The perfect storm for Property Investors!

[tonyc00]

Hi

You may recall that my initial opening words were:

"I wish that Michael's scenario was correct.

Except all analysts predict .."

Please note that I respect Michael's opinion, and wish his Mona Vale development well, and I'm not knocking optimism - I'm a fan of Tony Robbins, Earl Nightingale, Jim Rohn, etc, but

as a baby boomer myself, and an economist (that means nothing but its worth mentioning), I have read the articles / studies from people who have researched such, and I hold to my opinion - no disrespect to the others - that's what makes this a GREAT forum.

Regards

Tony

 

[MichaelW]

as a baby boomer myself, and an economist (that means nothing but its worth mentioning), I have read the articles / studies from people who have researched such, and I hold to my opinion - no disrespect to the others - that's what makes this a GREAT forum.

No disrespect taken!

I wasn't aware you were an economist, that does carry sway with me. I would welcome some insight into your thinking that the Baby Boomer retirements en masse will have an adverse effect on property prices. As I explained in my post on the previous page, I can't see it having that effect given the number of GenXers outnumber Baby Boomers and given the increased levels of immigration that are touted for the coming few years.

It seems government is awake to the risk, hence the future fund and high immigration. I really can't see Baby Boomer retirement as having an adverse effect in any meaningful way.

But I'd welcome being corrected so I can plan accordingly if you have insight that I'm not aware of!

Thanks,
Michael

 

[MichaelW]

Hi guys,

Some more positive outlook for Sydney. This time hidden in a negative profit report by AV Jennings:

http://business.smh.com.au/business/av-jennings-hurt-by-nsw-housing-market-20080813-3ul1.html

"The NSW housing environment has been at particularly low levels for a prolonged period due to the compound effects of taxes, protracted approval processes and interest rate rises," it said.

"These factors are structural in character and, other than possibly interest rates, unlikely to change in the short term.

AV Jennings said while the current environment has been particularly difficult for the sector, a cyclical turnaround is inevitable.

Whilst short-term issues such as affordability, purchaser confidence and investor activity can cause more volatile short-term cycles, long-term prospects for residential property development are strongly linked to underlying supply and demand.

The current cycle has resulted in a major shortfall in housing supply relative to underlying demand.

Underlying demand is determined by factors such as net immigration levels, birth rates, etc, and remains fundamentally strong.

The increase in its developments pipeline positions the company well for the next growth cycle in the housing sector.''

Why is such a simple concept so hard for our good Doom and Gloom friends to understand.

Ah well, I understand it and as such shall profit from it in time. You can only do so much to try and help others in their individual wealth creation journeys...

Cheers,
Michael

 

[Sean]

Its been a long time since the property market has been moving so strongly in favour of property investors.

Happy days!

It's wise to be suspicious of promoters for whom there is always only upside, as per John T. Reed's BS artist detection checklist. Recommended reading for all investors, amateur smalltime developers, speculators and compulsive seminar goers.

Note particularly points:
3. No pitfalls or corrections
4. No bad news

which uses words like 'pollyanna' and 'sunny Jim'.

'They always see “opportunity.” The closest they come to acknowledging the unhappy truth is to describe a situation as a “challenge.”

The Tax Reform Act of 1986 was a good litmus test. Any investor whose IQ exceeds his body temperature knows that was the worst tax law for real-estate investors since the income tax was invented. But when it passed, the B.S. artists called it “the best thing that ever happened to real estate”...or words to that effect. They are saying the same thing in 2008 about the sub-prime mortgage crisis which has lowered property values widely.'

 

[BayView]

It's wise to be suspicious of promoters for whom there is always only upside, as per John T. Reed's BS artist detection checklist. Recommended reading for all investors, amateur smalltime developers, speculators and compulsive seminar goers.

Note particularly points:
3. No pitfalls or corrections
4. No bad news

which uses words like 'pollyanna' and 'sunny Jim'.

