Property prices? Recession looming?

[Ross Sondergeld]

Melbourne market review...

Reply: 3.1.1.1.2
From: Ross Sondergeld


Hi Michael,


Subject: Property prices? Recession looming?


Thanks Michael... I appreciate your honesty about the melbourne market.

Lemmings follow each other... it's normally a stampede. Then WOOOOOO... they
fall off the cliff... (or so i'm told... ;-)

Personally, I always tell people to find a "unique" feature or point of
difference... or "unusual" situation.

Play the real estate game... but know the basic rules.

Why? Because when you loss a few $$$$$. (I'm told it hurts !!!)



Ross Sondergeld ~ Buyer Agent

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast [email protected]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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[Ross Sondergeld]

Different cycles at the same time...

Reply: 3.1.1.1.1.2
From: Ross Sondergeld


Hi Always,


Subject: Property prices? Recession looming?


You quoted PK In Syd (buyer agents)... "Hot Tip: The market is still moving
and it has a long way to go yet, so if you see something buy it!"

Then you said, "Does that quote "...so if you see something buy it", fit
with your observation about the end of the cycle being soon?"


You should always remember, that each city has multiple market cycles at the
same time in the same city... and each city of Australia will move at
different times for various reasons. Therefore... do your homework... and
buy according to your objectives.




Ross Sondergeld ~ Buyer Agent

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast [email protected]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


_________________________________________________________________
Chat with friends online, try MSN Messenger: http://messenger.msn.com

 

[Ross Sondergeld]

Thank you... 'grasshopper'

Reply: 3.1.1.1.1.1.2
From: Ross Sondergeld


Hi Michael,


Subject: Property prices? Recession looming?


You said, "I just had an agent tell me how great the market is and how
prices are going to rise further this year. (He was trying to sell me a
site) It was fascinating to now that he was an ex developer who went broke
in the last cycle and still hasn't learned the lessons. - Michael Yardney,
Metropole Properties"



Once again, thank you for your comments.

I love to hear from a profitable long term developer....

And maybe a few melbourne investors, should listen to the "grasshopper".


;-)





Ross Sondergeld ~ Buyer Agent

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast [email protected]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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[Michael Yardney]

Reply: 3.1.1.1.1.1.1.1
From: Michael Yardney


Always Learning
to answer some of your questions, and I am really talking about the Melbourne market which I know, because each state is at a different stage of their cycles,:-
>What differences do you see
>(apart from the interest rates
>and inflation rates) between
>this cycle and the last cycle?

A: last time we were in a recession, this time the Australian and major world economies (other than Japan) are strong. Last time we had strong inflation, this time round inflation will be controlled by the Reserve Bank's interest rate policies. Last time there was alot of unemployment, not so evident this time round.
>What if anything does this
>mean for the IP investors
>strategy?
I don't think we will have as long a slump or as severe a market downturn. It is likely that property prices will hold up well in most areas and we could have some moderate price growth
>Will you be recommending to
>your clients any change of
>strategy? I remember late last
>year (correct me if I am
>wrong) your recommended a
>"wait and see" policy due to
>inflated prices and general
>market uncertainty.
YES I will
>If the forecast is for lower
>capital gains and lower prices
>in some market segments then
>have you shifted downward your
>estimates of final valuations
>and thus viability levels
>upcoming projects? Will you
>wont pay as much now for a
>prospective site as you would
>have last year?
When commencing projects we have never taken into account price inflation over the life of the project as it was an unknown, this was just a nice bonus. You are right, we are more cautious about prices we are paying for sites.
>"If" there is a panic in the
>OTP deposit bond "HK"
>believers/investors, at what
>price point would you say some
>of these high rise
>developments make good long
>term investment sense (if my
>plan is to live off rental
>returns in 10 years)?
Of course at some price many of these inner city apartments make a good investment. Your question is a good one -at what price?
>You suggest that inner city
>housing has not reached it
>affordability limits. This is
>a very interesting statement
>to me, I currently believe
>that such things are driven by
>pure supply and demand
>economics. I agree with you
>that the bulk of outer suburb
>first home owners/young
>families have a basic limit or
>"wall" of affordability and
>simply cannot afford to pay
>more. Whereas in the chic
>inner city market, there is a
>much broader range of incomes
>and equity levels; as such
>given any desirable property a
>buyer who's income is only
>100K is pushed out at auction
>by someone on 200K/year, who
>is pushed out by the stock
>broker on 1M/year who is
>pushed out by the
>dermatologist etc. ie. there
>is no "wall" just various
>people who can either pay more
>(ante up) for that chic inner
>city pad or fold and look for
>something cheaper maybe in a
>location not as desirable. How
>do you view the inner city
>market?
>
Your assessment is correct, prices have not hit the "affordibility wall" in inner suburban areas where the income levels are higher and there is more disposable income. I'm still looking at the market with some caution, but there are always opportunities around and you have to keep looking for them to find them. I guess you also have to recognise them when you find them.

