem is that question that pops into your head… “what if” … “what if the world economy dives into recession, what if aliens come and abduct Bernanke for brain experiments only to find none.. etc etc

This thinking is sometimes confused with “worst case analysis” which if taken to such extremes is a pointless exercise because if you will never ever do anything because let me break down worst case for you in any investment.. you loose the lot.

So its much more productive to turn off the tv, stop reading the papers and grab yourself some pure statistics e.g. BIS Shrapnell and ask yourself is there or isn’t there a 28,000 in NSW, 47,000 in QLD.. dwelling defficiency, what does this mean for prices, is there an oversupply or undersupply, learn the dynamics of an economy.. yes actually involves reading beyond the headline scan we all do at the newsagency as we pickup “property investment” magazines etc.

Once we do this we can look beyond “commentary” and make sound decisions.. ones we can learn from because there’s no point screaming 12 months from now when the market picks up.. WHY DID I LISTEN TO A CURRENT AFFAIR…

Good luck and enjoy the ride.

 

[buzzlightyear]

Yes, because MYOPIA rules. And its getting worse..

 

[keithj]

One of my pet hates at SS is threads based on an article from the popular press as a reason for either D&G or exhuberance. These articles pick up a single recent statistic/event, and portray it as the only thing that matters. They rarely look at weighting it depending on the source, the timeframe, the relevance or in the context of the bigger picture.

I rarely read newspapers, or watch TV. They aren't there to present facts or information, they are there to entertain the gullible masses.

 

[peastman]

I think all you have to do is look at the post http://www.somersoft.com/forums/showthread.php?t=41184 about how people here see the future. It shows about 80% of property investors are positive. I would say the people here are better informed re property than the average population and therefore more likely to be right about these matters than ACA.

 

[alexlee]

Also read the comments about the poll, though. I didn't vote because I thought it was misleading. However, if forced to I would have voted one of the positive ones, even though I expect prices to fall in the next couple of years.

But in answer to the original post, yes, most people wouldn't know how finance worked if it came over and bit them (and bite them it has). That's why most people aren't rich and are saddled with stupid levels of bad debt.

Still, as investors we need such people. As renters, to keep the economy going, etc.
Alex

 

[FelixL]

I still find popular media very useful resource, when they are saying how doom and gloom is residential property, its a good time to buy. When they are harping on residential property being the hottest thing, then its time to think about selling some of the properties in the over-hyped area

I like reading raw statistics from ABS and BIS Shrapnel, and even more so when the statistics are pointing differently to what popular media is saying

 

[tcocaro]

I still find popular media very useful resource

I agree with your comments.. reminds me when i was in a news agency and i was browsing through a property mag when someone looked over my shoulder and said.. "so getting any good tips in there on what to do?"

i replied.. "yep.. i know now what you are all doing so i now know what i must not do"

condescending i know.... but really thats the only reason i read such magz.. i feel they are 6-12 months off the ball because they rely on whats happened before in order to report i.e. 12 months of growth before they start saying "brisbane is booming" buts its already been for 12-18 so if you jumped in on that news its too late, the more of such claims for prolonged periods simply heighten the need to stop buying hold or sell. (if you are into timing cycles)

etc etc..

 

[steveadl]

condescending i know.... but really thats the only reason i read such magz.. i feel they are 6-12 months off the ball because they rely on whats happened before in order to report i.e. 12 months of growth before they start saying "brisbane is booming" buts its already been for 12-18 so if you jumped in on that news its too late, the more of such claims for prolonged periods simply heighten the need to stop buying hold or sell. (if you are into timing cycles)

etc etc..

Yup, totally agree. That's why the hotspots are a joke, and pretty much irrelevant by the time they write about it.

TV and other popular media is alright if you look at it for entertainment purposes, not education purposes. I wouldn't classify shows like ACA & TT as either! Same with my capital city newspaper.

 

[BayView]

Serious and professional investors don't use tabloid news on property for their research.

It is good to have the tabs it they dictates the scene for the sheeple to follow, who are mostly owner/occupiers and renters - not investors.

 

[Harris]

One of my pet hates at SS is threads based on an article from the popular press as a reason for either D&G or exhuberance. These articles pick up a single recent statistic/event, and portray it as the only thing that matters. They rarely look at weighting it depending on the source, the timeframe, the relevance or in the context of the bigger picture.

