Properties that have dropped 20-50% over the years

[barney8]

a lot of people say, in property, its how long you are in the market, not when you buy OR if you buy well, it doesnt matter when you buy

ignoring, mining towns dependant on the only miner in town or overpriced $15m penthouse apartments, OTP and assuming residential property for hold and buy

Hindsight is a wonderful thing! but

for anyone who bought or knows someone who bought a property that has dropped signficantly over say a 2-5 year period,

did the numbers stack up at this point?? or were yields very good/poor at this point?? did you buy because it was a bargain at the time, eg market value $500k, got it for $450k?
or was it the best deal at the time, eg market yields were 3%, while you picked one up at 4%????

or would smart investors identified that poor yields = poor investment, and not purchased which pretty much eliminates the 'time in RE" and 'buy well anytime' sayings!

Im looking at a few areas that have dropped up to 40% in the past 4-6 years, the fundamentals stack up really well, yields are good now, so was wondering whether people who pruchased at +40% prices were just idiots or the figures did stack up at the time?

Its not me, but I think anyone who happened to own flood prone property in Brisbane!

But no, I have seen people pay well over the odds a number of times at Auction in the last 6 years. HUGE numbers and I know they would still be losing money today. Yield would still be crumby and they would have no capital gain.(a loss in real terms)

Only twice did it go when I wished I had parted with the money instead.
Once - I just wasnt organised financially(I will kick myself til the day I die on that one) and the second I probably underestimated the rarity of what was on offer.

So there are plenty of idiots out there. People get emotional over houses.

 

[boomtown]

Gold coast canal frontage would be down 50 percent from peak.

 

[JWR]

The problem with all of the areas listed above that have dropped so far (i.e. CC, GC, FNQ and niche property) is that the fundamentals aren't there. So overpaying in a market with bad prospects will almost certainly ensure dismal gains (or losses!)

I look at it and say - if this area has great prospects and I can find some really great bargains; buy them all before everyone else catches on!

 

[Property Meister]

I think some people have missed my original question,

sure some shoebox on the 100th floor in surfers may have sold for $2mill, and now be worth $1 mill,

but for the properties that werent hyped up in the first place,

and ignoring those that bought into a particular fallen area for a PPOR or for those with more $$$ then sense

did the fundamentals stack up back then, and its just been pure bad luck?

were the yields high back then??? did you determine the yields based on current interest rates?? eg 10% yield for 9% rates is good vs 5% yield vs 4% rates?

as I previously said, hindsight is a wonderful thing,

eg I recently purchased a share in a property where 6 years ago sold for $285k and was about the market price, for $195k, which is slightly below market, at the market price, the yields stack up against current rates, the area has fundamental potential, and people are now buying up, so was anyone that purchased at $285k simply expereinced bad luck, stupid purchase , or were crazy to even consider at those yields?

 

[depreciator]

I heard a price last night that made my jaw drop. A house round the corner from where I live - renovated weatherboard - was snapped up for $1.25M. I didn't see a sign on the place and didn't even know it had changed hands till the bloke in the local corner store told me. It's had a nice reno, but nothing too flash - maybe $300K. It last sold (unrenovated) about 7 years ago. Propertunity would know for how much - it's 4 Excelsior Parade. It's in an area that doesn't have wild price swings like the GC, FNQ etc.

 

[vaughan]

Do you think $1.25M is jaw-proppingly cheap or expensive? (Genuine question.)

Sorry I dunno Marrickville. That kinda money will get something nice-ish on the LNS.

In fact, the OTPs at Willoughby (between Sailors Bay Rd and Mowbray Rd) sold for $1.3M to $1.5M 12 months ago and are nearing completion, it will be interesting to see what happens when they hit the market. Land was small (like 300-400 m2) but they were on torrent title not strata.

 

[depreciator]

Expensive.

Five years ago a million dollars went a long way in Marrickville. Not any more.

I don't really keep an eye on local prices, but I can't resist an 'open for inspection' if I'm driving past and see one. I haven't seen prices move much of late either way. It's been pretty flat. That's why $1.25m for that weatherboard surprised me.

 

[vaughan]

Expensive.

Five years ago a million dollars went a long way in Marrickville. Not any more.

I don't really keep an eye on local prices, but I can't resist an 'open for inspection' if I'm driving past and see one. I haven't seen prices move much of late either way. It's been pretty flat. That's why $1.25m for that weatherboard surprised me.

Ok thanks.

 

[natedog]

I've seen (as recently as yesterday) examples of properties selling at a 40% discount to their 2006 purchase price.

What do they have in common? The vast majority were investment properties and at yields that only made sense based on significant future capital gain. Not sensible, obviously.

So avoid that sort of thing and...oh, hang on.....

Hi TF,

Where was this particular property located and what was it?

Cheers,
Natham

 

[Token Funder]

Hi TF,

Where was this particular property located and what was it?

