What stage of the property cycle are we at now?

[sash]

Well the property market around the country has many sub markets even within a city. But as a guideline:

1. Sydney - first home buyer market is in early upturn, mid level - slump high-end in a slump. Strongest market in OZ

2. Brisbane -similar to Sydney

3. Melbourne - similar to Sydney. Second strongest market in OZ

4. Adelaide - stable, though a few FHOG areas are moving well.

5. Perth - low end okay......but other markets will continued to go back particularly as the resources boom unwinds.

 

[Shadow]

Top-end Sydney property presents some great buying opportunities right now - that's where I'm in the process of buying. 20-30% reductions are certainly achievable in the top 5-10% of properties (if you can get the credit that is).

Are you talking North Shore & Eastern Suburbs $5m+ and/or $10m+ properties. Can you define 'top end' and 'top 5% - 10%'?

Thanks

In my case I have recently had credit pre-approved for a new purchase up to $1.7M. I'm looking at Northern Beaches properties that would have been selling for well over $2M at the peak, now available for around $1.6M and with very little buyer demand, So I'm just waiting for the perfect house to come along now. No rush, they won't be going back up in price any time soon. I'm planning to buy a property in that price range, keep it as an IP for a year or two, and then move in there myself and convert my current PPOR into an IP. You can get some Pittwater absolute beachfront or deep waterfront properties for well under $2M now which would have been unheard of a couple of years ago. I'm not buying with the hope of significant short term capital gain - I don't expect those sort of properties will start go back up in value significantly for a couple of years. The idea is really just to upgrade to a really nice PPOR while prices are low and there is no competition, and it costs me virtually nothing to hold it as an IP for a year or two.

Luckily my existing properties are all valued around the Northern Beaches median or below, and values in that price range are doing well (according to my most recent valuations in December), and I've had good capital growth since I first started buying in 2005, so I have the equity I need to buy again, and since my interest rate has almost halved in the past few months I have heaps of spare cashflow for servicing the new purchase - in fact even with the new purchase my total interest outgoings will still be lower than what I was paying on my existing properties at the peak of the interest rate cycle!

(The gloomers will probably tell me now that all Northern Beaches property will fall by 50% on top of the current 20-25% falls at the top-end... but that's a risk I'm willing to take D&Gers!)

Cheers,

Shadow.

 

[ianvestor]

Australia: It feels like 'stabilization' so I voted upturn, knowing things are always further along than they seem.

Rixter, defining 'Australia' as a market is just as relevant as defining 'Sydney', 'Glebe' or 'Glebe Point Rd' as a market.

Even in Glebe Point Rd, there are different markets.

 

[JIT]

I'm looking at Northern Beaches properties that would have been selling for well over $2M at the peak, now available for around $1.6M

...

The idea is really just to upgrade to a really nice PPOR while prices are low and there is no competition, and it costs me virtually nothing to hold it as an IP for a year or two.

What's the yield on a $1.6M property though, I wouldn't have thought it to be CF neutral-ish (unless you're putting in a decent cash deposit)...?

 

[evand]

Way too much info. Thanks and good luck with it.

In my case I have recently had credit pre-approved for a new purchase up to $1.7M. I'm looking at Northern Beaches properties that would have been selling for well over $2M at the peak, now available for around $1.6M and with very little buyer demand, So I'm just waiting for the perfect house to come along now. No rush, they won't be going back up in price any time soon. I'm planning to buy a property in that price range, keep it as an IP for a year or two, and then move in there myself and convert my current PPOR into an IP. You can get some Pittwater absolute beachfront or deep waterfront properties for well under $2M now which would have been unheard of a couple of years ago. I'm not buying with the hope of significant short term capital gain - I don't expect those sort of properties will start go back up in value significantly for a couple of years. The idea is really just to upgrade to a really nice PPOR while prices are low and there is no competition, and it costs me virtually nothing to hold it as an IP for a year or two.

Luckily my existing properties are all valued around the Northern Beaches median or below, and values in that price range are doing well (according to my most recent valuations in December), and I've had good capital growth since I first started buying in 2005, so I have the equity I need to buy again, and since my interest rate has almost halved in the past few months I have heaps of spare cashflow for servicing the new purchase - in fact even with the new purchase my total interest outgoings will still be lower than what I was paying on my existing properties at the peak of the interest rate cycle!

(The gloomers will probably tell me now that all Northern Beaches property will fall by 50% on top of the current 20-25% falls at the top-end... but that's a risk I'm willing to take D&Gers!)

Cheers,

Shadow.

 

[Shadow]

What's the yield on a $1.6M property though, I wouldn't have thought it to be CF neutral-ish (unless you're putting in a decent cash deposit)...?

My existing IPs are getting around 5% gross yield, so they are pretty much cashflow neutral already.