Michael Yardney
Metropole Properties

 

[always_learning]

Reply: 3.1.1.1.1.1.1.1.1
From: Always Learning


Dear Michael, and Ross
<p>
Thank you for your comments, it is always good to listen to the ideas of the professionals.
<p>
Human nature is very interesting, naturally I would like to analyze and think logically like Star Trek's Mr Spock, but I am human, so I must accept that I will color my thinking with my emotions.
<p>
If I look at the interest rate for borrowing in Japan ( 3 years fixed 1%, then 2.46%) homes/apartments are quite affordable by the average salary-man, however only one of the 6 Japanese staff I work with owns property, when I asked them why not, "too expensive" (same $ as renting, but with excellent tax incentives), "don't want debt" ( debt is bad? but a plan to rent all your life without other investment plan is good?), "risky" (so the "spend all my money shopping" plan is better?) is the answers I get.
<p>
The significant difference is market sentiment, Japan everyone is thinking the worst, Sydney and Melbourne too many are thinking over optimistically.

 

[WebBoard]

Reply: 3.1.1.1.1.3
From: Stephen Burman


You know it always amazes me when they ask people who have an obvious interest in the market are consulted as experts when it's really pretty obvious they are pushing their own barrow. When was the last time you ever heard an agent telling you it was not a good time to buy (that's selling or buying agent). It just doesn't happen, they needs to keep the market turning over to make a living.

My impression reading between the line of what's coming out of the Reserve Bank is that they think Housing Prices are increasing way to fast (and hence may impact inflation), hence statements like this are almost forcing them to raise interest rates further. I believe they will keep raising interest rates until Housing price increases stall (not decrease but just don't really increase either) and then you may get some more balanced comments.

However it's not a pure science this. To reach this state on average will almost certainly cause some parts of the market to hurt a lot more than others. And given so much of the market now is driven by other than good investment rationale, i.e. emotion, this emotion can disappear pretty quickly. Anyone who had any involvement in the tech stock boom would tell you the 'emotion' changed very quickly. Possibly faster that the Reserve Bank could react.

My belief is that this means prices could come off by say 5-10% from current but this may well translate to 20-25% in areas. There are a number of scenario's obviously but any look at booms in any market will tell you they don't usually just slowly stop, so I believe some degree of drop is almost inevitable. And I'll be one of those waiting for the opportunities!

Steve B

 

[Lissy]

Reply: 3.1.1.1.1.3.1
From: Felicity W.


I've been watching prices in a few select areas of Melbourne's outer east, and I have to say I disagree.
I'm looking in the lower end, and I've been surprised how long some of these properties are staying on the market - weeks, not days, and most of the time the property price drops at least $5k and sometimes $10k before it sells.
So personally I don't see any evidence of a continuing meteoric rise in my little target market.
Keep smiling
Felicity

 

[WebBoard]

Reply: 4
From: Choon NG


Hi,
I have been through 2 cycles (property + shares) in the last 12 years, and am not really a serious investor (compare with most of the forumites who share their valuable opinions/facts)by any measure.

My basic understanding of the market cycles (stock/real estate) driven by motion/greed/fear, correction will be certain (that is the nature of a market, given enough time ), and usually signal by a sharp movement (over a short period of time), followed by gradual movement over a period of time. Anyone still holding tech shares ???

I am not sure that we have seen the reversal in prices (at least in the middle eastern suburb of Melbourne that I am watching) yet. In the limited number of scenarios I can think of, I favour the one where the market will ignore the intention of the reserve bank until it is too late (maybe another 1 - 2 % increase), which will lead to the expected price reversal. Maybe things will be "clearer" by the spring selling season !

Recession ?? Might not be certain as if the real estate market does slow down (asap) with most people taking the "hint" from the reserve bank, then interest rate should continue to encourage business/government investment, and carry us through in the next few years.


