Perspectives on the Brisbane market - Prof Keen eat your heart out

[gman65]

I would say it will take more than a few months to see any changes, most things are a lagging indicator, and we don't even have the ABS housing index figures for even the September quarter until early next month. Expecting instantly verifiable statistics on the market is a little presumptuous up or down.

What we do know today is that inflation is running at 5% for the last year, which is a 13 year high. This has implications for real returns.

 

[evand]

Presumptuous or lacking experience in the property market.

Regarding the inflation figure of 5% (just heard on the ABC radio news) do we have stagflation?

The government lowering rates to kick start the economy and inflation well above the RBA'S neutral band.

I would say it will take more than a few months to see any changes, most things are a lagging indicator, and we don't even have the ABS housing index figures for even the September quarter until early next month. Expecting instantly verifiable statistics on the market is a little presumptuous up or down.

What we do know today is that inflation is running at 5% for the last year, which is a 15 year high. This has implications for real returns.

 

[sash]

Lizzie, I don't this is the case. This "credit crisis" severity is once in a lifetime sort of thing...I have been relatively quiet for the few months but have been watching things unfold. So discussions like this on this forum are good.

I have learnt a few things from other posters who I do not neccessarily agree. As a matter of fact I have changed some of thinking as a result of some of the more "robust" discussions.....guess what.....they are now starting to bear fruit...early days...but time will tell!

Even today....I have been on the phone trying to get out of my fixed rates...with a 6 or 7 in front....I am of the view we might see a 5 in front by late next year....so I am making preparations accordingly. Just this will put 5k per annum in my pocket! And the credit goes to Economics thead on this site. I have always been a DOER....not just a GUNNA DO IT.

Cheers
Sash

man - i'm getting tired of this "my economist is more right than your economist" bickering.

only time will tell who's was right - and when that happens, who will care? ... in the meantime, how about we discuss rather than try and point score.

 

[lizzie]

sash - i agree. the articles and constructive discussion has been great ... but the constant back and forth bickering about "someone's motives" about posting an article, or the sweeping statements, or "my economist said XXX so therefore yours is wrong", is just rubbish - making it harder to read the good stuff in between.

 

[Spectre]

Wouldnt it depend on where the property is in Brisbane/SEQ? I mean, end of the day Brisbane, like Sydney (or wherever) is a big place and its all a lot of general terminology.

I admit I do follow Matusik a bit and think because he advises on property that he does have an agenda but at the same time think he has a better grasp on Brisbane and on property than Keen does. These are two totally different ways of looking at things. I see Keen as a number cruncher and Matusik as a guy who lives and eats property

Having a look at his presentations, I see that he's changed them for the online stuff - one for Sydney and one for Brisbane too currently - Although the Sydney one doesnt relate much to Sydney.
(http://www.matusik.com.au/Default.aspx?tabid=114)

His old one did miss a few beats though well and truly. And I notice with the new one he took out the slide which used to have the immigration boosts in it.

 

[sash]

Yes...I know what you mean!

On a more positive note.....I might actual enjoy the coming months...I see a silver lining...amongst those dark clouds....FINALLY!

Hope the pressure is coming off you also with the drop in interest rates?

Cheers
Sash

sash - i agree. the articles and constructive discussion has been great ... but the constant back and forth bickering about "someone's motives" about posting an article, or the sweeping statements, or "my economist said XXX so therefore yours is wrong", is just rubbish - making it harder to read the good stuff in between.

 

[tcocaro]

I have owned 2 development sites, one in Chermside the other in Annerley totalling 25 dwellings does that make me more of an expert than you? - no.

However neither does owning your own house in Brisbane. Owning a property in Brisbane gives you absolutely no insight to the Brisbane market beyond literally your own backyard and your own sentiment which by the sound of your posts is right in tune with the irrational negative sentiment occurring right now.

RPDATA is not out of date, it has weekly updates of auction clearances and is updated as soon as land titles is updated which means about 30 days out of date? - surely a better source of information than your baseless and wild guestimate of 10-15% falls?

Doesn't matter mate theres no point in discussing when you don't substantiate even to a basic level your views.

PS why wait for a few months to see whose right? do you want me to send you the median price as of September? - oh thats right rpdata is out of date and hocus pocus..

What are you on about mate? Are you stalking me? LOL

All i can say is i (and others i know) own property in Brisbane and have seen it fall in price substantially recently.