'They always see “opportunity.” The closest they come to acknowledging the unhappy truth is to describe a situation as a “challenge.”

The Tax Reform Act of 1986 was a good litmus test. Any investor whose IQ exceeds his body temperature knows that was the worst tax law for real-estate investors since the income tax was invented. But when it passed, the B.S. artists called it “the best thing that ever happened to real estate”...or words to that effect. They are saying the same thing in 2008 about the sub-prime mortgage crisis which has lowered property values widely.'

His article is about gurus mostly. They have a vested interest to never talk property down.

This post illustrates the critical difference between the D&G'er and most of the forumites here - MINDSET.

Michael's mindset is one of looking for opportunity in an unfavourable (apparently) property market.

The opportunity would be things like:
a) cheaper houses to buy - buying at or near the market bottom, so it allows you to well placed for the next upswing when it occurs.
b) improved rental yields - the holding costs are neutralised mostly, this improves servicability for the next deal
c) neg sentiment scares away buyers, which improves all of the above.

D&Gers (you) only see an unfavourable market and want to stay away from it.

Unfortunately, they want us all to stay away as well, and not only that; they want the market to totally collapse so they can buy a cheap house without having to do any hard work. That's not nice.

We all know that the market is starting to turn unfavourable in a number of areas, but we look to find the opportunity, as there always is one.

So, as a D&Ger, are you going to continue to keep rabbiting on about the terrible market, it's terrible investment ra, ra, ra - or come over to the dark side with us evil LL's and learn how to make some money in all markets?

Here's a project for you to make yourself useful - find an area in Aus that no-one has discovered yet that has good rental yields, strong prospects for employment and cap growth in the future, good signs of improved infrastructure and population growth, affordable.

Or maybe study up on some nifty reno tips that will help us to add value and create some cap growth.

Then share with the forum. You needn't worry that everyone will zoom in and buy up everything, as not everyone is in a position to buy all the time.

This will require a change in your mindset.

 

[joeExpat]

Funny, when I first saw the title of this thread I assumed it would be an argument about all the negative factors aligning against property investment, a perfect storm that would force the market down, & thought 'this guy's talking sense but he's going to get flamed as a Doom & Gloomer'.
Then it turned into the exact opposite...

 

[VYBerlinaV8]

The D&Ger's get stuck because many people here are willing to examine a scenario and try to find ways to turn it to their advantage. If they don't want to change their minds, I don't really care - it's their loss.

And our gain.

 

[lizzie]

slipped over the gphc the other day for a laugh - what a hoot - now that the massive "crash" doesn't look like it's going to pull off this time around, they're now prediciting that we will have a massive crash in 2010 when all the bb's start to retire and sell off en-masse.

there is no logic ...

 

[knightm]

they're now prediciting that we will have a massive crash in 2010 when all the bb's start to retire and sell off en-masse.

there is no logic ...

...and my grandparents just sold their house of 40 yrs in a middle ring melbourne suburn in their late 80's and moved into a retirement villa thing. And my parents are retired but are rennovating instead of selling up and they will be in their 5 br home for another 15-25 years as long as they can be.

The massive selloff of homes may not happen, or at lease not en mass in 2010. Even if it does people are gonna live somewhere. Where are all the masses of new units and townhouses being built for this purpose? They aren't. Some will seachange or downsize but many will stay where they are for a long time yet.

 

[wylie]

The baby boomers are spread over quite a number of years. I used to miss out on being a boomer, born in 1960. I remember quite well being rather indignant when they slowly crept the years of the boomers out to about 1964. Made me feel suddenly much older than I felt before I read it .

My parents (at ages 70 and 67) moved from a three bedroom house to a four bedroom, three bathroom place to live their retirement years, in the next door suburb. Not all boomers are going to suddenly sell up and move to the coast.

Anyhow, won't the houses that do come on the market when some of the boomers starting moving into retirement villages and nursing homes mean the "shortage" will ease?

