http://www.propertyupdate.com.au/articles/594/1/Terrible-advice-you-should-ignore/Page1.html
I just read this.
Its really hit home.
As a person who has used Metropole before during the years we lived and worked overseas (and who was very happy with their ability to select good properties and their modus operandi):
1. Melbourne (or "inner city blue chip") is arguably MEGA over priced.
2. We are talking close to 3% even net yields on this stuff now or LESS.
3. Sure, take advantage of negative gearing for your first or second, but after you have some equity its a stupid strategy. On that basis, you're needing 4% CG just to break even. Assuming you get that "7 - 10%" rule (which has resulted in massive yield compression over the last 10 years) you're talking 3 - 6% returns. Downside say may be a few years of -5% to +3% growth, resulting in total LOSS of 1% - 9% (simplistic non-compounding).
4. Its all about emotion. The newsletter posted above shows that. Commercial property. Shares. Outer ring or rural high yield. Pretty much any asset class is more attractive now than Melb metro. Die hards are beating the "its safe" gong, give up 5% - 10% additional returns from another asset class for the "safety". The scares the crap out of me.
Thoughts / comments????
I just read this.
Its really hit home.
As a person who has used Metropole before during the years we lived and worked overseas (and who was very happy with their ability to select good properties and their modus operandi):
1. Melbourne (or "inner city blue chip") is arguably MEGA over priced.
2. We are talking close to 3% even net yields on this stuff now or LESS.
3. Sure, take advantage of negative gearing for your first or second, but after you have some equity its a stupid strategy. On that basis, you're needing 4% CG just to break even. Assuming you get that "7 - 10%" rule (which has resulted in massive yield compression over the last 10 years) you're talking 3 - 6% returns. Downside say may be a few years of -5% to +3% growth, resulting in total LOSS of 1% - 9% (simplistic non-compounding).
4. Its all about emotion. The newsletter posted above shows that. Commercial property. Shares. Outer ring or rural high yield. Pretty much any asset class is more attractive now than Melb metro. Die hards are beating the "its safe" gong, give up 5% - 10% additional returns from another asset class for the "safety". The scares the crap out of me.
Thoughts / comments????
