Somersoft leading indicator , neutral or negative

[see_change]

Every so often over the past few years I've posted about what the Somersoft leading indicator is doing.

As I've just posted in " dead cat bounce " , this forum has proven to be good indicator of what is going to happen in the property market.

http://www.somersoft.com/forums/showthread.php?p=513120#post513120

I'm talking about the general overall opinion , not the polarised views of a vocal minority. I'm also talking about the opinion of the longer term more experience members ( this may not be as obvious to newer members who they are ) .

After all most members are here ( hopefully ) because they want to make money by investing in Property.

Well at the moment it's definitely in a negative or at the best neutral mode.

Cliff

 

[Dazz]

Hi Cliff,


I presume when you say 'leading indicator', you are referring to the subject of capital growth on our individual title deeds ??


FWIW, IMHO the capital side of things is looking flat at best for a while, until decent yields re-establish themselves, and businesses have a bit more confidence.


I am experiencing a rapid increase in yields at present, so the "while" for us, and valuers of what we own, may be shorter than I think.

 

[Oscar]

Hi Cliff, I've never been out to make a quick buck out of property and so timing markets and looking for indicators really isn't my thing. I'm not much good at it anyhow. Having said that my holding of sydney blue chips (northern beaches and eastern suburbs) are all performing very nicely with massive increases in yields that I am very happy with. I'm happy to sit back and take the eventual growth that I know will return to sydney beach locations (there are just too many people that want to live/own/rent there (whether they can afford it or not)). Even 5% growth will be very nice indeed

I'm in a position where I could buy right now, but given the current environment, would prefer to just sit back, let my portfolio tick along and do it's thing, and dollar cost average into an index fund on Australian shares instead. It's all ho hum and I spend almost zero time thinking about it.

I hope you get smarter responses from others.

cheers,

 

[see_change]

Hi Cliff, I've never been out to make a quick buck out of property and so timing markets and looking for indicators really isn't my thing. I'm not much good at it anyhow. Having said that my holding of sydney blue chips (northern beaches and eastern suburbs) are all performing very nicely with massive increases in yields that I am very happy with. I'm happy to sit back and take the eventual growth that I know will return to sydney beach locations (there are just too many people that want to live/own/rent there (whether they can afford it or not)). Even 5% growth will be very nice indeed

I'm in a position where I could buy right now, but given the current environment, would prefer to just sit back, let my portfolio tick along and do it's thing, and dollar cost average into an index fund on Australian shares instead. It's all ho hum and I spend almost zero time thinking about it.

I hope you get smarter responses from others.

cheers,

Now is a good time to look for bargains in the areas your watch .

Cliff

 

[GIDDO]

I see the next 4 years or so as neutral or negative as far as resi capital growth goes.
Sure it is good to get net yields now that were not possible only 6 months ago. Makes a big difference to cash flow.

BUT, I have been a bit surprised at the number of somersoft members who have jumped back in, or are planning to soon jump back in and purchase more IPs resi.

I hope they are all prepared for flat growth. Waiting for growth can get tedious when it seems like nothing will ever happen again. Example 1993 to 1997. A LOT of investors just gave up and sold as no growth was imminent.

Even if your investment is positive cash flow, you still have the opportunity cost of your 20% deposit.

If i sound like a NON property investor, I am not. I am holding quite a bit and will continue to do so.

I just reckon we have got a fair way to go before the excitement really begins again. Low interest rates are the only factor in our favour right now. If they were to rise, even 3% or so, the next boom would look quite distant. property is still expensive compared to wages. These low interest rates are a blessing but they are our only blessing.

It is always darkest just before the dawn. But at this stage it is only about 1 o clock in the morning.

 

[willair]

After all most members are here ( hopefully ) because they want to make money by investing in Property.

I have to agree on that item,but the problem as I see it is "Performing Well" can be looked in different ways by several different people in this site from the ones who control between them and the "Banks"20mill plus to people like myself in the low 3-5 mill unencumbered brackets and depending on how far the " ASX" gets hammered each day the numbers can drop or rise very quickly, but the property values are steady have been for the last 1.5 years, when I started investing with 4k in 1983
My dream was to make 100k out of property now after all these years
100k does not sound that much anymore ,but too the person just starting off 100k is a lot of money ,it just gets more complicated as you go up the equity ladder..imho..willair..

