Property risk highest in a long time

[Dazz]

Not again.

Thanks hobo-jo for your latest "warning" about the ever present potholes in the road to wealth.

Pray tell, has anything changed in the last 2 years ?? Are you still standing there at the same spot, off to the side of the road not owning any property, being the wise and cautious good Samaritan warning people about the pothole opposite to where you stand.

Whilst you've been doing that, some people have whizzed by, some people have finished travelling and no longer need the road, and hence your pothole warning is of no consequence whatsoever.

"I'm a realist - not a pessimist" was squeaked from the background.

 

[hobo-jo]

You're welcome Dazz

Pray tell, has anything changed in the last 2 years ??

Property has gone nowhere. Risks to property prices remain. The average property investor is still negative geared. So no, not much has changed.

 

[Aaron_C]

Property has gone nowhere.

Maybe in Adelaide but down here it's as strong as ever

 

[hobo-jo]

Maybe in Adelaide but down here it's as strong as ever

That is true, but as you know Perth was an obvious standout sometime back:

The price action in Perth is very similar to the boom and price stagnation that we saw in Sydney earlier last decade (first peak in January 2004 then stagnation through to early 2009). Following over 5 years stagnation, Sydney prices rose 20% from January 2009 ($556,381) to the most recent print at $666,342. While it's far from "baked into the cake" we could see a similarly strong rise in Perth prices assuming we see conditions continue as they are...

http://www.bullionbaron.com/2012/08/perth-property-on-cusp-of-price-growth.html

It's also most at risk if the unwind from the mining boom becomes disorderly...

 

[oracle]

You're welcome Dazz

Property has gone nowhere. Risks to property prices remain. The average property investor is still negative geared. So no, not much has changed.

- People would have had their salaries increase few % points over the last 2 years in line with inflation

- Variable rates are >1% lower than 2 years ago

- People who pay P&I and have not changed their repayments would have reduced their mortgages over the last 2 years

John Symonds from Aussie Home loans says

If you want to pick a time to get into housing, you can't get a much better time than now

First-home buyers are now able to borrow money at 5 per cent, that's a better incentive than any grant

Mr Symond said changes in housing affordability could be seen in research from RP Data showed there were currently 796 suburbs around the country where it was more affordable to buy a home under $500,000 than rent.
Two years ago, there was only around 500 suburbs where this was the case.

Agree, John has vested interest in housing industry but we shouldn't forget the guy has build a business worth >$300m. I would certainly be paying attention to what he says but with grain of salt.

Read more: http://www.news.com.au/realestate/b...ys/story-fndban6l-1226646868902#ixzz2TsVCJD8a

Cheers,
Oracle.

 

[hobo-jo]

I'm not sure confidence will return post election if we start seeing the reduction in mining investment drag on an already weak economy (see recent service/manufacturing indices):

http://www.macrobusiness.com.au/2013/05/psi-falls-sharply/
http://www.macrobusiness.com.au/2013/05/australian-manufacturing-pmi-signals-full-blown-crisis/

John Symonds:

Pricing today is very attractive when you compare it to the last 10 years

Prices are a little off their peak level from a few years ago, but hardly attractive.

 

[HotRod]

That is true, but as you know Perth was an obvious standout sometime back:

Where have you been?????

That's the case right now.

Been following the Perth market much?

Stock down, rates down, rents up, yield rising, selling days down, prices rising???

I must be missing all this macro stuff , but all the micro stuff is standing out like tits on a bull right in front of us now. We could wait another 2 years and then you'd be missing out again. But such is your choice.

 

[hobo-jo]

Where have you been?????
That's the case right now.
Been following the Perth market much?

The price rise we are seeing in Perth now was pretty easy to pick as per my linked post from mid 2012. Of course it's the case now, that was my point. Those jumping on the train now are well behind the curve. No guarantee the Perth boom occuring now lasts as mining investment wanes.

 

[Player]

Maybe in Adelaide but down here it's as strong as ever

Which areas Aaron?

My finger has been off the pulse now for a couple of years. My holdings are in various suburbs, however still have two older land rich IP's in Caulfield South. Any insights on how that area is going?

 

[Aaron_C]

Which areas Aaron?

I think we bottomed mid-late last year. Of course this is anecdotal from my experience but for example a site in Box Hill I bought for $1.45m is now worth at least $1.8m based on what someone paid nearby for an inferior site in Box Hill South. Friend of mine bought 2 terrace houses (inner-city) for $2.2m, but each house now would be worth at least $1.5m as a smaller house nearby sold for that price just on the weekend. I just can't see the doom and gloom - and now with the rate cuts this can only increase activity further.

 

[Deltaberry]

http://www.macrobusiness.com.au/2013/05/property-risk-is-at-it-highest-in-a-long-time

Thoughts from the Somersoft think tank?

Not sure, just made $1m from a recent settlement.