For the new property we'd be looking at around $1100-1300 rent per week, so a gross yield of around 3.5-4%... net yield a bit less. I'm on 5.01% variable rate now, and I expect that to fall to 4% or less, so it would be pretty much cashflow neutral then.

Even now at my current 5% variable rate, after depreciation and negative gearing it wouldn't cost me much to hold.

Cheers,

Shadow.

 

[JIT]

My existing IPs are getting around 5% gross yield, so they are pretty much cashflow neutral already.

For the new property we'd be looking at around $1100-1300 rent per week, so a gross yield of around 3.5-4%... net yield a bit less. I'm on 5.01% variable rate now, and I expect that to fall to 4% or less, so it would be pretty much cashflow neutral then.

Even now at my current 5% variable rate, after depreciation and negative gearing it wouldn't cost me much to hold.

Cheers,

Shadow.

Fair enough, makes sense.

 

[The Fence]

You asking me..??

I voted slump. However I've never said 50% drops. Small drops or a stagnent market for many years is still a slump with an asset that costs money to hold. I'm not falling for the 'cash flow positive everywhere' garbage.

The property market is 18 to 24 months behind the share market. Australia's economy is 18 to 24 months behind the US and Euro economies due to the commodities boom giving us an extended bubble.

See ya's.

Gotta disagree with this.....the money you mention that "costs" to hold is ever dwindling in size with low interest rates and inflation over time.....Time has seen our portfolio go from neg geared to cf+ve....without paying down capital..!!!....oh forgot to mention also rising rents...

I dare say the (recovery) sharemarket will be behind the property market as it always has been (out of shares into property)...but then again that's a two way street so no winner of that argument....property has already tanked in SYD/NSW and all other states have since followed and SYD will lead again....Stocks are (partly) being deleveraged into property right now IMHO. At least into another assett class that does not include shares that is....the real gamblers are concentrating on the share market for their quick fix, not long term sustainability of property investing...or at least a "long term" view of investing.

You know, and have stated yourself, that the low end in SYD is ripe for the picking and I know you are looking too....! Push the button Topper!

Have fun !

 

[topcropper]

Time has seen our portfolio go from neg geared to cf+ve....without paying down capital..!!!....oh forgot to mention also rising rents...!

Hey, that's great Thorpey. Good to hear. That's exactly how it's supposed to happen. Great stuff.

You know, and have stated yourself, that the low end in SYD is ripe for the picking and I know you are looking too....! Push the button Topper!

Have fun !

We've bought a unit in Mortdale Sydney in the last few months. Started my farm succession planning with my rural hating brother. Got to eventually buy him out, so starting now. This unit in his name will mean an adjustment to the oldies will.

Send me a PM if you want some details, or, I'll tell ya next time I'm talking to ya.

I know all about the rental crisis and rising rents in Sydney first hand off him. He was getting booted out of his flat and had trouble finding another place. So we killed two birds with the one stone. Also seemed to be a lot of demand for the property we bought.



As for the shares and property and the timing and cycles debate? I've explained my thoughts on this so many times I don't want to repeat it. Sounds like your views are very different to mine, and that's great. That's what we are here for, to debate this stuff.

I'm sticking to what I think is the cause of this mess, and the path that will be followed. If I'm wrong, too bad, and I've been a lot more wrong than right in recent times that's for sure. If I'm wrong and the resi property boom takes off, then I can get in later. No worries.


Missed ya's at Shazza's this year.


Cheers mate.

 

[yorke]

Way too much info. Thanks and good luck with it.

Actually you asked for it.

I did found this bit interesting,

Luckily my existing properties are all valued around the Northern Beaches median or below, and values in that price range are doing well (according to my most recent valuations in December), and I've had good capital growth since I first started buying in 2005, so I have the equity I need to buy again, and since my interest rate has almost halved in the past few months I have heaps of spare cashflow for servicing the new purchase -

because according to some D&Gers prices have been falling in the Sydney area for the last 5 years and still has a way to go. Not only does this make a mockery of their claims but also would place Sydney many months (if not years) ahead of the other capital cities as far as the property cycle goes. Boom anyone ?

 

[Mindmaster]

Hi Mindmaster, just curious, why the interest in Australian property if you are located in China?

Cheers,

Shadow.

Hi Shadow.

The interest in Australian property is because I'm an Australian from Melbourne, I have one IP (Sunshine) and I'm planning to get a second IP.

I'm not a very educated investor so I'm reading a lot, learning and trying to ask the occasional intelligent question

 

[rambada]

Ask away Mindmaster. I've been investing for a moderate time and still scour this forum. Its all good.

 

[sparky23]

Hi Shadow.

The interest in Australian property is because I'm an Australian from Melbourne, I have one IP (Sunshine) and I'm planning to get a second IP.

