Here is one example of the "worst house" on the best street
And here is another in the attachment
What will happen to Property prices in VIC..
- Thread starter Property Meister
- Start date
And here is another in the attachment
Looking back to the original post. I understand how it can be hard to jump. Becouse of possible turbulant times ahead, you dont want to go buy a IP and lose 20% in the following months. Yes it is more than likely it will see 100% growth in the following ten. Its just hard to see a deflating asset even if you have no intention of selling. Below i give three options, Totally made up.
Option 1
Buy house now $300,000
2008 housing slump hits value now $250,000
2018 Housing boom value now $600,000 You have $300,000 equity
Option 2
Buy house in slump $250,000
2018 Housing boom Value now $600,000 You have $350,000 equity
Option 3
Wait 2 years but prices continue to climb House value $350,000
2018 Housing boom Value now $600,000 You have $250,000 equity.
I guess the point is yes you might save a some money IF a slump comes and your area suffers from it but it still shows little is lost if you just jump in and hold on for the long term.
The longer you hold on the less the purchase price seems relevent.
Option 1
Buy house now $300,000
2008 housing slump hits value now $250,000
2018 Housing boom value now $600,000 You have $300,000 equity
Option 2
Buy house in slump $250,000
2018 Housing boom Value now $600,000 You have $350,000 equity
Option 3
Wait 2 years but prices continue to climb House value $350,000
2018 Housing boom Value now $600,000 You have $250,000 equity.
I guess the point is yes you might save a some money IF a slump comes and your area suffers from it but it still shows little is lost if you just jump in and hold on for the long term.
The longer you hold on the less the purchase price seems relevent.
1995 would have been nice ... I was still studying though.
1997 marked the beginning of the boom in Melbourne. Had you got in in say October, you would have been laughing!
I happened to fluke it and buy land for my PPOR - it subsequently rose by $5000 a week for quite some time after I purchased!
Back then though, I was really worried about parting with my cold hard cash. It was in a nice safe term deposit until I purchased. Glad I took the risk and bought - not to say that this will happen every time though of course!
Regards Jason.
Akumaslair, would you like a 3 page photo copy of Median House Prices 1994-2005 courtesy of the Victorian Valuer-General?
In this "relatively well respected" information it gives you the decade of shifting values; historical growth patterns of many towns and cities of the State of Victoria....if you wish you can then buy the current year Victorian Valuer-General median house prices and also compare (that would be 2004 to 2006-short term figures are less indicative of course, prices can ebb and flo with the short term )
Anyway let me know and I can fwd you the interesting report....it's good information to have along with all your other bits and pieces.
In this "relatively well respected" information it gives you the decade of shifting values; historical growth patterns of many towns and cities of the State of Victoria....if you wish you can then buy the current year Victorian Valuer-General median house prices and also compare (that would be 2004 to 2006-short term figures are less indicative of course, prices can ebb and flo with the short term
)Anyway let me know and I can fwd you the interesting report....it's good information to have along with all your other bits and pieces.
Yessss pleeassssseee!!!!
Hi all
Yieldmatters,
You would only invest in 1995, with HINDSIGHT.
In 1995, growth in prices had been slow or negative for a few years, yields were low compared to interest rates, and it looked like we were heading into a recession!! Plus everyone just knew that interest rates could easily go up to 17% again.
bye
Yieldmatters,
You would only invest in 1995, with HINDSIGHT.
In 1995, growth in prices had been slow or negative for a few years, yields were low compared to interest rates, and it looked like we were heading into a recession!! Plus everyone just knew that interest rates could easily go up to 17% again.
bye
But the capital gain, the capital gain! The rest is just details remember!
The conventional wisdom in 1995 was that property couldn't go up as it had done in previous booms as the inflation beast had been slain by the 'recession we had to have'. If inflation was cut to 2% from 8% then house price growth would be similarly low.
As it turned out this analysis was faulty since the link between house prices and CPI is tenuous at best*.