 

[steveadl]

BUT, I have been a bit surprised at the number of somersoft members who have jumped back in, or are planning to soon jump back in and purchase more IPs resi.

Remember some property will still perform well over the coming years in which you still see flat/negative growth. Will the 'medians' stay flat - perhaps, but who cares. Will we all pick the right propeties, probably not - but doesn't necessarily mean we shouldn't try.

 

[see_change]

I see the next 4 years or so as neutral or negative as far as resi capital growth goes.
Sure it is good to get net yields now that were not possible only 6 months ago. Makes a big difference to cash flow.

BUT, I have been a bit surprised at the number of somersoft members who have jumped back in, or are planning to soon jump back in and purchase more IPs resi.

I hope they are all prepared for flat growth. Waiting for growth can get tedious when it seems like nothing will ever happen again. Example 1993 to 1997. A LOT of investors just gave up and sold as no growth was imminent.

Even if your investment is positive cash flow, you still have the opportunity cost of your 20% deposit.

If i sound like a NON property investor, I am not. I am holding quite a bit and will continue to do so.

I just reckon we have got a fair way to go before the excitement really begins again. Low interest rates are the only factor in our favour right now. If they were to rise, even 3% or so, the next boom would look quite distant. property is still expensive compared to wages. These low interest rates are a blessing but they are our only blessing.

It is always darkest just before the dawn. But at this stage it is only about 1 o clock in the morning.

I've recently bought , but only because we saw what we consider an absolute bargain in a prime position.

We're also not extending ourselves LVR or cash flow wise. Our LVR prior to this purchase was under 20 % and will be around 40 % after this. Cash flow won't be a major issue . My job is recession proof an if I need more moeny I can work harder for longer hours ( but I don't think that will be necessary ) . We have a healthy cash buffer.

I wouldn't be buying standard deals at the moment , simply because we don't know when the market will move. Won't be in a rush to buy anything further , but if we see a further bargain like this we'd be very tempted , if only to buy and sell for a quick profit , which we could comfortably do with this one .

Cliff

 

[Ms Jade]

I agree with steve. As always, there will be suburbs that will buck the trend and show growth in the short term (probably FHB areas, as we all suspect). This might be important if people just want to do something and perhaps get some growth to enable them to buy another within the next couple of years. Like the majority, however, I am expecting very little CG for a few years to come. In the current situation I think buy & hold is a more risky strategy than it had been for the past 8 years. On the other hand I know that there will be "bargains" coming up and it will be hard to resist them. I'd like to believe that the bulls are correct and perhaps they are.... I also think that the risks are very high this time if they are wrong. It's a weird situation where many of the usual fundamental indicators for PI show positive (low rates, FHB in the market, affordability improving, yields improving, stockmarket tanked...) but the contraction of credit hangs like a dark cloud over all of it.

 

[GIDDO]

I wouldn't be buying standard deals at the moment , simply because we don't know when the market will move. Won't be in a rush to buy anything further , but if we see a further bargain like this we'd be very tempted , if only to buy and sell for a quick profit , which we could comfortably do with this one .

Cliff

Exactly what is sensible I think, Cliff.

You and Steve and Willair are a few of "the big guns" on somersoft, and have done the hard yards. I am probably not very concerned about you guys cos you have the experience and the nous to recognize a bargain and manage your cashflows.

I am more concerned about newer investors who see the neutral cashflow scenario and may end up buying a pretty "standard deal" with buy and hold in mind.
I have always been a big believer in making sure the deal stands up on it's own without the need to "wait" for a viable outcome.
The current climate makes this philosophy even more valid.

 

[steveadl]

I am more concerned about newer investors who see the neutral cashflow scenario and may end up buying a pretty "standard deal" with buy and hold in mind.
I have always been a big believer in making sure the deal stands up on it's own without the need to "wait" for a viable outcome.
The current climate makes this philosophy even more valid.

