Sydney prices to plunge!!

[suggo]

From all this it sounds to me like we should all be getting ready to buy more ips rather than selling them!
The 3 ips I have at the moment were all bought before the last boom (more good luck than good management back then) when everyone was telling us we were mad to be buying houses for investment. They are going great guns and I fully expect them to only get better as rents rise.
The advice we seem to be getting from that story on Sunday (and other negitive people that post here and make outragous claims but aren't even in the real estate market )is now is the time to sell. From what I can tell when the media tells you this it is actually the time to buy. At the top of the boom there were so many stories in the media telling us real estate was the way to make money and it was actually the time to sell.
I see a bit of a herd mentality here, does anyone else?

 

[L Bernham]

I see a bit of a herd mentality here, does anyone else?

Not yet, but I see the start of one.
I wouldnt call it herd mentality until the mainstream media jumps on Aussie Johns bandwagon which will cause the greater majority of the population to follow.

These things dont happen in a day.

Remember, near the top of the boom almost every media article was about how good an investment property was. At the moment, we arent seeing every media article say the opposite, not yet anyway.

What we will see is a few more subscribing to Aussie Johns opinion and more and more not wanting to appear to be the last ones to notice the change.
A couple of the banks are already protecting themselves in this way by broadcasting that they've intentionally kept their low-doc loan book lower than other banks because they foresaw the problems unlike their rivals.

Not time to buy just yet.

 

[willair]

L B,
There is a third choice,it not really logical to start to use the reverse stragegy
till the axe falls, and then take advantage of the situation,do you still own property
L B or are you still on the sidelines waiting?
good luck
willair..

 

[suggo]

Not yet, but I see the start of one.
I wouldnt call it herd mentality until the mainstream media jumps on Aussie Johns bandwagon which will cause the greater majority of the population to follow.

These things dont happen in a day.

Remember, near the top of the boom almost every media article was about how good an investment property was. At the moment, we arent seeing every media article say the opposite, not yet anyway.

What we will see is a few more subscribing to Aussie Johns opinion and more and more not wanting to appear to be the last ones to notice the change.
A couple of the banks are already protecting themselves in this way by broadcasting that they've intentionally kept their low-doc loan book lower than other banks because they foresaw the problems unlike their rivals.

Not time to buy just yet.

You answer not yet but then say "I see the start of one". That's what I was saying!

willair, but is there a specific time of the 'axe' falling and how do we recognise this?

 

[suggo]

His parting advice to investors was to sell even if that makes taking a loss.
L Benham

That was only for people who haven't got the backing to last through the slow period, he didn't mean all investors. The advice was if you are able to hold on do it but if you can't sustain a long period of soft market you should get out now.

 

[willair]

Suggo,
IMHO,
i only wish i knew that answer,if we start to see short term price fluctuations
and if higher interest rates come into play next year,, then if you know the market
in your local area and the price is in line with what you want, gear up another
part of your portfolio and buy......
good luck
willair..

 

[asdf]

For those who sell (ie Sea Change), interesting to hear that you guys think after you pay selling costs, 1/4 profits away in CGT that you can put the funds to better use elsewhere. In my simple analysis, I need to make at least 30% in the next deal just to get back to where I was prior to selling. But then again I suppose you are banking your profits and moving on rather than holding it over a period of flat growth.

I'd love to be able to sell and move on but I just hate paying so much tax to see so little back from this govt.

 

[keithj]

For those who sell (ie Sea Change), interesting to hear that you guys think after you pay selling costs, 1/4 profits away in CGT that you can put the funds to better use elsewhere. In my simple analysis, I need to make at least 30% in the next deal just to get back to where I was prior to selling. But then again I suppose you are banking your profits and moving on rather than holding it over a period of flat growth.

I'd love to be able to sell and move on but I just hate paying so much tax to see so little back from this govt.

Hi asdf,

I did a spreadsheet to investigate this - it's post #40 in this thread.
The results of swapping between shares & IP asset classes at 5 year intervals was interesting - the best result was to never sell IP, but draw down on equity to invest in shares, and to ALWAYS sell shares at the end of the cycle & reinvest in IP. These results would be different if my assumptions regarding txn costs, tax & leverage were different.

KJ

 

[see_change]

For those who sell (ie Sea Change), interesting to hear that you guys think after you pay selling costs, 1/4 profits away in CGT that you can put the funds to better use elsewhere. In my simple analysis, I need to make at least 30% in the next deal just to get back to where I was prior to selling. But then again I suppose you are banking your profits and moving on rather than holding it over a period of flat growth.

I'd love to be able to sell and move on but I just hate paying so much tax to see so little back from this govt.

Things are never as simple as that.

