New investor... a time to be cautious?

So yes if you're after a studio apartment that's not going to have alot of CG then sure, it's doable, or you can buy a 3b house further out.

You can actually get a 2bd apartment for that kind of money.

But in any case, it's a good question to consider. Is it better to go for a 2bd apartment closer to the city, or a 3bd house further out? I guess it would depend very much on the specific suburbs in question. But in general I would like to stay closer to the CBD as rental demand is unlikely to fall.
 
That's what people said 12 months ago.

As for gloom, that was late last year, you must have missed all the press coverage back then.

I feel that you're not quite understanding where we are in the ''economic cycle'' with respect to property...

You may be right. I'm aware that the property market has been in a minor downturn, tracking sideways for a number of years and with small falls in most markets. But it has been coming off a very high base, and there are very few people around who would argue that property is under-valued. That's the kind of gloom and bust I'm referring to. The stock market was gloomy because stocks got annihilated. The property market has merely taken a breather... or so it would seem to me.
 
You can actually get a 2bd apartment for that kind of money.

But in any case, it's a good question to consider. Is it better to go for a 2bd apartment closer to the city, or a 3bd house further out? I guess it would depend very much on the specific suburbs in question. But in general I would like to stay closer to the CBD as rental demand is unlikely to fall.

As i said not sure how accurate i'm being.

But yes rental demand is very unlikely to fall so close to the city, in saying that, there is still rental demand everywhere else but you need a good PM too, or a good strategy.
 
And 20-60k in the lower end.

Ashleyb,

It seems you debate those that insinuate buy and jump to attention on the mention of doom and gloom.

From an outsiders view, looking at your reactions to various comments, I think you want to wait for the gloom that you perceive to be coming.

For your own peace of mind, perhaps this is how you make your decision?

Merely an observation.

Regards JO
 
The difference between buying at the end of a boom, and buying near the bottom of a crash is really quite astounding.

Picking the bottom and then actually going out and picking up properties is easier said than done. I was looking for a PPOR from September 2008 to April 2009, but as soon as it became apparent that the world wasn't going to end, the supply of properties on the market really dried up, and by the time the next suitable house that fit my criteria came on the market, things had moved 10% in the blink of an eye.
 
I might be having a "senior's moment" :D but your reasonings below are just so staggeringly stupid to my mind (This is not a personal assalt on YOU just your reasonings) that I felt driven to say something.

I think the plan would be to wait 12 months to see what the state of the world economy is.
If you take the time to unbury your head from the sand, you will see that the world actually survived the GFC. We are in recovery mode now. The worst is over. The sky did not fall in. Sure it may be a bit bumpy here and there but look what happened THIS week: Dubai's government Monday said it received $10 billion in financing from Abu Dhabi. 6 months ago this news would have wiped hundreds of points off the Dow Jones & the ASX. The market has already priced this stuff in. It will not be the last announcement of this type - but I'm sure you know that.

It seems to me that our housing market is unlikely to collapse in the absence of a further global economic trigger which leads to job losses here.
Are you stuck in a time warp or something? This was the mantra being sprouted by the D&G brigade 12 months ago. Not going to happen. Steve Keen has his runners on. He's admitted he was wrong.

Prices may stagnate, or rise, but won't fall significantly unless unemployment goes up significantly. That's my theory anyway, although I take my theory with a big grain of salt as I am entirely unqualified to make such pronouncements. ;)
Look, rising unemployment (if it happened) and its effects were commented on in April 09's Westpac Market Insights report of April '09 which (in part) said:
The housing recovery is already on track and the last two recessions confirm that the housing recovery will not be derailed by rising unemployment.

If in 12 months the world economy -- China, US in particular -- is looking healthier, then it might be a better time to buy.
Why??:confused: Sure join the herd. Buy only when Hot Property & Location location are back on the TV. You'll miss 25% of the growth. You have already miised 10% of it in Sydney by not buying in Jan this year.

But yes, this strategy could play out for several years without making a purchase. If I was to wait for significant price drops I could be waiting a while. I'd more likely just wait for the general economic gloom just to lift a little bit more.
aha :rolleyes:

Having said that, undoubtably we won't see the next crash coming either. It will probably be some bubble bursting in China, which will hit us hard in Australia. Who knows!
Probably not. Chinese buyers are already buying our RE. China doing badly = more Chinese investment in "safe" Aussie RE.