Very true, and you're right new investors need to be careful. I just don't like seeing new investors being too scared to make any decisions or possibly not make what they believe is a good investment after proper research because they're worried the whole market is going to implode. If they're research leads them to believe a particular property is a good buy for whatever reason (and there are so many reasons in good and bad times), they shouldn't lose a good deal because they're paralyzed by fear - or worse yet and perhaps quite prevelant at the moment - not even look for deals.

Cliff is the perfect example, he's not overly positive about the market at the moment, but still took the opportunity to puchase what he felt was good value/bargain. If he shut his eyes to the market in fear, he wouldn't have seen it.

PS Don't think I'm anywhere near Cliff and Will's level, but thanks for the complement.

 

[Gools]

....it just gets more complicated as you go up the equity ladder..imho..willair..

I was hoping it would get easier (less complicated) the further up the ladder I got. Doesn't cashflow and equity increase and it makes it easier or do you then try and spread your investments over differing property typres which makes it more complicated?

I was thinking there is nothing harder than picking up that first IP. Bugger.

Gools

 

[Dazz]

I was hoping it would get easier (less complicated) the further up the ladder I got.

Just imagine your investment journey is like trying to get an open cut mine up and running.


Everyone starts off with a little pink plastic bucket and spade and madly thrashes away filling as many little buckets as they can with their little spade. Their costs are low, their equipment is simple and they make a tiny dent. They reckon they are just cracking along.


After a while you upgrade to a bobcat, it costs alot more to operate, you have a few problems at the start, but soon enough you are a guru bobcat operator and you can scoop up more dirt in one go than the guy down the track can with his plastic bucket and spade can bangin' away all day.


Your mate down the road drives a big D12 and has a shovel bucket going flat out 24 hrs a day that you can drive your 4WD into. His costs are large, the gear is pretty technical, and needs alot of expert attention, but suffice to say he moves a tad of dirt.


You look further down the road, and someone owns and operates a fleet of draglines, each dragline bucket able to swallow 4 whole D12's in one scoop. That someone doesn't actually drive machines anymore, they are managing maintenance contracts and arguing with machine operators, trying to glean the best efficiency out of his workers.


What's funny to see on this forum, is the guy with the little pink plastic bucket and spade thinks (because their teachers and parents told him) he's just as good a miner as everyone else and regulars stands up and yells out to the dragline fleet owner / operator - "What the hell would you know you smartass. I'm the quickest and best plastic bucket and spade operator here."


Others stress that the cost of plastic buckets and spades are going up. The D12 operator ignores that. Others stress that draglines can fall over, some laugh and hope and pray that the draglines fall over, so they can pick one up for scrap. The plastic bucket guys don't even know the draglines exist.

 

[BoatBoy]

Just imagine your investment journey is like trying to get an open cut mine up and running.


Everyone starts off with a little pink plastic bucket and spade and madly thrashes away filling as many little buckets as they can with their little spade. Their costs are low, their equipment is simple and they make a tiny dent. They reckon they are just cracking along.


After a while you upgrade to a bobcat, it costs alot more to operate, you have a few problems at the start, but soon enough you are a guru bobcat operator and you can scoop up more dirt in one go than the guy down the track can with his plastic bucket and spade can bangin' away all day.


Your mate down the road drives a big D12 and has a shovel bucket going flat out 24 hrs a day that you can drive your 4WD into. His costs are large, the gear is pretty technical, and needs alot of expert attention, but suffice to say he moves a tad of dirt.


You look further down the road, and someone owns and operates a fleet of draglines, each dragline bucket able to swallow 4 whole D12's in one scoop. That someone doesn't actually drive machines anymore, they are managing maintenance contracts and arguing with machine operators, trying to glean the best efficiency out of his workers.


What's funny to see on this forum, is the guy with the little pink plastic bucket and spade thinks (because their teachers and parents told him) he's just as good a miner as everyone else and regulars stands up and yells out to the dragline fleet owner / operator - "What the hell would you know you smartass. I'm the quickest and best plastic bucket and spade operator here."


Others stress that the cost of plastic buckets and spades are going up. The D12 operator ignores that. Others stress that draglines can fall over, some laugh and hope and pray that the draglines fall over, so they can pick one up for scrap. The plastic bucket guys don't even know the draglines exist.

