People still investing in Australian residential property are just plain dumb

[ger]

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

I have been in the PI game since 1981
I have NOT seen a boom (in Melbourne)
at least than the one we have just had
The difference in this boom is that first time
investors JUST looking for CG have come along
for the ride
as soon as they will see no more CG
they will not stick around for the
2-3% rental Income

 

[ocean view]

your views

Why are we debating items that are obvious..

We do know that the BOOM is over in most areas..SYD MELB

But Does it matter?
boom must mean that it is the only way you can profit or invest?

What is a boom????? 20% cg 30% cg 40%cg p/a//????100% cg??
over what period is this growth..???

Why does a boom make it right or wrong to invest..?

Lb your joking right? ......

If the price is right & it will make a return (good one) whats the problem.
.
Buying a Race Horse , 1960 mustang,,, If you know that the Home/investment will return you profit ,,,,,& your happy with that profit ,,,,what is the problem.

The only thing obvious to me is that IT IS CLEAR that some of you obviously don't know where to buy so it seems easier to slam the idea for now..

OK i will agree that even the bad judges could of got it wrong & picked anyhome in the last 3 years & still come out an expert.
YES...those high cg areas are now say 3%-5% of the property market.. But there still there!! Why is it so hard to find them.
Lots of us are still this week getting it right to ourr expectations that is..

Shares are always there & I buy every weekl. (some good floats comming up feb march) & looking forward to them

But no one is right or wrong ... everyone has the power to decide for themselves which will make a better return

Time............ short term or long term 1 week or 5 yrs???
Facts are going to show up the good investors & the bad...
Also will show the ones that could not make a return as they stopped buying.

Proof is in the pudding! (Mother use to tell me)
& nothing can & will change that. Look forward to hearing over the next 3 mths of people like myself getting in & buying a profitable purchase...

ocean

 

[abcdiamond]

Re: your views

Originally posted by ocean view
Why are we debating items that are obvious..

We do know that the BOOM is over in most areas..SYD MELB

Ocean
I think the answer could be that statements gets made, and are looked at by others who disagree.
eg: you COULD have said : "We do know that the BOOM is over in most areas" and that would have brought replies from those who disagreed that the boom is over " in their area", however, you specified ..SYD MELB, so no disagreement, well, so far

I also think that if the right property came up, even those who say its all over would be buying it.

 

[L Bernham]

I also think that if the right property came up, even those who say its all over would be buying it.

you are completely right Acey. Even I'm going to an auction this weekend for a property that I believe could present a good buy, even in this market. However I don't expect to get it because I expect that the owners will have a far higher price tag on the property than I think bidders will pay. That doesnt stop me trying and I will be sticking to my one main investment stragegy ie Dont be scared to miss out.

If you know what you are doing you should be okay. Even while the bear stock market was going on I was thinking "what bear market"? (maybe I was just lucky)

BAd investments will be made when people see a property that has a 4% yield when those surrounding have 3.5% and thinking its a bargain.
The key to finding a bargain is finding something that will pay itself off and interest in 25 years or less either due to high current rents or an excellent proposition of increasing rents. If capital growth comes let it be a bonus but nobody should count on it at this stage.

Trouble is, if this is applied it would be found that the majority of properties are way way overvalued. And its this that makes up the average.

LB

 

[ocean view]

If capital growth comes let it be a bonus but nobody should count on it at this stage. \\\

LB it's one of the wonders of investing... Choices..
We all have different ways & stratergies.

But I only buy & count on capital growth..
Without it I can not do what I do..

Good to see your like us after all
still lurking around in the pit looking for that special buy!

go get them tiger '
knew you had it in you.. LOL

TIP for you

ask agent for the names & address's of all the people that have a contract out on a desperate vendor auction.
Make sure you are the only one there by letting their tyres down an hour before. Then turn up//

You then pick up a super deal... hehehe (dont laugh to much I have seen all types of stuff!!!!!!

ocean

 

[brains]

OceanView,

Speaking of floats. I sent a cheque away for the recent Auatralian Leisure and Hospitality Group (ALH) float. The cheque was returned and I was initially p....... off because i missed out as it was oversubscribed.

The original float price was $2.40 and it closed yesterday at $2.23....haha so now im glad i missed out on it. I wanted to stag it anyway, it wasnt even good for that.

Be careful mate, its float season again and there will be some pretty avearge companies hyped up.

 

[quoll]

Originally posted by ocean view


TIP for you

ask agent for the names & address's of all the people that have a contract out on a desperate vendor auction.
Make sure you are the only one there by letting their tyres down an hour before. Then turn up//

You then pick up a super deal... hehehe (dont laugh to much I have seen all types of stuff!!!!!!

ocean

Ocean View
Glad your in Sydney ...... I'm not.

I agree with most, different strategies for different people, as long as they work. I'm still buying when the right stuff comes along, got one that settles Dec 9 $312k returns $500pw. Just enough to pay the mortgage and as the rent goes up I should get some income, also in an area with high demand for housing.

There are always deals to be done you just have to find them and recognise them for what they are. Tha'ts the hard part.

Quoll.

 

[saucy gibbon]

Trouble is, if this is applied it would be found that the majority of properties are way way overvalued. And its this that makes up the average.

Lucky then that your logic is flawed.

The value of a residential property is not purely dependant upon the gross yield.

BAd investments will be made when people see a property that has a 4% yield when those surrounding have 3.5% and thinking its a bargain.

Are we talking gross yield or net yield ?
What are the interest rate assumptions ?
I'd hate to have one of these properties and capital growth of 10% for 10 years, LOL.

