Static House Price

I found time to do a few valuations for my old firm last Saturday (only 5th weekend home in nearly 7 months, such are the travel demands of the new job).

After the inspection I was driving around looking at some comprable sales and as I drove by one I realised that I had valued it.

So I looked up the history.

Purchased in Jan 2003 for $200k, valued by me in Jan 2004 at $205k and sold again in Feb 2005 for $200k.

The property was in the Albion area of Sunshine in Melbourne's west.

The property would have yielded 4% gross.

When I inspected it it was rented to some refugees who only had 3 matresses, three kitchen chairs a table and a radio (it made an impression on me) and there was only one change of clothes per person. My guess is that there were some rental vacancies during the holding period.

After stamp duty, commissions negative gearing, rates etc the owners of this IP would have lost money over the two year holding period.

It just reinforces the fact that property is a LONG TERM investment and that the HK strategies of only living off capital growth will not work in all years of the property cycle.

I would venture to guess that in 25 years $200k for this property will seem a steal........


Just some food for thought,

cheers,

RightValue
 
Hi RightValue,

Static house prices were common in Tassie in the 90's (I'm sure SOS would agree) and you were lucky if your home obtained 1% growth per year.

Having lived through it, it is something I always keep in the back of my mind when investing in property. :)
 
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G'day RightValue

I think this is something we will see more of it in the next few years. I still remember the mid nineties we bought an average 3 b/room 1970's home in Adelaides south in 94 for $80k and sold it in 99 for $85k.

The bonus $160pw rent.

The good ol days ;)

An the wheel turns.

cheers
quoll
 
And what about the periods when prices go down.

With almost half of the IP's we bought , I could look back at previous sale data and see that someone had sold for less than they paid...

But property never goes down in value does it :rolleyes:

See change
 
I know of a person who purchased a townhouse in 1992 for $130k.

I purchased a similar townhouse late 1997 for $105k.

In 2000, similar townhouses were valued @ $120k

Late 2003 similar townhouses were valued @ $170k (The person who purchased in 92 sold at this time)

2004 - 2005 similar townhouses are valued @ $270k.

Prices do go down, remain static and go up. This cycle lasted about 12 years.

Who said timing isn't important !

Based on history, would you buy now if you weren't intending to hold the property 10 - 15 years ?
 
We've all got em.

My "learning" IP was:

Bought in 1993 for $80K
Sold in 2000 for $75K (loss of $5K plus opportunity cost of capital employed, holding was neutral).
Current value in 2005 $140K (someone else reaped the benefit that I'd reserved as my own then released to them at the absolute worst time).

But it was a learning IP. I won't make that mistake again...

Michael.
 
Ausprop said:
yes I would - if it were worth $100k now and I bought it for $80k I would be mad not to.

Of course, there are a whole lot more variables than that to be considered...

For example let say we are at the top of the cycle...

2006 sees -20% returns....

2007-2010 sees a sideways movement in prices....

2011 sees +20% returns

The property is negatively or neutrally geared...

Happy you bought today or 2010?

Of course you could also show a situation where the opposite occurs... but the example above is what WillG was trying to get us to consider...
 
not all bad

I suppose to some my efforts in property are moderate. Having sat through the last 5 years of investing and assisting others as soon as I felt able to buy property, I wonder about the variety of properties I didnt buy and what I could have achieved. This takes 30 seconds and then Im back to the Super 12.

If you worry about the past and do not cover the bases with research now, the future will also be a case of what if's. We all have good stories or this forum and others would be ghost towns.

Those bad deals, or lost opportunities should excite you to find more of the success stories so somewhere down the track you dont say what if, you say remember when...........on the yatch.

DD1
 
I've got a chart stuck above my computer that I got out of the AFR on median Sydney house prices from 1977.

It shows a good rise from 77 to a peak in about 81.
About a 20% drop to 82, then flat till 86.
Boom to 89, with about a doubling from 86 to 89.
Big drop to 90/91, possibly 20 to 25%.
Flat to 97 then a steady rise to 2000.
A slight drop 2000, possibly GST or Olympics related. Down 5%.
Boom time to mid 2003 Prises rise about 60 to 80%.
Down a bit since then.

Will history repeat? If it did, an investor would sit out the next few years as rents and wages and inflation catches up, then get in ready for the next boom. I think plenty of people on this forum are suggesting this now, so if heaps think this scenario will happen, then perhaps the opposite may occure.

My share portfolio is down 12% in 2 months. Ouch.