Just another view from bystander.

choon

 

[Tibor]

Reply: 3.1.1.1.1.3.1.1
From: Tibor Bode


Steve you just stated the same as I feel about the subject. The only problem is that the interest rate increase does not effect everyone on the same way. What I mean that in real struggle street .5% is sufficient to stop any further increases, and 1% starts to show some reasonable drops in price, in better off coo coo land 1% does not really make a big hit, albeit it might just start to cool prices. I know of people who will be in BIG trouble if the Reserve increases the rate by 1.5% and most likely they will have to sell, but also know others who just will take this as an opportunity and be able to buy more.
Felicity, also do not forget that Melbourne had a fabulous run and cycles in different cities (and within cities) are in different phases. In Brissy, prices still going up, albeit in several areas from a very low base.

Tibor

 

[Robert]

Reply: 3.1.1.1.1.3.1.1.1
From: Robert Forward


I to am starting to see houses sit on the market "for Sale" for longer periods of time in my area. Vendors are also not getting their prices at auctions anymore either.

Is this the start of the slow down????

Cheers,
Robert

Get your Property Inspection Reports @
http://www.CreativeFinance.com.au

 

[WebBoard]

Reply: 3.1.1.1.1.3.1.2
From: Andrew S


I fully agree with you Felicity. I live in outer east Melbourne (Narre Warren), and have been accustomed to houses selling within days of the boards going up - some even before they get a board. The last few months however have seen that change. For Sale signs are remaining for much longer as places are taking longer to sell.

Can I ask which areas particular areas you were referring to?

Regards,

Andrew

- "Don't look at things and ask why, look at things and ask why not!"

 

[Ross Sondergeld]

Reply: 3.1.1.1.1.3.2
From: Ross Sondergeld


Hi Stephen,


Subject: Property prices? Recession looming?


You said, "You know it always amazes me when they ask people who have an
obvious interest in the market are consulted as experts when it's really
pretty obvious they are pushing their own barrow. When was the last time you
ever heard an agent telling you it was not a good time to buy (that's
selling or buying agent). It just doesn't happen, they need to keep the
market turning over to make a living."


Hey... "buying agents" are GOOD, HONEST people. (Although we're extremely
rare in Australia! ;-)

In response to your above statement... i told all my friends NOT to sell...
in 2001 on the Gold Coast. (And i was a buying agent!)

But hey... when i bought for people... we bought before the local market
moved. And i freely tell people all the time... NOT TO BUY. But i make sure
i explain why? And redirect their focus if appropriate!



P.S. I do agree that "agents" normally their own self interests.

P.P.S. I would like to say that people do need to be careful. In Australia,
their are very few "real" buying agents... At present, many organisations
seem to be jumping on the buyer agent bandwagon. (i.e buying agents as
fronts for marketeering organisations etc.)







Ross Sondergeld ~ Buyer Agent

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast [email protected]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


_________________________________________________________________
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[Lissy]

Reply: 3.1.1.1.1.3.1.2.1
From: Felicity W.


Hi Andrew
I'd call Narre Warren south east!!
By east I meant Mooroolbark, Boronia, Bayswater, that sort of area.
Keep smiling
Felicity

 

[WebBoard]

Reply: 3.1.1.1.1.3.1.2.1.1
From: Andrew S


Yes Felicity you are right. Us males were never meant to be good with directions!!
I imagine the effect however is similar in all of the outer suburbs.

Regards,

Andrew

- "Don't look at things and ask why, look at things and ask why not!"

 

[WebBoard]

Reply: 3.1.1.1.1.3.2.1
From: Stephen Burman


I wasn't questioning anyone's honesty I was questioning their ability to give an unbiased opinion.

Anyone who has lived through boom times anywhere knows that there are lot's of people who honestly believe the story and I have no doubt that most of those real estate agents who are saying that the market will keep on booming honestly believe it. It's a natural human phenomenon to seek to find explanations that support your beliefs.

However, that does not believe that if you want to really make money out of any market you should not attempt to think a little differently. If we look back at the tech stock market it's pretty obvious that people lost the power of rational thought but how many people saw it at the time.

If I look at the current property market I see many of the same hallmarks and the fact that there are a number of people out there who just can't see a setback as even possible (you know who you are out there) probably is one of the strongest signs that we are due for a bit of deflation. I don't see a recession but in any market where people take an extreme view and the market takes the other view there will be plenty of opportunities!

Steve B