I'm not a very educated investor so I'm reading a lot, learning and trying to ask the occasional intelligent question

No need for the questions to be intelligent ask the silly ones aswell, often people don't but they really should it might pay down the track!

 

[Dazz]

gross yield of around 3.5-4%... net yield a bit less.

Only "a bit" ??

I would have thought the council rates, water rates, insurances, land tax (wacko - that'll hurt), maintenance, PM fees and a whole bunch of other stuff that is being ripped out of the gross yield prior to you getting your mits on it wouldn't be described as "a bit".

Play your cards the wrong way round and that gross rent could easily turn into a negative yield.

I'd be interested to know how much "a bit" is for a 1.6m RIP.

 

[Shadow]

Only "a bit" ??

I would have thought the council rates, water rates, insurances, land tax (wacko - that'll hurt), maintenance, PM fees and a whole bunch of other stuff that is being ripped out of the gross yield prior to you getting your mits on it wouldn't be described as "a bit".

Play your cards the wrong way round and that gross rent could easily turn into a negative yield.

I'd be interested to know how much "a bit" is for a 1.6m RIP.

Nah, it doesn't come to that much (land tax being the most significant), but they're all tax deductible costs, and pretty much canceled out by the depreciation deductions anyway.

Council Rates: 2000
Water Rates: 1000
Insurance: 2000
PM Fees: 3000
Land Tax: 10000 (Assume land value of $1M, NSW LT threshold is $380K)

Wouldn't be planning any significant maintenance in the first couple of years, but if it happens it happens.

Total: $18000
Total after tax deduction: $10800

I'd be claiming that or more back in plant and building depreciation anyway, so it all balances out. No big deal.

Cheers,

Shadow.

 

[The Fence]

Hey, that's great Thorpey. Good to hear. That's exactly how it's supposed to happen. Great stuff.





We've bought a unit in Mortdale Sydney in the last few months. Started my farm succession planning with my rural hating brother. Got to eventually buy him out, so starting now. This unit in his name will mean an adjustment to the oldies will.

Send me a PM if you want some details, or, I'll tell ya next time I'm talking to ya.

I know all about the rental crisis and rising rents in Sydney first hand off him. He was getting booted out of his flat and had trouble finding another place. So we killed two birds with the one stone. Also seemed to be a lot of demand for the property we bought.



As for the shares and property and the timing and cycles debate? I've explained my thoughts on this so many times I don't want to repeat it. Sounds like your views are very different to mine, and that's great. That's what we are here for, to debate this stuff.

I'm sticking to what I think is the cause of this mess, and the path that will be followed. If I'm wrong, too bad, and I've been a lot more wrong than right in recent times that's for sure. If I'm wrong and the resi property boom takes off, then I can get in later. No worries.


Missed ya's at Shazza's this year.


Cheers mate.

Ahh..forgot about brother...yes good move TC...you're on the ball with that one. Congrats on the purchase too....!

I see a bloke claimed (Weekend AFR page 45) that today will mark the bottom of the stockmarket and up from here to 4800 in sept before a last bear laugh........ that's a big call but one I could agree with....pity property lags in getting the data thru but it will come out eventually....then we will see what stage of the property cycle we are in right now.....I do agree with most though that cycles depend upon locations, there is not one big Aussie cycle, it is fragmented....

PS:Would love to have got up to Shazza's but work to do and a new boat to play with now....

 

[ffc1883_1996]

Dr Frank Gelber joins Lateline Business

Dr Frank Gelber of BIS Shrapnel believes...

we're starting to see the impact of a housing upswing coming through. And this is a very undersupplied housing market. The next phase is the upswing, and I think it's starting now.

http://www.abc.net.au/lateline/business/items/200902/s2500424.htm



Personally, I’m not so sure that there even is a housing cycle. Property values surge/drop/flatline from time to time but the forces at play are much more complex (even chaotic).

I don’t think a “cycle” can explain why my little three bedder in Boronia would have fetched $290k in Jan07, $400k in Dec07, $330k in Jun08 and probably a little more now.

Regards - Ben

 

[Ms Jade]

What weird-**** thing is going on with this thread? My computer leeps seeing ffc's post as a new one - like it renews itself or something. As I have no magic powers I am hoping that this post is a boring, normal one thus breaking ffc's spell on this thread.



Sorry for this waste of time post, BTW, I'm just sick of stupidly selecting this thread as "unread" over & over.

 

[Ms Jade]

Wow, surprised you can't say **** on here. Can't even say "***" for all our American friends. Hmmm, "mule" is OK, "***" is not.
(Can you tell it's been a long day?)

 

[Shadow]

My computer leeps seeing ffc's post as a new one - like it renews itself or something.

Each time somebody votes in the poll, it flags the thread as having new posts. Just a forum thing.