People still investing in Australian residential property are just plain dumb

[ocean view]

pot luck

LB ,,, Good method used

I have used this method of offering a 30% lower.... on 38 homes this past week. 2 of which have been accepted with average purchase price of 35% less than valued...

It's not always going to easy to have a win this way.. But it is the right time to try.. (after another .25% even better) But it's not hard work either....

By the way Both homes have exchanged + one of them has re sold again for 28% more than I exchaged on.
The second we will hold as is a great purchase short term say 18 mths..

In panic times say 1 in a hundred (thats a guess) vendors get it totaly wrong... I guess it is up to us to find them...

Acey sometimes it does not come down to expectations... Just errors in judgement by a certain party. (Rare I know but still , in a panic mind of a desparate vendor anything is possi,,)

The agent did not try & haggle up the price with vendors,,, (vendors more than happy with prices..set,,,,Agent has people like myself who will buy it & then re list it with them for double commission.. 3 happy partys...

OV

 

[brains]

Thn again, maybe not.

I think Stve McKnight knows enough about property to realise if this was the case. If he did realise it he would have mentioned that the property was way over the odds to start with due to vendors unrealistic expectations.

Even if this is the case its what causes property prices to fall anyway.

Originally posted by Unit
The house that Steve Mcknight puts forward as dropping in price is located in Blackburn. I checked the houses sold recently in this area in Realestate.com.au. Most were priced around 350k. Perhaps the vendor initially had an unrealistic expectation of what their property was worth.

regards

 

[iLuxo Jr]

Got your attention?

Yup, sure did...

In inner Sydney there is certainly a situation where the rental yields have been driven down to about 3.5% largely by the rental vacancy levels being high, combined with (being inner Sydney and the prices here) a fair percentage of the renters are themselves investing AND fairly well aware of the exact value of what they are renting.

I think what's going on is that because they know the game as well as we do, they can calculate within $50 where the breakeven point is for the owner, and it simply impossible to get more out of them because they can (and do) shop around for alternative places to rent.

There is also the problem of people paying huge prices (I mean millions) for high end apartments and renting them out at very low returns, on the basis that they don't care about the rent and are in it for the depreciation allowances and CG. Examples of this are surprisingly numerous and I think are skewing the figures.

I'd say the RBA is correct on warning people not to buy IP in areas where this is happening.

This situation won't change until the rental vacancy rates drop and hopefully rents rise somewhat bsed on supply vs demand, and there is some glimmer of this at last.

There are exceptions, just harder to find close to the CBD.

 

[always_learning]

Re: pot luck

Originally posted by ocean view
I have used this method of offering a 30% lower.... on 38 homes this past week. 2 of which have been accepted with average purchase price of 35% less than valued...

It's not always going to easy to have a win this way.. But it is the right time to try.. (after another .25% even better) But it's not hard work either....

By the way Both homes have exchanged + one of them has re sold again for 28% more than I exchaged on.
The second we will hold as is a great purchase short term say 18 mths..

In panic times say 1 in a hundred (thats a guess) vendors get it totaly wrong... I guess it is up to us to find them...

Ocean view, are you working in RE professionally? 38 homes, thats almost 6 per day to view and make offers upon, ie 1 per hour in a standard working week (yes I guess you are not a 9to5er).

What is your feeling of the market in Sydney? a touch of panic?

 

[Aceyducey]

AL,

I don't believe that ocean view wastes time going to see all the properties.

So long as the numbers work, the area is good & offers are contingent on inspections, traipsing through open houses is definitely not required

Cheers,

Aceyducey

 

[NigelW]

Just to add some research to the pot... here's an extract from a newsfeed I receive.

HILDA Says More Households with Investment Properties
The Australian reports that the most recent Housing Income and Labor Dynamics in Australia survey (HILDA) shows that 16.7% of Australian households own an investment property, contrary to other figures from the Australian Taxation Office (ATO) which put the number at approximately 12%. The HILDA survey tracks members of approximately 12,000 individual households for an indefinite period of time, collecting responses relating to economic well-being, labour market dynamics and family dynamics. According to The Australian, the Reserve Bank of Australia (RBA) provided funding to the HILDA survey in order to collect responses concerning investment housing. The results of the survey showed that the average investment property was worth approximately $220,000 with an average mortgage of $70,000. The RBA was reportedly concerned about the number of loans for investment properties being approved, and the HILDA survey shows that the national debt figure for investment loans is $140 billion, while the national debt for own-home mortgages is $275 billion.

So if we assume the average investor owes only $70k on a $220k property there should not be blood on the streets without major interest rate rises coupled with a sustained economic downturn (which would be the opposite of what you'd expect ).

Naturally there will be investors who will get into trouble, but it is likely to be only those who went in hard and late and/or OTP. So I guess we'll all be circling to pounce on those unlucky investors 2+ StdDev's from the mean

 

[Peter Parker]

Got your attention?

The Reserve Bank said in it's statement to the Productivity Commission Inquiry on First Home Ownership that people investing in Australian residential property were continuing to do so despite gross yields much worse than the comparable yields for local industrial, commercial and retail property.

Are they? The only retail property auction I went to was a group of 3 nondescript shops in an established shopping strip in Melb's SE. The rent was $100k pa. It sold for $2.2m - a yield of not much more than 4%. Residential rental yields here are around 4%.

A country area I've been looking at has residential yields in the 7-10% range while the highest commercial yield I've seen was 11%. Being a mining town, I'd regard a commercial property there as fairly high risk though times are good now.

In neither case is the differential particularly great. And given more articles about commercial property investing, it could well narrow.

Maybe the RB was thinking of Sydney where I've heard Paul Clitheroe talk about 2% yields in premium suburbs?

Regards, Peter

 

[Aceyducey]

Are they?

Timeframes Spiderman, timeframes.

I posted this last November...the article was based on information even older.

The market has shifted

Look at the original question.

Cheers,

Aceyducey

 

[bundy1964]

Are they? The only retail property auction I went to was a group of 3 nondescript shops in an established shopping strip in Melb's SE. The rent was $100k pa. It sold for $2.2m - a yield of not much more than 4%. Residential rental yields here are around 4%.

A country area I've been looking at has residential yields in the 7-10% range while the highest commercial yield I've seen was 11%. Being a mining town, I'd regard a commercial property there as fairly high risk though times are good now.

In neither case is the differential particularly great. And given more articles about commercial property investing, it could well narrow.

ADL has seen commercial yields as low as 5% net

Come refinance time that will be a nice cap rate

Sensable prices can still be found, you just have to look harder

I got no problem if a revalue comes in higher so I can go shopping again

If I can't find something there is always margin lending and cashbonds as another way to do it

bundy

 

[House_Keeper]

People forget that in the next decade more people will retire in that time frame compared to the last 100 years. And also more than the next 3 decades.

What is this based on exactly?

 

[skater]

Based on the fact that Baby Boomers are nearing retirement age.

 

[Aceyducey]

Look at the ABS population figures House_Keeper (abs site).

There's also plenty of material on the web about the crisis facing many western countries due to an aging population.....one worker supporting more than one retired person, lack of infrastructure, the power of the grey vote, etc, etc.

Google (www.google.com) is your friend....Copernic (www.copernic.com) is an even better friend.

Cheers,

Aceyducey