"Outlook for 2015"..

[willair]

Just wondering what other people think about 2015?,some media fast buck soap box speakers are narrowly focused on the upside with Sydney still going gangbusters and may well over run the value level,as it has before then go into the next stage of the cycle ,Brisbane from what the few Real-Estate Agent I know tell me sales are slow,rentals number are up unleased just sitting there,but they have been selling for over 35 years and unerringly honest at least to me anyway..

So what do you think no matter what anyone tells you it's always best to question the error rate in what you read,myself the ASX will do the same as it always has ,property maybe a slow pull back,interest rates maybe up 1.5% just going to be another normal year with the same bumps along the way..imho..

 

[plusnq]

Hard to know but in our area off inner Brisbane (Wooloowin) several house and land development blocks haven't had nibbles and the house across the road is up for auction but very few cars viewing. This contrasts with early last year when about five or six houses in the street sold quickly after being on the market for quite a while.

Maybe just a slowdown but definitely watching. Medical work is still coming through and usually that is a bellwether for us.

 

[The Y-man]

I thought this thread was about a new version of Micrsoft Outlook..........

The Y-man

 

[willair]

Hard to know but in our area off inner Brisbane (Wooloowin) several house and land development blocks haven't had nibbles and the house across the road is up for auction but very few cars viewing. This contrasts with early last year when about five or six houses in the street sold quickly after being on the market for quite a while.
.

Thanks that's the same story that the RE told me in the front-bar Friday night,last time when Brisbane went up 10k per month it was spread over most areas,Inner City too Logan Railway Station maybe it will be different this time even Rocklea is going into the 400k range..

 

[HiEquity]

If interest rates rise, property will tank. Demand is only being held up because money has never been cheaper.

So interest rates are the million dollar question. What could cause them to rise?

An outbreak of economic confidence and activity? Hard to imagine given the state of commodity prices and the rest of the world.

Inflation as a result of a lower dollar? Possible but historically the RBA has tended to "look through" this issue at the upper end of the inflation band if the underlying economy is looking a bit sick.

Black swan event? Always possible but hard to plan for and planning for Armageddon has only been a wealth destroyer to date.

The main driver (among others such as double income families) over the last twenty years for increasing property prices has been the overall reduction in interest rates since deregulation and floating the dollar. Can this continue?

Actually I think it can. As the mining investment boom continues to fade IRs will have to be kept low / lower to keep the economy going. Rates at their current lows are not enough to get businesses investing so they will likely have to go lower despite jawboning over asset prices. The lower dollar allows it too.

So FWIW I expect more of the same - high and increasing asset prices accompanied by low yields in all investment classes just to maintain the status quo in the economy in the face of the continuing funk in the rest of the world. Without the mining boom, interest rates are the only lever left and we are one of the only countries left with the ability to keep dropping them further.

So the trend of the last twenty years will keep continuing - and if that's still not enough then there is always quantitative easing to keep things inflated...

 

[willair]

I thought this thread was about a new version of Micrsoft Outlook..........

The Y-man

I was going to start one with the title, Are you a Feminists,but that one maybe would get more traction but this one maybe will bring out different opinions..

 

[Redom]

If interest rates rise, property will tank. Demand is only being held up because money has never been cheaper.

So interest rates are the million dollar question. What could cause them to rise?

An outbreak of economic confidence and activity? Hard to imagine given the state of commodity prices and the rest of the world.

Inflation as a result of a lower dollar? Possible but historically the RBA has tended to "look through" this issue at the upper end of the inflation band if the underlying economy is looking a bit sick.

Black swan event? Always possible but hard to plan for and planning for Armageddon has only been a wealth destroyer to date.

The main driver (among others such as double income families) over the last twenty years for increasing property prices has been the overall reduction in interest rates since deregulation and floating the dollar. Can this continue?

Actually I think it can. As the mining investment boom continues to fade IRs will have to be kept low / lower to keep the economy going. Rates at their current lows are not enough to get businesses investing so they will likely have to go lower despite jawboning over asset prices. The lower dollar allows it too.

So FWIW I expect more of the same - high and increasing asset prices accompanied by low yields in all investment classes just to maintain the status quo in the economy in the face of the continuing funk in the rest of the world. Without the mining boom, interest rates are the only lever left and we are one of the only countries left with the ability to keep dropping them further.

So the trend of the last twenty years will keep continuing - and if that's still not enough then there is always quantitative easing to keep things inflated...

Great post!

Their (RBA) waiting for a pickup in non mining investment. All preconditions are there - low rates, increasing population, healthy balance sheets, etc.

Waiting for the 'animal' spirits to kick in. Once a few make big moves, others will follow and the 'transition' will be in full swing. If it doesn't happen, than rate rises may be a while away.

International context will play a role too.

 

[WesternRat]

rates on hold until mid next year, but in the meantime, population will continue to rise and continue putting pressure on housing affordability (which means higher values for us)

 

[lizzie]

If interest rates rise, property will tank. Demand is only being held up because money has never been cheaper.

Depends on what side of the market you are on. We're finding our rents are either static or dropping because of the low interest rates - people are buying rather than renting.

If rates start to rise, and less people buy, the rental market should improve - for us landlords that is

 

[Freckle]

We're finding our rents are either static or dropping because of the low interest rates - people are buying rather than renting.

I would disagree.

Investors have and are displacing private buyers in the market by a significant margin. Investors now account for around 46% of the market. I beleive up from 18% some years ago.

