Is the property market about to bust?

[DanielG]

http://corporate.afgonline.com.au/i.../web_content/mortgageindex-feb10-national.pdf

What do you think? I hope so, I'm cashed up and ready to splurge, and a downturn in the market would allow me to buy more properties than I could right now.

 

[Propertunity]

I hate to burst your bubble Daniel but really........bear this in mind.
1. The property market did all its busting in the middle of the GFC. Top end properties took a hit of 20%. Mid-level median priced stuff did nothing much but their were some bargains to be had in SW Sydney. That boat has sailed off over the horizon.
2. Most Australian RE is OO'd - about 70% of homes are. OO do not continually take out mortgages. They stay put, pull their heads in during tough times and do whatever they can to 'save the house'. We are far from being anywhere near that situation IMO.
3. Investors have taken up the baton where FHBs left off.
4. Just because AFG had a slow Dec/Jan and want to make a headline news item out of it does not mean much. Dec/Jan is always quiet in RE. People go on holidays and do not look to moving etc.
5. Additionally, stock levels are LOW. You cannot take out a mortgage if you cannot find a suitable place to buy. And believe me, there are PLENTY of people looking to buy.

Cheers Dan,
Alan

 

[alexlee]

Let me ask, Daniel. Say the market does fall 10%. 15%. Whatever. When do you buy in? IF the market falls, you can bet there'll be plenty of articles and experts predicting further falls. At what point do you decide it's worth buying?

Actually, scratch that. Way too logical. Yes, the market is going to tank. Keep sitting on the sidelines and wait until some desperate sucker pays you to buy their property. Have fun.
Alex

 

[warrenkh]

re

This year I just dont see a property 'crash' coming in. There may be a drop in Median house prices - and this wound not be due to a fall in average house prices, rather more lower end properties been sold and or becoming available in the first 6 months or so.

The only thing that would bring down the house price crashing is that if the interest rate goes to 18% like the Keating years.

Warrenkh.2010

 

[pieman]

http://corporate.afgonline.com.au/i.../web_content/mortgageindex-feb10-national.pdf

What do you think? I hope so, I'm cashed up and ready to splurge, and a downturn in the market would allow me to buy more properties than I could right now.

No way in hell buddy. If you are "cashed up and ready to splurge" buy whenever you can and keep buying whenever you gain equity in those properties. Not rocket science, forget macro economics, just buy the *******s.

I've been reading that "cashed up and ready to splurge" stuff on here for at least 6 years by various people and hopefully they just bought instead of waiting for some fantasy property crash, where the faires dropped the prices of all 1000sqm blocks within 10k's of major city in australian to be worth 100k each and then they "snapped them up".
Wont happen mate, just buy after doing some DD on the property - simple

 

[willair]

http://corporate.afgonline.com.au/i.../web_content/mortgageindex-feb10-national.pdf

What do you think? I hope so, I'm cashed up and ready to splurge, and a downturn in the market would allow me to buy more properties than I could right now.

Just get in line with everyone else,anyone who bought into Australian
real estate over 5-10-15-20 years ago would not care less,when you buy properties for 50k that are now worth over 500k,then the market can tank all it wants,you either stay on the sidelines and watch,like so many in this site have done for all the time i have been in this site,or make it happen in a free market country..willair..

 

[Aaron Sice]

if median prices fall, it just means that a larger number of lower priced homes (homes with a value at or under median) sold in that particular area / state.

medians do NOTHING to support a case for rising or falling house prices.

 

[darcy13]

The last 2 posts from Pieman and willair I think tell you ( everyone ) what you really need to know about investing ( given your DD and all the others parts of it ) but I believe they have sumed up what needs to be done .



stuart

 

[hobo-jo]

Let me ask, Daniel. Say the market does fall 10%. 15%. Whatever. When do you buy in? IF the market falls, you can bet there'll be plenty of articles and experts predicting further falls. At what point do you decide it's worth buying?

Personally, when buying is around the equivalent cost of renting. It's been there before, will be there again.

From an investment perspective, when positively geared properties are possible or at least better than the crap 5% yield they provide in most cases at todays prices.