Similarly, I'd be more than happy to jump into the share market with some more money right now, as I think shares are good value at the moment. However, I've come to the conclusion that I'm not going to get wealthy through stock market investing because I'm not willing to leverage into something which can crash overnight.
OK so buy some shares and don't leverage. If you don't leverage into an investment then you are right - not going to get wealthy :( (much)

The monetary opportunities in property seem much larger due to the leverage which is available.
Oh but what about a crash? Oh that's right - even people with negative equity in property did not get a margin call from the Bank....not so with shares AND the banks did a deal to waive repayments for 12 months for borrowers on property that lost jobs.

Of course, the leverage applies to the risk side too. I'm just trying to be cautious because losing the odd $100,000 would really hurt (I've only got about $130,000 of assets!).
Well congratulations. I only had $32K of available equity when I started out to invest seriously.

Look I understand the emotion involved in losing $100K - been there done that - know how it feels.

Example: If you buy a property and it goes up from $250K to $350K and you manage to get that $100K out and blow the lot on some investment becuase it was a poor investment, how do you feel? bad - why?

What did you do to make that $100K? answer - nothing. The market went up and you refinanced and got out $100K. So what? Why are you treating your "precious" $130K like you'll never see it again if you invest it? Am I saying 'be frivilous with money"?, no in no way. Just don't hold onto it so tightly that you become afraid to do anything but protect it.

I know this has sounded harsh but really, you need to "toughen up" by taking the proverbial concrete pill - in my opinion - and start investing again.
 
I know this has sounded harsh but really, you need to "toughen up" by taking the proverbial concrete pill - in my opinion - and start investing again.

Ha, ok, well don't sugar-coat it will you?! :)

I'm beginning to sense that the answer to this thread in the minds of most investors here is "no". ;)

And that's really the crux of it. In posting this thread I was keen to get a feel for how many folks here think that the current property market and economic conditions warrant more caution than normal. Clearly not many!

I realise that things are way better than they were 9 months ago. But I also realise that humans have a tendency to extrapolate from the current situation and assume that it will continue for the next couple of years (eg. pre GFC crash most people though the stock market would keep chugging along, eg. the recession earlier this year that everyone predicted never arrived, 8% unemployment etc).

But enough of the pros and cons of buying or waiting. If I were to buy (and I will of course be doing a lot of research prior to doing so) is a 2 bedroom apartment in Sydney a reasonable place to start? I'm thinking of trying to get somewhere which ticks the usual boxes (transport, shops, etc etc) as close to the CBD as I can afford, with good rental demand, and somewhere which has not already had large CG increases in the past couple of years.

Or should I take a step back in my research and look more closely at what type of property I should acquire? I must admit that I have simply opted for a 2 bedroom apartment because they fit within my $220-300k price range, and seem to be a popular option for both renters and buyers.

Your thoughts have all been very helpful, so cheers. :)
 
....my $220-300k price range, and seem to be a popular option for both renters and buyers. Your thoughts have all been very helpful, so cheers. :)

Yeah OK, why don't I stop pulling punches and tell you what I really think? :)

Because you have handled the criticism so well, here's a hot tip:

For that money you can buy a 2brm unit in Lakemba say, that costs under $250K and rents for $280-300pw. These are fast disappearing - so don't dilly dally - do your research & DD by all means.
 
Ha, thanks. Lakemba has been on my list along with one or two others. Not sure how quickly I can buy in, because I'm between jobs. May have to wait until Feb/March. But I agree.... if I am going to buy, I need to buy soon. Thanks for the tip.
 
Ha, thanks. Lakemba has been on my list along with one or two others. Not sure how quickly I can buy in, because I'm between jobs. May have to wait until Feb/March. But I agree.... if I am going to buy, I need to buy soon. Thanks for the tip.

You're welcome. Here's another: Don't make "waiting time", "wasted time".

Do as much DD as possible, go to OFIs and auctions, so that you will know a genuine good buy when you see it. ;)
 
im betteing on march/april, this is my buying tip for 2010, when all the media presents with , OMG rates are rising, and the FHb grant is truly done and dusted, i have seen build up of property now on our local site, 95 last wk , and then it will be off at the gates again, just my two cents worth.;)
 
You're welcome. Here's another: Don't make "waiting time", "wasted time".

Do as much DD as possible, go to OFIs and auctions, so that you will know a genuine good buy when you see it. ;)

Good tip. While I am not working is actually a perfect time to spend doing research.
 
im betteing on march/april, this is my buying tip for 2010, when all the media presents with , OMG rates are rising, and the FHb grant is truly done and dusted, i have seen build up of property now on our local site, 95 last wk , and then it will be off at the gates again, just my two cents worth.;)

Hehe, well I hope you're right. I'm not sure whether people are going to start stressing about home loan rates until they get over 7% and are still on the rise. I guess it will depend how well the economy kicks along in 2010.
 
ashleyb...just reading thru this thread makes me think you are bringing up all the excuses to NOT invest....

