Forum Replies Created
- Sorry … dunno what you’re on about there.
err.. [blush2]It was a tongue in cheek reference to this gem:
Originally posted by 1Winner:Sydney market is busted, people are going broke left right and centre, banks are cutting their losses and relocating in China and Pakistan, the current recession makes the thirties look like a picnic I am diggin out a bunker in my backyard to wheather out the bad times, stocking up on no frill food …. [baaa]
Come on people join in it is dmichie’s birthsday!!F and David – are you backing the 10% forecast interest rates?Ignoring current economic trends; I’m not interested in making specific interest rate predictions, and the latest BIS forecast is 9% in late ’06. However, I will state for the record that I expect the RBA to raise interest rates at least once more this year. That will take many home-borrowers into 7.7% territory. From there, 9% would not seem such a huge jump. Interestingly, in 21 of the last 35 years, home loan interest rates have reached 9% and above. The average during that time has been just over 10%!
Cheerio, F.[cowboy2]Your first step should have been a phonecall explaining that you were about to issue a ‘notice to fence’ (I’m assuming you have these in SA?), and asking them ‘not to take it personally, it’s just a formality for my bank / business partner’ etc. Next step get quote, attach to notice and post via registered mail. It works in Victoria.
Cheers, F.[cowboy2]… I don’t know?! I guess it’s all about the spin. See, I started off all positive:
Positive forecast for house buying bargainand ended positively:
Still, it’s very good news for serious investors with portfolio LVRs of 60% or less (although a tightening of lending criteria may well make even lower LVRs a necessity).Despite my being absolutely positive this encompasses very, very few amateur property investors and positive that a larger proportion are going to positively take a bath over the next couple of years, my positive post recieved a positive hearing!
Yay! F.[cowboy2]PS Happy birthday for yesterday! [biggrin]
[worried]I would like to buy some shares but at their current prices they are just too expensive.There are plenty of shares returning around 7% pa in dividends at the moment. Plus you have much higher liquidity than in real estate. However, as I’m still expecting the XAO to touch 3700 later in the year, now is not the time for me to be trading with borrowed money. As a hedge I am holding a geared equity managed fund. Win-win!
Cheers, F.[cowboy2]In 20 years time, anyone who buys now will probably think it was the right time.Unless house prices are 30+% overvalued in 20 years time, I don’t believe the average house purchased now will appreciate faster than inflation over the next 2 decades. However, given that many people don’t understand the difference between nominal and real values, I guess you are right. For me, any return less than inflation is a loss.
Cheers, F.[cowboy2]what do I need to look out for to signal when to buy and when not to buy?Buy residential real estate when you can afford to and when the return on your investment will be greater than the return on other investment options. The 2 measures of return on investment are yield and capital growth. Both are important.
Do not buy residential real estate when prices are falling and yields are miniscule. Do not gamble your own house and future financial stability on an over-priced, depreciating and deflating asset.
I consider 11%+ gross the absolute minimum annual yield in a flat market. I will not buy in my area (VIC) until inflation adjusted prices have fallen by at least 30%. Even then I will wait until the cycle has clearly passed its lowest point.
Cheers, F.[cowboy2]Originally posted by nkibel:With a cooling housing market and a slowing economy why would interest rates rise.
As long as the US Fed maintains it’s tightening bias, there will be pressure on Australia to also raise rates. The alternative is price inflation (particularly in oil and anything (everything?) that requires transport) as the AUD loses value and foreign investment dries up. Remember, monetary expansion (including credit) leads to inflation.
Finally housing affordability really has more to do with first home buyers. If you are buying and selling in the same market it does not really matter.Correct, price falls are good for FTBers, but they also enable single home owners to trade up / take the next step on the ladder more cheaply, and if you are a ‘Buy low / sell high’ kind of investor (me!) or a strict yield based investor you can also do well by following price trends. The only people who lose out when prices fall are speculators who have recently paid well over the odds for negatively geared properties and investors who constantly ‘withdraw equity’ during a booming market.
Cheers, F.[cowboy2]1. When $2.0m of capital compounds at 10% and an annual drawdown of $100k compounds at 7%, at what year is the “turning point”? (ie when your capital starts reducing)Jeff, surely you don’t think this is a normal situation (ie sustainable) do you?
I just checked my stats for median Melbourne house price (REIV) versus standard variable rate home loan (RBA) over the 34 years from 1971 to 2004 and found that the home loan interest rate was higher than nominal house price inflation in 15/34 years. IRs were higher than inflation adjusted HPI in 24/34 years with an average of -7% (HPI-IR).
Yeehaa. Where is the turning point in that scenario?
Cheerio, F.[cowboy2]I think it’s a good idea to reduce the interest for my PPOR, and use the equity from my PPOR.Yes, if the value of your PPOR increases you could consider ‘accessing some equity’ to buy an IP, but if house prices remain flat or fall, you’re probably better off simply repaying that PPOR loan.
