Why would anyone buy in the current market?

[Weasil007]

Hi Guys n Gals,

With the recent (last couple of years) general market declines and near future price rises unlikely (I'm talking about real gains not a 0.2 percentage rise an a month only to see if fall the following month) why would you purchase residential property at the moment? I mean if the market is flat (if not a further slide backward over say the next year or two), why not wait? If all future buyers held off purchasing our already stressed market would be further distressed hence a cheaper entry point for future investors. I'm curious as to why any potential investor would buy now if there is any chance of a further deteriorating market, hence a cheaper entry point. Thanks.

 

[spludgey]

Down, down, prices are down!

Prices are down, so are interest rates and rents are up. I can hardly think of a better time to buy!

 

[Marty McDonald]

Because they dont believe the market will be flat. It is ceratinly heating up in some parts of Sydney.

BIS sharpnel are predicting 21% growth for Sydney over next 3 years. Not saying they are right but it is not universal that prices will be flat / decline in real terms as you suggest.

You are not trolling are you?

 

[Ausprop]

future price rises are far from unlikely?? returns on property are really looking good, no new supply, population growth, economy taking off, rest of world recovering, funny money supply increasing, rates dropping. sure beats sticking it in a term deposit and accepting a reduced interest rate every time it matures

 

[Angel13]

Because they dont believe the market will be flat. It is ceratinly heating up in some parts of Sydney.

BIS sharpnel are predicting 21% growth for Sydney over next 3 years. Not saying they are right but it is not universal that prices will be flat / decline in real terms as you suggest.

You are not trolling are you?

21% wow do they say anything about Canberra?

 

[Weasil007]

Down, down, prices are down!

Prices are down, so are interest rates and rents are up. I can hardly think of a better time to buy!

Prices are down as are rates, the question is do you buy now or wait until it is cheaper still at lower prices and lower rates. Why buy now?

 

[sanj]

Hi Guys n Gals,

With the recent (last couple of years) general market declines and near future price rises unlikely (I'm talking about real gains not a 0.2 percentage rise an a month only to see if fall the following month) why would you purchase residential property at the moment? I mean if the market is flat (if not a further slide backward over say the next year or two), why not wait? If all future buyers held off purchasing our already stressed market would be further distressed hence a cheaper entry point for future investors. I'm curious as to why any potential investor would buy now if there is any chance of a further deteriorating market, hence a cheaper entry point. Thanks.

Depends on which market you're talking about, and even then what areas and types of properties within that market.

Ive been buying throughout the downturn in Perth these last 3 or 4 years and have also seen some really good growth for certain properties.

For example, in the small pocket of Bedford bordering Inglewood, retain and subdivide sites went for as low as $540k in 2008, you would struggle to find one under $720k at the moment with most fetching above $750k

This is despite Perth as a whole not having much growth.

Beware of broad stats like Australian prices fell 5%, they more or less mean nothing.

 

[devank]

funny money supply increasing

What do you mean by that?

Prices are down as are rates, the question is do you buy now or wait until it is cheaper still at lower prices and lower rates. Why buy now?

How do you know when to stop waiting? Unless you know something we don't, it is impossible to pick the 6 O'Clock rock bottom.

 

[Weasil007]

Because they dont believe the market will be flat. It is ceratinly heating up in some parts of Sydney.

BIS sharpnel are predicting 21% growth for Sydney over next 3 years. Not saying they are right but it is not universal that prices will be flat / decline in real terms as you suggest.

You are not trolling are you?

From what I have read BIS are far from an accurate gauge of future market activity. I realise markets differ between states and areas within states but my general question was why buy now if there is a chance of further declines. I'm in QLD and cannot see any real price gains in my area soon (given the economic uncertainty, budget blowout due to lost revenue, forced redundancies, further expected bank rate cuts and banks provisioning for further losses and direct anecdotal evidence of families on struggle street meeting repayments). I have money to invest but do not believe now is the time to step in, hence my original query.

 

[Ausprop]

What do you mean by that?

I understand the mass printing of money globally will inflate assets and commodities.