I rarely read newspapers, or watch TV. They aren't there to present facts or information, they are there to entertain the gullible masses.

If there is a series of D&G artciles in the mainstream press shouting recession, downturn, subprime crisis etc etc then the average investor (with 1 or 2 investment prop) might want to sell to get out of the market whilst values are relatively stable.

Multiply the selling by thousand of times from those average and uninformed investor and you get a glut of prop on the market showing surplus stock and depressed market. That yields to low clearance rates and further softening confirming the fear of those investors who would now take low offers.

The valuers then jump on that "recent low" figures and return low valuation.

Whilst the fundanentals stay strong, the depressing market should technically last for a short while and then start its recovery again, albeit with a low pool of investors/ purchasers at the start of recovery.

ANZ's latest commentary from their April resi prop outlook confirms the fact that demand is staying very strong and that they didnt see any recession or a slide in prop values.

http://www.anz.com/documents/economi...ril 2008

The strong fundamentals in this market will cushion the D&G'ers dream of a property crash.

Harris

 

[oc1]

Couple of other BASIC things we should know (in simple terms):

1. Owner occupiers make a larger share of market
2. Owner occupiers drive prices higher when things are going well (The opposite also applies)
3. This being the case, If sentiment is DOWN, they stop buying. You're average OO is not going to care about a housing shortage of x thousand dwellings per year. To base your whole argument on this is foolish. To ignore market sentiment is even more foolish. To think a snowballing effect of negative market sentiment won't effect most investors is foolish(er).

 

[Lake]

Sorry but I'll continue to do my own research and ignore the opinions of those who have a vested interest in maintaining this bubble. Fundamentals mean nothing when sentiment sours. You should know that.

Putting your head in the sand is both dangerous and irresponsible.

BIS Shrapnell??? Thanks for the laugh

When I bought my first property in late 2001, BIS Shrapnell came out with a prediction that Australian housing prices were overvalued and will crash by 30% by 2005. That was my first ever purchase and all the media ran a story on it so I was a bit spooked.

I know one colleague of mine sold her property based on that BIS report, and went back to renting. I bumped into her 2 years ago, and I dared not ask if she was still renting. But if she could sue BIS, she would have taken them to the cleaners!

Ever since, I've not paid any attention to any of these industry research reports. Yes I'd read them, but I'd take their prediction with a huge grain of salt.

Just like BIS's latest prediction that prices will increase by 40%. I find that a bit unbelievable, with the current credit crunch, uncertain economic environment, and many people hitting peak debt, I don't really think property as an asset class is going to do too well in the short term.

 

[Sunder]

Orrrrrr the much less exciting realistic reality that we will see a slight dampening of prices (with the exception of Perth) i.e. little growth or a small 1-2% drop in some areas (e.g. the western suburbs in sydney) followed by strong price growth in the following years.

Houston, we have a problem: (or maybe Sydney, we have a problem: )

Surburb, Postcode, State, Type, Yield, Median, 1Y, 2Y, 3Y price movements.
Kingsgrove 2208 NSW Unit 4.7% $253,000 -44% -33% -10%

Sylvania 2224 NSW Unit 4.2% $445,000 -34% -8% -15%

Berala 2141 NSW Unit 4.9% $203,000 -33% -4% -30%

Concord West 2138 NSW Unit 4.3% $309,000 -30% -29% 4%

Taren Point 2229 NSW House 3.5% $650,000 -19% -17% -18%

Zetland 2017 NSW House 5.0% $530,000 -17% -9% -15%

South Wentworthville 2145 NSW House 4.3% $341,000 -13% -13% -20%

Units down "up to" 44%.
Houses down "up to" 19%

Notice where I chose the houses from. Taren Point is not Sydney West or South West. Neither is Zetland, Sylvania, Kingsgrove or Berala. They're all middle to upper working class areas.

Hell, grant me one more:

North Sydney 2060 NSW House 3.6% $932,000 -10% 5% 4%

With a median of 932k, North Sydney is NOT mortgage belt.

BTW, all data courtesy of APM. (Unapproved, but it seems "fair use" to me - Education.)

Am I a GHPC member trying to shoot you down? Well, yes I am a member of that forum as well, but they probably know me more as a bull than a bear over there. All I'm trying to say is: "As tabloid as the media is, and as exaggerated as their stories are, they're rarely completely fabricated".

