Hi All, FYI
I just cought the end of sky news today and they were just wrapping up a story on the housing bust that has just started in the UK. With predictions that it will hit australia early to mid 2004. So it looks as if Bill will be right on the money. Will be interesting to see what sort of panic ensues and how this will present itself in the market. Ang judging by a few of bill’s last posts it looks as if many here could already be in trouble. I’ll take your advice Bill, and get my approvals organised!Cheers. Sunshine[
]Naive question time: Unless there are a whole lot of UK investors here, why would it directly correlate that a bust in the UK = bust in AUS.
Cos in the UK (and US) interest rates are at record lows (like here), prices have been on a five year boom (like here), and there’s been an increasing amount of people taking on massive levels of debt to get into IPs (like here) (at least from some of the stuff I’ve read)
cheers
r
Cos in the UK (and US) interest rates are at record lows (like here), prices have been on a five year boom (like here), and there’s been an increasing amount of people taking on massive levels of debt to get into IPs (like here) (at least from some of the stuff I’ve read)cheers
rYup,
I keep an eye on the UK market as my folks have several properties over there.
It’ been a huge boom, just like here. I have some figures somewhere in my filing cabinet that showed in the last downturn (92ish[?]) that value fell about 30% across the board
OK – so the raionale is not so much that there is a strong direct cause and effect link but that the symptoms are the same.
hi guys
i don’t think anyone would argue that the market isn’t going to cool, we have all been saying it for ages (sunshine, long before Bill arrived in Sept)[
]. i chose not to buy in Melb in 2002 because i wrongly thought that was the top of the market[], it is the healthiest thing for the market to stop catch its breath it may take 5 years, but do you sell now that is the question, Sunshine where i disagree with your Mentor Bill is his push to sell, generally speaking you should not sell. its not the stockmarket where it is very cheap to move in and out. with property you have stamp duty, etc if you sell now you would have to hope the market had a very large downturn to get back in. The important question is where will the prices be long term, history shows that the market doubles every 10 years here in Oz. with our continual growth in immigration etc demand for housing will continue. if you sell your IP now will you be regreting it in 10 yrs time? if you can afford to keep your property/s do so. personally i have a large exposure to property so im playing it safe and reduced my holding (i have sold about 13 properties in the past 5 months, but i’m still happy to hold many others)
westanAll very well my friends but lets look at the early 90s spiraling interest rates at 17-22%sorry but the astute investor can lock in today at 6.75 or thereabouts of course those morons that brought spec of the plan in the city southbank or docklands have already done dough but lets look at the fundamentles good economy and growth since 98 to 2003 has only made up for a lack of growth in 1993 1996 averaged out growth has been steady since 1993 until 2003.Since jobs are secure im sure we all can pay our mortgages and avoid hype created by the media regarding henri kaye,lets face it he was always going to go down my 1 year old could have predicted that,good established property is always good, crap real estate is always crap,and gee arnt more people renting anyhow than buying so demand is good for rentals yes the returns arnt huge but there still going many people have made good capital growth by speccing since 1998 anyone could, not hard at all but of course those that own tons of real estate with no real plan but to hold and watch the growth may get burnt but not the smart people!!
good post westan logical and correct as an estate agent i sold for many people in 1998 who told me they were selling to get back in when it drops they dropped out similar because of hype, as an agent working 6 ks from the cbd our market is good every property is selling and really people dont you know never sell in spring simple supply and demand favors the buyer so auction clearance rates drop i checked the reults from last year and what do you know we went from selling 80% in winter last year to 60% in spring it happens every year and march april next year i will bet anyone its up again!!!!
good post westan logical and correct as an estate agent i sold for many people in 1998 who told me they were selling to get back in when it drops they dropped out similar because of hype, as an agent working 6 ks from the cbd our market is good every property is selling and really people dont you know never sell in spring simple supply and demand favors the buyer so auction clearance rates drop i checked the reults from last year and what do you know we went from selling 80% in winter last year to 60% in spring it happens every year and march april next year i will bet anyone its up again!!!!
