MA: Yes I remember rates at 18%. Was also in the market holding property and struggling to keep up with payments.
What I was alluding to is that rates are on the way up and at 10% in approx 2006, investors that got in this time at 6% will struggle at 10%, just the same as I struggled when they bit me in the bum going from 11 to 18% in the early 90’s
If they go to 10% its not an issue as far as I an concerned (we’re not leveraged to the hilt this time)but it will hurt some if not many and there will be a fallout

Cheers, KP

Jaffasoft: You qualify ??? You’ve never owned a property.
Surely the first home owners grant is only for the purchase of your first ever home ?

KP

I think the point he was making was that Ian McF would have no choice but to put rates up in line with rising global interest rates.
The domestic rate has an immediate impact on the AUD.
The RBA spends a small fortune in buying or selling the currency to maintain in within a bandwidth where they feel it should be.
The RBA only has finite resources to do this with.

Rising rates are on their way.
How many property investors have experienced rates up around 10% or more?
Many have, but I am sure many also have not.
How many have factored this into their calculations ?
A -ve property gets more -ve as the rates rise, which is fine if you can hold on…but if you’re maxxed out on your cashflow and your LVR and face the prospect of increasing repayments and decreasing property values….
And don’t rely on rental increases to make up the shortfall. They currently supposedly lag the property price (property prices have increased strongly las 12-18 months but rents have not kept up)but all you have to look at is the To Let colums in the weekend paper to understand that there are HEAPS of rentals available, and thus pressure is kept on rents increasing.

I don’t think there is anything special about what Alan Kohler has written, only that it is symptomatic of what is to come.

Cheers….KP

SP,
Who are you purchasing the lease from or through ???
If its an agent, trying directing yr queries to them,, surely they shoud know…what is being sold.
Is this leasehold on property, or a business..or….or..

KP

Yes I agree, I know it did happen….anyone with a toe in the market at the time would have known it was happening. And if you sold, then the money in the bank would have confirmed that it was real.

Terry: if this correction occurs in the next two yrs, what do you think will cause it, eg rising interest rates, distreessed property holder havinbg to sell, vacant rentals, simple correction because prices have overrun the market, ?
I am really curious to know what triggers these changes.

One thing that does concern me is the social cost of all these savvy city investors targetting these regional centres, snapping up all the property with their greater buying power and creative financing methods,which in turn keeps the locals out of the buying market and forces them to be renters.

I am not against the legitimacy of it, indeed in a free market and capitalist system, this is what you are supposed to do to get ahead.
But is there a social cost to this, and a backlash coming ?

I understand this is a global phenomenon ( UK and OZ investors descending on NZ for example) and not just occuring with Aus, but what will be the fallout from all this ?

Also, what will be the effect on all these positive geared investors if interest rates rise to ~10% in 2007-07 as seems to be predicted widely ? Is this the 2 yr. window you speak of ?

Artticle in the local paoer by Alan Kohler explaining that 20% of Australias home loans have been turned into bonds and sold on the global market at yiels of 5.65 to 5.8 % He then predicts that US rates are about to rise, possibly steeply which impacts on this 20% which could lead to a housing credit squeeze and a big fall in property prices (??)
He concludes that global rates are about to go up and it is irrelevant to the Australian property market whether Australian rates go up or not, as the fate of our property market is not in our hands or in the reserve banks hands.

Time to cash up and sit on the sidelines ?

Cheers…KP

Almost forgot….
Property been on the market 9 months ????
Exclusive Agency almost certainly has expired…. maybe you can go direct to the vendor, ensure he cancels the listing in writing, and then negotiate direct…more scope for price negotiation when there isn’t an agents fee involved. By the sounds he hasn’t been doing his job anyway if its taken 9 months to sell..

I did something similar…only it was a FSBO and I was the seller… advertised the property and was inundated with enquiries from AGENTS. Offered them a part commission if they found a buyer, unfortunately, I found a buyer first.The buyer was happy as I was able to reduce the price by equiv of an agents fee. Seemed like a win/win outcome, and no agent involved…. KP

Hmmmm Sairah,
Where is the location of the apartments ? and are they new ?
Usually there is a reputable hotel/motel type management operator in place and on site (maybe 24 hrs?)and the place is run like a hotel/serviced apartment. Your rent guarantee (6.5% or 7.5% ?)typically has an escalation clause attached, (either fixed percentage or cpi) and hence in theory the property increases in value in line with the rent increase. Kinda like a commercial property where you cap up the rent rate to work out the asset value.
Usually low risk and pretty passive as an investment, but not necessarily the best for capital appreciation. Get more opinions before you make a decision…KP

Hi Leesa /Lizzy,
Well…..I am in the NW of WA, and most of the properties here are +ve geared (and plenty for sale )
I sold one end of last year for $260k with a rent of $500 pw on a 2 year lease.
There a plenty avail for sale between $200k – $250k. Rents around $350 to $400 pw.
In fact the town is a bit quiet compared to last year, but depending on next announcement (later this year) we expect a repeat of what happens (its cyclical and predictable) where there is an acute shotage of rentals available, and rents go a little crazy for 12 to 18 months.
However, having said that, most of the mining operations and especially new mining operations seem to revolve around fly in / fly out personnel, so it doesn’t necessarily flow on to spending in the local town or appreciating house prices ( except for rentals being in short supply during the construction phase)
I have heard Darwin is experiencing good demand / growth on the back of the Gas train construction to process the Bayu Undan gasfield. That should go on for over 12 months (construction phase).
The other big one in WA is Gorgan, but that is a while off and overrated as far as local towns are concerned, due to the fly in/fly out nature of it.
Anyway, if you need more detailed info….call

Cheers, KP

Cheers Derek,
I suspect it is not that easy to get issued with a CP Licence.
I started doing FInance Broking 1 & 2 last year, and the FBSB kept moving the goalposts till in the end you had to do all the units towards the Certificate in Finance Broking before you could get a licence.
But I will contact MOFT to check out the requirements regarding the CP licence.
Most properties where I am are +ve geared with high rents so there is a potential market for rental/purchase or wrapping if its legal…

Cheers, KEvin..

Hi Marisa,
Going through that very same problem now,…signed building contracts in Aug last year, and pads went down last Feb. and brick were delivered 2 weeks ago. Building is very SLOW at the moment, and the builder says that there will be an 18 delay if you sign up today…enough to send you broke…in holding cost if you are not careful.
But at the end of the day…a property zoned duplex is always better to have…
Regards…KP