It neglected the fact that reducing inflationary pressures led to lower interest rates. Which of course encourages more employed people in an expanding economy to borrow more to chase the same number of houses, leading to a boom.
Many of us here remember this but this doesn't stop other conventional wisdoms being peddled and believed, eg the unlikelihood of capital growth in the outer suburbs.
* conversely one can find years in the '70s and '80s when inflation was around 10% but house prices hardly moved so real prices fell by maybe 8% in a single year.
In short, property keeps rising DESPITE conventional wisdom (at each period) saying that property will never go up. Lower inflation would kill property prices. Higher rates would kill property prices (talk about having it both ways). Maybe short term they will, but long term........ UNLESS you believe the last 40 years of economic development is going to unravel. In which case I would hoard gold, cans of food, guns and build a bomb shelter.
I suspect the reason is that conventional wisdom only looks at the recent past and doesn't really look at the fundamentals. The late 90s 'wisdom' stated that with inflation down, properties wouldn't rise (and with the specter of high rates still in people's minds). However, they didn't see (probably because inflation had been such a boogey man in the prior decade) that lower rates would mean people could afford to pay more.
The fundamentals of population increases, rising incomes, and perhaps most importantly the very human want for a better place to live will mean property prices will trend up over the long term. Will there be short term, even years of flat or down markets? Sure. We have those every decade or so, and are probably overdue for one. Personally, I have a long enough time horizon that I can ride out pretty much anything, and emerge into the next boom loaded up with property.
Alex
I suspect the reason is that conventional wisdom only looks at the recent past and doesn't really look at the fundamentals. The late 90s 'wisdom' stated that with inflation down, properties wouldn't rise (and with the specter of high rates still in people's minds). However, they didn't see (probably because inflation had been such a boogey man in the prior decade) that lower rates would mean people could afford to pay more.
The fundamentals of population increases, rising incomes, and perhaps most importantly the very human want for a better place to live will mean property prices will trend up over the long term. Will there be short term, even years of flat or down markets? Sure. We have those every decade or so, and are probably overdue for one. Personally, I have a long enough time horizon that I can ride out pretty much anything, and emerge into the next boom loaded up with property.
Alex
Hi all,
Yield, As Peter and Alex have so eloquently put the reasons to you, I really should not persist, but what the heck.
My point was that you can look at any year in the last 40 and find that at the time there were very good reasons not to invest in property, however on only a couple of occassions would you have been correct, and even then only over the short term.
For example, I can imagine if this forum had existed in 1990, the doom and gloomers would have been out in force. They would have continued to say 'I told you so' right through the early '90's. Then as the mid '90's approached, anyone who popped there head up to suggest IP's would have been trodden on.
Probably by '97 0r '98 the same D&G'ers would have stated how the boat had been missed, and all who jumped on board now was guaranteed failure.
Looking back with hindsight is always easy, if property softens now, in 2 years time you will be glowing, but married to your position of how poor IP's are as an investment vehicle. Of course eventually you will be proved wrong.
However if property continues to rise for the next couple of years, your 'thoughts' will look (Bill being polite) 'silly'.
bye
Yield, As Peter and Alex have so eloquently put the reasons to you, I really should not persist, but what the heck.
My point was that you can look at any year in the last 40 and find that at the time there were very good reasons not to invest in property, however on only a couple of occassions would you have been correct, and even then only over the short term.
For example, I can imagine if this forum had existed in 1990, the doom and gloomers would have been out in force. They would have continued to say 'I told you so' right through the early '90's. Then as the mid '90's approached, anyone who popped there head up to suggest IP's would have been trodden on.
Probably by '97 0r '98 the same D&G'ers would have stated how the boat had been missed, and all who jumped on board now was guaranteed failure.
Looking back with hindsight is always easy, if property softens now, in 2 years time you will be glowing, but married to your position of how poor IP's are as an investment vehicle. Of course eventually you will be proved wrong.
