Waiting cost me $11 k in 8 weeks - a December 09 deal fell through and then we went away on holiday. Today equivalent unit in Sydney is about $15k more.
Is the property market about to bust?
- Thread starter DanielG
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Waiting cost me $11 k in 8 weeks - a December 09 deal fell through and then we went away on holiday. Today equivalent unit in Sydney is about $15k more.
I have two IPs already so its not like Im on my hands doing nothing. However, from my understanding of whats currently going on around the world in terms of financials, there is a great risk that the world will be thrown into a second GFC. We are still a year or so away from slipping back but I honestly believe its coming and to buy when the world is so unstable is a great risk.
SO where in the boom/bust cycle do you believe we ate at?
Putting it yet another way, when did you think was a time when there were few / no risks in the market, and therefore would have been a good time to buy? Late 90s? 2001? When did you last feel there was little / no risk?
Then clearly you don't understand the concept of opportunity cost. If you genuinely have an intent to buy then opportunity cost is real, not just textbook goblidigook. i.e. Waiting might cost you $50K when you end up buying exactly the same house in 12 months time for that much more than what you could have paid for it today. That's real.
I agree that medians can be misleading. The median unit price in Mona Vale where I'm about to do my MUH development has spiked from $500K to $590K in the last 12 months. That's great! But it might all be a bit compositionally driven. As such, I also talk to REAs and understand exactly what the market is doing. I spoke to my favourite REA who services this area and she said that everything had gone up $50K-$100K in the past 12 months across the board. She personally has 70% of the North Narrabeen listings as listing agent and said these are all up that amount. Anything under $1M is being snapped up as soon as it goes to market.
So, medians can be misleading if not adjusted for composition, but they can also be a very good indication of what the market is doing. My market is red hot.
Daniel, depends where you're buying. Here's a good resource for answering that question for your market (tables from p42 onwards). Yet again it has my Sydney Units and Houses as a Rising Market. All the indicators point in the same direction. Up.
Cheers,
Michael.
sure thing.
it'll cost you $50k more if you want to get in the market now versus a year ago, though.
so keep waiting.
Yip this is pretty much me to a tee.
I purchase when:
Net rents = at least interest repayments in a normal interest rate environment
When was the last time i was buying: 2007, Melbourne CBD apartments. Nominal growth over 2 years: more than 50%.
Cost of holding: none, zippo, zilch in fact cash flow positive now with rent rises.
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Hi IV,
So you buy when the net yield is about 8% then?
That's pretty rare in my experience...Cheers,
Michael
No you misunderstand me...there has always been risk and if you are an investor you cant wait till all seems placid to buy, what I am saying is that I BELIEVE that a major crisis is still before us, the GFC was a prelude to the main event.
You have the USA that can not stop spending, even while its broke it is ramping up the spending like no tomorrow. I also know that china and other countries have stopped buying their treasuries, which is why the democrats want to pass this healthcare bill which will force people into a new tax and are also looking to steal their peoples 401K by converting them into treasuries and paying out annuities.....
http://market-ticker.denninger.net/archives/1830-401kIRA-Screw-Job-Coming.html
Who does this? A country that is nearing the end game...that is they are looting their own citizens to be able to continue the ponzi scheme that is the US economy. By doing things like this they are able to keep liquity in the bond market and keep interest rates low to continue to allow the country to try and recover; it won't...all the manufacturing jobs are being destroyed and you you have a government that now trying to SPEND its way out of trouble instead of PRODUCING its way out. Its been shown over and over again you can not SPEND your way out of a recession, or you do it laden the economy with new debt, and when that debt becomes too high you DEFAULT.
If the USA defaults, china is history...what happens to Australia next?
I am not saying a total collapse it coming, but I do foresee (if things play out as I understand they will) a time soon when the housing market will begin to decline as the world economy affects the australian economy.
These comments are inconsistent to me. If the US defaults and China is history, Australia is DEAD. There WILL be total collapse.
If I thought the US was going to default, I would sell everything and buy guns and gold.
Alex
This can be achieved at any time in any environment if you put enough deposit into it, surely?
And what about the fundamentals....again.
1. Shortage of housing
2. Historic low interest rates
3. Immigration
4. Low unemployment and getting lower
5. Buyer confidence increasing
6. Rudd stopping the banks from taking peoples homes
In my opinion there is another upswing coming our way in 2010. 2011 might be another story, but I'll worry about it then.
No it's not. It's that $50 k less the interest paid on the mortgage less the opportunity cost that the money invested could be earning dividends elsewhere. (eg, Term deposit). Most highly leveraged loans would attract that amount as interest anyway.
Anyone who used this logic to buy a 3br brick veneer in Sydney in '04 would still be bleeding. There are no fixed rules for investing: The nimble move with the times and the lucky get the right timing for the wrong reasons. Others just keep searching for their pot of gold.
I believe we have two more years to go in the property cycle. Interest rates will continue to rise and this will lead to a recession at the end of the third year.
Based on the current economic performance Labour will get re-elected however, they will struggle for a third term as people look for someone to blame for the greed and fear cycle.
Fair enough, but lets say the property you bought 2 years ago for $500k, say it's valued at $600k now. Some would say awesome capital gain! but how much interest have you forked over to the bank during that timeframe? $500k @ 6.49% on IO loan = $64,896 in interests alone. Lets forget about management fees and council rates, the true CG is about: $35k. (e.g. ($500k -> $600k) = $100k increase - $64896 bank interest = $35,104 true capital gain. If sold 50% = $17,552 in pocket.
So if you sold it, you'd end up with around $17k. So say your house drop 10% in price after the third year of purchase, you would of paid about $65k in interests, since the house is valued $50,000 less (10% off) so you'd be -$115,000 less better off. ($65,000 in interests + -$50,000 fall (10%).
btw this is assuming the property had no renters. As it's virtually impossible to find cash flow positive homes now, you'd end up paying about 50% of the bank interests. So in this circumstance if property prices fell just 10%, you would be $64,896 interest over 2 years - 50% covered by renter = $32,448 - $50,000 = -$82,448 in the RED. Does this look right or did I miss something?
But the name of the game is making money on Other Peoples Money, not your own. If you throw 30% cash into the deal and "just break even" then you have suffered an opportunity cost via not getting any investment return on your $200k (dep +exs).
Cap gains are more fickle than the believers would have you believe.
Where is the rent that is paid to you in these figures?
Yes, I guess you're right, if this was the case last year, it must be the same again. And nothing else matters
So are you saying that there would be no capital gain on the $200k deposit, only the borrowed funds? And if so how do you make a capital gain if you own it outright?
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