 

[Deltaberry]

Interesting...so does he mean low AUD is good for Australian property?

Was watching an interview on Inside business, the head of Australian Industry group advising AUD at 88cents will make lot of Australian industries extremely competitive on world stage.

Even Australian based miners (aka Atlas etc) will double or triple their profits if the AUD falls.

So there is a very good chance even if mining investments falls there will be other industries that will start doing well and compensate some of the losses to the GDP caused by reduced mining investments.

Since, the article already had a few IFs I thought I might add one more. If Indian government gets their act together by controlling the current inflation problem then the RBI (central bank) will start cutting interest rates which will trigger investments in infrastructure and will lead to demand for mining resources. Indian Government has identified it needs to make approx US$1 trillion investment in infrastructure over the next 5 years.

I think the China and India story has atleast another 20years to run easily.

IMHO, in 10-15 years time the chances of SS members arguing with property bears about Sydney median prices >$1m is quite possible.

Cheers,
Oracle.

Anyone who has half an economic brain will work out that a percentage fall in our currency will more or less offset the negative impact the same percentage fall has on our commodity price (ignoring hedging). The only reason miners have been hit so hard recently is that commodity prices have tanked but we haven't seen a corresponding fall in the AUD.

Or maybe it's just obvious to me since I look at this stuff every day.

 

[greedy2000]

2 words "Black Swan", never say never.

I remember back in day before the GFC, I'd attend all these fund manager breakfasts, lunches and dinners (anything for a free feed and to get out of the office).

The theme of all these presentations was how well our economy was going, how strong China is and how the resource sector is going to be stronger for longer. They'd show graphs that always pointed upwards at a nice angle and made some pretty rosy projections.

Any fear or concern was squashed pretty quick.

que 2007/2008 and we all know what happened to the share market.....

now back to the property market, don't let your pride blind you. Property can collapse, it has before and it will again. "When" it will collapse no one knows.

If you're an economist you just keep making predictions until you are proved right.

If you are an investor make plans for a collapse, have a large buffer, make sure you can service loans with/without rent coming in, don't over leverage yourself and plan for your own unemployment what happens then...

A lot of people went broke during the share market collapse and some came out the other end in a stronger position than before.

Decide which one you want to be.

 

[willair]

Can you think of another time in history when Australia was at risk of a downturn in mining investment to degree we are today along with high prices relative to rents and income? Maybe the 1890 bubble?

You could match that up too several times in Australian history under several different governments,and you can only look at the mining one way volume-price per ton,,imho gold is more of a bubble then anything else..

 

[Ausprop]

Uh !!! With a lower dollar you increase purchasing power , you receive more dollars for goods and services you exchange for them , you may even get to keep your job so you can afford to buy any fuel at all. Parity pricing means a lower dollar means australia earns more from its oil and other exports and can pay wages and increase tax revenue without increasing tax rates. So the consumer has more money in their pocket to buy fuel. A few extra cents for fuel is negligible compared to not even having a dollar to spend. It is very naive to just look at one side of the equation. Other countries are getting out of ecomic do do, by policies that lower their currency. to give the people more spending power.

I don't know which point to tackle first here... perhaps the biggest one is "With a lower dollar you increase purchasing power" so how about you go first and devalue your currency, I will give you 50c for evey dollar in your bank account. you can then be gleefully fully employed working a 100 hour week trying to make some money to survive. tell me how that is working out for you in 6 months time

of course the real situation is a lot more complex... there would be little more earnt from oil as it is mostly foreign owned anyway and due to the capital intensive nature of the projects costs will rise dramatically. We manufacture very little here so all goods will go up in price. the structure of this economy is not conducive to a low dollar... we cannot compete with wages in India and China so why try. Instead we need to focus on producing goods that people want, not goods that peole just buy because they are cheap. e.g. you will buy an iphone regardless of whether it is $500 or $600.

but i am sure the calls will continue "ooh we can't compete, we're so hopeless, make our goods cheaper so someone will buy them". yeh right, you must be so proud producing the cheapest junk on the shelf.... the sad thing is, it isn't the cheapest and it aint the best

 

[Shadow]

Pray tell, has anything changed in the last 2 years ?? Are you still standing there at the same spot, off to the side of the road not owning any property, being the wise and cautious good Samaritan warning people about the pothole opposite to where you stand.

It's even worse than that. He sold his home a few years ago and put all the proceeds into gold and silver.

 

[HotRod]

It's even worse than that. He sold his home a few years ago and put all the proceeds into gold and silver.

 

[tambourineman]

The only reason equities are on a run is because the fed and Japan are printing their way out of one mess and into a worse one

 

[Deltaberry]

At least he can eat the gold when he's hungry

Oh wait, it's only paper asset. Can eat paper.

 

[Ausprop]

The only reason equities are on a run is because the fed and Japan are printing their way out of one mess and into a worse one

bodes well for gold...might sell my house and buy some