Howdi,
I was reading a newspaper article (Herald-Sun?) yesterday about how the boom in property has priced the ‘average’ wage earner out of the market. One of the reasons given was the fact that property investors had bought up big, creating this price hike.
Do you think this is true?
Are we not trying to get the prices below market value? If we do, then how does the price explosion occur?
Are property investors likely to buy in an area of a price explosion, or is it the ‘average’ buyer who is willing to pay anything for the property they want, effectively putting the price up?
I’d like to know your thoughts.Cheers
Sooshie [
]“small steps make the journey” (SAS)
I think its fair comment to say that investors add to buying pressure which must leave to increasing prices. It does not matter if investors want under market value.
Furthermore, taking advantage of things like ‘negative gearing’ makes it easier for investors to buy their 23rd house rather than a first home buyer buying their first.
Having said that, I wonder what would happen if negative gearing was taken away? Rental housing would be on the up,up
I don’t know in some areas of the big cities it would be fair to say that early investors find undervalued areas and begin to buy. Others see whats happening and want to get in on the action and soon the prices go crazy.
However, the rural and regional price boom I would say could be almost solely driven by investors as many people would not buy PPOR in these areas in large numbers, because they are cheap and all the “bargins” have gone from the major cities.
Let’s face it who would have thought of buying in NZ or Tasmania just two years ago?
Another factor is the media. Current affair run these stories usually along the lines of in Tasmania you can get a mansion for just $100,000 located on a sparkling stream etc. Suddenly everyone thinks cheap property in Tassy and the prices go through the roof.
Another example was the Brisbane suburb of Inala. High crime, high unemployment mainly housing commission suburb. However, located just 12km from the CBD and right next to the largest new suburb built in Qld Forest Lake(large lake relaxed life style new homes etc).
Current affair did a story on the housing commission doing up the houses and selling them off. These houses just one year ago were selling for $65,000. Now they sell for $170,000. Many of those that bought in this area were from Sydney and Melbourne. Even now many Brisbanites are very wary about buying there.
So I think everyone can take the blame, PPOR’s investors and the media. I think everyone is jumping on the bandwagon. I also notice the media seem to be the main advocates of the property bust scenario. So it will be interesting to see if the “bust” occurs much sooner now the media are on the trail.
Yep I read the article too. Blaming it on investors is like someone saying ‘that person is earning more than me so it not right/correct’. Market works in supply and demand. People invest to make money. Along the way we take risks too. We will eventually see a crash. But I think most of us know it is going to happen within next 2-3 years but we still like our property investment.
Anyone remember late 90s and early 2000s in tech boom time. Buying shares without following the fundamentals. EPS was negative we still loved it. Then we know what happened.
But I still love my IPs. You could say I am mad.
ta, Paul
hi all
agree with the other posts but would like to add these thought. i notices the market start to rise in regional Victoria when it was announced that the GST was coming in, as people raced to buy before the price rise. Then prices went up as the gov’t introduced the 7k FHOG it seamed to add 7k plus to each house. These First home owners i noticed were prepared to pay very close to asking price sometimes offering asking price and not skilled in negotiating a deal. of recent it has been many inexperience property investors going like crazy to buy buy buy, pushing prices to record highs. Paul i agree with your comparison to the tech boom, those of us who went through that know the frenzie we all had (and made some great profits 400% in one week on one stock). but it turned sour for many. i don’t see a tech like bust ahead but i wouldn’t be suprised to see prices flatfor many years ahead (don’t buy only for capital gains).
westanHi there,
Your responses were awesome! Dave70, I guess the media has played a large part in directing the attention of the masses. I watched (I think it’s called) Hot Property, a program that shows the highs and lows of buying and selling, renovating and renting out properties. I may have watched snippets of a few episodes and one thing that was apparent during almost evey auction, was that people set their money ‘limit’ but in the heat of the auction they upped their limit or were easily coerced into raising their limit and offering more money.
Sometimes the house wasn’t ‘ON THE MARKET’ and people were bidding like crazy !!! The real estate agents were having a ball!
What about other programs that show renovations and DIY for the average person, doing the reno with less money? They advertise a product they use and suddenly the product you buy every week, has risen by $3, or its ‘out of stock’. Okay, it could be a coincidence []
I also think this gives the average property buyer a false sense of what’s real. I mean, 1 weekend to renovate an entire house, backyard or whatever! Beautifully edited with music, sound effects, little trick saving tips, do you get to see the stuff ups?