However if property continues to rise for the next couple of years, your 'thoughts' will look (Bill being polite) 'silly'.
bye
And, if property flattens or even falls for a few years (and I wouldn't be surprised if that was the case) the D&Gers will have a good cackle. They will wait while the market falls, and they would expect it to keep falling. Then when the market turns (a la the mid 90s) they will say it's just a dead cat bounce, you losers. Then the new boom will begin in earnest, and once again they'll be left in the dust.
Meanwhile, those of us who have saved money, managed our LVRs, risk and cashflows would have kept buying more property all throughout the slump, and emerge from it with a big portfolio ready to catch the wave.
In a recession, yields go up, rates will likely go down, AND the growth rate will be below the long term trend. That's the BEST time to bulk up in time for the next boom. If the D&Gers aren't buying now, they won't be buying in a slump either: they'll be too busy cackling.
Alex
Meanwhile, those of us who have saved money, managed our LVRs, risk and cashflows would have kept buying more property all throughout the slump, and emerge from it with a big portfolio ready to catch the wave.
In a recession, yields go up, rates will likely go down, AND the growth rate will be below the long term trend. That's the BEST time to bulk up in time for the next boom. If the D&Gers aren't buying now, they won't be buying in a slump either: they'll be too busy cackling.
Alex
I'm not married to my position. I'll buy property again - just want the timing to be right. A recession would be good - should be a few desperate sellers to pick on during a recession. The guy on $60K with 8 properties and $2M in debt would be a good target.
It's just a bad vehicle at the moment. Without capital gain it is a dud - no earnings to support your costs. I think the probability of capital gain from now over the medium term (i.e. probability on further capital gains from the peak of the largest boom in history) is low. But the market might surprise me!
You're making a broad, generic comment from you textbook/theoretical perspective.
If you were to ask me about Melbourne, I would say that for inner Melbourne, the chances of high CG in the medium term may be less, but if you look further out you may find suburbs and properties with potential for much higher CG in the medium-term.
GSJ
gee you are tough on the textbooks!
you following what's happening in the USA? there was a debt fueled asset bubble in the USA just as we have in Australia - the cash that went into property was not from incomes, it was from debt. so the same result will happen here and there will be some great buying opportunities. I look forward to the shopping (providing I have a job)! I expect you will enjoy the shopping during that time as well because you are in this for the long term and paper losses on your existing properties don't phase you.
of course, always a chance I am wrong but you can only act on the likely probabilities based on your own best judgement.
I'm just saying that if there is a 'crash', those properties that do 'crash' may do so by different amounts, and others may not crash at all but stay flat, and, if you're a skilled property investor (like me !), you will probably be able to find properties that will even continue to rise at such a time in the future.
Surely you agree with this???
Then realise that this, for me at least, is the core skill of property investing ie. good selection.
GSJ
!), you will probably be able to find properties that will even continue to rise at such a time in the future.Surely you agree with this???
Then realise that this, for me at least, is the core skill of property investing ie. good selection.
GSJ
I'm just saying that if there is a 'crash', those properties that do 'crash' may do so by different amounts, and others may not crash at all but stay flat, and if you're a skilled property investor (like me
GSJ
true true !! and I genuinely believe you are good at picking them. something I could learn some more about!
true true !! and I genuinely believe you are good at picking them. something I could learn some more about!
Thanks, you're not as silly as I thought you were after all
.GSJ
I'm just saying that if there is a 'crash', those properties that do 'crash' may do so by different amounts, and others may not crash at all but stay flat, and, if you're a skilled property investor (like me
Surely you agree with this???
Then realise that this, for me at least, is the core skill of property investing ie. good selection.
GSJ
Picking specific properties is a relative thing - i.e. it is relative to the health of the property market overall. I think the property market overall is in some trouble so even if you pick a good one it just means you will burn less than everybody else due to your skills at property selection.
So unfortunately we still disagree on the big picture but I agree on the micro stuff. You can pick good areas relative to others and I have no doubt you are good at it.
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