A few of us have had houses on the market. That's a pretty good guide.

Most of the public record sites (rpdata, Residex, APM ) are out of date so they're not reliable. They get their data from public records which take quite a while to come through. They cant keep up when trends are moving fast, as they are now and the last few months.

Hold that thought and wait a few months till the current and recent sales data comes through and i'll get your stat that shows large falls in Brisbane.

Lastly, i don't get angry, i dont even get emotional about this stuff. Do you?

 

[tcocaro]

for those interested i have put up the median prices for Brisbane City & Brisbane LGA which is a reliable enough gauge overall price movements given the massive size of the Brisbane LGA.

Its like banging ones head on the wall but please show me the fall in price....

as I said before, drop in volume of sales but not in price. Together with rate cuts and the FHOG boost will translate to increasing sale volumes (once sentiment abates somewhat).

I am not claiming boom but we will see continued growth in nominal price rises probably at the start of next year but nil growth till then.

 

[boomtown]

20 percent falls in Brisbane is laughable. A unit that I bought in May in a large complex has a gross yield of 6 percent. Brisbane was stilll peaking in May. If prices have fallen by 20 percent since then I should be able to buy units in that complex on a 7.6 percent yield which would be pretty close to CF neutral. If IRs drop to 6 percent as most seem to think will happen then those units would go CF+.

I can assure you that is not the case. What a joke. I'm on the ground every day and can tell you that you are talking crap.

If I could buy high quality near CBD units on a 7.6 percent gross yield in Brisbane I would buy 3 more today.

 

[letiha]

We just got our valuations done for properties finished last year, not the rise we wanted but still a substantial one.

I think a lot of property hasn't moved because of fear over interest rates, now that interest rates are dropping a lot of people will start looking to buy, especially with rents getting higher and higher in Brisbane.

 

[eggnog]

Curious to know how a 7.6% yield is nearly CF neutral. In my books its long ways from.

20 percent falls in Brisbane is laughable. A unit that I bought in May in a large complex has a gross yield of 6 percent. Brisbane was stilll peaking in May. If prices have fallen by 20 percent since then I should be able to buy units in that complex on a 7.6 percent yield which would be pretty close to CF neutral. If IRs drop to 6 percent as most seem to think will happen then those units would go CF+.

I can assure you that is not the case. What a joke. I'm on the ground every day and can tell you that you are talking crap.

If I could buy high quality near CBD units on a 7.6 percent gross yield in Brisbane I would buy 3 more today.

 

[BV]

Curious to know how a 7.6% yield is nearly CF neutral. In my books its long ways from.

CF+

Why do you say that?
7.6% would mean that a property worth $274K is making you $400/week in rent.

Around 7.6% is the current interest rate so the interest payment for such a property would be $400/week = same as the mortgage.

If we consider that depreciation will probably give you an additional $40/week (after tax) then this property will be very close to being neutral.

This is an imaginary scenario though because currently it would be very hard to find and purchase such a high yielding property but you could probably find properties yielding 5% and as interest rates fall from their current level (which is expected) the holding costs of such properties would be very low (if any).

cheers

 

[eggnog]

as you said at 7.6% yield the rental will just cover the loan repayments but when I do my numbers I take into account all costs (hidden and otherwise). ie: PM fees @ 10% is allready $40pw taken out of the rent (there goes your depreciation/tax benefits). then rental vacancy say for 2weeks per year = $15pw lost rent. home/landlords insurance = another $15pw costs. you also have council, body corporate, mortgage propack fees, bank account keeping fees, accountant and tax return fees, maintenance can be a killer, etc. I also like to buffer in a slightly higher interest rate. It all adds up. I guess you can see where i'm comming from. When most people say oh, this property is CF neutral/positive/etc they are only comparing the rent to purchase price and don't look at the proper picture, which they always should. I'm not nocking a 7.6% yield. Hells if I came across one i'd seriously look at the numbers myself personally, just saying to properly do the numbers before jumping in.

 

[boomtown]

Ok lets assume that 7.6% pa yield covers the mortgage repayments only.

I pay 7.5% PM fees on $450 pw. 450 x 0.075 = 33.75 pw + 3.38 GST x 52 = $1930.

Insurance is $220 pa.

1 week vacancy is $450.

Rates are $1730 pa

Body corporate fees are $3500 pa.

Depreciation is about $4000 pa.