I mention this because (as usual from left field)
when people buy a property nowadays, maybe their expectations are higher. They want the mod cons, sleek stainless steel flashbacks, mosiac tiles in the bathroom with spa bath with 12 jets etc etc etc… I believe the expectation for the ‘new’ property buyer is to buy a house that has all the trimmings for a cheaper price… I don’t think the article mentioned the effect media has on the expectations of new buyers. [?][?][?]
On the beat up of HK on t.v tonight, one of the lady presenters, said that the ‘Boom is over and houses are on the slide’. How many people are going to dump their stock as quickly as possible? How many people are looking to find those properties that those people sold for less than market value? What is that common saying ‘someones trash is another man’s treasure’
I think one of the most important things I heard today was ‘life is a balance between needs and risks’.
The FHOG was in the first stages when I purchased my PPOR and I didn’t qualify for the FHOG because it was means tested.
I missed the tech boom and bust.
I guess it just comes down to goals and stratergies.Cheers
Sooshie []“small steps make the journey” (SAS)
I think it’s a bit simplistic just to blame property investors for the boom. But it’s not unusual for the mass media to take a simplistic approach. There are many different factors which have contributed to the boom: fhog, low interest rates, poor stock market returns, easier finance (rams, aussie, wizard etc).
As to whether there will be a bust, my view (and that’s all it is) is that some areas and sectors will certainly crash. But most areas will just see a slow down, with a slight retreat from the peak and then a flattening for 2-3 years. When will this happen – no idea! It’s possible that it’s already occurring in some sectors, but others may keep growing for another couple of years.Be careful out there.[
]Rod.
Hi Sooshie
I read a similar article in yesterday’s edition of the Australian.
The Media hype about investors creating high prices is just exactly that. Investors are such a small percentage of the overall market and I believe that they are not responsible for the increases.
Good Investors (not all investors) have their limit and will stick to it.
The Investors, and others for that matter,who let their emotions take over with the hype of the auction and up their limit because “they want the property” are crazy.
I went to an auction of a warehouse in North Melb. last week. Was interested because it could be developed into 18-20 apartments for University Students. The Agent said that it would sell for around $800K – 850K based on the $ per sq metre for the sale of land across the street.
Bidding started at $900K, was on the market at $1m and I was stunned when the hammer was knocked down at $1.35m. It was very obvious from the body language of the winning bidder that he had paid too much for the property. He actually pulled out of the bidding (which was probably his limit – $1.15m) but then went back in with enticement from the Agent. Emotion took over.
Absolutely Crazy.
Mind you the Vendor in the back corner was rubbing his hands and grinning with delight.The Bendigo Bank site in Geelong was sold yesterday for $825K. I was told the purchaser wanted it at any cost because the Bank was the Lessor. Don’t know what the reserve was but it was well below the knock down price.
It’s these sales that are giving investors a bad reputation and blame being laid on them for the increase in property prices.
I believe that we have to look beyond the hype and these sorts of silly investors who are buying on emotion and small or break even returns. They are the ones that will have a bust problem.
All of us on this forum know we can do our deals without the hype and emotion can’t we [
]Cheers
NessieHi Nessie,
I’m interested in the article you mentioned. I looked but couldn’t find it anymore. Would you happen to have URL for it??
Have a great day!
Marco
Hi
What worries me is the amt of TV renovation programs. I think the mkt is saturated with them now. How many people out there making quick turnarounds? On the Gold Coast, I know of a property in Biggera Waters – bought for $270K, el quicko and cheap reno – less than 2 months turnaround – back on the mkt for $350K. The vendors r Sydneyites trying to cash in on the current situation. I’m not saying it’s wrong and i’m not saying it’s right, but it does make me want to throw up.[!]What affect does this have on the mkt ?
Cheersi think we are seeing an incredibly unique situtaion where the australian property market has boomed for many reasons. the fact that these reason have occurred at the same time is unprecedented
– record low interest rates
– weak stockmarket
– baby boomers with excess cash
– lifestyle changes
– strong world property market
– lifestyle media programs
– diy fads (bunnings warehouses)
– get rich property seminars/gurus (hundreds of them)
– more knowledge ie savvy investors
– legislation (fhog, negative gearing)
– awakening out of the ‘job for life’ years.
– lack of job security leads to thinking of other ways to make a buck.