Lynchy – see the “M” on your keyboard. Now, move two keys to the right… there. See what happens when you press it? That’s how you break up a sentence.[
]Hey chooky,
I dont know about you but i needed oxygen after trying to read that one. I think that maybe he was excited!!thanks for the contribution Lynchy
i don’t even own any property in Sydney or Melb but if i did i wouldn’t sell it. it just concerns me with all the “HYPE” about a bust that some may forget the big picture and make decisions based on this weeks emotions. Everyone should have a strategy and write it down, get it out and review it every so often.
Interesting the media HYPE (on sunshines original post)was the news described it as the beginning of a Bust what the heck does that mean ? the market has dropped slightly and they expect it to continue ? many other interpretations can be made from the same data whatever that is. another survey out recently said 1,000,000 australian plan to buy property in the next 12 months it would take a huge change in sentiment to change this.
westanExcellent posts Westan, and thankyou. I was interested to hear different thoughts on the subject as I find media manipulation of the market quite fascinating. I have taken your replies on board but would like to know your opinion on one thing. Does your buy and hold strategy also relate to negative geared property (bought well before I ever picked up a finace book, now I’m older and wiser I hope). Some capital gain but still costing $500 per month out of pocket. Better to sell for the capital gain or hold and eventually get positive property to help fund. I can afford to hold for now, but who knows what the future holds job wise. Would appreciate your thoughts. Cheers
Sunshine[]hi sunshine
yours is a tough one, $500 per month is a lot, that means if your income in the future is in doubt you may be in touble[?] worst case senario rate rises and vacancy may hurt you by the sounds, thats why cash positive is so much better because you can ride out the hard times better. i hate to give specific advice to you because i haven’t seen the property etc, all i can say is genaral statements, it may take you years for the property to make money for you as you will be going backwards by $6000 per year plus your money is tied up, but if history repeats itself and your property is double the value in 10 years where do you stand. personaly i can see why you are considering getting out and buying something not so demanding on you own finances.
hope this helps a little
regards westanHi guys,
Westan, I see what you mean about long term and looking at history. I found out the hard way with my last prop. It served it’s purpose then, (although negatively geared) but would easily be worth double now for which I sold it, about 4 years ago.
I feel that many here are focusing purely on the positive cashflow aspect, while ignoring growth in the balance. What’s your opinion on the mix of both -ve and +ve ? As in, the +ve finance the -ve and the growth creates equity to refinance as the +ve’s approach neutral? OR .. does the tax payable on the +ve mean that a far greater number of +ve’s will be required to neutralise the negative?
I had also deliberated my current house. Sell/refinance/rent out/stay put. After perusing the collective thoughts, I have ruled out 2 options. As for Bill saying to sell, it’s not quite as straight forward as that. I argued with him on site that I should realise and prove the market, stick my money in the bank and await the next opportunity. Although we agree on the downward trend predicted, I see the costs in changing properties even over time, may in fact negate most of the gain. I’m fortunate to have a full time job, so I figure that I can buy again anyway when the timing appears.
Lynchy .. maaaaate .. why do you refer to buyers as “morons”? I guess as a moralistic person, you would not have taken on such a listing as the Docklands if you had the chance, would you? There happens to be one of your so described on this forum. Perhaps you could extrapolate your thoughts to him. From your thoughts expressed so succinctly, it would appear that it was just as well that a recently departed contributor helped him get the hell out of it.
Sunshine, what a name! .. says it all. If your property isn’t growing by the equivalent to your shortfall, it’s costing you to keep it. But if you are looking long term as Westan says, don’t you think it will appreciate by more than $60,000 plus costs in 10 years?
How did you get on with your dark corners?
Kind regards, Phil
Hi Suchshine
Is that after tax or pre tax calculations. I am in a similar boat its a hard decision.
One i suppose does waht one feels is right sometimes or the financial wisdom is thrown out for peace of mind.
