OTP = off the plan
Aus Prop.
My point was that the long-term trend indicates for e.g. that the CG growth in Brisbane has been about 2% over the last 50 years. Therefore, the CG’s of 20% and higher p.a. every year for the past 8 years amounts to 144% (18% X 8yrs) higher than the long-term trend.>>All booms are always followed by a bust.<<
Housesonly, those words are too strong. They evoke pictures of the sky falling in.
Prices retracing a bit may well be a disaster for those of us who are overcommitted but it isn’t a reason to stop being interested in buying properties.
One’s strategy may perhaps have to be adjusted, that’s all.
Cashflow +ve properties and/or flips are the way to go in times like these.
Remember, no matter what happens people have to live somewhere. So if one has rental properties the sky cannot ‘fall in’.
As long as there isn’t an oversupply or a threat of a stack of new dwellings being built to compete with us (how could a new dwelling possibly compete rent wise ?) one is safe as …….. eh houses.
Pisces133
Pisces133
Pisces,
Flips would seem to be to be an extremely risky strategy in any time other than a boom. how can one be sure of making a quick profit these days? One might be lucky to break even.
The deposit bond strategy was over at least two years ago.
Is there some other way to flip? Are you speaking of land or something?
kay henry
Pisces133
I dont think that the wording is too strong.
The extent of the contraction is dependent on the extent of the boom. Nobody can argue that today is at or close to the peak of one of the biggest booms that Australia has ever seen. This should be an fair indicator to the extent of the boom and thus the extent of the bust that is required to return balance to the market.Chan$ posed the following questions to HousesOnly :
What if the property price is not downward?
What if the price is not downward at time you suggest?
what will you do from now to your prediction date?
I have disclosed my strategies, i.e. that cashflow +ve properties and flips are the way to go. so what are you going to do HousesOnly ?
HousesOnly, if you are really absolutely convinced that the sky is about ‘to fall in’ rather than playing the devil’s advocate let me too ask you a question.)
Am I right in assuming that right now
you are in the process of flogging off any property you and your family might control and putting the dollars into government bonds ?And why not as you will be able to buy them back later on for cents in the dollar if your scenario turns out to be correct.
Pisces133
>>Nobody can argue that today is at, or close to, the peak of one of the biggest booms that Australia has ever seen. This should be an fair indicator to the extent of the boom and thus the extent of the bust that is required to return balance to the market.<<
HousesOnly, I happen to be an old sharetrader and most interested in cycles. I have learned one thing if I have learned anything at all and that is that a long term trend isn’t going to reverse overnight.
Your expectation of the sky falling in is based on an assumption that there will be a retracement of considerable magnitude.
One other thing which I have learned is that I cannot, economists cannot, the Reserve Bank cannot, no-one can, predict what exactly will be the future.
One can project yes, but …………. just make sure that whatever one projects isn’t written in stone as ANYTHING can happen.
Large trends are caused by important fundamentals, the other socalled causes which reputedly move the market only do so for a short time only.
The one important fundamental which I keep returning to is the continuing influx of immigrants.
That factor alone will cause a demand and drive the market up (or at worst, sideways).
The other important economic factors are the economy and the employment. Both appear to be on the up and up.
So what large negative factors (factors which will move the market in a large manner) can you see ?
Terrorism ?
Pisces133
Sorry guys to be monopolising this topic as much as I have.
Unfortunately I need to respond to Kay’s question which asked : “Flips would seem to be to be an extremely risky strategy in any time other than a boom.” and “How can one be sure of making a quick profit these days? One might be lucky to break even.”
There aren’t any guarantees Kay. Nevertheless,
flips is the one thing which I am very keen to do at the moment. As long as one works in an area where people can afford to buy a house there will be buyers. (To me that means a price range of between $ 100 K to $ 350 K).(So the City of Sydney and immediate surrounds are out).
The comforting thought is that as long as one doesn’t overcommit one cannot come to much harm.
And if one wants to reduce the risk start thinking of working with options.
For me, building new dwellings and/or buying negative geared properties are out because I don’t really know what the future will bring.
If that sounds contradictory to what I said to housesOnly, it isn’t.
I am merely playing safe. Like many others, I expect that there will be a downturn in the prices of properties. What I don’t profess to know is how big and for how long the downturn will be.
As I don’t want to sit at home twirling my thumbs I choose what I consider safer areas for the time being.
If anyone has another viewpoint I would love to hear it.
Pisces133
HousesOnly wrote:
“8 years of 15-20% CG’s p.a. which are 10-15% above the long-term trend should mean a very large correction is required. The above translates into 160% increase in prices over this period or 120% higher than the long-term trend. In order to return to a normal CG situation, prices would need to at least halve. I dont expect price to halve though but rather expect a 20-30% downward adjustment.”
Without entering the hurly burly of this topic, I’d like HousesOnly to consider the ramifications of compounding on the (unchallenged) data presented. Even at the 15% end of the range, the CG over 8 years would be over 200%.(An unimaginable CG of 330% at the 20% end.) The correct calculation for the CG at the long term average that you quoted later of 2% would be 17.1%. So the correction you are really forewarning us about is really about 63%- from 300% down to 117%. At that rate I’m looking for a bomb shelter!HouseOnly Still sleeping / won’t be replying
Kind regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Pisces133
I dont think you read my responses correctly. I do think there will be a correction soon and I do think it will need to be a large one to return true value to the market. I do however not expect this to happen and certainly not overnight. I instead expect some areas to be more affected than others (as always) and many IP’s held by moms and dads that are not very property savvy will be feeling a lot of pain because they paid too much for their IP’s. This will drive prices of these IP’s down quite a fair bit but not overnight. I expect the downturn to actually last well into 2007 and not 2005 as other predict. Although a 50-60% drop in prices is needed to return the market to equilibrium this will probably not happen and I expect a 30% drop over the next 4 years and no sky falling in.To answer another question you asked. No I am not selling all my IP’s so that I can buy them back at 30% discount. Good IP is hard to find and selling the good ones I have now would take many years to replace. I am in it for the long run.
