Let me get this straight

[IFBB]

Newbie here, so sorry for bringing up the topic again, just trying to un-jumble my train of thought before i go for an open house this afternoon.

In a property downturn:

- IR likely to go down if it is over an extended period of time (thus making repayments less / ability to hold property easier).
- An increase in demand for properties as there will now be more people in the market looking to buy, this should help to increase the price.
- Rents should hold over a period of 12-24 months, as there will be less people looking to rent, but an increase in house prices could force them back there if they cant afford it.

I think the next 6 months wont be such a bad time to buy, im hoping and thinking rates dont go anywhere by the end of the year. If they do rise though, all the better for us i guess. As long as you dont get over your head, with a fairly decent yield from the get-go, even if there is a downturn, or flat period, you should be able to get through it fine (hopefully).

Im looking for some places where i can give it a quick cosmetic reno to add some equity, which would give me a bit of a buffer if something happens. Also, yield will play more of a role in my next purchase, rather than the hope of better CG.

How do you think this sounds? Reading A LOT lately, and this is what i have come up with. Please, if you have any differing opinions, let me know... very eager to learn.

 

[Tahoe]

The RBA uses alot of different factors to set their IR (e.g inflation, employment rate, etc).

In a property downturn, IR may not follow the trend down.

 

[Murphy69]

None of these things is a given. The problem is the cause of the property downturn is going to influence what happens during the downturn.

You really need to think about the overall economic situation to determine possible impacts of a property downturn.

Is it due to a general economic slump? The IR's might go down as the RBA seeks to encourage growth.

Is it because the average investor/home buyer has decided that the current market(s) are over priced? So low volumes and low prices, but the economy is still doing Ok? Then rents might actually rise as people decide to rent whilst waiting for better affordability.

Is money being diverted into other investments, perhaps because the stock market is going wild? Then IR's might continue to climb to help cool down the economy, but property might still suffer as funds get diverted away from the property market. So even though properties are becoming cheaper, IRs will still make them appear less attractive. Smart renters might decide that the money they might put into property (either PPOR or investment) would be better off in the stock market.

So its not the downturn in property per se, but rather the 'why' of the down turn that will affect things such as rents and IRs.

Having said the above, I agree that rates will hold for a while, and I would be surprised to see an increase beyond 25 points this year. The equity markets, particularly the US, are making ok to good gains, but there is a lot of sudden short reversals, and trading is hard at the moment, so for the average investor, the incentive isn't there to pile into shares.

Constant talk of a property bubble is probably keeping more nervous investors away from property, and some ppor buyers are probably holding off in the hopes that the 'bubble' will pop. This will probably serve to (on average) keep price rises moderate to nil, which will serve as evidence on an impending 'pop'.

Even many relatively sophisticated investors are probably taking the time to improve LVRs.

Of course as many have pointed out here, there is no 'one' property market in Australia, some will be declining, some will be advancing, some will be stagnant. You said you are more interested in yields, rather than CG, so clearly you will be looking for a market that reflects this, and factoring in the possibility that there might be a small rate rise that will impact on your yield, and that if property pricess remain 'soft' then you might not be able substantially increase the rent in the short term.

Murphy

 

[Deltaberry]

Newbie here, so sorry for bringing up the topic again, just trying to un-jumble my train of thought before i go for an open house this afternoon.

In a property downturn:

- IR likely to go down if it is over an extended period of time (thus making repayments less / ability to hold property easier).
- An increase in demand for properties as there will now be more people in the market looking to buy, this should help to increase the price.
- Rents should hold over a period of 12-24 months, as there will be less people looking to rent, but an increase in house prices could force them back there if they cant afford it.

I think the next 6 months wont be such a bad time to buy, im hoping and thinking rates dont go anywhere by the end of the year. If they do rise though, all the better for us i guess. As long as you dont get over your head, with a fairly decent yield from the get-go, even if there is a downturn, or flat period, you should be able to get through it fine (hopefully).

Im looking for some places where i can give it a quick cosmetic reno to add some equity, which would give me a bit of a buffer if something happens. Also, yield will play more of a role in my next purchase, rather than the hope of better CG.

How do you think this sounds? Reading A LOT lately, and this is what i have come up with. Please, if you have any differing opinions, let me know... very eager to learn.

In a scenario where oil price spikes due to war in middle east and unrest over there, inflation spikes. IRs go up. A sudden temporary downturn in China (remember all things happen in cycles) causes job losses to spread and property prices and rent to crash. But due to the war the IR still remains high. Gee that sounds like a familiar scenario...

 

[IFBB]

Thanks for the different ways to look at the situation, it definitely helps clear things up, and make me understand why prices go up/down, and the consequences.

Im in no rush to purchase, but am still going to keep a look out. Im only intending to buy if i can see real value in what im buying.

 

[Tahoe]

Thanks for the different ways to look at the situation, it definitely helps clear things up, and make me understand why prices go up/down, and the consequences.

Im in no rush to purchase, but am still going to keep a look out. Im only intending to buy if i can see real value in what im buying.

Best of luck in your hunting!