 

[hysterical]

I'm in QLD and cannot see any real price gains in my area soon (given the economic uncertainty, budget blowout due to lost revenue, forced redundancies, further expected bank rate cuts and banks provisioning for further losses and direct anecdotal evidence of families on struggle street meeting repayments). I have money to invest but do not believe now is the time to step in, hence my original query.

Invest outside your area then..

 

[Dan_p]

I understand the mass printing of money globally will inflate assets and commodities.

and escalated after the carbon tax floods through the economy

 

[Dan_p]

Everything is getting more expensive. Repeat everything. Begs the question, why not property?

 

[Graemsay]

I could think of a few scenarios where it would make sense to buy in the current market:

• Prices aren't significantly down from the peak, so someone who is downsizing will get a larger windfall trading their old house for a smaller one.
• The top end appears to have softened much more than the bottom end. A buyer might get a bargain compared to a few years back.
• A family might desperately need more space. For example, I've got friends who have three small children in a two bedroom house.

I'd be interested in knowing what BIS Shrapnel's basis is for claiming house prices are going to rise by an annual 7% over the next three years.

If Martin Wolf is right about the commodity boom blowing over then the economy is going to slow, and I can't see what is likely to drive rises at twice the rate of inflation or wage growth in that scenario.

 

[spludgey]

Prices are down as are rates, the question is do you buy now or wait until it is cheaper still at lower prices and lower rates. Why buy now?

My crystal ball tells me that rents aren't going to go down and that interest rates probably aren't coming up in the near future. It's very hazy on prices however.

 

[matto_]

buy when people are fearful, sell when people are greedy.

The OP post sounds quite fearful..............

and you are never going to pick the bottom.

 

[VYBerlinaV8]

21% wow do they say anything about Canberra?

Canberra's running a few years behind.

The issue with Canberra is that residential building has slowed down, and this will put upward price pressure on existing stock (especially considering the cost of a new build here). But while the govt keep cutting spending, Canberra will stagnate. The pressure builds, though, and eventually there will be good growth.

In the meeantime, rents are doing well.

 

[brisbane 04]

Just my thoughts I think its a great time to buy well postioned property in stable areas. I have never seen conditions like this in my 20 years of investing. Being able to buy in areas that are as safe as can be, and receive rent that covers your loan and associated costs sounds good to me. Sure the capital growth isnt here at the moment but who knows what the future holds. As long as it doesnt cost me money right here right now. I invest in Bendigo at present and I remember when I started out it was all about negative gearing. I bought properties when interest rates were high, rents were ordinary and banks refused me further loans due to servacibilty. At the time property values were stagnant in Bendigo for at least 7 years. Then we had the boom. So yes I think now is the time to buy.

 

[westminster]

Hi Guys n Gals,

With the recent (last couple of years) general market declines and near future price rises unlikely (I'm talking about real gains not a 0.2 percentage rise an a month only to see if fall the following month) why would you purchase residential property at the moment? I mean if the market is flat (if not a further slide backward over say the next year or two), why not wait? If all future buyers held off purchasing our already stressed market would be further distressed hence a cheaper entry point for future investors. I'm curious as to why any potential investor would buy now if there is any chance of a further deteriorating market, hence a cheaper entry point. Thanks.

I bought because I found a property which stacked up financially and was also unique. The property had been for sale for a year and price had been adjusted by 10%

Could the suburb drop more? Yes it could but there is one block for sale that is this size in the past 5 years. There are no more blocks like it in the suburb - I have the last one. I'm going to build 4 houses on it.

If I was buying a vanilla established house then my answer might be different but uniqueness has its only value.

 

[Weasil007]

Beware of broad stats like Australian prices fell 5%, they more or less mean nothing.

Hmm..I should think that a broad based statistic would be a consideration before any investment of capital. I mean if it is only a 5% price fall on average this means nothing..what about a 10% fall, should I also dismiss this? Is a 20% fall just statistical noise? Where should I draw the line and actually have some cause for worry under this method of judgement in respect to my capital allocation. If I had a share portfolio fall 5% in value would this be nothing to be concerned about? Why is a property different to other investment classes?