A theme of mine on this forum has been my suggestion the the sharemarket and property often move in opposite directions to each other, and my attempts at profiting from this fact. Stockmarkets are being effected by the current concerns about interest rates, debt, inflation etc, especially in relation to the US. I would suggest that these same concerns would effect property in the next few years, but then property is always regarded as a safe haven. Interesting times ahead.

See ya's.
 
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topcropper said:
I've got a chart stuck above my computer that I got out of the AFR on median Sydney house prices from 1977.

It shows a good rise from 77 to a peak in about 81.
About a 20% drop to 82, then flat till 86.
Boom to 89, with about a doubling from 86 to 89.
Big drop to 90/91, possibly 20 to 25%.
Flat to 97 then a steady rise to 2000.
A slight drop 2000, possibly GST or Olympics related. Down 5%.
Boom time to mid 2003 Prises rise about 60 to 80%.
Down a bit since then.

Will history repeat? If it did, an investor would sit out the next few years as rents and wages and inflation catches up, then get in ready for the next boom. I think plenty of people on this forum are suggesting this now, so if heaps think this scenario will happen, then perhaps the opposite may occure.

The problem with this thinking is that you assuming that the members of this forum are representative of the general public.

They are not

Over the last four years IHMO members of this forum have been fairly accurate in picking areas that are about to take of, before the big moves in these areas have happened.

When will the next move start ? I've no idea , but I know where it will start and I know if I watch that market I'll have plenty of time to make plenty of money.

I've made a lot more than I planned to in the current cycle and I didn't start buying until early 2002. At that stage, inner brisbane was well and truly moving and the wave was about to hit the middle and outer rings. If you did some basic research it was obvious what was about to happen.

I don't need to pick the bottom or the top . That's for fools. I just need to get a nice bit of the action in the middle of the trend.

I see no reason why history won't repeat itself because the basic underlying driving force ( Human Nature ) behind enonomic cycles isn't going to change.


See Change
 
When will the next move start ? I've no idea , but I know where it will start and I know if I watch that market I'll have plenty of time to make plenty of money.

In sydney. It always does. But when is the question. 2011-2013 perhaps.

Just quickly, when did real estate data start to show a decline in sales since the latest boom? That is, approximately when did the last boom actually end? I'm thinking early 2004?
 
When did last boom end?

Well, speaking about Sydney - I could see the end happening in 2003 and was desperate to sell my house before things cooled off. I sold in November 2003. My neighbour's house was on the market at the same time and it is still on the market today and they are on their third real estate agent (now 19 months later). So going by my experience, I got out by the skin of my teeth in November 2003.
 
Not sure what the stats say about dcreasing prices, but as far as decreasing demand , the two interest rate rises at the end of 2003 stopped the market going up in those places that did stop at that stage.

In logan it was like turning a switch . One week there were lots of over enthusiatic buyers who were prepared to pay what ever they needed to, to get some where. Next week they wern't there.

See Change
 
grubar30 said:
In sydney. It always does. But when is the question. 2011-2013 perhaps.
BIS and HIA are both suggesting around the 2007/2008 mark for the next market upswing. Also, the following link shows Westpac thinking in the same way.

http://www.westpac.com.au/manage/wr.../er20050414InterestRateView06.pdf?OpenElement

grubar30 said:
Just quickly, when did real estate data start to show a decline in sales since the latest boom? That is, approximately when did the last boom actually end? I'm thinking early 2004?
2003 saw the tide turn by most statistical models. Here's another nice link for you, though it doesn't go beyond 2003. I'll see if I can find a better one...

http://tradingforaliving.netfirms.com/real_house_prices.htm

Cheers,
Michael.
 
I picked September 2003 as the end of the boom at the time in this forum and stand by that.

I'm not picking the start of the next property boom yet.

But I'm too busy riding the energy boom anyway.

Why wait for a property boom?

Cheers,

Aceyducey
,
 
Aceyducey said:
I picked September 2003 as the end of the boom at the time in this forum and stand by that.

I'm not picking the start of the next property boom yet.

But I'm too busy riding the energy boom anyway.

Why wait for a property boom?

Cheers,

Aceyducey
,

And Acey is away on EnergyBoom but up the back is PropertyBoom followed closely by BoomBoom and dropping off is ...
 
...BioBoom.

TechBoom is coming back and ResourceBoom is on the rails pushing hard.

And here comes .........NanoBoom!!!

Cheers,

Aceyducey
 
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