MEL going gangbusters: buy now/wait?

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From: David Simon


Hi all,

The market at least in Melbourne is going gang busters and prices are still climbing.

I need some advice on whether to buy now or wait until the market has a correction which would appear to be just around the corner due to the rise in interest rates.

By doing this we can build up additional funds in our existing home loan.

What do you all think?

Is it better to wait or is it better to just jump in provided we get a good not over priced property. The trouble being these appearv to be harder and harder to find.
 
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Reply: 1
From: Peter Davidson


Buy, buy, buy....

If you think prices are going to come down now, you are KIDDING yourself. Even if interest rates went up another 1-2%, prices would still be HOT. If anything, they would stagnate a little and then shoot up again like a cat on fire.

Get in while you still can, otherwise you'll be kicking yourself. I was saying the same thing 6 months ago and I've already made 20-30k on my recently purchased IP. I'm sure I'll be up another 20-30k in a years time(Melb area, East).

There are too many dumb investors now to slow the market down.

You think the .25% interest rate is going to make a difference. It sure will, it will boost prices even higher because it's going to create panic in the market. People will say, well interest rates are still the lowest they have been for years, let's buy now before interest rates go even higher pushing demand for property up. Somehow, people will always find a way of paying that extra $50-100 per month. They will prefer to starve before they sell, especially if they paid premium for a property.

Choose wisely and go for it, while prices are still affordable now, rather than waiting for prices to come down, they won't.
 
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Reply: 1.1
From: David Simon


Thanks,

That confirms my initial thoughts.
 
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Anonymous

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Reply: 1.1.1
From: Anonymous


In my humble opinion the property market is like the share market, it moves in a cycle. There are booms and busts. We are now in a huge boom equivalent to that of the '80s. Prices will fall, it's just a question of when. So I wouldn't think that buy not buying now you're missing out somehow.

In general, there has historically been a 7 year cycle. A few years of boom, followed by a bust, a plateau period, and then a climb again. It would be great to be able to pick the heights of the booms (and thus avoid them) and then to pick the bottom of the busts (and to buy then). But this is difficult, even for experts.

In the end, it's time in the market that matters more than being a great crystal ball reader (and being able to pick the booms and busts). If you buy for the long term, the booms and busts smooth out and you will benefit from the rise in property values that occurs over the long term.
 
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Reply: 1.1.2
From: Duncan M




I wonder whether the following report which describes the fact that most
superfunds will show a negative return this year for the first time in 20
yrs..

http://www.abc.net.au/news/justin/nat/newsnat-8may2002-40.htm

Might actually sustain the current property boom.

Duncan.




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Subject: MEL going gangbusters: buy now/wait?


From: "David Simon" <buybuy@hotmail.com>

Thanks,

That confirms my initial thoughts.




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Sim

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Reply: 1.1.2.1
From: Sim' Hampel


With all the doom and gloom around company profit figures at the moment, the sharemarket seems a little shaky right now. I think a few people might still be looking to move out of shares and so on and into property - especially to avoid missing out on those awesome capital gains that Joe Bloggs down the road is getting.

 
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Anonymous

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Reply: 1.1.2.1.1
From: Anonymous


Remember: Buy in gloom, sell in boom.

Don't get caught up in the hype and "herd" mentality. A knowledgeable friend once told me that when everyone is excited & talking about a certain market, convincing one another they've got to buy now because it's red hot, that's the time to sell.
 
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Reply: 1.1.1.1
From: Thorpey !


On 5/8/02 10:19:00 AM, Anonymous wrote: Prices will fall, it's
>just a question of when. So I
>wouldn't think that buy not
>buying now you're missing out
>somehow.
>
how much will they fall though?
By as much as the loss you may incur from not participating in the gains available over the long term.
It all depends on one's plan. Long or short term. Shorter the term, shorter the fuse.
It's all relevant. Some like it hot some don't....some DON'T know what they like.
That's the main problem.

Have a planned approach....

Just pondering....
thorpey
 
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Reply: 1.1.2.1.1.1
From: Mike .


WHICH Melbourne market is going gangbusters? Yes, that's right, there are TWO markets. The largest, by far, is the home-owner market which represents 74% of income-earners. The investor market (us) represents 6.5% of income-earners. The others can't afford to buy and will rent our properties.

Question is does price growth in the home-owner market equate to similar price growth in the rental market? It should if your property can attract a hord of home-buyers. However, I don't think a 2 bedder in a high-rise development is going to attract as many home-buyers as a house and land package.

That being the case the value of a rental property is mainly determined by how well it attracts renters ie low vacancy history. The townhouse phenomena seems to be trying to appeal to both home-owners and investors. But the worrying aspect is the location may appeal to home-owners but as a buy and hold investor you want renters. Only when you eventually sell will you hope your townhouse will appeal to a large market.