– the internet (information easily available)
– Harry Kaye
– Eddy Maguireok – the last one was a long shot
if investors are pushing up the market, then its because of all the above reasons that investpors have chosen to do so. all are legitimate, its just that its getting a little out of control.
cheers
Hi Guys
This is my first post. This topic gave me motivation.Investors certainly add to pricing pressure but it is only a small part of the puzzle!. If there were no tax incentives for IPs then landlords would ask for higher rents or not invest at all. This would mean either a shortage in properties available for rent or very high rents, which in turn would push some potential renters into purchasers which would have its own impact on the property market. The fundamentals of the Aust economy must be playing a large part in the price rises. Take the USA. 30 year fixed (not variable) interest rates are around 6.5%! and you get a tax deduction for your home loan and they are certainly not in a housing boom.
cheers
Hi there,
Nessie, as you mentioned, emotional buyers are who you want when you’re selling your property, not who you want bidding against you when you want to get a below or market value property.
Media hype…sometimes it works to the sellers advantage though. Whether it be property, seminars, books, cd’s etc… Leverage…
I’m always curious to know, what is their stake in the outcome for creating the hype? What’s your thoughts?
Eddie Maquire??? he’s a cutie.
Welcome LGB to PI forum. Congrats on your first post!Cheers
Sooshie []“small steps make the journey” (SAS)
Interesting thread.
One of the things I do when I buy is make sure the numbers work. I don’t speculate. So as far as me driving the market up…..I don’t think so.
I guess my question though is what is defined as a property investor ?
Anyone who owns a house …… you need to own five houses……what and who defines property investor.
There is no doubt that the market is experiencing strong growth and many people will be hurt in the future. I remember being hurt in the Share boom because I couldn’t moderate my greed gland. This time I am using my head not my heart. To buy the numbers must work. To be honest I have cashed a few properties in that has allowed me to pay down my house significantly.
This will give mea very cashed up position for the future.
So as to property investors driving the prices up I can’t argue but I can be aware of what is going on and not get caught up in the frenzy.
Only buy when the numbers work…..If they don’t work, don’t buy.
Time will heal this problem..be patient or get creative. There are always way to have cashflow in any market….find the tools and utilise them.If you have a plan with goals and only do those things that get you closer to your goal then you won’t go wrong…If you buy because things always go up and there is no plan then good luck.
Happy investing…………..
Enjoy
AD [:0)]
(Andrew)“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
Hi Guys! I’ve read with interest everyone’s ideas and I agree with everything that has been said. I do think that there are a lot of “investors” out there that are going off the deep end thinking that a property at any price is a great deal particularly if it is under 100K. I was in a rural centre a couple of weeks ago and experienced the frenzy happening in RE offices of people ringing up and as long as the property was under $100K were taking up to 12 properties. There was no negotiation, no checking where the properties were in town or anything else. If anyone out there is pushing prices up, I’d say these people have a real good chance of taking the medal. Love to hear your thoughts!
Hi all
Marco, I was waiting for a train when I read the article – someone had left behind and I did likewise, so can’t remember which page it was on.
Hi there,
Edgewise, I’ve seen this happen too and heard it on the phone. The RE agent had changed his rod for a net due to the sheer numbers of calls. His web site was 2 weeks out of date because he didn’t have time to update it, due to the frenzy.
I think AD mentioned the key as did Mini in other posts. Do the numbers and use your head not your heart.
Nessie, don’t you just love it when you find free reading on public transport. (By the way, we have to catch up)
Cheers
Sooshie []“small steps make the journey” (SAS)
I think the media is full of mischeif. Mhey talk up then talk down property markets. They make it look easy. Many people get burnt along the way and the smart and experienced and well financed ones cash in. More of the rich getting richer and the poor getting ripped off.
Great thread guys, I love it.
I agree that the rich get richer and poor stay poor, generally anyway. And it is during the bad times that the rich and well informed become much richer.
Personally I have a lot to learn from you guys. I only joined this forum recently and it has been great!
The reason for the property hikes is multifactorial, including less land available and up to 1/3 of the cost is: GST, stamp duty, tax on tax etc., council fees.
Guess who really has their snout in the through and is not likely to let go, because prop-eprty is a huge cash cow! Yes state, federal and local governments.
There are articles in the week end FIN and Age.
The whole tax system is unwieldly, complex and is impossing more and more burdens on your average citizen.
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!]What affect does this have on the mkt ?
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