I'm assuming that places like Rocky and Logan ( the two places where I've sold ) are unlikely to move much in the next 5-6 years , so all I've got to do is make 30 % ( assuming your figures are correct ) in that period. I think I can do that. I think I can do significantly better than that. In the last 5 years I've increased my wealth by considerably more than 300 % and this was being a late starter in the current cycle. I think conservatively I can increase my wealth by more than ten times in one cycle but to do that I need to be active during the next trough, buying bargains.

Sure I can redraw equity , but that would mean taking on a higher LVR at a time when it wouldn't be 100% obvious that the market was moving convincingly and at a time where there may be interest rate rises, and who knows whether the banks will change their lending practices or start revaluing properties which have gone down in value . Doing what I've done I know I'll be in a position to buy multiple properties when many others won't be (including some of those who like to stay fully committed ) .

As an example ( I've quoted too many times before ... ) Robert Kiyosaki , once he'd decided that he would retire by buying cash flow positive properties , waited five years before he could find a property that fitted his criteria.

It's also part defensive . I know more people who've gone bankrupt from over committing to property at the end of the last cycle than from any other cause.

If I was in my 20's I might take the increased risk , but in my late 40's I have no intention of starting again, and noing I can get where I want to with minimal or no risk , why take any risk.

Even without selling I'm probably in a better position to weather any down turn than most people on the forum , but it would mean that I'd have to work hard at my day job , possibly for several years, whereas I'm looking forwards to winding down that in the next year or two and spending time doing other things like enjoying live.

See Change

 

[asdf]

Thanks for the advice Keith J and Sea Change. I do not disagree with that strategy at all. You need to be able to move with the cycles. A few forumites do that already and some will do very well after this WA cycle finishes. I suppose they can then retire and flick their properties one at a time to maximise their tax positions. Good problem to have. I suppose you're up for a huge tax bill this/last year too then Sea Change? Have you looked at Protected Equity Loans to reduce that bill? You can think about it now or in June 30 2006. What some clients do is pay monthly in arrears interest now and switch to annual in advance prior to June 30 and get a wad back in July. Buying some trees will achieve the same outcome or I Bonds if you know people in the loop. If you manage to get your hands on em, send some over to me...

 

[see_change]

Thanks for the advice Keith J and Sea Change. I do not disagree with that strategy at all. You need to be able to move with the cycles. A few forumites do that already and some will do very well after this WA cycle finishes. I suppose they can then retire and flick their properties one at a time to maximise their tax positions. Good problem to have. I suppose you're up for a huge tax bill this/last year too then Sea Change? Have you looked at Protected Equity Loans to reduce that bill? You can think about it now or in June 30 2006. What some clients do is pay monthly in arrears interest now and switch to annual in advance prior to June 30 and get a wad back in July. Buying some trees will achieve the same outcome or I Bonds if you know people in the loop. If you manage to get your hands on em, send some over to me...

I'm in the top tax bracket and with the 50 % discount on Capital gains I'll be paying a smaller % tax than I do at my marginal rate .

Will they put more money in my Pocket ?

See Change

 

[superb]

Reality check

I think Mr Symond's comments reflect his "gut feel" about what is happening in the market at the moment and that he has no ulterior motive other than to wake people up. There are many people out there at the moment that bought during the boom and currently owe the banks (and John Symond) more that their properties are currently worth. I sold a property in July this year for $100,000.00 less than the appraisal figure I received in October last year. The agent who sold it in July was the same agent who did the appraisal last year and this year his appraisal was not far off the mark of what the market was willing to pay for my home. Im just happy I sold it when I did (let alone regret not selling last year). This is how I see it:

The Reserve Bank decided this week keep interest rates on hold but with inflation reaching three percent in the September quarter, and the hike in fuel prices causing an outcry for higer wages, my bet is they (reserve bank) will use their tried and tested method of increasing interest rates to curb any further increase in inflation. In this market, how can any further rise not ensure a further down-turn of the property market? Add to that, the impact on ordinary workers (first home buyers, mum and dad investsors) of the new Industrial Relations reforms with respect to penalty rates, overtime etc, I think a return to the heady days of the property boom are a long way away.

 

[spark]

In 1994 - post-boom, I bought for $105,000 with sitting tenants paying $150 - about 7.5% gross.

Same house today worth c$300,000, rents for $260 - about 4.5%.

House gross appreciation 285%, rent 173%. Shoo, shoo, let all the half-hearted investors sell up and buy a new car. I can't see when rents for that property will reach $432 per week, which would be back to the reasonable yield of 7.5% gross, but just for fun I think I'll keep it a bit longer and wait and see.

Cheers

Kristine

Thumbs up! You should get a decent return on your holdings! 7.5% sounds nice and fair, which with a rent of $260pw implies that the a.m. asset has a current price revaluation pressure back towards 180K.
That's by your standards.