People still investing in Australian residential property are just plain dumb

[Cosmo]

I’m with oceanview,

IMHO Lifestyle locations will continue to show great growth. My relatively basic studies of Sydney’s northern beaches shows that a lot of purchases of units, townhouses etc are being done by retirees for cash! Typically, they sell up their north shore home for 900k and buy a unit for 650k and use the money left over as an income supplement to their super etc.
The cost of getting in now is over the top but further a field is definitely worth investigating.

Follow the baby boomer to great CG’s!!!!

 

[The Fence]

Cosmo & Oceanview,

Spot on !
Follow the trend. The trend is your friend!

Regards,Thorpey

 

[Aceyducey]

On Auction results, I thought it might be useful to compare the clearance rates at this time of year with the same time last year.....how about that! The auction clearance rates in Sydney & Melbourne are virtually identical & Brisbane's was lower last year.

So did the boom end this time last year and no-one notice?

It was true that clearance rates were down in Adelaide & Perth this year however.


SOURCE: Home Price Guide, 20 November 2003

Mixed Signals from the Auction Market

Auction markets around the country this week presented mixed signals. Volumes were up in most markets, signalling solid vendor confidence. However, clearance rates fell across the board, perhaps indicating that the current rate climate is finally starting to deflate demand.

504 auctions were held in Sydney over the last seven days, down from 611 last week. The clearance rate also fell, from 61 per cent to 57 per cent. In the same week last year, 594 auctions were held at a clearance rate of 58 per cent.

In Melbourne, 1014 properties went under the hammer, compared to 868 last week. However, the clearance rate declined from 58 per cent last week to 56 per cent this week. The number of properties sold at auction was almost identical to the same week last year.

Brisbane showed strength on the supply side, with 85 properties offered at auction. The clearance rate, however, was well down – falling from 70 per cent last week to 48 per cent this week. This is still a much better performance than that we saw this time last year, when 49 auctions were held and 21 sales made.

The Adelaide market continued a recent softening trend, with the number of properties offered falling from 124 last week to 102 this week. The clearance rate also fell to 50 per cent, compared to 58 per cent last week and 71 per cent this time last year.

32 properties were auctioned in Canberra, up from 21 last week. The clearance rate fell to 31 per cent, compared to 48 per cent last week and 71 per cent this time last year.

In Perth, 22 properties went to auction, up from last week’s figure of 16. The number of sales also improved. Compared to this week in 2002, the volume remained steady, but the clearance rate fell.

There's more interesting stuff about the return of the bargain hunter & buyers holding all the cards as Christmas approaches - if you want to read it visit: www.homepriceguide.com.au

Cheers,

Aceyducey

 

[brains]

I live in a classic coastal/sea change/baby boom area one hour north of Sydney and after three years of great growth the market has gone flatter than yesterdays beer. According to local agents enquiries have dropped off alarmingly in the past few weeks and they have heaps of stock for the first time in ages. In fact ive been seeing those dodgy 'market appraisal' gold certificates in from REs in the letter box. Havnt seen them around for years.

Originally posted by Cosmo
I’m with oceanview,

IMHO Lifestyle locations will continue to show great growth. My relatively basic studies of Sydney’s northern beaches shows that a lot of purchases of units, townhouses etc are being done by retirees for cash! Typically, they sell up their north shore home for 900k and buy a unit for 650k and use the money left over as an income supplement to their super etc.
The cost of getting in now is over the top but further a field is definitely worth investigating.

Follow the baby boomer to great CG’s!!!!

 

[Cosmo]

Hi Brains,

I’m interested why this is so in your area. Have prices long ago reached ridiculous levels and with a perceived (real) softening in the general market people now refuse to pay vendors prices?

What do you think?

 

[BV]

Brains,

If you sell your place in Umina
you won't be able to buy it back later.

You are dreaming thinking that property prices will fall
(particularly in the low end of the market where there are lots of potential buyers).

Your town, Umina could see some slowdown but even so, I don't see price drops.

For us down here our population is on a steady increase and as a result demand for housing will continue well into the future.

I only see your stocks falling and that would be painful
Perhaps you should sell, before another stockmarket crash comes along....LOL.

Bill

 

[Mondie]

Originally posted by Cosmo
Hi Brains,

I’m interested why this is so in your area. Have prices long ago reached ridiculous levels and with a perceived (real) softening in the general market people now refuse to pay vendors prices?

What do you think?

