I wonder if the media understands that the endless writting of negative stories about the RE market is actually discouraging foreign investment and thus helping snowball the decline of the market? On a personal level I am an expat who was all ready for my next VIC purchase with $500K in the bank set up and ready to go. Now that I am reading gloom and doom here and online http://www.theaustralian.news.com.au I am getting really torn about actually doing this.
Is it really as bad as everyone is suggesting or is the media distorting what is really going on?
I worked for a property developer from 1987 to 1990. The only good thing that happened in 1990 was that I got married. This is a walk in the park compared to 1990. I think people forget just how bad things were. The media are alsways negative. If you take a medium term view and you are after capital growth you will do very well over the next ten years. Like anything you need to be selective on where you purchase. That mainly comes down to common sense. My personal aim is to buy as much as I can over the next 3-4 years. For once we get another boom you will double your money. This is the best time in the cycle to be purchasing
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
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You go to the newspapers to analyse a property deal? And if they say it’s bad and no-one’s buying, you don’t buy either?
Not making a buy/sell recommendation here, just suggesting you look at your information sources and methodology.
You could do worse than to read Foundation’s stuff vs. the market bulls in here to actually get some meaningful information and two sides to the picture.
Hi Quiggles,
I really do believe newspapers affect the market and is one of the reasons that the less knowledgable (mom & pop investors) have left the market. Of course you can find bargains in any market and to anaylse individual bargains there is all kind of software and more targeted research readily available. (I have been reading this site for a year and its been fun reading about all the people coming over here even though we too seem to be nearing the end of our boom). I guess my point is that if you aware the world is flat, and if you want to encourage foreign investment, then you should make some attempt at self promotion. I do hear there is lots of land down under.
Well if you have read this far let me redirect the thread to an article I personally found fascinating as it captures some of what is going on here:
http://www.fortune.com/fortune/investing/articles/0,15114,1061371,00.html
Hi Nigel,
I was thinking to wait 3-4 years as then we should be in the middle of the drop and buying then. Timing is tricky. The other option is to buy commercial as there is plenty of stuff returning > 7 %. Its a little trickier researching the commercial cycle as there seems to be less written about it.Speaking as one of the ones coming over there, I’m not actually looking at california now. Over valued and overheated in most areas I’ve seen, although it’s MUCH to varied to make such a generalisation stick.
What I really meant was that you need to define what you are investing for. Cap growth? Then you’ll have to add value, generally. The boom has been running a long time and may have exhausted itself. Cashflow? Same applies.
My point? You need to be examining specific properties and deals, looking at your methods and aims. Newspapers mould opinion, sure, but are pretty lousy when it comes to facts and figures.
I’d suggest sticking to analysing individual deals, and making detailed decisions based on the individual property’s data.
You simply cannot purchase what the papers are talking about. It doesn’t exist.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
The general consensus is also important. This is where the media is important. People like dmichie love the doom and gloom stories and will go to great lengths to promote them. It helps their cause of purchasing cheaper property.
If you discard general public opinion and only focus on the individual property, you could quickly get into trouble.
An example of this is recent media stories about low lying coastal areas not being as popular as they used to be following the recent Tsunami. This will not show up in any due dilligence that did not look at public consensus.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksI didn’t read thoroughly other replies and appologise if repeating anything.
My opinion, market trend is not the most important issue, as long as you have the ability/flexibility to hold and sell. If it happens to go down alot, then just hold this one (perhaps it’s +ve cashflow property) and buy the next few at cheap prices (due to market going down). Unless, your goal is to only buy 1 or 2.
From FUN
That is the same principle behind dollar cost averaging. I think it is a sound plan for long term investors. It certainly will level out the highs and lows.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential Linksabugslife,
If reading about the state of the market depresses you, then don’t read it. People were happy to read about the boom and how their IP’s were doubling, but seem to not want a reality check in 2005- go figure.
As for me, I am happy to read everything I can get my hands on about markets and economics- I like keeping abreast of what’s happening in different states and locations- it’s good to know of general trends if we want to purchase down the track- or sell up if we think a market might be peaking. For example, the WA market is still pretty healthy- how will we know that if we duck and cover from commentary on the market?
I imagine if one was in the business of stocks and shares, one would spend a lot of time reading the financial pages instead of just hoping all was well. There is nothing to fear from hearing about markets- I think knowledge is power. And it makes for working out where might be the next best place to buy into.
kay henry
Hi Kay,
Actually I enjoy reading about the market. I must admit though that the prospect of using that knowledge is part of what excites me so there was a little disappointment for me realising how much extra effort would be required to get something that works in the declining market. Of course I could just go short some REITs [biggrin].
Bye the way – what do you think of this deal?
http://www.mel.mcgees.com.au/ Property id 24593
It is brand new and they claim a 10% return.
(Finance is a little tricky for me going this high though as I am $200K off).abugslife,
Your property deal will need a lot of due diligence.
First question, can the area support this development?
Other questions like, how many units are vacant.Is the neighbour-hood swaped this type of development?
Who’s going to lease the place?
Has any of the other units been sold?
If they have,what will these units be used as?
Are there going to be a dozen spray painters doing their thing there?
Or a dozen mechanical workshops?What kind of industry would lease the place? Mechanics, panel beaters,would it suit a small fabrication workshop(welding-fitting and turning -electrical etc?
The building does look impressive.
Not knowing much about Melbourne,I’ve no idea about cost to value.Over valued,under valued?
Good value!
Good luck,and remember to do your due diligence.bruham.
Isn’t a good thing when the media rags on the R/E market? Doesn’t mean that the prices slow down and gives you the opportunity to purchase at a lower price than if it continued to grow? Also gives you greater capital return when you do sell later. You make your profits when you buy not when you sell!!![biggrin]
Same as the share market you don’t buy at the top only when it has gone down and is heading up!SH WA
abugslife,
I strongly disagree with your REIT shorting assertion. REIT’s are not, in fact, proxies for residential real estate and with an average yield of 7% how could they be? Holdings usually include hotels, retail, infrastructure, commercial, etc. Shorting such certainly would not be the bet you intend, given you have stated above that commercial remains fair value.But an aside, prices will only slide in real terms and will stagnate nominally for at least 3 years. So shorting and options are of no value if the prices do nothing nominally. I think the way to make money in this scenario is to profit from the yield differences between RE and mortgages… I.e. RENT [biggrin]
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