 

[joeExpat]

slipped over the gphc the other day for a laugh - what a hoot - now that the massive "crash" doesn't look like it's going to pull off this time around, they're now prediciting that we will have a massive crash in 2010 when all the bb's start to retire and sell off en-masse.

there is no logic ...

On the contrary I find the mood on those house price crash sites has changed from one of hope & anger to one of vindication & joy as the various crashes they've been long predicting finally play out in the various markets around the world.

 

[devo76]

True but its a shame many of them are waiting for a hopefull 20% drop while this whole time values have doubled or trippled.

Now would i buy a house at $100,000 years ago or would i wait years for them to drop 20% from there current $300,000 valuation. .

But if they drop 70% then they can pull the piss out of me all they want.

 

[Shadow]

On the contrary I find the mood on those house price crash sites has changed from one of hope & anger to one of vindication & joy as the various crashes they've been long predicting finally play out in the various markets around the world.

Except Australia of course. I think Lizzie was referring to the Australia section of the GHPC forum. I am starting to detect a hint of panic and frustration over there. The fact that interest rates are falling has them on edge... their hopes for a big crash have been dashed once more!

 

[BayView]

On the contrary I find the mood on those house price crash sites has changed from one of hope & anger to one of vindication & joy as the various crashes they've been long predicting finally play out in the various markets around the world.

The fact that they show any vindication and joy at a housing crash shows you that they are not right in the head.

I want the prices of houses to go down so I can buy more at yesterday's prices, but I'm happy if they still continue to go up as I already have a few, and if I buy now and they continue to go up, I win either way.

Obviously, none of them own any property.

 

[nonrecourse]

You need to have a balanced approach to investing

I have visited the dark side (GHPC) and my take is that on both sites, GHPC & SS there is a hard core that believe that their form of investing be it property or shares is the only "true" way of investing. At the moment there is a large core of SS investors that acuses anyone that states the obvious ( a fiscal calamity is occurring) is a doom and gloomer and "Hit the road Jack to anyone that expresses that opinion.

 

[BayView]

I have visited the dark side (GHPC) and my take is that on both sites, GHPC & SS there is a hard core that believe that their form of investing be it property or shares is the only "true" way of investing. At the moment there is a large core of SS investors that acuses anyone that states the obvious ( a fiscal calamity is occurring) is a doom and gloomer and "Hit the road Jack to anyone that expresses that opinion.

I don't mind D&G talk here - it gives us all forewarning, makes us take notice of the trends and state of the market. Not that I think many here need it; the fact that most are here shows that we are more in tune with things than the average Joe.

There are a few experienced investors here who are bearish about property in the short term, but not the long term - me, Alex Lee, Evand, Sunfish and so on.

But what I don't like is when people tall D&G to a fanatical level, with no runs on the board, and display a dislike of property investors as greedy, preying on renters, forcing up the prices, prices can't continue to go up and so on.

They were saying prices couldn't go up any higher when I was a boy.

 

[nonrecourse]

To be forewarned is to be forearmed

Hello L.A.Aussie, Pehaps like you and the others you mentioned as long term players, the wife and I have all our assets in properties and have been building our property portfolio since 1995. Before I met my wife I was more interested in shares but over time she has demonstrated why property for us is a superior model. We have until July 2007 been very aggressive in our gearing and have been in the buy, never sell, use the equity to acquire more over time camp.

Having said that if you go back and look at my posts in the last year I have described an impending soft financial depression that is now starting to play out. We don't shy away away from putting our money where our mouth is. Our least valuable asset sold this week and our jewel in the crown goes up for auction next thursday. By selling our least valuable asset first at a 10% discount we are now in a very strong position. We are into property for the long term and the next ten years of very difficult times will also be one of enormous opportunity.

As the song says you need to know when to hold them, know when to fold them, know when to run. Now is not the time to sit at the table counting our money there will be plenty of time for that in the coming difficult years. You will never see us featured in any investors magazine its not our style.

