Forum Replies Created
Hi All
Yip it does seem that it is near impossible to find these little gems! Sure if you spend much more effort looking in every nook and cranny then you will probably find something. These properties that you will find are the few which are being sold under market value because the vendors are probably not aware of the current state of the market or just want out fast. These often don’t last longer than a few days though.With respect to the bubble busting. It is logical that because the long term (350 years or more) trend for residential property is to yield a return below 10% and many areas have yielded more than twice that for between 6 and 8 years it is obvious that the situation is out of balance. This along with a huge amount of other anecdotal evidence which I won’t go into now requires the situation to return to the long-term trend. It is no accident that people like the Governor of the Reserve Bank, Treasurer and many others are very concerned at the moment. The situation will be brought back to equilibrium sometime soon and many predict price drops of between 20 and 30%. I feel that this is being conservative because the last 6 years have caused prices to increase by more than 100% more than the long-term trend. This may have been possible where the property industry performed below the long-term trend for many years before the boom, but sadly this is not the case in most of Australia. People only have to look back at Melbourne 10 years ago to remember the correction that the property market went through there. It was in the order of 20 to 30% as well.
The long and the short of it is that prices cannot continue to increase at this rate and in fact must decrease sometime soon to bring the much needed correction which the market requires to put it in a sustainable state. Just when this correction will occur is up for debate but I would not be surprised if it was to happen in the next 12 months. Too many factors are pointing to it now.
Hang on for a while and you will be able to get into the market. So many mommy and daddy investors are going to be burned that they will just want out. Be ready for this to happened and then buy buy buy!
Hi Johnny
My IP is managed by another Strata Manager but have also found them to be less than interested in keeping fees and costs down. They seem to encourage interaction as it obviously generates a fee everytime. On top of this they also seem to be less than helpful or experienced with regards to the intricacies of owners rights and responsibilities in a strata block. I suppose one should not expect more from them as they often have no limit to which they can run up these fees especially with regard to letters and taking phone calls etc. I don’t think that you would kind many good managers who were not out to increase revenue but please help change my mind anyone!Hi All
I believe that although there is merit in both PI and SI that people need to be very wary when either of these markets begin to “skyrocket”. Looking at a 350 year trend is far more sensible than looking at the 5 year performance of a market. Having said all of this one unmoveable principle still applies. Property values are mostly backed by a real tangible asset which can be seen, touched, felt. Share values are often a combination of real assets, goodwill, expectations, future contracts, and a lot of intangibles. This is the key differentiator and also the reason that shares are more volatile. The age old adage applies, the return is directly related to the risk. This applies to all investments. Shares offer a potentially higher risk and therefore a potentially higher return or loss.Hi Joff
I fully support some of the comments in this thread and in particular the comment that it is reckless to advise people to just get into the game. Also the comment about this being a game is not a good comment to use when speaking to young people. Investing is real and not a game, it involves real people and often people who are struggling (renters).Back to the subject of the original post. I would suggest that your sister looks at buying an IP in an area that will provide a +CF and will be more affordable. She should then (if possible) stay at home with the parents or share digs with friends as long as she can, whilst renting out the IP. This will give her the kind of start she needs into the property world as CG’s accrue over the years that she is young. When there sufficient equity in the IP, she can sell the IP and purchase in a slightly better area. There is no overnight magic to this!
There is no doubt that because this is a market, there will be corrections and we are due for one some time soon. This may to a limited extent address this affordability issue but not to any great extent. Even a 20-30% correction (which is predicted by many) will not make it that much easier for FTB’s to get into property because of the 100-200% increases in prices (depending on area) over the last 5 years. Salaries have not kept pace with these increases and this is where the affordability problem has its beginnings.
In conclusion, young people should use the opportunity to live at home with parents as long as they can to subsidise their IP. Most parents are willing to allow this to see their kids get a start. But be wiery of just getting straight into the market. As with any investment, do research and ask questions in forums like this.
Cheers