Declining demand has another (or other) causes. They may be local, state or broader, like general economics. Until you understand the cause(s) it'll be hard to put a counter strategy in place.

 

[lizzie]

I would disagree.

Investors have and are displacing private buyers in the market by a significant margin. Investors now account for around 46% of the market. I beleive up from 18% some years ago.

Declining demand has another (or other) causes. They may be local, state or broader, like general economics. Until you understand the cause(s) it'll be hard to put a counter strategy in place.

If only things were that simple. Depends entirely on where your IP's are - and where the investors are investing ... not necessarily even the same city.

 

[LeoT]

Outlook for 2015, 2016 and so on doesn't matter.

If you know where to buy, when to buy and what to buy and at what price, all the macro nonsense doesn't matter.

The topic of IR, unemployment etc etc has been spoken about for decades, and yet there are still investors who ignore all of it and do very well.

There are heaps of people who bought in Syd in the boom, paid crazy inflated prices. Im sure when the IR goes up some will be in trouble and sell. Then the smart investors comes along and gets a bargain. So in the same time period, while some ppl will blame interest rates for their demise, others will welcome it, utilise it and actually works in their favour.

Its all about knowing where, when and what. and price. Unfortunately, I believe a large majority of ppl are still quite vague on all this.

 

[starter]

Outlook for 2015, 2016 and so on doesn't matter.

If you know where to buy, when to buy and what to buy and at what price, all the macro nonsense doesn't matter.

The topic of IR, unemployment etc etc has been spoken about for decades, and yet there are still investors who ignore all of it and do very well.

There are heaps of people who bought in Syd in the boom, paid crazy inflated prices. Im sure when the IR goes up some will be in trouble and sell. Then the smart investors comes along and gets a bargain. So in the same time period, while some ppl will blame interest rates for their demise, others will welcome it, utilise it and actually works in their favour.

Its all about knowing where, when and what. and price. Unfortunately, I believe a large majority of ppl are still quite vague on all this.

Well the macro nonsense and outlook for 2015, 2016 and so on would surely form a part of the analysis of where, when and what to buy and at what price.

 

[charttv]

Without the mining boom, interest rates are the only lever left and we are one of the only countries left with the ability to keep dropping them further.

hmmm, was thinking about this. Wasn't the reason they rose in the late noughties due to the heat of the mining boom anyway? Haven't heard the RBA moaning about a "two speed economy" for quite some time now.

 

[LeoT]

Well the macro nonsense and outlook for 2015, 2016 and so on would surely form a part of the analysis of where, when and what to buy and at what price.

Hi Starter,

Your right to some extent but I think ppl place way too much importance on all those factors IMO. Really if you do sensible investing like stay away from high strata 10k plus a year, DONT buy in boom markets, DONT buy in like 500 unit complexes I see in Rhodes etc, don't buy in places where vacancy rate is 8%..you know.. the basic stuff that I believe ppl should know and stay away from and a handful of stuff like that, then really I believe it doesn't matter what the economy is doing, medium to long term well bought and well thought out purchases will do quite well.

That's my opinion.

 

[starter]

Hi Starter,

Your right to some extent but I think ppl place way too much importance on all those factors IMO. Really if you do sensible investing like stay away from high strata 10k plus a year, DONT buy in boom markets, DONT buy in like 500 unit complexes I see in Rhodes etc, don't buy in places where vacancy rate is 8%..you know.. the basic stuff that I believe ppl should know and stay away from and a handful of stuff like that, then really I believe it doesn't matter what the economy is doing, medium to long term well bought and well thought out purchases will do quite well.

That's my opinion.

I don't see them as either/or. You should be covering the basics as well as buying in areas with good future prospects.

I think we're on the same page anyway, I'm sure you're analysing the macro factors much more than you think. Especially when you're looking at whether markets are in boom stage or not.

 

[Freckle]

Well the macro nonsense and outlook for 2015, 2016 and so on would surely form a part of the analysis of where, when and what to buy and at what price.

Macro has longer time lines in general (5-10y) so if one is up to speed macro should already be a part one's overall view.

A reno and flip wouldn't require a macro analysis as such. If you're still in the acquisition phase, rounding out a portfolio or restructuring an existing portfolio then macro becomes an integral part of shaping a strategy.

 

[starter]

Macro has longer time lines in general (5-10y) so if one is up to speed macro should already be a part one's overall view.

Well put, that's the way I look at it as well.

 

[Graemsay]

"Prediction is very difficult, especially when it's about the future" - Niels Bohr.

House prices have risen by around 15% or more in Sydney over the last twelve months. Given that incomes are growing by around 3%, that's five years worth of price rises.

A conservative projection would be that this will slow, and you could well see some falls, as prices tend to overshoot on the upside during a boom.

 

[BlindBull]

You?re right Graemsay, prediction about the future is near on impossible, especially these days with the pace money moves..

However, before this 15% rise (equivalent to 5 years worth or price rises give or take..) Sydney house prices were near on stagnant for 5 years, so it had some catching up to do, and markets will never move in a straight line with inflation. It is a constant battle for market equilibrium balancing what is perceived to be over priced and underpriced assets, driven by fear and greed..

The trick is to be in the market for the long run to reap the rewards of both.

As for what will happen next year??? I don?t really care.. If prices continue to increase, I will sit with my portfolio happy with the knowledge that my equity is increasing.. If prices drop, I will be ready with powder dry to snap up the bargains that will appear as greed turns to fear, happy in the knowledge that as the market overshoots to the downside, prices will rise again...