Also....when you bought into the stock market in 2007, when almost daily if not weekly the market was making new highs and did so for months on end....did you ever say to yourself...how long can this go on...are we topping out here...???

That is when the sheep pile in...when it's all glitter and gold on the front pages......don't go there...

But when the front pages have been saying property is no good like earlier this year and late last year...that's when it's time to have a real serious look.....

I think you need to do some serious study of markets and the cycles that they roam in from time to time....

Good luck...I wish you well...;)
 
Anyway, to my question... does anyone here advise caution for the next year or two?

Your thoughts are very much appreciated. Let me tell you, it's not fun saving up for an investment only to watch years of savings disappear steadily from the balance sheet. Investment Rule number 1 for me is definitely: do not lose money!


I always, always, always, ALWAYS advise caution!!!

A couple of years ago in the space of 4 months I had a 37% ROI, or $20k profit from a little over $55k bet on fights... it was my first significant wealth building upswing as a professional gambler with significant money, betting at least $2.5k a fight after working on and studying it for years.

I got cocky, thinking I was so smart and could get just about everything right to make money... and so in the space of 3-4 weeks I lost $15k, about $7k on the share market and $7k gambling.

rule #1 is preserve your capital
rule #2 is preserve your capital

Since losing $15k a couple of years ago, I've increased my net wealth by at least $100k and that's being conservative... the ride has been so much smoother this time around as well. I just sold 2 different stocks for an 80% and 497% gain (opposed to losses like 2 years ago) and made a 17% ROI betting fights for the year.

Anybody who tells you they've never lost money investing in one way or another is most likely lying. I think everyone has a significant loss or 2 that hurts, but it's all part of the the journey and the main thing is to learn from it and come back stronger.


As far as property goes, I would suggest staying within capital cities where they have the population and economy to support the growth. e.g. I would invest in Melbourne (or Sydney) as I think you will achieve growth there in the next few years that will allow you to duplicate opposed to Tasmania which is cheap, yet has a population that is declining and any growth it does have is unlikely to be able to be sustained with a declining population.
 
Yeah, don't worry... you're not the first sceptic, but I don't need to prove anything to anyone. I know what kind of ROI and money I make and that's the only thing that matters to me being the bottom line. I have no doubt if I was to show people my records, most people and fund managers in particular would be green with envy. It is an incredibly powerful system when you consider the "churn" effect (essentially like leverage) - 100k liquid cash can be churned over for $4-500k bet and $100k clear profit easily.
 
I would also advise a degree of caution. This economic cycle and upswing we are seeing is not a usual one and if not for the government's massive stimulus package we would be in recession, albeit not as severe as most other countries. It will be interesting to see what happens when the stimulus effect starts to wear off in the next 6-18 months, particularly if the rest of the world's economy does not improve significantly in that time or actually worsens which is quite possible. House prices have run hard in the last 6-12 months (esp in Melbourne) and are back to or above pre GFC levels. There is not much room for any further unexpected economic shocks and the government has played their hand so IF (Big IF) things get bumpy again, they will have less firepower to reverse the price drops next time round.
 
I just wanted to add my bit. About eleven years ago we bought an IP in a good street, asking $153K but with five contracts going in that night, we signed cash unconditional for $156K and got it. (Hubby had not seen it, and just signed the contract I had faxed through :)). We have put about $30K or so into it to improve it (deck, re-roof, kitchen) and last valuation was around $700K. It probably dropped $50K but would be back to $700K or more by now. (House prices are moving in this area.)

Four years ago the house behind (very ugly, smaller, same big block) came on the market at $650K. What a joke. It was probably worth mid $400K. A year later we bought it for $460K.

Our first reaction was "The one we have was only $156K. It is a bigger, better house. How can we possibly pay $460K for this smaller one right next door?"

Many people would have said "no way". We paid $460K, spent $17K and a LOT of elbow grease on reno and its value now would probably be $600K, possibly $650K.

Had we sat on our hands and said "well, house prices have risen so much in this area, they cannot possibly keep going up", we would be kicking ourselves now.

Sometimes, you just have to throw caution to the wind and buy SOMETHING. If house prices drop by 50% the value of your purchase will probably be the LEAST of your worries.

I don't gamble, except on houses.
 
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