I guess in simple terms there is always a risk to lose your job. (
If the property is worth say 400000 now 10years 800000 cost 6000py so thats
60000 out
CG 400000doesnt look so bad its the holding thats the worry
vacancy rates
job
bad tenants
interest rates
etcI know what you are going through and most forunites are divided which doesnt make it any easier.
sell 50%
dont sell 50%regards
alf
If the property is worth say 400000 now 10years 800000 cost 6000py so thats
60000 out
CG 400000doesnt look so bad its the holding thats the worry
Except you’d have to take into account in that calculation erosion due to inflation as well.
Allan.
sunshine, without knowing any other details on the property, and therefore giving no opinion as to sell/hold etc., I hope that you are on a P&I loan, and can therefore save some $$ out of pocket by refinancing to IO.
If you are already on IO and it’s costing you $500 per month – ouch[
]Cheers
Mel
lets look at the fundamentles good economy and growth since 98 to 2003 has only made up for a lack of growth in 1993 1996 averaged out growth has been steady since 1993 until 2003.Since jobs are secure im sure we all can pay our mortgages and avoid hype created by the media regarding henri kaye,lets face it he was always going to go down my 1 year old could have predicted that,good established property is always good, crap real estate is always crap,and gee arnt more people renting anyhow than buying so demand is good for rentals yes the returns arnt huge but there still going many people have made good capital growth by speccing since 1998 anyone could,A number of things…. important factors in our economic growth were the low dollar (good for exports), low interest rates and a flat share market making property investment favourable, and lots of new housing construction (the building industry makes up a big slice of the economy).
What is the situation now? Rates are set to climb (meaning consumer spending will fall), the dollar is up, exports have fallen, new housing construction is falling. The economy will cool its heels over the next year or two.
Prices have reached a point where getting into property (whether to invest or occupy) is becoming unaffordable. Like you said, rental yields are low, there is significant oversupply, so rental demands are relatively low (vacancy rates arent exactly pretty).
The sharemarket is picking up and investors are moving their money into the next big thing. Remember the herd mentality? It was a major factor pushing up house prices. It works both ways. When people see other people leaving property, they follow.
It’s all cyclical. Like shares, property is not immune, and some will not do well out of their property investents.
Thanks everyone,
My original intention in buying the property was to hopefully make around $60,000 which would knock the last bit off my home mortgage. It is at that point now, and as I have a ‘capital gains tax loss’ to offset the 50% tax there shouldnt be much if at all to pay out. The area however has just been fully revamped by council to the tune of a new swimming pool, new movie theatre, street scaping and shopping centre. The council has renamed (remarketed) the place as the gateway to the hinterland and it is now the most affordable suburb on the gold coast…so the ‘flavour’ of the place is changing. But as a single mum I do worry about losing my job. I will post what I decide to do when I way everything up so thanks for the fugures, it put things more into perspective for me.You have a good memory westan! I did work out the painting. Went to a couple of free courses and kept asking everyone. Apparently, its not a good idea to paint on a hot or humid day here as the paint goes off fast and what was happening was the corners were drying before I had even time to roll and blend with the rest. Havnt worked out how to paint any faster, may have to do both simultaneously (!). I guess it would be easier if I had two so will have to rope someone in. On to the next room.
Thanks guys,
sunshine
]
], it is the healthiest thing for the market to stop catch its breath it may take 5 years, but do you sell now that is the question, Sunshine where i disagree with your Mentor Bill is his push to sell, generally speaking you should not sell. its not the stockmarket where it is very cheap to move in and out. with property you have stamp duty, etc if you sell now you would have to hope the market had a very large downturn to get back in. The important question is where will the prices be long term, history shows that the market doubles every 10 years here in Oz. with our continual growth in immigration etc demand for housing will continue. if you sell your IP now will you be regreting it in 10 yrs time? if you can afford to keep your property/s do so. personally i have a large exposure to property so im playing it safe and reduced my holding (i have sold about 13 properties in the past 5 months, but i’m still happy to hold many others)
]
]
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