 

[piNoob]

http://corporate.afgonline.com.au/i.../web_content/mortgageindex-feb10-national.pdf

What do you think? I hope so, I'm cashed up and ready to splurge, and a downturn in the market would allow me to buy more properties than I could right now.

me too. I see no rush to buy for now, waiting to see what happens.

 

[Aaron Sice]

waiting lost some folk nearly $50k on average last year.

what will you lose this year?

 

[Sunfish]

waiting lost some folk nearly $50k on average last year.

Only one of my properties increased by that much gross and that is a development block whose time has come. But I paid my interest so I lost on the others last year. In my market your statement is incorrect.

 

[alexlee]

Personally, when buying is around the equivalent cost of renting. It's been there before, will be there again.

From an investment perspective, when positively geared properties are possible or at least better than the crap 5% yield they provide in most cases at todays prices.

Fair enough. But I haven't seen those sort of numbers since about 2001. By sticking to your rule, you've missed out on the last 10 years of gains.

Remember also, that's only your rule in determining when property is cheap or not. If the market doesn't agree with you, then the market can still go up. Owner occupiers don't care about yield.
Alex

 

[Propertunity]

Personally, when buying is around the equivalent cost of renting. It's been there before, will be there again.

Of course it is just part of the cycle that goes/comes around.

But are you really saying what you mean?
Example:
You could buy a $450K place that rents for $450pw now, but you'd rather wait for the next part of the cycle to runs it course where you pay $900K to buy or $900pw rent for the same place?

*edit* I see alexlee was posting much the same thing while I was typing

 

[Sailesh Channan]

I always recommend that people buy whenever the bank lends you money. You do not want to get caught up in the buying frenzy that takes place in the middle of a boom.

The only time I do not recommend buying is at the height of the boom. This is usually in the third year of a bull run. However, over a period of a couple of cycles such mistakes pale in comparison to the overall capital gain of your portfolio.

However, a reasonably good timing allows you to accumulate more properties sooner

.

 

[Propertunity]

me too. I see no rush to buy for now, waiting to see what happens.

Yes, let's all wait to see what happens to the chart in 2010 before we buy

 

[hobo-jo]

Fair enough. But I haven't seen those sort of numbers since about 2001. By sticking to your rule, you've missed out on the last 10 years of gains.

I owned a PPOR from 2006 to Jan 2010, so didn't miss out completey. It's not a hard and fast rule, simply a gauge (amongst others) I will be using to approximate where to buy back in.

Example:
You could buy a $450K place that rents for $450pw now, but you'd rather wait for the next part of the cycle to runs it course where you pay $900K to buy or $900pw rent for the same place?

Don't really understand what you are saying? Are you saying that a yield of higher than 5.2% won't ever happen again (e.g. rents/purchase price always rise in unison)? Or that you can already buy a $450k property for the equivalent $450pw rent?

 

[Propertunity]

Don't really understand what you are saying? Are you saying that a yield of higher than 5.2% won't ever happen again ..

My apologies for not being clear. I was merely responding to your statement that you will not be interested in buying back in until rents = approx. repayments.

What I was saying was that (as alexlee said) this happened many years ago. The next time it is due to happen will be when the market goes through that full cycle again, except, at that time what is $450K now, will be $900K. So effectively while you've been waiting, the market has been undergoing growth that you'd have missed out on.

 

[piNoob]

waiting lost some folk nearly $50k on average last year.

what will you lose this year?

Strange, last time I've checked waiting cost me nothing?

 

[hobo-jo]

My apologies for not being clear. I was merely responding to your statement that you will not be interested in buying back in until rents = approx. repayments.

What I was saying was that (as alexlee said) this happened many years ago. The next time it is due to happen will be when the market goes through that full cycle again, except, at that time what is $450K now, will be $900K. So effectively while you've been waiting, the market has been undergoing growth that you'd have missed out on.

Your example still doesn't make sense as you are assuming that rent and capital growth will be exact, whereas Keith pointed out the last time rents met approximate costs to buy was in 2001. What I am saying will happen is that house prices will fall (or stagnate)/rents will rise until the cost to buy is equal to that of renting (or not much more). Your example shows a situation where that won't happen...?