Total shortfall is $3800 pa or $73 pw. After tax on a 40% tax bracket (PAYG variation) thats $43 per week. To me - $43 dollars per week is almost cashflow neutral - I would never notice it.

 

[Bluegoose]

My 2 bobs worth.

I have several properties in Brisbane - all withing say 15km of the CBD with a heavy bias to the bayside areas.

From my experience, prices have dropped only very slightly - less than 5% and in some cases maybe only 1% from the PEAK of late 2007.

I can report that first home buyers are back in the market. I have a house under contract from first home buyers who have been looking for 6 months and decided to jump in. This house was on the market for only 1 month. The contract is not unconditional yet so who knows if it will go through but the point is we are a long way from doom and gloom. I suspect the cheaper areas may have fallen more but decent quality suburbs near water or the city should have held up well. I expect prices will remain about the same for the next 8 or 9 months but volume will increase significantly. If we really get some serious rate cuts then there is scope for prices to rise 5%+ in 2009 as it may be cheaper to buy than rent in the next couple of years.

The reason I am selling this particular house - to pay down debt on my PPOR and most likely buy again very soon in a more tax effective but still high gross yielding way.

 

[pricey]

Intesting thread.

I'd like to ask how about Gold coast, inparticular northern gold coast.

I think the area has had a battering. I have a waterfront property in Hollywell. There are approx 150 waterfronts for sale on the northern gold coast at the moment. I spoke to the agent last week and she said it is "terrible". Houses are selling 20% less than 6 months ago.

Any feedback on this?

The good news is my tennants vacated and I put the rent up and within days got another tennant (and that was after a rent increase in july)

 

[josko]

Waterfronts are a completely different market. They are the sort of houses that can change erradically. In a boom people will pay ridiculous prices for them, in a recession ( especially a property and share bust) there is hardly anyone around with money , and those that do want a bargain...as we all do!

I have a coupkle of properties on the recliffe peninsula, in the lower end of the market- 300-400k. Apparently, according to a local R/E, he took four contracts out last weekend. The price of my properties, much to my shock, has actually risen by 10%.
I have a couple at Beenleigh. One is for sale- I could probably say it has dropped by 20%!

I have one at Biggera Waters...it is scarey there. I can't even get a look in. I have lowered the price by 10% and am considering another 5%.

My experience tells me prices tell a completely different story when your house is actually on the market for sale.

Regards JO

 

[tcocaro]

feel free to attach the graph you prefer me to use. Perhaps you have a graph that has 2009 on it?

** added this when i noticed you quickly deleted your comment **
(Josko, why delete your comment? you just noticed the data was current till September? - and then people wonder why I have tired debating this issue)

 

[steveadl]

whilst prices have certainly been stagnating - i would not say there has been anywhere near a 10% decline around here.

Finding the same thing in the areas I follow in Adelaide. Market has slowed down, but I'm yet to see falls. If anything some parts are still seeing slower growth.

Talk about selective filtering of opposing view points. Why on earth would you encourage people to put him on the ignore list?

Oh c'mon Evan. Every single post he's made had been a one post bait in a thread to which he never returns. Unlike you, he just pokes his head in to stir and never follows up his comment. Hardly a worthwhile contributor to any debate.

Are there actually any wealthy economists?

Ha! Don't bother bringing up that argument. They aren't in it for the money you know! Not every one in society is monetaruly focused, it's evil you know!

All i can say is i (and others i know) own property in Brisbane and have seen it fall in price substantially recently.

A few of us have had houses on the market. That's a pretty good guide.

Most of the public record sites (rpdata, Residex, APM ) are out of date so they're not reliable. They get their data from public records which take quite a while to come through. They cant keep up when trends are moving fast, as they are now and the last few months.

Evan, I don't think TC is being unreasonable asking you to come up with a few actual figures as opposed to just saying you know what's happening cos you're in the market experiencing it. So am I, but I can throw some specific figures out there when it's needed.

As for RP Data etc. I believe QLD has a bit more delay than some other states, but I don't really think that's a valid argument. RP Data in SA for example has settlements appear this week that happened last week - hardly much of a lag I would think? Sure the contract may have been signed one month before that, but then the claims around here of substanial drops are older than one month right?

 

[Hgrant]

Finding the same thing in the areas I follow in Adelaide. Market has slowed down, but I'm yet to see falls. If anything some parts are still seeing slower growth.

Market has fallen. Hard to see if you have your eyes closed stevie