Hi Brains,

l too would like to hear your ideas on whats happening in the market in your area as we have 2 IP's in BB/Coastal towns. Do you think its a reaction to the interest rate hike that may only be a temporary lull? Perhaps growth has been so high in your area that yields are now so low the numbers dont add up for a lot of buyers? Or maybe it is the beginning of a flat growth period. What sort of CG has occured in your area over the past 5 years?

Cheers Mondie

 

[abcdiamond]

Originally posted by billvals
I only see your stocks falling and that would be painful
Perhaps you should sell, before another stockmarket crash comes along....LOL.

Have you been reading this article from The Australian

quote: But if the world suffers another terror attack or the Middle East situation deteriorates, then the effect on consumers, particularly those in Japan and the US, will curtail the recovery. The share market will not take long to react.

 

[Tibor]

Hi everyone,

Interesting thread, differing opinions.

My opinion is that the market will into any direction that is based on sentiment (herd mentality). The really serious investors do not pay much attention to it, as deals are available every day, it might just takes a bit more effort to find them while the herd is on rage. Eventually the herd sentiment is going to change (as did in the past and will do it in the future) and the latest 'hot' thing, might as well be shares or ostriches or who cares about it anyway, will move the herd onto greener pastures and property again will become easier to buy with good yields and sound fundamentals.

It might will require a bit more journalistic enticement, RBA and senior political / economical and other people to talk it down and a bit more interest rate rise. For those who bought on sound fundamentals good times will come with lots of excellent opportunities available, for those who bought as it is the flavour of the month might not be so lucky and lots of them will decide that they can not endure the pain any more (and there are lots of new doodads for self justifications), will leave the market, until the share market does another 2000 and sentiment changes again, then the herd will be back.

Just the 2c.


Tibor

 

[brains]

I think its because the market cannot continue to increase and at some time it has to level out or go backwards. Its a natural cyclic thing and its happening now. Yields are terrible here, almost as bad as as Sydney (<3.5%) . But that only affects investors and its not a huge investor area so thats not an issue.

And the statement that property prices will increase due to rising population is a given - of course it will, all property will increase in price over a long time frame. But you have peaks and troughs within that long term.

According to one agent i was chatting to at an open on Sat. morning, vendors are starting to accept much lower offers than previously, some accepting them because they think that they will have to field worse offers in the future as rates rise and this is the sort of thing that causes property prices to drop.


Billvals,

"I only see your stocks falling and that would be painful
Perhaps you should sell, before another stockmarket crash comes along....LOL."


What is this comment based on and what does it have to do with property? You continue to display your ignorance on a daily basis.

Of course stock prices fall - just like property in the short term - but in the long term my share portfolio will always increase in value. And anyway, i have strategies to reduce risk and minimise loss (as all investors should) in case of a collapse, so its not a problem.

As for the rest of your inane post, dont you think property has ever fallen in price? What color is the sky on your planet ?

 

[ocean view]

plain dumb

This subject has taken many turns.

Brains has experience in his area & we must respect that.
Reading between the lines He is saying that his umina area has slowed down in CG. On AVERAGE......... But he is not saying it will decrease in value ON AVERAGE...

Now time to be nasty again...
Note,,, not here to gloat ,,,,only inform & put up facts to go up agaist the doomers who haved stamped the current australian buyers as dumb.

I am happy to say I purchased 3 homes in the last 3 days.
One of which has re sold for $100k more then I paid for it on Friday. 3 DAYS

The other 2 should return 35% cg over the next 10-12mths.

Yes I know .. I will be hammered by the narks putting up these figures.

But the fact is there will always be a Bargin out there & it is up to US to research & find the Bargin.. In all situations... Plenty out there.... I had to knock a couple back on the week end.

Funny.... the one that made the 100k (net) on ,,,. The agent told the vendor that the market has turned..DOOM & GLOOM TALK made the difference............LOL LOL LOL

Vendor was from OS & did not stand a chance... Agent did not want to take a chance & his instructions was to move it in 5 days by vendor
(even the doom & gloom got to him (AGENT),hence the low price. Note the vendor did make $200k profit since his purchase 1999 so I guess everyone is happy.



The dumb one is ....I can tell you.

 

[Tibor]

This is from an RE agent in the Logan shire (as of today) whom I will see on this Saturday (not to buy at this stage, just to keep contact) in short points for my question how things were going?

"Inquiry rate dropped to zero in the last three week
Prices has stoped but they are holding
I have a stock of 50-60 house in the two offices
(as against 5-10 in the last 4 months)"

Logan was maybe the hottest area during the past 6 to 12 months and several people who have bought experienced 100%+ cap gains
on cash-flow positive properties.

