just bought second IP-60 minutes FREAKED me out!!

[neaka]

Should i be worried? I dont know a lot about the looming financial crisis, i just watched 60 minutes and am now freaking that we have done the wrong thing? Our first IP we owe $120k on and get $270 a week rent. Our new IP we owe $400k on and am getting $220 a week rent (this is a house we plan to make our PPOR one day).

Its a general question but will the crisis effect us? How do i learn more about it?

I am 27 and hubby is 29, we are hoping to start a family soon very scary times?

 

[sash]

What is done is done.

What exactly did 60 Minutes say that freaked you out?

I hope it was not Professor Keen again? If so take his advice with a balanced view. The economy will eventually right itself.

However, I have stopped acquiring property for the moment as I am bearish on property...but no where near the 40% that Keen says. I am more in the camp which says a moderate drop say 5-10% for low end and median property. The 40% drops is possible in the high end ($1 m plus) though!

On the good news front....interest rates are coming down...probably to 3.5-4%...which would mean interest rates sub 6%.

Cheers
Sash

Should i be worried? I dont know a lot about the looming financial crisis, i just watched 60 minutes and am now freaking that we have done the wrong thing? Our first IP we owe $120k on and get $270 a week rent. Our new IP we owe $400k on and am getting $220 a week rent (this is a house we plan to make our PPOR one day).

Its a general question but will the crisis effect us? How do i learn more about it?

I am 27 and hubby is 29, we are hoping to start a family soon very scary times?

 

[Red Car]

I don't think anyone really knows. There is evidence either way. My opinion is the real risk in Oz is that you are one of the people who looses their job. I think if a person is secure in their job, haven't over commited and have left a buffer I think they will see it through and be better off in the end.

 

[Hgrant]

Should i be worried? I dont know a lot about the looming financial crisis, i just watched 60 minutes and am now freaking that we have done the wrong thing? Our first IP we owe $120k on and get $270 a week rent. Our new IP we owe $400k on and am getting $220 a week rent (this is a house we plan to make our PPOR one day).

Its a general question but will the crisis effect us? How do i learn more about it?

I am 27 and hubby is 29, we are hoping to start a family soon very scary times?

I would be worried. Hope you and hubby have insurance

"Our new IP we owe $400k on and am getting $220 a week rent" Thats a serious shortfall. No offence but thats not an investment....

 

[investor888]

Yes neaka. 400K loan, and only 220/wk in rent. Assuming 20% deposit here, that would mean you payed 500K for it. That's a gross rental yield of 2.2%. That's extremely low rental yield. You better hope that you get really good capital gain, otherwise your negative gearing is a serious loss of money. Factoring in inflation, your actually going backwards (even with flat capital growth).
Generally, a good rule initial rule, should be 100K = 100/wk in rent. (about 5% rental yield). If you can get better, than that's good.
Though, I suppose it's different if your viewing this as your future PPOR, rather than just an investment property.
Still, 220/wk rent seems very low in the current environment.

 

[imonmyway]

Who actually believes that normal priced properties in cities with near full employment and a country experiencing its biggest growth spurt (350,000 new people a year) could have house prices drop 40%? Are they all going to start living in tents?

 

[sash]

Professor Keen of U of Western Sydney thinks so....LOL!

Cheers
Sash

Who actually believes that normal priced properties in cities with near full employment and a country experiencing its biggest growth spurt (350,000 new people a year) could have house prices drop 40%? Are they all going to start living in tents?

 

[BV]

Neaka

Things are not as bad as they say.
I've watched 60 minutes and I thought that it was naive and irresponsible reporting.

For anyone who didn't watch it, they interviewed an elderly couple who lost money in super and in Shares and had to go back to work part time and to plant their own veggies.

Then they had some guy who was made redundant and finally, you guessed it, they had prof Keen who thinks he knows economics backwards and can also read the future...

Redundancies are nothing new, they take place even during boom times.
It's normal for the automotive industry to be going through a restructuring and modernising phase because people now want energy efficient cars so that's what the factories will have to produce.

It seems to me that quality journalism is gone down the drain.
In recent times we've seen the media introduce fear tactics just for to make up a story and they have gone down this path on several occasions.

However, people are not stupid, 60 minutes are not gaining brainy points with nonsense reporting and this professor they brought along just for to make up a story is confused more than any of us and the more media attention he gets the more confused he gets.

Cheers

 

[Tin Tin]

I saw 60 mins too and thought that 40% drop in property prices seems mad to me.. How can one make a blanket statement like that.. They have fallen up to 40 % in America yet much more bad loans were written over there than here.. And they have a massive oversupply problem that we don't have, not where I live in SE Qld anyway.

Yes we are not immune to the financial crisis and yes we are getting hit with rising unemployment, a dramatically falling stock market yet we do not have an oversupply of property like they do over there.

We have a shortage of new property as less developers have been building (this might turn around with the 21k incentive) and buyers are back in the market with the govt grants.

I'm not bullish on a quick turn around in the property market yet yet I think that guy was a real over the top pessimist.