I believe in buying for CG and at a price as close to neutrally geared as possible. Thus I will still buy –ve IP if I think it will grow and that the rent will grow. Besides, there is very little choice but to by –ve if you want CG in the long term. Over time these IP’s become +ve anyway. My approach is to aim for these IP’s to turn +ve in 5 years. This means that I am limited in how many I can buy but this suits me.
In response to your statement that there is a large influx of immigrants. The government allow 65000 skilled immigrants into the country every year in their immigration program out of a total of about 110000. These immigrants represent about 0.55% of the total population. This is not a large enough number to affect anything. To add to this the birth rate in Aus. is declining which offsets this 0.55% influx of immigrants to some extent.
Terrorism is a huge factor and was the direct cause of the stock market crash in 2001. This luckily affected the property market in a positive manner. It is just a matter of time before the next attack and its nature will determine how property is affected.
One major factor that will affect the property market is a stable/unstable share market. If it remains stable for 10+ years people will move back into shares and managed funds to support their retirement. This will reduce demand for IP.
HousesOnly, I am still thinking about your statement
“All booms are always followed by a bust’The problem with the above statement is that it implies that there MUST be a bust.
I am not saying that there won’t be a bust or that there cannot be a bust.
My point is that by being so emphatic one will create the mindset in oneself that it MUST happen.
I don’t know whether you understand what I am trying to say there. I think it is very important to be flexible and that can only come from projecting rather than from predicting.
By being locked into a mindset that a particular event MUST come about one will be left flatfooted whilst the market takes off again.
As far as calling a 0.5% increase in population (because of immigration influx) as insignificant is concerned, think about what the vacancy factor is.
If the vacancy factor is say 2%, the moment the number of vacant properties go down by 25% there will be a big scramble (and the situation will be even worse the following year and so on).
As a consequence of higher demand and lesser supply the rents will increase, some tenants will therefore buy a house and as a consequence of that house prices will increase (a vicious circle, feeding on itself).
(BTW, I don’t know what exactly the vacancy factor is but for the point of this discussion it isn’t important. The worse that can happen is that it may take a little bit longer before the house prices take off again).
Pisces133
<<post edited>>
You have been asked not to post in this manner which is sacastic and offers no constructive criticism. This kind of negative post offers nothing to the community. -Admin
Sounds like you want to use people to get rich any way you can.
Does load the price up mean charge struggling people top dollar for your house, as they can`t get one through the normal means?.
As soon as they have some hardship in making the payments will you take a look at the value of the property and adjust your kicking method when you “boot” them out the door?.[V]quote:
Originally posted by HousesOnlyKay
Always consider the long-term trend currently which indicates that almost every property for sale today is overvalued by about 100-150%!Hey Guys
If a property was overvalued by 100% wouldn’t that mean it should be free, or at 150% the seller should pay me to take it off their hands?
Hmm, sounds like a plan!! I might just suggest it next time I make an offer.PS I hope my agent doesn’t get too upset[
]Mick INC[
]Hi all,
With reagrds to the immigrants, I don’t think this is the main factor driving the prop market. (I read somewhere that most of them rent which may affect the vacancy rates and thus props but I thhink it is minor) At the moment it is the baby boomers who are driving this property market, and anything driven by this group of people will make the market go higher and further than predicted by most.
I was thinking that the prop market was hot in 02 but it kept going. Most of these boomers pushed the massive bull market in shares up until the turn of the century. Now they have all started to move into the prop market so a long run of CG may be expected.
This extended push may lead to a bigger drop in prices than the past. (The past has generally seen around a 10% drop follwed by no to little CG over a good number of years) Most people who enter the prop market enter as better buy and holders than the stock market hence past prices tend not to drop as much but tend to flatten for a good number of years. ( A slow decline thanks to inflation.)
The speed of this decline will propbably have a lot to do with employment and interest rates but that’s another story.
Personally I’ll be waiting for everyone to be talking about the stockmarket so that I can get out and enter the prop market, whenever that is.
Josh
One thing for certain is that no one knows the future. I have seen in my local area a lot of new realestate agents poping up, this leads to fewer listings in each agency. The market will correct these factors. I find that I am in a strong position to negotiate, even commission. I have just sold one of my IP and have already seen a drop in price since selling. I am now looking out for bargains as they have started to appear. What is a bargain is the question! No doubt people who are in too deep, in wraps, will take losses and create bargains. It is a win-lose but such is life. get greedy and end up losing! Now is the time to keep ones eyes open!
Monkeybam, why do you keep suggesting that people will have got in too deep with Wraps? Are you saying that they won’t have found buyers? That’s the only thing I can see that would cause them some stress…
Cheers
MelHi Monkeybam,
The other option Wrappers have is, that if they cant find anyone to wrap the property to… They can always rent it out.
Cheers,
s.i.s
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