The key to finding a bargain is finding something that will pay itself off and interest in 25 years or less either due to high current rents or an excellent proposition of increasing rents.

I'd be happy to hold a property for 25 years or less that doesn't cost me a cent. Gee, I'll take a dozen thanks.

 

[ger]

I'm still buying when the right stuff comes along, got one that settles Dec 9 $312k returns $500pw

I wish I can find something with a return
like that In Melbourne I will buy it this minute
Here for that price you will be lucky to
get $250
I am interested in a property at the moment
price Around $350000
Rent apraisal around $250

 

[abcdiamond]

Originally posted by ger
I wish I can find something with a return like that In Melbourne I will buy it this minute Here for that price you will be lucky to get $250
I am interested in a property at the moment price Around $350000 Rent apraisal around $250

I like to get at least $1 pw for every $100k cost price. eg: $265,000 getting $265pw. Any less than that, probably wouldn't work out very well.

My nephew just got a house last week for $260k, and it can get $270pw. Thats in my local area, Redlands, SEQLD.

 

[see_change]

Originally posted by 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

I don't disagree with you comment here at all LB
But MY COMMENT WAS MADE IN THE CONTEXT OF BRAINS COMMENT THAT THE SIGNS OF A PROPERTY SLUMP WERE VISBLE EVERYHERE, NOW.

I don't see lots of highly motivated Vendors NOW. Every agent I've talked to has said that the Vendors they're talking to are happy to sit on the sidelines.

Again you take things out of the context that they were written in.

See Change

 

[brains]

Do you mean $1 gross rent for every $1000 purchase price?

Why dont you just say 5% and sound like an investor
(actually its 5.2% but the 5% is common usuge and 10% when its double)

Originally posted by abcdiamond
I like to get at least $1 pw for every $100k cost price. eg: $265,000 getting $265pw. Any less than that, probably wouldn't work out very well.

My nephew just got a house last week for $260k, and it can get $270pw. Thats in my local area, Redlands, SEQLD.

 

[Aceyducey]

Originally posted by brains
Do you mean $1 gross rent for every $1000 purchase price?

Why dont you just say 5% and sound like an investor
(actually its 5.2% but the 5% is common usuge and 10% when its double)

Brains,

You sound a bit pedantic to me - that's so unlike you!

ABCDiamond's terminology is standard investor terminology IMHO. it's often used as a simple rule of thumb rather than telling people to work out a % of the purchase price.

Cheers,

Aceyducey

 

[brains]

I was trying to be funny in a semi sarcastic sort of way.....cant pull it off all the time.......haha

 

[suggo]

Few articles about saying that interest rates will probably go back down in the second half of 2004, this sort of news spurs people on to continue buying. That 8% interest rate won't happen if this turns out to be true.

LB, can't agree with the falling prices theory, people won't take that much of a loss unless it is unavoidable and property is perceived differently to shares. If share prices are falling due to the pressures you state people are more incline to take their lumps generally because the loss is not as large (% wise, yes, but in actual dollars, no) House prices will fall a small amount but due to the general perception that in the long term housing prices will always come back (unlike shares such as Ansett etc) people tend to hang on to them and the market just lies dormant. This is what I expect to happen, all IMHO of course.

 

[brains]

For those that think property prices are not falling already. Here is a quote from property guru Steve McKnight, from his latest monthly newsletter:


"A good example is a property that I have been following in my local newspaper"

(heres the link)

http://www.realestate.com.au/cgi-bi...1&f=10&p=10&t=res&ty=&snf=rbs&cu=&fmt=&header

"From memory, it was originally for sale at $425,000. Then, in last week's paper, the price had fallen to $395,000. Finally, in yesterday's paper I noticed it had dropped further to $365,000.

Given the lack of buyers, you'd probably expect to pick up the property for around $450,000, which is a long, long way off the original asking price and a huge drop in profits for the vendor"

***By the way, i think he means the property could be bought for around $350k, not $450k***

 

[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

 

[abcdiamond]

Originally posted by Unit
Perhaps the vendor initially had an unrealistic expectation of what their property was worth.

Hi unit,
I'll agree with that comment.
My wife reckons our PPOR is worth about $595k. I've been thinking it's about $460k, although just been told i could probably get $490k. One day it will be worth what she thinks , but by then she may think its worth more.
If we did decide to sell, we would have to advertise it first at her price ( I like a quiet life) and then accept the real price
I've just realised the power she has; Lets say we advertise at $595k, and accepted $485k. The result would be "PRICES DROP $110k (18%) in Victoria Point !!!

 

[L Bernham]

According to the news tonight prices in Brisbane have already fallen 5% and auction clearance rates were at 42% on the weekend.

I had the impression that this would never happen in Brisbane. I'm not too surprised though. The house I wanted to buy on the weekend that I valued at $300K was passed in at $440K. Apparently the seller had some unrealistic expectations. there were quite a few bidders.

LB

 

[Aceyducey]

Originally posted by L Bernham
The house I wanted to buy on the weekend that I valued at $300K was passed in at $440K. Apparently the seller had some unrealistic expectations. there were quite a few bidders.

Clearly you had some unrealistic expectations as well.....

If 'quite a few bidders' were willing to pay up to $440K for the property & you only valued it at $300K YOUR barometer is also way off L Bernham.

You need to retune it....

So what do you think that specific property will be worth in 10 years time?

More or less than $300K?

More or less than $440K?

Cheers,

Aceyducey