People still investing in Australian residential property are just plain dumb

[Ziggy]

LB, don't be carried away by what brains says and start your doom and gloom talk again.

I've been passively monitoring posts in this forum for many months now and I can see that something is going on here.

brains and some others are trying to spread fear and insecurity to investors.

Sea_change seems to know the coastal market better than both of you. Instead of trying to analyse his post,
brains himself decided to tell us that the market has turned.

We don't need to be told what happened.
If it has, we can decide this for ourselves.

Whats your agenda guys?
If you don't like property investing you shouldn't be here.

Ziggy

 

[see_change]

Looking at the underlying motivation behind the recent interest in property , and prior to that shares you have a common factor.

The desire of a significant percentage of the population to make money.

While a few have been hurt at times , the majority are still enthusiastic in their pursuit of riches.

The herd is still out there . The underlying motivation hasn't gone away.

They're just catching their breath. Some will get nervous , but a large proportion still want to make money.

Shares are still percieved as risky. Most people know someone who lost money in the tech wreck , but so far most people don't know someone who has lost money on property .

I think it will take more to stop the market than a .25 % rise in interest rates.

Personally I think it's good if the recent dramatic rises slow down, and the market becomes slightly saner. If it continued at it's previous pace, interest rates would have ended going up more dramatically, and people WOULD have neded up getting hurt.

On a historical basis Brisbane still has at least another 18 months to go , though the rises ( IMHO) will be much more reasonable. The typical cycle is for Sydney to out perform Brisbane for five years , and then for Brisbane to out perform sydney for the fo9llowing five. We're about 2 years into the brisbane section.

Brains , people have been buying in comparable sydney areas at returns a lot lower than are currently available in Brisbane. Why do you seem so convinced that the market is about to fall through the floor?

You havn't been listening to LB too much have you ?

See Change

 

[BV]

ZIGGY

Constructive critisism is good but their talk is usually on the destructive side.

LB has sold his properties and now wants prices to fall so he can buy them back, it aint gona happen LB. You missed the train this time.

Little Brains has invested his money in shares and he wants people to get out of property and buy risky shares. Thats not happening and it drives him mad. Thats his plan and if you don't agree with him you are Bad with a capital B.

Brains,
to answer your question, the sky on my planet is always blue, but let me guess, the sky on your planet is always dark gray.
Remember that people in this forum are well informed and therefore you are wasting your time.

You are simply showing your bad character.

Bill

 

[brains]

Im just calling it as i see it and so does LB. For those that are realists the signs are everywhere. Ziggy, you can promote otherwise and buy all the IPs you want in this market and i certainly know who will be at the most financial risk.

Do you think that i think my posts on here will affect the property market in a negative sense? You gotta be kidding!

And I love property investing but im a realist and its just that i love my money better.

Thorpey,

I dont have a clue what will happen to rents. I'll leave that one for someone else to answer.

Originally posted by Ziggy
LB, don't be carried away by what brains says and start your doom and gloom talk again.

I've been passively monitoring posts in this forum for many months now and I can see that something is going on here.

brains and some others are trying to spread fear and insecurity to investors.

Sea_change seems to know the coastal market better than both of you. Instead of trying to analyse his post,
brains himself decided to tell us that the market has turned.

We don't need to be told what happened.
If it has, we can decide this for ourselves.

Whats your agenda guys?
If you don't like property investing you shouldn't be here.

Ziggy

 

[brains]

Bill, Youre crazier than i thought.

I own almost 2 million in property (inc. PPOR) geared at about 33%. (Soon to be over that amount with the - off market purchase of a few bargain blocks of land from a govt. dept.)

My share portfolio is in the low 6 figures - owned outright.

I own my own business which i am a passive part owner these days - this year hopefuly will sell out totally.

I have no hidden agenda for my posts. I have much more to lose in a property slump than to gain in a share boom, the good part is i dont have to choose between the two. I make decisions with each one indepenently to benefit as much as i can.


I am just being realistic - The signs of a property slump are everywhere. Pull your bloody head out of the sand. You sound like a newbie investor who is saying what you want to beleive will happen and not what is actually happenning.

And If you think people are not buying less property (wether or not they are buying shares) you are seriously deluded.

Time will tell who is correct on this one and i reckon by June next year we will know who is right.

Originally posted by billvals
ZIGGY

Constructive critisism is good but their talk is usually on the destructive side.

LB has sold his properties and now wants prices to fall so he can buy them back, it aint gona happen LB. You missed the train this time.

Little Brains has invested his money in shares and he wants people to get out of property and buy risky shares. Thats not happening and it drives him mad. Thats his plan and if you don't agree with him you are Bad with a capital B.

Brains,
to answer your question, the sky on my planet is always blue, but let me guess, the sky on your planet is always dark gray.
Remember that people in this forum are well informed and therefore you are wasting your time.

You are simply showing your bad character.