Brilliant

Dave

 

[willair]

I was hoping it would get easier (less complicated) the further up the ladder I got. Doesn't cashflow and equity increase and it makes it easier or do you then try and spread your investments over differing property typres which makes it more complicated?

I was thinking there is nothing harder than picking up that first IP. Bugger.

Gools

TPFKAD,i think it just depends on the property most of what my wife and i control ,and have out in the open are old run down old weather board fibro tin roof properties no up market brick and tile jobs,bought cheaply in area's that everyone would laugh at me when i would tell them what we were doing but it has taken a long time,plus i have made a lot of mistakes
back when i started before i meet my wife,there was no books no internet,NO SOAP BOX HIGH FLYERS,you had to bend over ever time to see the bank manager and unless you had 40% upfront, they would just open the door and say come back in six months,a lot different these days, i reckon they would have given my dog 500k if he had a "ABN"number a few years ago,but it has paid off ,all i ever wanted was to get to a level where the rents would pay the school bills and our normal running costs
and enough left over at the end of the week to buy a few bottles of beer
every week there is always some problem happening,i don't worry about all the professional forcasts that people pay for, means nothing to me you only have to look at all the different opinions in this site alone..

BTW on of my first properties i bought was a large parcel of land on the side of a hill facing the gold coast covered in lantana and burnt out car bodies it had been on the market for several years,everyone would just pull up and not even get out of the car the Real Estate company used that property as a spring board , they would take you there first then try and sell you something 2 times the price ,very old Qld sales trick in the same area,but on that day i got out of the agents car went into the lantana and made my way to the top of the hill,from there you could see the gold coast,no one have ever done that,so i thought why not a D9 can push a road in clear a pad up the top ,push several dams in and i have a home,when i went back to sign the contract a put the money on the table
that afternoon,after buying a cartoon of beer for the saleman,when i walked in the office they were all upset i had bought the advertiser still makes me laugh, you start thinking i can make 100k then you say well 200k is just another number then came 500,the big mill after 14 years i mill turns into 2 ,then 2 turns into 4mill,but i agree the first one is always the hardest..willair..

 

[MichaelW]

Brilliant

Dave

Ditto, love a good analogy!

But to Cliff's original observation: I voted dead cat bounce in that other thread, but only because it was asking about the bottom end of the market. I personally don't believe the bottom end will ever lead a boom. I think the market will boom as the economy stabilises and the middle to upper medians start to kick along.

Then again, I could be wrong. But I don't think this is the beginning of the next boom. Give it a year or so and you might see those bog standard medians start to move again if affordability stays at these really low levels and investors join the FHBs in returning to the market.

Here's an article on affordability. Looking good, but too early for traction with the spectre of redundancies looming over the masses:

Homes most affordable in five years

Cheers,
Michael

 

[yadreamin]

My SS leading indicator is when investors like you sea change start popping back ito the forum for a chat
cheers
yadreamin

 

[essence]

Ditto, love a good analogy!

But to Cliff's original observation: I voted dead cat bounce in that other thread, but only because it was asking about the bottom end of the market. I personally don't believe the bottom end will ever lead a boom. I think the market will boom as the economy stabilises and the middle to upper medians start to kick along.

Then again, I could be wrong. But I don't think this is the beginning of the next boom. Give it a year or so and you might see those bog standard medians start to move again if affordability stays at these really low levels and investors join the FHBs in returning to the market.

Here's an article on affordability. Looking good, but too early for traction with the spectre of redundancies looming over the masses:

Homes most affordable in five years

Cheers,
Michael

Michael,

With all the respect. Question to See_change and yourself - where on the earth have you seen property market doing dead cat bounces and sucker rallies? Give me an example. One condition though - do not give examples where rally was abruptly terminated by RBA raising interest rates - because it simply not going to happen with this property boom.

 

[see_change]

Check out this post

http://www.somersoft.com/forums/showthread.php?t=49627&page=5

Cliff

 

[eternit]

Check out this post

http://www.somersoft.com/forums/showthread.php?t=49627&page=5

Cliff

so what sort of yields are the entry level units lower north shore? they must be atleast 10% right????