Cheers,
Natham

That particular one was an apartment in Palm Cove but we've see similar examples from Mandurah to Vaucluse. As a result of this bizarre focus on median prices at the suburb or state level, people massively underestimate the volatility of individual addresses.

 

[natedog]

Thanks TF

So is it mainly top end properties you are seeing hit this hard.

I wouldn't think that lower end, round $300-$350k houses on land would swing that much?

Cheers,
Nathan

 

[depreciator]

I think there are plenty of modestly priced properties in places like the GC and Cairns that see big price swings.

 

[Token Funder]

I think there are plenty of modestly priced properties in places like the GC and Cairns that see big price swings.

Yep..........

 

[natedog]

I think there are plenty of modestly priced properties in places like the GC and Cairns that see big price swings.

I just can't see why or how a $350k bread and butter house on a block of land around a capital city or BIG regional centre could drop by 20-40% though.

A 40% ($140k) drop on a house this price seems a bit far fetched....assuming employment doesn't go through the roof and forced selling occurrs

Cheers

 

[depreciator]

I said 'big price swings'. I did not mention any percentages at all.

 

[natedog]

I wasn't havin a crack at your wording depreciator, TF obviously has seen this 40% swing from his previous post with some specific properties....I am just pointing out that i think it unlikely odds of it happening at the lower end of the market round capital cities.

 

[china]

I just can't see why or how a $350k bread and butter house on a block of land around a capital city or BIG regional centre could drop by 20-40% though.

A 40% ($140k) drop on a house this price seems a bit far fetched....assuming employment doesn't go through the roof and forced selling occurrs

Cheers

Even if unemployment goes through the roof, I don't expect 40% drop in prices. In Australia, only one third of houses are mortgaged and most people are way ahead on their mortgage payments. Therefore, there should be minimal effect from unemployment.

 

[INVSTOR]

a lot of people say, in property, its how long you are in the market, not when you buy OR if you buy well, it doesnt matter when you buy

ignoring, mining towns dependant on the only miner in town or overpriced $15m penthouse apartments, OTP and assuming residential property for hold and buy

Hindsight is a wonderful thing! but

for anyone who bought or knows someone who bought a property that has dropped signficantly over say a 2-5 year period,

did the numbers stack up at this point?? or were yields very good/poor at this point?? did you buy because it was a bargain at the time, eg market value $500k, got it for $450k?
or was it the best deal at the time, eg market yields were 3%, while you picked one up at 4%????

or would smart investors identified that poor yields = poor investment, and not purchased which pretty much eliminates the 'time in RE" and 'buy well anytime' sayings!

Im looking at a few areas that have dropped up to 40% in the past 4-6 years, the fundamentals stack up really well, yields are good now, so was wondering whether people who pruchased at +40% prices were just idiots or the figures did stack up at the time?

I think that some people are not focussed on making money from real estate, maybe they are too emotional about the purchase. With purchases I try to have a buffer so that if I had to sell tomorrow I wouldn't be out of pocket. I usually borrow 110% so timing the market or buying undervalued properties is important to me. With my first property, I remember a real estate agent saying to me that prices were increasing rapidly, and if I didn't purchase now, I may never be able to afford to buy a property. I bought and sold a unit at close to the same time as my next door neighbour. I paid $95,000 she paid $110,000. Her unit was neater. I tidied my unit - mainly painting (me and my dad) and cleaning. I had it valued a year later by the bank, it was valued at $116,000. Interest rates were rising, and soon after, reached their peak. Rents were rising also. Then, The economy wasn't looking that good, interest rates began to drop a little. Mortgage repayments were close to renting. 5 years after purchasing my neighbour and I decided to sell. She sold hers first for $95,000, I sold mine for $106,000. Her property dropped in value by about 15% mine rose by about 11% at the same time. (excluding selling/purchasing costs)

 

[INVSTOR]

Here's an old thread that may be of interest. http://somersoft.com/forums/archive/index.php/t-32217.html

 

[Truly Exotic]

ok I would like to ask a question as well

my guess is that some of these properties that have dropped significaintly, say 20-40%, excluding serviced apartments, overpriced penthouses, and single miner towns or towns with population 10

my assumption is that yields must have been horrible back then, the people buying would be people who had emotional attachments, PPOR, or for whatever personal/non investment reason.
had the yields been ok back then, assuming CPI increases in rent, that would mean that at a 20-40% drop, then the yields of today must be between 10-20% which is not possible for standard resi property

so I guess from an investment perspective, buying in a place with say 2% yield in todays market is nuts or a massive gamble,

so any smart investor would not have touched it back then????

and in terms of future growth back then, could anybody see any indicators that a market could drop so significantly????? I ask myself, if a suburb has fallen 20% in a couple of years, and all the fundamentals still stack up, whats stopping it from falling another 10%?