Its seems to me that property investment is at its worst point in 5 to 6years. I beleive that property price are way to high right now to start accumulating and to be holding property right now is a great risk. Interest rates look like moving next time the board meets and price are just out of wack with current living standards. I feel the market has a major correction to go thru, before property investment will take off again. the next year or so will sort the men out from the boys, what are peoples thoughts?
Johhnnie
Should you not be concentrating on the next election!
I tend to agree. I just sold a property that was costing me too much on a monthly basis as I do not expect much growth over the next 3-5 yrs.
Now I am at the stage where all costs are covered by the rents ie (neutrel).
I expect we are in a cycle where interest rates will rise. The first rate to happen shortly after the next election.
I also remember when property did not rise for a good length of time. So I expect the same as you.
I also reckon it will sort out the men/women from the boys/girls.
I am looking forward to the next 2-3 yrs. As a long term investor, now is the time to cash up and consolidate.
Hi john and yack
you may well be right. But remember that property investing is very expensive to move in and out of (unlike shares) which will mean that you are better to ride through the down period as by the time you sell and buy back again you maybe out of pocket, not to mention paying tax. You maybe aware that the market in the larger cities moves through cycles and i suppose sometimes we have to say where will prices be in 5 or 10 years time.
One concept mentioned on this forum is positive cash flow properties, these are ones that put money in your pocket at the end of the week. Sure interest rate rises will hurt the bottom line but hopefully not turn it into a negative geared property. I certainly wouldn’t like to own 30 negative geared properties at the moment.
Regarding interest rates i don’t believe that the rate increase will be that much (but i’ve locked a few in at fixed rates), look at what rates you can get for 5 year fixed loans , obviously the banks don’t expect any dramatic hike in rates no matter what there rhetoric.regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
Hi guys,
Its seems to me that property investment is at its worst point in 5 to 6years. I beleive that property price are way to high right now to start accumulating and to be holding property right now is a great risk.This is a broad generalisation, not every country, city, or suburb will move at the same rate or within the same timeframe. I still maintain there is a bargain in every market.
Regarding interest rates, comparing the 90 day bill rate and the 10 year bond rate will give you some indication of what will happen to interest rates in the long term. It is a good idea to have a mix of floating and fixed mortgage rates.
Cheers
JeffWell, hello mr howard… always nice to see you [axe] Just want to make a few replies to some points you’ve made. I’m hopeless at quoting and using different colours though
You said:
“Its seems to me that property investment is at its worst point in 5 to 6years.”Well, yes, if you are looking at it from an owner’s point of view. Prices have cooled somewheat from peak times, auctions are deader, it takes doubly as long to sell a place etc etc. But conversely, we could say that property investment is at its best point for buyers.
You said:
“I beleive that property price are way to high right now to start accumulating and to be holding property right now is a great risk.”In my reading, this almost contradicts what you have said above. I see prices as cooling (but probably with a way to fall before 1st home buyers have an opportunity to buy). Yes, they are still high though- but that is good for thoseof us who own them, right? I agree with you that to accumulate at high prices is risky, but I see prices as cooling- and falling in some places. Indeed, this is borne out by media articles (check today’s article on smh.com.au re this)
You said:
“Interest rates look like moving next time the board meets and price are just out of wack with current living standards.”All my reading suggests that IR’s will NOT rise at next board meeting. The above article also reflects this. RE has slowed- not just prices, but spending on RE, so the slower spending will means IR’s will stay on hold.
Re prices being out of whack with living standards.. sure, prices of RE and wages are not in sync. But if prices reduce, it becomes an opportunity for investors to buy, ensuring RE remains a viable investment because the market will still have activity- from investors and first home buyers.
You said:
“I feel the market has a major correction to go thru, before property investment will take off again. the next year or so will sort the men out from the boys, what are peoples thoughts?”I agree the market probably still has some correction phase left to go. Much analysis though, suggests a broader cooling, rather than a steep decline. This to me, is a holding phase. If property continued to have huge CG’s, then we would not be able to purchase more. CG was needed to purchase – using equity or selling- and now, we accumulate during the “correction” phase, and have it almost paid off for the next phase, where we can again have the benefits of CG and equity.
Re the men from the boys… [hmm] I know it’s just a turn of phrase, but you might want to read the latest edition of API. The cover/feature article is about women investors in RE.
kay henry
Hi
Where do you find the 90 day bill rate and 10 year bond rate. Are they really good sound indicators? in regards
to IR.cheers
alfAlf,
They’re educated guesses
Bad time to be investing in property – well if you’ve had your head in the sand for the last five years through one of the largest booms in property in Australia it probably is. But then isn’t it ALWAYS a bad time to invest for these people?
But if you’re in the market, there’s little reason to totally exit.
It’s a good time to reorganise the portfolio, get rid of any poor performancers to reduce LVRs & begin financial positioning and looking for bargains.
A bad time to START property investing – well maybe. But it’s an inefficient market & there are plenty of niche opportunities
It all depends on your ability to identify them.
Every time is a good time if you can work out what it’s good for.
Cheers,
Aceyducey
Someone forgot to tell WA that the property market is cooling. (maybe it really does stand for Wait Awhile)
Prices have slowed down but have not retreated, and according to 3 agents I have spoken to, there is an acute shortage of listings….40% below average…
So far its business as usual….maybe our crash comes later…KP
Hey all
In regards to WA housing market still looking OK and having a shortage of houses on the market, well I would agree. May have something to do with stamp duty reduction here for first home buyers introduce on 01 Jul.
Another note to all, keep an eye on rockingham WA, I’m expecting big things to happen here. Major infrastructure planned. Just watch this space!!!!! Things looking great in my corner of the country. No doom and gloom to be seen here!!