So where would you buy a townhouse? In a residential area near schools appealing to home-owners with families or near a commercial centre with good public transport nearby, appealing to singles or couples without kids?
 
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Reply: 1.1.2.1.1.1.1
From: Felicity W.


I'd buy it near a commercial centre etc in an area which would appeal to singles or couples.
Do I get a gold star? ;-)
Sorry, it's early....
Keep smiling
Felicity :cool:
 
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Reply: 1.1.2.1.1.1.1.1
From: Gail H


Hi,
I'm in Melbourne and I have decided to wait. Yes, it is a nightmare reading the property section in the Age every Sunday and hearing of another property sold which has just doubled in value in one year. But, many experts are saying that the big capial gains have already happened, and once the current shortage of stock settles down, the plateau will already start to happen. With the current shortage on the market, people are paying a 15% premium for property. Is that what you as an investor should be doing? Especially with a property that will be negatively geared?

This has already been the longest boom ever. Yes, everybody was wrong a year ago when they said it was over. But that doesn't mean it can go on forever. The Melbourne market has always been cyclical. Has this suddenly changed? Have all the rules suddenly gone out the window? Maybe. I don't know. But I don't think so, so I will follow the advice of many people who have been through the cycles before and wait a while.

Gail
 
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Sim

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Reply: 1.1.2.1.1.1.1.1.1
From: Sim' Hampel


On 5/9/02 7:32:00 AM, Gail H wrote:
>
>The Melbourne
>market has always been
>cyclical. Has this suddenly
>changed? Have all the rules
>suddenly gone out the window?

Apparently history keeps telling us the same thing. People get so caught up in the boom that they honestly start to believe that it will go on forever. The people who convince themselves of this are generally the ones who will go that one step too far and be the first with their backs against the wall when the revolution comes... umm... I mean downturn ;-)

 
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Reply: 1.1.2.1.1.1.1.1.1.1
From: Tibor Bode


Hi,

Complete agreement with Sim. For the oldies (and for myself) a quick reminder of 1986 to 1998 in RE and 1985 to o1987 in stocks, for the young ones .com boom in year 1998 to 2000 which "was different this time". Yes it was, some people lost even larger sums buying late overpriced rubbish. Just remember the cycle is well and alive and greed and fear are big motivators, no matter who says that this time around is different.
I can start to smell some minor fire in the air. Another 2 to 3 rate rises, might ignite it to become a fire. This time around it does not require 16% to 18% as the borrowing is in much larger sums. I am just sitting back and watching while the story unfolds.

Tibor
 
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Anonymous

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Reply: 1.1.2.1.1.1.1.1.1.1.1
From: Anonymous


But doesn't this angle on things go back to the 'it's always a good time to buy and it's always a bad time to buy' philosophy? - Whatever the economic cycle, there are still good buys out there somewhere, just maybe with not as good growth at the moment until things pick up again (assuming things do slow down as much as everyone seems to think) but some growth is better than nothing and those who do nothing gain nothing. We just have to look a bit harder. Where else are you going to put your investment $$?
 
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Reply: 1.1.2.1.1.1.1.1.1.1.1.1
From: Tibor Bode


Investment rule no 1: Never loose money
Investment rule no 2: If in doubt refer to rule no 1.

I rather withdraw from an overheated and emotional market and stick with cash (or maybe start to look at other options like shares) than to buy something that does not stack up financially. Break even over this period is still better than going backwards and hoping that the LOOOOONG term future will correct the mistake. Most likely, it will happen, but I hate gambling with large sums of money. It might also worth to calculate the opportunity cost like currently a 200K property in distressed market suddenly can be bought for $130K to $140K. My guess is if the Reserve is not careful this time they can inflict the same pain as it was in the late eighties and early nineties. Then suddenly the 2years in cash and buy (as you have the cash) might just be better than trying to find in the current market (I refer mainly to Sydney and Melbourne) something that makes sense and seeing that stagnate and costing money to hold. Cash flow positive property is a different scenario.

Just something to think of.

Tibor
 
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Reply: 1.1.2.1.1.1.1.1.1.1.1.1.1
From: Rod Myers


property bust when does it occur? i bought my little house in inner Melbourne 1983, for 39000 its now valued at 345,000 what property bust? if you reckon it wont be worth more in the next ten you are dreaming. i have been screwed buying Howards telstra shares.
 
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Reply: 1.1.2.1.1.1.1.1.1.1.1.1.1.1
From: Tibor Bode


Rod,

It is really good hearing that you have made such a great capital gain. Maybe you should talk to some investors in the Logan area (South west of Brissie) who bought their properties in the early nineties for 60K to
to 110K and now they are selling them 20 to 40K lower. I bought some of them from those investors who believed that property prices go always up no matter how much they pay for it. Eventually the property price will exceed whatever they purchased it for, but would you say was it a really smart investment? Especially, if they had negative cashflow for several years?

Tibor
 
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