Bill

 

[see_change]

Brains

The Signs of a property SLOW DOWN may be everywhere ,

But For PROPERTY SLUMP you need LOTS OF HIGHLY MOTIVATED VENDORS and no buyers . That, I don't see.

See Change

 

[see_change]

The other comment I'd make is about how fickle the Media/ Commentators are in their analysis.

With the 0.25% rise, we had predictions of a further 0.5% to come next year. This was as much the cause of the slow down as anything else.

Over the last week I've heard three reports ( including front page of the SMH financial section today ) about how the economy is slowing and the next rate change will be down !!!.

The one think I've learnt over the last three years is you don't react to every little bit of info. Give it time to settle in. Most of the "noise" out there is aimed at selling more papers rather than providing worthwhile financial commentary.

Three years ago I'd buy the AFR to catch up with what was going on , now I buy it to confirm what I've already seen.

See Change

 

[Bill.L]

Hi all,

Here we go again!!

LB, you still dont get the point on property, do you. It is a different type of investment to shares.

Shares are pieces of paper, giving you a part ownership in an entity. These entities can be created out of thin air and nobody NEEDS to own or possess them.

Property(shelter) is one of the basic necessities of human existence. If there were unlimited stock of property for the existing population, then yes property would behave like other commodities(read shares).
However property is not unlimited, the shelter must be built. The current stock of housing is only just above demand(obviously varies between areas and property types). Any type of slowdown effects the developers first(just ask Henry Kaye). Therefore the number of new dwellings is reduced.

I'll even agree that you could have a slump if the population was static and the oversupply was large.

For those that don't know THE POPULATION IS RISING by about 1.4% per annum. They NEED to live somewhere. If the developers slow down their rate of new building, then fairly swiftly any oversupply will be taken up.(put an extra 100,000 people in SEQ, and no new developments and see what happens, to take the extreme view).

Building costs have risen dramatically in the last 10 years, due to inflation and stricter codes. This puts a FLOOR under prices.

Property that has good access to infrastructure and is highly desirable in built out areas, and has growing population; this puts a FLOOR under prices.

As property slows down, the economy suffers and further interest rate rises are less likely. This puts a FLOOR under prices.( For those that don't know, interest rate rises are bad for the sharemarket. Just look at the history of the DJIA from the late 60's through to 1980.)

If the only aspect of property that you look at is yield, then you are not looking at the whole picture. At a very minimum you need to look at the combination of yield compared to cost of money(interest rate),compared to inflation.

An analogy to looking at yield only would be a horse race where there are 20 runners and watching 2 only and saying that x is in front of y, therefore x is going to win. Meanwhile the bigger picture shows that x and y are in the middle of the pack.

bye

 

[brains]

Bill,

What you are saying is absolutely correct. But as ive said previously property will always rise in the long term - its a given.

But within that long term you have booms and busts. And after one bust you have another boom which has a peak higher than the previous boom, followed by a slump which is higher than the previous slump and up and up it goes over the long term.

Sounds just like technical analysis charting

 

[see_change]

Brains

Originally posted by brains
Bill,

Sounds just like technical analysis charting

It is

See Change

 

[ocean view]

?????

Firstly Cosmo. That home was $600k purchase.

Brains,,, I think you are a bit hard on your stock SEQ.
I have Hundreds of clients who will be are currently purchasing in that sector..over the next 1-3 years.
Now,,, if little old me has that many????

If your selling, ring me first,, we can work something out(no agents)..

My Honest opinion is good cg for sector,,, & even better closer to water. In fact it is so strong I have shifted 70% of my Sydney portfolio to there in the last 3 weeks.

Brains ," the signs are there everywhere?"

sarcasim again I hope!

If not ,,,,,,Now...... I will have to disagree with you,,, prob for the first time...though.

I must of missed them ?? SIGNS
Ok 4506 may have signs and I would not start to question you there. As you seem to have the pulse

But what about the areas a little north & east,, Bribie , sandstone point,,,, toorbul point
And what about woody point???

The signs in some of these are not even close to slowdown..

It is a Meat market in one or two of those areas. Agents buying even this week before public gets to see them. (snakes in the grass waiting to pounce)

ocean

 

[abcdiamond]

Rising vacancy rates in some suburbs are giving landlords a headache, says Paul Coomb

I've just been reading some old articles from Sydney Morning Herald, and the warning signs have been around for some time:

eg: October 17 2001
some quotes are :
"There's little or no capital growth for owner-occupiers and double trouble for investors battling to get tenants willing to pay rents to service their borrowings. "

"He says he's not a gloom-and-doom merchant. Sydney median prices should rise 2 per cent to 3 per cent as construction cools down for the next June year"

Remember, the date was October 2001

Where would I be now, If I had read that article back then ?

 

[see_change]

ABCD

I suppose I shold be Glad that without my Glasses I'm legal blind, otherwise I might have seen the signs back then ....

I can remember being paranoid when we were having problems getting our first subdivision though council in 1999. Took 18 months .. I was worried that we wouldn't have it finished in time for the olympics boom...