My concern in these dangerous times is for the naive new investors who are on this site listening to drivel about how you can never lose with property. Fools are parted with their money in property just as brutally as with any paper equity or fiat currency. Add a pinch of greed and you have a receipe for a great deal of suffering.

My contribution in our investing is understanding and using D.I.Y. super to invest in property, plus outside of super owing nothing but controlling everything through the judicious use of discretionary and unit trusts. Understanding the complex ever changing bankruptcy laws and keeping up with the ATO's tax rulings has been an evolving education.

 

[GIDDO]

We don't shy away away from putting our money where our mouth is. Our least valuable asset sold this week and our jewel in the crown goes up for auction next thursday. By selling our least valuable asset first at a 10% discount we are now in a very strong position. We are into property for the long term and the next ten years of very difficult times will also be one of enormous opportunity.

As the song says you need to know when to hold them, know when to fold them, know when to run. .

Hello NonR,

Intereasting that you have just sold your least valuable assett and are also selling your best one next week.
A lot of wisdom seems to say ppl shouls keep the best ansdd sell the dogs.

I am interested cos I will sell one property soon and need to decide which one?

It is going to be the one that is most saleable and may not be the dog!!

 

[The Fence]

Yes, I must admit some amazement over why a long term player would be selling anything, let alone the jewel, at this point of the cycle.....?

Would like to be enlightened as to why.....

 

[BayView]

Hello L.A.Aussie, Pehaps like you and the others you mentioned as long term players, the wife and I have all our assets in properties and have been building our property portfolio since 1995. Before I met my wife I was more interested in shares but over time she has demonstrated why property for us is a superior model. We have until July 2007 been very aggressive in our gearing and have been in the buy, never sell, use the equity to acquire more over time camp.

Having said that if you go back and look at my posts in the last year I have described an impending soft financial depression that is now starting to play out. We don't shy away away from putting our money where our mouth is. Our least valuable asset sold this week and our jewel in the crown goes up for auction next thursday. By selling our least valuable asset first at a 10% discount we are now in a very strong position. We are into property for the long term and the next ten years of very difficult times will also be one of enormous opportunity.

As the song says you need to know when to hold them, know when to fold them, know when to run. Now is not the time to sit at the table counting our money there will be plenty of time for that in the coming difficult years. You will never see us featured in any investors magazine its not our style.

My concern in these dangerous times is for the naive new investors who are on this site listening to drivel about how you can never lose with property. Fools are parted with their money in property just as brutally as with any paper equity or fiat currency. Add a pinch of greed and you have a receipe for a great deal of suffering.

My contribution in our investing is understanding and using D.I.Y. super to invest in property, plus outside of super owing nothing but controlling everything through the judicious use of discretionary and unit trusts. Understanding the complex ever changing bankruptcy laws and keeping up with the ATO's tax rulings has been an evolving education.

I've changed my name from L.A Aussie to Bayview now. Happened this morning. (Many thanks to the Mods!).

I absolutely agree 100% with your post.

I don't believe in the "never lose with property" mindset either. Although, I still believe that over the long term (10 years) you are far less likely to lose - especially if you buy in areas with proven growth etc.

"Speculative", short term trades and OTP deals are more likely to be a risk, and require very good market timing I believe. I've never done one, and will do one in the future, but I have a decent amount of equity and "padding" to save me if things go wrong.

A good solid "buy and hold" strategy for most people will work out fine over the longer term - as long as the cashflows stack up, even if they buy at the wrong time, as long as they can hold the asset through the slow CG period.

I think there is a very good buying opprtunity coming upon us in many areas, given the current climate of rates and buyer sentiment, but of course; the old Due Diligence rule always applies.

Many people just blindly buy when the herd does, or not buy when the herd doesn't.

Smarter investors need to be more on the ball than this, watch the markets and adapt their strategy to the conditions.