Tibor

 

[BV]

Tibor,

Thats a lot of stock in just 2 RE offices.

Can you find out if its mostly out of town investors who are selling?

I haven't been following Logan much, have property prices there followed Brisbane in %CG?

Bill

 

[Tibor]

Bill,

I will provide an update on Logan, after talked to him (and maybe with some others) over the weekend. I would not think that the majority of the sellers are out of town investors, but it is only my opinion. Logan after 10 terrible years just had an extreemely fast catch-up, but it is nowhere near to its full potential. In the next 12 months I will be buying more, once vendor expectations became much more realistic and yields can justify the purchase.
I am just simply not interested to purchase at 3.5% yield, irrespective where the location is. Thats what I am calling gambling and I am interested in investing. Not wright or wrong, it is just my philosophy.

Tibor

 

[Cosmo]

Hi Oceanview,

100k nett for 3 days. Wow! Was the property value greater than 1M? I know of purchasers in that category who casually negotiate in increments like that (crazy eh)………..makes regional purchases which put $10 a week in your pocket look a bit sick.

Great work!

 

[see_change]

Hi Bill

Originally posted by billvals
Tibor,

Thats a lot of stock in just 2 RE offices.

Can you find out if its mostly out of town investors who are selling?

I haven't been following Logan much, have property prices there followed Brisbane in %CG?

Bill

Having followed logan for about two years , 50-60 houses in two agencies is not a lot of Stock . Three years ago , agents had 2-300 each . When we were buying middle of last year all the agents had 30-40 each.

Logan is a relatively large area, and my perception is that the number of agents in the area is probably low for the number of houses.

The area is at the bottom of the price scale in brisbane , so to make a decent living the agents need to amke more sales than in othere areas.

I spent about two hours talking to agents one week ago , and Sales did stop with the increase in rates. The perception amongst the agents was this was more due to uncertainty about future rate rises , rather than people not being ableto afford to buy any more. Buyers are aware the market has changed, and are not in a rush to buy but the number of enquiries had started picking up in the preceeding few days.

There was also the observation that prices had gone up some 40 K in the preceeding three months and the market was due for a pause while people adjusted to the new prices. This included valuers who were stoping some sales due to low valuations.

Last nov Dec, the market took a breather as people adjusted to paying close to 100k for houses. ( before 60-80 as the norm )

This year the market had also taken time adjusting to going through barriers at around 120 , and more recently 150. Around June agents reported purchasers wanting buys under 150.

Christmas has also had a dampening effect.

I know one person who used the slow down last nov / dec to pick up some good bargains.

At the moment I have been told that the hot sector in Logan are the town houses around 120. The bottom end of the houses around 160-170 are also selling , thought there arn't many of those around. Places that are more expensive for the area arn't selling. There are also vendors around who still expect silly prices and if houses are " over priced " they are not selling even if they are in the lower price range.

See Change

 

[brains]

All the above by See_Change and/or the end of the boom has hit. Investors have dispearred due to crap yields and we all better get used to flat or negative growth in the future.

This aint no seasonal thing, its going to be the case in the immediate future for areas that have had amazing growth in the past 1-2 years with no underlying fundamental reason.

I would not be surprised to see prices go backwards big time in these areas - and that includes Morayfield - but moreso for Logan.

I am at this point time seriously considering liquidating my properties in Morayfield and investing the funds elsewhere.

I have been chatting to an gaent or two up there and sounds like a similar story to Tibors, maybe not quite as bad.

Originally posted by see_change
Hi Bill



Having followed logan for about two years , 50-60 houses in two agencies is not a lot of Stock . Three years ago , agents had 2-300 each . When we were buying middle of last year all the agents had 30-40 each.

Logan is a relatively large area, and my perception is that the number of agents in the area is probably low for the number of houses.

The area is at the bottom of the price scale in brisbane , so to make a decent living the agents need to amke more sales than in othere areas.

I spent about two hours talking to agents one week ago , and Sales did stop with the increase in rates. The perception amongst the agents was this was more due to uncertainty about future rate rises , rather than people not being ableto afford to buy any more. Buyers are aware the market has changed, and are not in a rush to buy but the number of enquiries had started picking up in the preceeding few days.

There was also the observation that prices had gone up some 40 K in the preceeding three months and the market was due for a pause while people adjusted to the new prices. This included valuers who were stoping some sales due to low valuations.

