Property in 2009 and beyond - disspelling the myths.

[essence]

Again, starting new thread - because two previous were about "predictions".
I have made my predictions few months ago, so I am just going to summarise.

http://www.news.com.au/business/money/story/0,28323,24896398-14327,00.html

http://www.homepriceguide.com.au/saturday_auction_results/sydney.pdf

http://www.news.com.au/business/story/0,27753,24897459-462,00.html

What these three links have in common?

Ok, the only useful info in the first one - nearly 70% of Australian public expects property boom.

Second - auction clearance rate in Sydney hit 71%. It is at a boom level.

Third - sucker's rally on the sharemarket comes to an end.

Funny thing about public perception is that if public thinks that there is GOING TO BE a property boom - it means boom is already here.

There is a simple reason why I write to this forum - I ran out of cash buying 21 properties between October and now. I monitor railway corridors in a triangle Penrith-Wyong-Wollongong and now I would like to share some observations with you.

There is nothing overly creative in what I do - buy solid rundown property, give 3-4 days makeover, rent it out, then go to bank and mortgage itfor the full purchase price.

Three months ago I was aiming for 8% post-makeover return. Two months ago - for 7%. Last month I was forced to settle for 6%.

Spoke to dozens of agents - all state the same - many willing buyers, vendors reluctant to list and reluctant to negotiate.

Agents' behaviour dramatically changed over the last few weeks. There is full set of the symptoms of "boom syndrome":

- Half of the agents have their phones on voice mail and do not bother return calls, emails, etc
- Agents refuse submit offers to vendors
- Agents talk you out of particular properties (Want it for themselves?)
- You get gazumped (practice not seen for a long while)
- Many listings in windows or Internet are bogus (Oh, we did not have a time to remove it - was sold three weeks ago)
What I have seen the last week - I never seen before.
- Two agents faled to show up for an appointment.
- One agent did not bother to come to an advertised open house. 11 people tried to ring her out of her cosy hole to no avail.

But the most amazing - I have seen 20 people strong investment club looking for properties. If such lousy people who form investment clubs are out for property - what else would I say?

Few months ago some people on this forum were spitting at me fo rpredicting the property boom.

I have a news for you. There are still properties at the same price range that I have bought mine, but with substantial difference. If average reno spend on those I bought was $3-5K, the ones that left require $70-80K spend to make them livable.

In other words, I have got 21 property that did not cost me a cent to own and never will be. And you did not.

And in unlikely event you wake up right now, you will be about
$1.5 MMMMIIIIILLLIIIOOONNNNN dollars worse off.

Almost forgot - please do not bugger me with what happens in WA, QLD or in Sydneys "effluent" suburbs. They are not driven by normal market forces but resource bubble. Unfortunately these areas will have to go down before they go up.

 

[essence]

Arghh!!!!

Forgot to tell about third link. End of sucker's rally on the sharemarket is usually the point when share investors bring their bruised egos and other body parts to heal. And since cash (due to low interest rates) and gold (due to the risk that US will sell their gold reserves to fund bailouts) are not an options - they can only heal on property market.

 

[Nathan]

Good work mate,

i have been singing similar tune, however be aware of the doomsdayer's here who will come slam you. goodluck and hope it works out for you.

i am seeing in similar corridors, market is moving with listings dissappearing at same price centro properties group is being traded on my comsec platform.

it is going off out there and there is money to be made but i also say to members of this forum to do their own research so they dont get caught with their pants down like thosewho bought in sydney in 2003 (myself included however wasnt scared from it).

prices are moving, have been moving and appear to still be moving, but we dont know where any of this will end.

but have to agree, exciting times.

 

[tonyc00]

Hi

I agree with all of the observations made by Essence.

I focus on Parramatta (post code 2150). In that regard I regularly (2/3 times per week) go to findmeahome.com.au and realestate.com.au. And I stay in touch with agents, and read the local papers.

There is no doubt that older properties, 2 b/r, units in 2150 are rising in price (at last).

The last property (number 9) I bought was in Parkes Street - 2 b/r, top floor, last sold for $226.5k in 2003 and bought by me in 2007 for $200k.

In January 2009 there would be nothing available in Parramatta close to that price.

I suspect that in 3 to 4 months time we will be reading that Parramatta is destined to be the latest "hot spot", but by that time the best properties will already have been taken.

I'm sure that others will have similar thoughts on similar type suburbs eg Liverpool, Ryde etc.

Regards

Tony

 

[Nathan]

Tony,

shheesh....

i was looking there late last year for something and there were quiet a few under or around 200k. now there is nothing under 250k... amazing.

i also noticed of recent that around where i live northmead/old toongabbie/ constitution hill that all the prices are rising sharply, i was going to buy my mothers property, but due to emotional/family repocussions i have decided against but they have all jumped up and not much under 500k if any.

these number will appear on the headlines in time, as newer listings will be sold at higher prices. this point in time its been quiet accumulation.

 

[Player]

There may still be upside in Parramatta and North Parramatta as they in the throes of trying to rezone quite a significant numer of properties. There is a draft plan you can refer to and navigate here:

http://www.parracity.nsw.gov.au/development/residential_development_strategy/draft_lep_2008

 

[essence]

Tony,

shheesh....

this point in time its been quiet accumulation.

Exactly. Keep it to your chest Tony. Real bargains go really fast these days, and there will not be enough for everybody.

I perhaps start giving some hints in 6 weeks time when I am done.

Although I do not own any strata title - seems to be a waste of cash and borrowing power when Sydney is running out of land and there is still unbelievably cheap houses within commutable distance to Sydney. But you do whatever best suits you.

 

[santaslayer]

You're also seeing an emergence of property shows on TV again!

 

[MichaelW]

Why would not you instead of engaging into futile and depressive hobby of seeking excuses for not doing anything actually engage into something useful (find a job, buy a house for example)?

Essence,

Firstly, thanks for your posts. Its good to hear that you're out there succeeding in your investing. I agree there's a lot of opportunities at present and some sub-markets in Sydney in particular are on the move. Well done.

But, to your point above, Evand has been around for a while and is an investor. He is typically a fairly balanced poster who accepts a positive argument when made. He is still a bit negative on short term property potential which is fair enough. I differ to him on this outlook, but that's what makes this forum so powerful, the differing points of view. By doing "nothing" he is actually executing his strategy, so in effect is doing exactly what he should given his perceptions. Nothinng wrong with that, and nothing wrong with his sharing those perceptions. Others here can choose to listen or not, that's their choice.

One thing I have learnt, is that it is a waste of time trying to change entrenched points of view. Just post your own successes and allow others to form their own opinions. And for doing that, again I say thanks!

Keep up the good investing.

Cheers,
Michael

 

[evand]

Mate, ive done the hard yards and now i can do what ever i like. I own property and shares and have sold my business a few years ago. Looking to start another one up after the holidays as early retirement can send a person a bit stir crazy.

After this short term growth spike of bottom end property in crap areas artificially inspired by the government/RBA/ATO intervention finishes the party will be over and there wont be any growth in property for a looong time. And yield growth is slowing big time.

The reason i'm bearish on property is because i want to have an opportunity to buy lower/median priced property in good areas at good yields. And when i get that opportunity i will 'load up' as you say.Beside that i'm sitting on my hands. I've seen it happen before and it'll happen again.

I only buy when the situation is there for me to have maximum benefit. As i've said previously i dont buy property that doesn't perform - short or long term - just to feel good. And to pump untold dollars into it waiting (hoping) for growth some time and interest rate cuts/government assistance.

Strangely enough i consider myself a real investor. And the ones that i've known that are very successful are the same.