Cheers, F.[cowboy2]Use that cash to reduce the non-deductible interest payments on your PPOR. Principle payment or offset account is equally effective. You’d be hard pressed to find a better return from residential property investing at this point in time (IMHO).
Cheers, F.[cowboy2]A different take from news.com.au:
US House Bubble Set to Burst“I have to tell you that some of these stories we’re hearing about residential speculation make me uncomfortable … real estate is ultimately driven by fundamental factors such as general economic growth, demographics, and household income.”Swonk said some of the factors contributing the strong housing sector are low interest rates, income growth and demographic trends.
“It’s not defying odds when mortgage rates are falling and incomes are improving,” she said. “You can have (national) balance and regional imbalances.”
Swonk said the experience in Japan — where property prices have fallen for the past 14 years — highlight the risks and show that a correction can be long and painful.
But the analysts added, “When it comes, it could be a doozie. Some simple calculations suggest a hit worth about three per cent of GDP (gross domestic product).”Cheers, F.[cowboy2]
My financial situation is excellent (plenty of cash).I’m very interested in investing in property and keen to learn how to create wealth for my life and family.Would you be satisfied with a an investment for that cash which returns a guaranteed 7% or better pa compounding daily?
I have a graph… going back to 1860 showing how property prices have grown and grown and grown and grown.…and I have a graph from Commsec showing that from 1900 to the mid 1980s house prices fluctuated around a trend of around 4 times household income. A graph showing only $ with no real-world reference is next to meaningless. Also worth noting – any VCE stats student worth their salt could make mincemeat of the ‘statistical analysis’ found on most real-estate websites, and one (to remain un-named) in particular.
Back on topic, living off equity is a fine idea. Unfortunately in the financial world very little appreciates at 5%+inflation continuously and indefinitely. If life was so certain, surely 90% of the workforce would buy a few houses and retire to live off their equity…
Cheers, F.[cowboy2]
Originally posted by kay henry:I guess if there is less supply, prices could actually go up?
I don’t think there is an issue with supply. Try monitoring a suburb in Sydney (or just about anywhere else in the country) on Realestate.com. Count the properties for sale. You’ll find that numbers of listed properties are on the increase. It’s simply the sale volumes that are down.
The increase in median sales price is more likely a reflection of the type of properties changing hands… although if the REINSW use the same dubious recording methods as their Victorian cousins I would ignore their numbers altogether.
Bear in mind that such organisations are currently between a rock and a hard place – trying to convince the RBA that the market has ‘softened’ dramatically, yet maintain Joanne Average’s belief that house prices are rising.
Cheers, F.[cowboy2]Sorry, don’t wish to buy into the current discussion – can I back up a bit?
Originally posted by nkibel:If you buy an investment property in main city in Australia and you are looking at a 5-10 year hold you wont lose.
Do you have any support for this claim? Plenty of people in the past have lost money in real estate over 5 years. Plenty have lost over 10 years. There has never been a time in Australian history when house prices have been so high in relation to rents, to wages or to long term trends. How on earth can you make such a confident prediction?
If we are suggesting that the next boon is say 5 years away, then if you can buy and hold 3 properties you will then double your money.If house prices return to their historical means over the next 5 years, then go on to double over the following ten years (with the fundamental support of increased incomes, rents & inflation), do you really believe buying now will have been the most sensible option?
Anyhow, F.[cowboy2]
Originally posted by surreyhughes19905:6.25% is a good rental return
No. It isn’t. 11% is a good rental return.
Cheers, F.[cowboy2]Of course Westpac have a very good historical basis for their caution…
Cheers, F.[cowboy]Ok, that’s a more sensible take on things. Check out http://www.morningstar.com.au for managed fund ratings.
Cheers, F.[cowboy2]
I am wanting to put $10k into a managed fund that can ideally pay for, and theoretically “cancel” out, the $30k’s monthly repayment as well as hopefully make some income that can be re-invested or go into the business.…so – you’re looking for a managed fund that will consistently return over 34%* annually over a long term. This is not realistic.
Cheers, F.[cowboy2]*based on a 7.5% business loan over 15 years
Interesting point dmichie – why are the RBA concerned about inflation at all? Why specifically do they focus on consumer prices? Is not monetary inflation in any form equally as destabilising?
I have noticed regular mention of concern over house prices in statements from the Reserve Bank, yet the market has largely ignored their concern. In the case of falling house prices will the RBA react to contain investor damage or simply say “I told you so..”?
My personal take is that they are frustrated by their role as CPI police only and will fight to curtail consumer price inflation over and above other concerns. Only time will tell.
Cheers, F.[cowboy2]
[worried]