Mick
I say that investing is at its worst point in 5 to 6 years because, as ppl have pointed out property has not retreated and is still very costly to accumalate. Key Henery said “Well, yes, if you are looking at it from an owner’s point of view. Prices have cooled somewheat from peak times, auctions are deader, it takes doubly as long to sell a place etc etc. But conversely, we could say that property investment is at its best point for buyers”. Sure prices have cooled but as a whole the market is still way over valued. A bargin today in my opion will be a house that you have paid to way to much for. Its in my opion that one interest rate rise will see the market go into melt down. Remember guys you make your money buying not selling. Also replying to wester when you said this. “you may well be right. But remember that property investing is very expensive to move in and out of (unlike shares) which will mean that you are better to ride through the down period as by the time you sell and buy back again you maybe out of pocket, not to mention paying tax”. To me that is crazy talk. Number 1 rule, trust yourself, if you think there is going to be a major down turn, dont ride it out, act on it, the last thing you want is to be holding a liability that is going backwards that you are unable get rid off. Its all about choices, set your self for the next buying oppertunities, Cash will be king for the next 2 to 3 year. It will be hard to borrow of previous properties equity as property prices fall.
Originally posted by john howard:Its in my opion that one interest rate rise will see the market go into melt down.
Ahhh – another Doom Sayer.
I love you guys – you make me so much money! [biggrin]
Cheers,
Aceyducey
Hi all
John
let me explain why often it is better to ride the ups and downs.
say you bought a home 5 years ago for 125k today you can sell if for $250K. Lets look at the cost to dispose of this asset.
selling cost Legal $1,000
agents selling commission $8,000 (guess)
so let say $9,000 to sell.
then you need to pay tax on $125k. No mattter what tax bracket you are in most of this will be taxed at 47% (on 50% of the CG) so 47% of $62,500 is about $29K. Total so far $38K.
Now you have to buy back in lets say the market drops 10% from now (i ‘m not saying it will, infact it may not drop at all !).
So let say the market drops 10% you buy a home for $225K, you have some costs associated here these include Legal $1K and stamp duty (in Victoria) about $9K. Plus loan costs,
lets say total $10K.
So far the costs have added up to $38K plus $10K total $48K. Even without any CGT it is still about $20,000
hope this helps to explain my point.regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
weston. As you said there might be a 10% drop in houses if the market does go bust, But as i work off a cycle of 7 years, your house in 5 years time in my opinon might only be worth the same as todays rates, no to take other thing into account for eg inflation and so forth you are stuck with a property that is worth 250k in 2009 which in real dollar turms in 2009 might only be 230k. To sit on your hands and do nothing you are asking for trouble. Its not the money you havent lost but the money you havent made.
Originally posted by Aceyducey:Quote:Originally posted by john howard:Its in my opion that one interest rate rise will see the market go into melt down.
Ahhh – another Doom Sayer.
I love you guys – you make me so much money! [biggrin]
Cheers,
Aceyducey
wait for the 20% correction to happen, you wont be making to much money then
Originally posted by john howard:wait for the 20% correction to happen, you wont be making to much money thenActually it will make no difference to my cash position at all.
But it will provide me, and other experienced investors, with a number of purchasing opportunities.
So please talk down the market.
Cheers,
Aceyducey
Hi,[biggrin]
could I follow up on Aceyducey’s comment —
Actually it will make no difference to my cash position at all.But it will provide me, and other experienced investors, with a number of purchasing opportunities.[specool]
For us less experienced investors, how about throwing some light on your comments.[confused2] Hoping to hear from you.
Regards,
HelenHelen,
Nothing sophisticated.
Finance is easily available. If prices fall as ‘John Howard’ is saying (and mark you I don’t expect that type of across the board fall in prices) then that will encourage a great number of people to exit the market taking their profits of the last 3-4 years.
This creates buying opportunities for those of us who are positioned correctly financially.
If you’re investing for the long term, buying & holding properties that are at minimum cash flow neutral, have good prospects for income & capital growth & effectively cost you nothing to hold for 10+ years, well it’s a no-brainer. Buy as many as you can find
Right now generally I recommend considering assets other than residential property in Australia for better returns in a 3-5 year outlook – however it still really depends on where you buy, the potential for improvements or usage modifications and your specific goals.
The Australian property market certainly isn’t uniformly negative – we looked at one cash flow slightly positive property in a good location within 10km of the CBD of a major metro with some reno potential today….they are still out there if you get down on the ground & look around
Cheers,
Aceyducey
Thanks Aceyducey.[biggrin]
Wished I had your expertise[blush2]
Regards,
HelenOriginally posted by elika7264:Thanks Aceyducey.[biggrin]
Wished I had your expertise[blush2]
Regards,
HelenHelen,
It just takes time in the market & research. We all start at the same point, it’s just an accident of time as to who becomes more experienced earlier.
There are plenty of more experienced people on this forum & others and plenty of other great resources available for investors.
The trick is working out which are the good ones for you [biggrin]
Cheers,
Aceyducey
Nothing sophisticated.
Finance is easily available. If prices fall as ‘John Howard’ is saying (and mark you I don’t expect that type of across the board fall in prices) then that will encourage a great number of people to exit the market taking their profits of the last 3-4 years.
This is crazy talk acey!!!! You are talking about current conditions, wait untill the recorection, banks wont be handing money out like they have for the last 5 years. Banks will be revaluing properties and the ppl who are to highly geared will be asked to show moreequity and if you think im talking B.S then just go back to the late 80s and see how many banks were doing this. Revaluation will kill alot of australian investors in the next couple of years
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