 

[jingo]

Neaka

Things are not as bad as they say.
Cheers

Hi BV,

In the short to medium term I am not so optimistic. I believe that what we are seeing now is the crisis just beginning to hit the real economy. Jobs are being lost in a variety of sectors - Finance, manufacturing, and hospitality. The reality of what is occuring is filtering down to the man on the street. As confidence continues to deteriate other sectors will be hit and unemployment is expected to rise further.

By all reports we are in for a rough ride. Ideally preparing for this event should have occured in the following stages:

1) If you needed to sell shares or property late last year was ideal.

2) Reviewing cashflow and setting aside extra cash. (Ongoing process).

3) Locking in Lines of Credit - Late last year/ Early this year before property values began to drop.

4) Jumping off fixed rates before the variable moved below it. A couple of months ago would have been the right time to do this. Unfortunately for me I did not!

5) Buy again when prices have dropped substantially. (Shares are cheap now and property will be cheaper soon!)

Regards Jason.

 

[suburbangirl]

Gosh, I used to watch 60 Minutes with my Dad years and years ago, and it was an intellegent, thought-provoking show.

It has turned into A Current Affair/Today Tonight. How can anyone still take it seriously??

 

[The Y-man]

Should i be worried? I dont know a lot about the looming financial crisis, i just watched 60 minutes and am now freaking that we have done the wrong thing? Our first IP we owe $120k on and get $270 a week rent. Our new IP we owe $400k on and am getting $220 a week rent (this is a house we plan to make our PPOR one day).

Its a general question but will the crisis effect us? How do i learn more about it?

I am 27 and hubby is 29, we are hoping to start a family soon very scary times?

As others have stated, it comes down to:

1. how secure is your current income(s)

2. how many months can you survive on reduced income (if one or both loses
jobs)

3. how much of your income have you got to spare each month after paying the shortfall in your IPs and all the bills.

There's a big difference between where you are both working in jobs that pay each $250,000 p.a. in a recession proof industry; compared with a single income on $50,000 p.a.....

Cheers,

The Y-man

 

[BV]

Hi BV,
In the short to medium term I am not so optimistic.
Regards Jason.

Jason,

How many redundancies have we seen so far?
a couple of thousand and should we believe that the sky is falling?

Common mate, Sydney and NSW had slowed down well before all other states
and we didn't see many people become unemployed.
Do you know why?

Because our companies already operate on minimum staff and any less number of employees means that companies won't be able to function.

In our company it would be very hard to make any employees redundant
Some senior executive positions could go though.

Cheers

 

[craigb]

another point is the unemployment/dole that is available here, this will keep people off the streets, things might get tight and the worst scenario is the rent yeild sit at 1% for a year or two, but in time will return.

 

[urchin]

i hope everything turns out well for you.

 

[Bon]

Who actually believes that normal priced properties in cities with near full employment and a country experiencing its biggest growth spurt (350,000 new people a year) could have house prices drop 40%? Are they all going to start living in tents?

Exactly! One of my golden rules is to only buy in capital cities... I don't see much value, or growth in regional areas.

My parents bought a 4 bedroom house in Newcastle 3+ years ago for ~$360k... I just recently bought a 4 bedroom house 30mins from Melbourne CBD for $360k. Will my parents' house drop in value? Probably.

I'm only comfortable with the prospect of servicing property because I live & work in a mining town with an abudance of jobs and know I can get a job another job tomorrow if I need to.

 

[plusnq]

Hi Bon

How long have you lived in Mt Isa?

Cheers

Shane

 

[MichaelW]

I love Prof Keen!

Seriously, I do!!

The more he talks, the more people listen, the more the RBA will have to ease rates!

I'd love to see rates at 6% of less offered by the big 4. Its enough to make you swoon with anticipation...

But as others have said, as long as your cash flow is OK then don't worry about it. The game at the moment is hold on to what you've got and watch your cash flows. Rates are easing and rents are rising. Both improve cash flows over time, so its all good in the short term. Eventually inflation will rear its ugly head again so that's the time to think about locking your rates in. Whilst fear rules the day stay variable and watch them fall. When the economy recovers and China kicks into gear again, look to lock rates because the RBA will shift stance from easing to tightening.

Just MHO, take it all with a grain of salt.

Cheers,
Michael

 

[Pete_d]

This thread reminds me of the Bill Hicks quote (US comedian)

"Watching television is like taking black spray paint to your third eye"

Trust the information as you see it, not from TV current affairs that has a vested interest in selling the sensationalist side of the story more than the less sexy steady as she goes side.

 

[sash]

I work in a corporate and have friends in large corporates. They are all taking steps to curtail costs including the option of looking at headcount reductions.

I am watching the unemployment numbers closely...this holds the key to how people react. I suspect there will be a five in front by Jan-Feb. 2009.

Cheers
Sash

Jason,

How many redundancies have we seen so far?
a couple of thousand and should we believe that the sky is falling?

Common mate, Sydney and NSW had slowed down well before all other states
and we didn't see many people become unemployed.
Do you know why?

Because our companies already operate on minimum staff and any less number of employees means that companies won't be able to function.

In our company it would be very hard to make any employees redundant
Some senior executive positions could go though.

Cheers