Last nov Dec, the market took a breather as people adjusted to paying close to 100k for houses. ( before 60-80 as the norm )

This year the market had also taken time adjusting to going through barriers at around 120 , and more recently 150. Around June agents reported purchasers wanting buys under 150.

Christmas has also had a dampening effect.

I know one person who used the slow down last nov / dec to pick up some good bargains.

At the moment I have been told that the hot sector in Logan are the town houses around 120. The bottom end of the houses around 160-170 are also selling , thought there arn't many of those around. Places that are more expensive for the area arn't selling. There are also vendors around who still expect silly prices and if houses are " over priced " they are not selling even if they are in the lower price range.

See Change

 

[The Fence]

Hi Brains!

In your opinion, what is going to happen to rent rates now the market is going the way you say ?

I'm interested in what will happen as a result of this drop off in the market.

This is becoming a very interesting thread, good stuff!

Cheers,
Thorpey

 

[L Bernham]

Investors have dispearred due to crap yields and we all better get used to flat or negative growth in the future.

thats the million dollar question - how flat or how negative?

MY feeling is that when flat (or negative) capital growth becomes the expected, investors will stop buying. When I say investors I mean the herd majority. AS it is the herd that brought this market to where it is, it requires quantities of buyers the same size as the herd to sustain it. Without the herd of buyers, the few odd investors, owner buyers etc wont be enough to satisfy the number of sellers. This will occur even if the number of sellers remains at the same level.

As a result the more desperate (or realistic) sellers will reduce their prices first - this is the stage we are at now - hence the lower auction clearance rates.
Eventually clearance rates may improve but only because sellers are lowering their reserves to more realistic prices.

IF you have more buyers than sellers, prices will rise (as we have seen). If number of buyers drops, prices will fall. if more decide to sell or take profits, prices will also fall. If both these events occur simultaneously (as often happens because buyers often become the sellers, ie brains).

Once we have deflation in prices, buyers hold off as they figure they may as well wait till next year when they could be even cheaper (the media will assist in this).
There will be no incentive to buy - ie Why buy for a 2% net yield and possible negative growth.
Banks will also play a role because they will become more conscious of their responsibilities of not letting their customers overexpose themselves.
Mortgage insurance will go up due to higher expected claims costs thus increasing the cost of owning IPs

As a result, prices fall more and more until the income yield attainable makes it worth buying again.

Sorry for the doom and gloom. Calling it as I see it, I can do no more than that. If anyone has alternate opinions as to how these events play out I'm happy to hear them.


LB

 

[Tibor]

Hi Brains,

Regarding to Logan I am still willing to stick my neck out that there will be no big time fall. In the past I have already mentioned several reasons why Logan had to increase in price dramatically, but for those who have not read ot let me repeat some of them;

1. Logan is one of 3 shires in SEQ that has land shortage and it is not an artificial one like in Noosa, but a real one and as we know they just not making any more of it.

2. After the last boom (about 10 years ago) large part of the shire went into sustained sleep, while Brisbane (especially inner Brisbane) was going up to the level that one point in time a 2 bedder townhouse in Kedron (6 kms from the city) was costing 4.5 times the price of Logan (20 kms from the city). It was so obvious that either the inner area had to fall or the outer area had to increase. It has now returned to a rather acceptable 2 to 2.5 multiple.

3. The price rises have forced some people to look outside of their on area in the inner city and some have discovered that Logan is not so far, has good infrastructure and considerably cheaper.

4. Rental yields some part of Logan were 12% to 13% (some cases even more) and rent were dirt cheap. It was easy to get something cash-flow positive with reasonable growth prospect.

5. Logan also is in an excellent position both to Brisbane as well as to the Gold Coast with excellent infrastructure.

6. The Local Council is business oriented, unemployment is reduced, areas are gentrified and price rises are gradually pushing out the 'rough / undesired' elements.

7. As rent is Logan are still much cheaper than other parts of Brisbane, there is a good upside opportunity for rent rises over the next couple of years, which will bring some of today's high prices (together with some natural and forced cooling and more realistic investor view based on yields) look cheap in another 5 years time.

8. I often compare Logan to Parramatta about 15 to 20 years ago and always Logan comes out better. I would have loved to buy some properties in the early eighties or even before in Parramatta.
Some of the smart money did both in residential as well as commercial and in the past 5 to 10 years reaping the benefit.

If you wish to liquidate your holding in Logan, it is your decision.
I am in it in the long term and when further opportunities will arise, I will be moving on them.

Cheers,

Tibor