To Buy or Not To Buy



From: Mojo Jojo

Its pretty clear that we are in an overexcited market. Even a newbie as myself just needs to go to a couple of auctions each week to see that the prices are still rising each week. Seems like whereever you go people are talking about IPs and what they have just bought.

The question that I would like other people's opinions on is "should we be buying in this market or waiting?" Not myself specifically, just people in general.

I could see that if I had a number of IPs this would be a great time to sell a couple and then wait for the next dip in the cycle to start purchasing again. But I only have the one and am in a position financially to purchase another.

Do I join the many other people and go in search of that last remaining bargain or do I indeed wait for that dip?

How long will it be until that dip occurs, 1, 2 years?

Will the dip be of any great significance and I have just sat around for 2 years waiting?

Does anybody really know so therefore I should just go for it now?
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Reply: 1
From: Dave :)

Great question Mojo,

I've been thinking the same thoughts. True, this is a fairly
overexcited market right now. However, in speaking to several industry
experts recently, it seems that many have the view that the current
'crazy' state will continue for at least another 12 months - at least in

So, what my opinions are is this:

1. The market is overexcited, and this will continue, at least in
Melbourne, for another 12 months at least.

2. The next interest rate move will most probably be up. Interest
rates this time next year could be at least 1% point higher than now.
Money has never been cheaper than it is now.

3. Even if the market slows in 12 months, it's considered by many
experts who have been
around for far longer than I have, that property prices will flatten out
or slightly 'correct', and remain that way for a short period - rather
than dramatically fall and crash as they did over a decade ago.

4. By this time, a property bought well today, would still be a great
buy - especially if interest rates are higher than they are now.

My own personal conclusion? Whilst careful research and caution is
needed now more than ever, I am still looking to buy, and will buy, if
the right deal is there.

As many people here know, I like to buy Off The Plan. When some less
experienced developers hear words such as 'crash', 'slowdown', 'interest
rate increase', some of them take a panic and are willing to offload
some quality stock for far less than they should - especially if I get
into their ears before the Real Estate agents talk them up on all the
colourful words they want to hear. I'd be stupid to ignore these
opportunities just because the market is overexcited and might slow, or
correct, in 12 months time.

This is just MY opinion. I may be the only fool that thinks this way,
and I may end up regretting it...although I don't think I will. Even
then, I'd rather regret the things I do, than regret the things I didn't
do. Time will tell.

I'd love to know what others feel on this topic.



{Life's hard. When the market's overexcited...even harder!}

p.s BECAUSE the market is so hot, now would probably be a good time to sell up some personal stock that's shown great growth. I've spoken to several people in the last week who are selling their personal homes. Some have had their homes valued up to $100,000 higher than this time last year. So, they're cashing on the growth in their own homes, without the greedy CGT, and moving on. Makes sense to me....
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Reply: 1.1
From: H T


Interesting comment about your friends selling their primary residence to avoid CGT. To me the money made on your own residence is "play money" or money that you dont realize, 'cause you have to buy back into the same market and the more expensive properties your hankering for, generally, moved at the same rate.
Of course if you downsizing or are moving to a cheaper property-thats when its a gain or you just sit it out in anticipation of a downturn and rent

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Reply: 1.1.1
From: Michael Yardney

Why sell your personal home to take advantage of the booming market???
All you are doing is buying back into the same heated market but paying for 2 sets of agents fees and stamp duty.
I know many who are renovating their homes and upgrading that way, without paying all the costs of moving.
And if you want to use the equity in your home for other purposes, that's easy....borrow against the equity in your home and use it as a deposit on an investment.
Michael Yardney
Metropole Properties
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Reply: 2
From: Glenn Mott

I have to agree with Michael here. Having a few friends that are real estate agents, I would never deny them income. However, for someone not experienced in consistently picking properties that will go up in value over and above their buying and selling costs (including interest and cgt), you are much better to buy without selling any existing props.

Instead of thinking.."I need to sell my current place to be able to afford the next" you could maybe think..."The bank requires 20% deposit for the loan, how can I fund this (equity in current house, shares, business assets).

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Reply: 3
From: Scott Marshall

If you wait, the value of your existing property may drop, losing buying power. If you buy, you have 2, and don't need to worry about drops, as rents will rise. This is based on a dropping market. It's win-win if you keep over many years.
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Reply: 3.1
From: Jacque Parker

Sydney is definitely overexcited. People seem to be panic buying, afraid that they may never get a property for a price they can afford. The rental market is soft (one page normally of rentals advertised in our local paper is now four and a half, with photos!!) and returns, generally, are not great. Let's just say that I'm glad I bought my last place in March- I'm sure it would cost me a lot more now.

the trouble is, no one can predict what will happen exactly. I guess due diligence is required to ensure that you don't pay more than the median price so that you are still catering to the greater population of renters in a suburb. In a soft market, I can only assume that the bigger the rent, the bigger the hurt for us investors! Stick to lower priced properties and popular locations for renters. Keep your places clean and well maintained and you may have to reduce to get people in- but, hey, the market will change and rents will rise. It's just a matter of time. As for the money that you may lose, eat less tim-tams!
Hang in there fellow investors! Jacque :)
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Reply: 3.1.1
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