As property investors, you should all know that all markets go in cycles. House prices have had an unprecendented run. There will be a correction. It may not be a universal 30%, but it's clear "the worst" is not 1-2%. I'd say you'd be lucky if "the best" was 1-2% and the worst was closer to the forecasted 30%.

 

[coastymike]

South Wentworthville looks like a decent buy. At $341,000 you can get rents of around $400 per week based on what domain is saying. Interest on $340K will be around $27,000 so only a shortfall of $7K per annum. With depreciation deductions then this property would cost hardly anything. If it went down according to the projections this property will be positively geared in almost no time. Close to transport. Close to Parramatta CBD. Close to Westmead Hospital. Hmmmm.

 

[Sunder]

South Wentworthville looks like a decent buy. Close to transport. Close to Parramatta CBD. Close to Westmead Hospital. Hmmmm.

Some of these places that have been hammered already seem like a good buy. A friend is planning to buy in Guildford in the next couple months (Other side of Parramatta)

I agree with him that the yields are fantastic, and they probably have less correcting to do than the rest of the market, but I'm still holding out. Even if it doesn't rise, I still think I can do better holding cash. Late 2008, early 2009 is where it's at, I reckon. Just in time for the 2010 boom

 

[feihong]

I think this forum has seemed to reach an consensus that Sydney's due to pick up anytime, as the fundamental's there, and I have recommended Sydney to all my friends who are interested in property investing. I know that everyone's complaining about NSW government with its inaction, but could it be that the government is also one of the sheeps, where the infrastructure improvement projects will only start to go ahead as property price starts to pick up?? It certainly looks like a gold mine to me!!

 

[gooram]

I think this forum has seemed to reach an consensus that Sydney's due to pick up anytime, as the fundamental's there, and I have recommended Sydney to all my friends who are interested in property investing. I know that everyone's complaining about NSW government with its inaction, but could it be that the government is also one of the sheeps, where the infrastructure improvement projects will only start to go ahead as property price starts to pick up?? It certainly looks like a gold mine to me!!

Can you explain why you think Sydney house prices are going to rise? Surely yield alone is not enough to drive a market wide rise in prices... especially since this will only entice investors back into the market which make up a minority of buyers.

 

[FelixL]

I think Sydney is the most likely to pick up in property price.

1) Its been flat for quite a number of years, especially the western part, the price is so low now that it will very soon becomes cheaper to own a property than buying.

2) Has the highest oversea immigration due to nice weather and international fame

3) median price is not that much higher than Brisbane or Melbourne. Triditioanlly Sydney has a much higher median price. This was a big factor in lots of people moving interstate out of Sydney. Now that the price gap has gone smaller, less people will move out of Sydney, thus increasing demand

However, this will only happen if Australia doesn't go into recession and interest rate need to remain steady or heading down. Thats a gamble I am taking

 

[oc1]

I think Sydney is the most likely to pick up in property price.

1) Its been flat for quite a number of years, especially the western part, the price is so low now that it will very soon becomes cheaper to own a property than buying.

2) Has the highest oversea immigration due to nice weather and international fame

3) median price is not that much higher than Brisbane or Melbourne. Triditioanlly Sydney has a much higher median price. This was a big factor in lots of people moving interstate out of Sydney. Now that the price gap has gone smaller, less people will move out of Sydney, thus increasing demand

I'd use those reasons if i were to take a punt. I would need more concrete info before committing there.

 

[alexlee]

1) Its been flat for quite a number of years, especially the western part, the price is so low now that it will very soon becomes cheaper to own a property than buying.

5% yield and 8.7% interest rates?

2) Has the highest oversea immigration due to nice weather and international fame

Doesn't mean prices will go up. Rents will, though.

3) median price is not that much higher than Brisbane or Melbourne. Triditioanlly Sydney has a much higher median price. This was a big factor in lots of people moving interstate out of Sydney. Now that the price gap has gone smaller, less people will move out of Sydney, thus increasing demand

Are you still talking about Western Sydney? The Sydney median of about 500k doesn't really apply there.

I think Sydney will be the first to boom next time too, because it's further along the cycle. However, I don't see it happening for 3-5 years.
Alex