I wish I shared the optimism of others. But once the FHBG is finished, unemployment reaches 8.5% and interest rates begin to rise, why wont house prices decrease?
You always have to be optimistic and positive Jackstar.
Doesn't mean you have on the rose-coloured glasses though.
If you are able to buy, there will always be a good deal in any climate.
If the climate is not that favourable, there are hedges against loss you can use; such as better rent returns, lower LVR's, depreciation. These are cashflow improvers and will allow you to hold an investment through most turmoil.
For example; here's how I think;
now the rates are low, and rents are going up. This means cashflows are improving. If the property prices go flat or decrease after the FHB's disappear, then your buying price will be lower, which improves the cashflows even more. Nice.
Then, add to this some debt reduction immediately after settlement and further re-investment of tax returns and excess rent monies (if this is the case) then your investment is relatively safe from economic conditions.
This is my mindset, my ongoing strategy, and as you can see, it means that the hoo-ha from the various media sources and street people (sorry; people on the street) means nothing if you look at things in this way.
Think of this; most people are a herd. Herds do the same thing as each other. Most people are down in confidence and even scared of property right now.
They will do nothing if they were looking to buy, or even get out of property.
Meanwhile, there is opportunity and a few will see that and act on it.
The herd will wait until everyone else is feeling confident again before they do anything, and many will have sold out by then and want to get back in.
I have been hearing about massive drops in property values for over 30 years, and there are some. They are operator error caused in ever case I'm willing to bet.
No-one ever sold a house at a loss because they felt like it. They were forced to.
Meanwhile, the guys who plod along, buy a decent house in a decent area, at a reasonable price, with a safe LVR margin, don't get silly - these guys just keep on gettin' richer steadily.
When you get more established, then you can up the stakes and play a bit more near the edge - a
bit more.
The guys who get burned play very close to the edge. They borrow too much, they don't do enough research, they pay too much, they get too little cashflow back from rent etc, they use every cent of equity and buy too much property in one go, they capitalise interest, or never pay down debt, or all of the above together, and so on.
It's more exciting and the returns are higher, but it's more dangerous too.
I don't expect my properties to fall at all in the near future. If they do; it'll be not much, and I won't care if they do.
Actually; I will care, because it will slow down my ability to purchase again sooner, and I'll have to sit around and wait until things improve LVR wise again, but that's all.