See Change

 

[brains]

Thanks See_ Change. It was a rhetorical comment

Originally posted by see_change
Brains



It is

See Change

 

[L Bernham]

Bill L: I think I DO get it. re your last post. I think you should take that to these other countries that have had 80% falls and tell them that these falls should actually never have happened because -
"Property(shelter) is one of the basic necessities of human existence" or "its a limited commodity.

You are right, the population is rising by 1.4% pa so that justifies 20% growth pa?

Building costs have risen dramatically in the last 10 years, due to inflation and stricter codes. This puts a FLOOR under prices

Building costs have risen due to frenzied investor demand. As soon as demand steadies again we'll see building costs reduce as well. We were looking at a new development and were told that prices were going up 2% a month! When I asked why the honest salesman told me simply 'because they can get away with it'. Its another simple law of economics when demand increases and supply is more inelastic prices will rise.

billvals wrote

LB has sold his properties and now wants prices to fall so he can buy them back, it aint gona happen LB. You missed the train this time.

It looks like I could already buy it back for less. Melbourne is already experiencing negative growth by the look of it
http://www.propertyreview.com.au/archives/26112003/headlines/26112003005.html

So certainly not worried about missing a boat. As Ive always said there is no shortage of places to invest that don't require the almost certain loss of capital and very low income returns.

and I think Brains summed if up nicely here

The signs of a property slump are everywhere. Pull your bloody head out of the sand. You sound like a newbie investor who is saying what you want to beleive will happen and not what is actually happenning

I think everyone should read that again and then stop and really think to themselves "COULD THERE BE A REMOTE POSSIBILITY THAT I'M DOING THIS"

I'm currently here to learn. At the moment I'm trying to learn more about investor sentiment during bubbles and the reasons people still continue to buy when now almost everyone in the know is saying look at prices and STOP this nonsense.
And I'm wondering if these diehards are going to be the same ones that will be holding all the way down, constantly in denial.
Did the Economist magazine say the decline was only going to happen in the inner-city market - NO - it was across the board. Some more than others but all will suffer because each market has some degree of interdependance.

LB

 

[L Bernham]

see change wrote

But For PROPERTY SLUMP you need LOTS OF HIGHLY MOTIVATED VENDORS and no buyers . That, I don't see

and for a steady decline of around 30-40% over a few years all you need is the frenzied panic buyers to become less enthusiastic than they have been, happy to wait for a vendor to come down to their price for a change and rent for 'free' in the meantime (ie paying only for the expenses and only some of the cost of capital)

Lets not forget, houses will keep on being built to satisfy new demand so I dont know who will be buying all the other houses.

 

[Bill.L]

Hi all,

LB, I think you will find that if you went to repurchase a similar unit to the one you sold, it may be at a cheaper price. However after you take into account CGT, selling costs, time looking for new unit and DD costs, stamp duty, new loan costs etc, then you will be very much behind.

My estimation of what the overall cost would be is close to 20% of your original selling cost. I stand to be corrected if you have figures to the contrary. I also think your CBD unit may come back more than that.

But if we go into the suburbs, which are currently built out, and look at houses that are close to infrastructure, and are median priced for the suburb, then the chances of your 30-40% decline are just about zero. And I don't care what "The Economist" stated, as the article was probably written by an academic who doesn't understand what happens in the real world.

Now the question remains, at what point could I possibly agree with your point of view??

My answer that either interest rates would have to rise to 12% or prices for average houses would have to double from here. Only then would average houses be as overpriced as they were in 1990. Of course if average wages continue to rise then the figure becomes higher.

Brains,

My point is that we are not in the boom end phase yet, prices may have risen alot, but much of it was catchup from the last bust, especially given the very low interest rates. Do you see interest rates rising by much and why??

bye

 

[brains]

Bill,

If you think we are not in the 'boom end phase' yet, youre crazy!

Where do you think we are?

Its actually past 12 on the clock. And maybe interest rates will get to 8% sometime in the next 2 years. But its only a guess.

 

[Bill.L]

Hi all,

Brains, Maybe I am crazy

But when I look at history of house prices I see that the end of the booms were at the high point of the interest rate rises, or at the end of the credit squeezes. Of course the data lags what really happens, but if interest rates continue to rise for the next 2 years, then don't be surprised if house prices go up even as some sectors of the market(apartments) go down. We always have to remember that booms go alot higher and longer than most predict.

If we look for an analogy in the stockmarket, then Greenspans "irrational exuberance" speech in 1996 when the DJIA was at 6700 is the classic. The warning at the time was that there was no justification for the current prices. However the real "blowoff" came in the next 3 years.

bye

 

[see_change]

I'd agree with Bill here.

Was having a re look at what happened in Logan at the last peak. It actually platueaxed for about three years ( some minor fluctuations, will post chart when I get some time ) before prices went down.

That was at a time of High rates, and some pretty dodgy marketing in the area.

I think that prices will drop at some stage , but , at least in the markets i'm in , I don't think that will be fore a while, with some gains before that happens.

See Change