- Originally posted by wealth4life.com:
Hi GMH,
I think you are right in predicting that there is worse to come for the out west in SYD, my sister in Cambeltown is packing it big time as they have a house today worth $300k (was $400k) and now there debt is $325k.
Hi Foundation,
Yes lets see what people do this year at xmas to their little Aussie or Virgin low interest rate credit card – boy aren’t you glad you have one of those little babies, Credit card debt hit a new time high of 36 billion dollars – so i predict that Aussies will hit 40 billion in credit debt by January 2007 – go Aussie go, you little beauty, but hey why not its been a hard year so at least lets have a good Christmas.
L.A Aussie,
I don’t think the smart people are buying property at the moment, I think the smart investors are waiting till after xmas possibly May/June to start buying – the people and big developers I talk to are sitting on the fence ready to pounce on another 15% drop. Are they right or wrong, well lets wait and see …
D
sounds like we need to save a bit longer for those straw hats then?
I suppose the latest (and next) rate rise will have an effect in the new year. It’s good for some!Cheers,
Marc.
[email protected]Hi LA Aussie;
Yes next year will be the turning point – or the bottom that all the gurus predicted 10 months ago … IMHO
Credit debt is the biggest problem in Australia and i believe it will hit 40 billion dollars before the end of Feb 2007
All indications show that Perth is now over the top and starting to turn, however lifestyle locations on the East Coast is still Booming … is this the baby boomers geting ready to move out ??
Well thats my prediction … let see …
D
Originally posted by L.A Aussie:Originally posted by wealth4life.com:Hi GMH,
I don’t think the smart people are buying property at the moment, I think the smart investors are waiting till after xmas possibly
Doh – joined the not too smart ranks – just put in an offer on $730k worth of property
Seriously though, I guess it depends on what you’re buying it for. This is to live in, well, for my company to live in
Perth is slowing, but in sales only at this stage it seems. Prices have become ‘negotiable’ rather than dropping like a lead balloon. I’d suspect your lower socio-economic areas will be effected first, with high level property still selling from what I can see coming across my desk.
It doesn’t matter when you buy – there are always those that say “You shouldn’t do it now”. Some of those people (that I’ve met) still don’t own a house……
Can Am that is how Sydney started.
I know I hear the top end is holding up but saw that Flemings mansion on the Georges river sold recently at a loss(7 figues) from its 2003/4 last sale price.
Also I keep hearing the same comments from clients. I put it on the market and did not get a nibble. Market is pretty dead, will try again next year / after Christmas. it is amazing how quickly people become locked into a boom price level and think somehow the market must “bounce ” back to it.
Both of these people are bleeding, so can’t hold out for ever have a feeling a lot of near new units town houses apartments will have to be cleared some time next year. Neither of these in Sydneys west both Sydney coastal
With strong retail (thats what I am hearing) and another rise next year, yep getting close.
Hi GMH
I hear what you are saying – but – like I said it depends on what you are buying for. In our case this is a long term investment – a new home.
Will prices drop? Possibly, but not guaranteed.
Did we buy at the right price? It is comfortable to us and within our budget…AND we have an exit strategy if required.Originally posted by gmh454:Can Am that is how Sydney started.
…..Flemings mansion on the Georges river sold recently at a loss……
I don’t know the Flemings place, but, am assuming that is is maybe a multi million dollar property? MY own observations have been that this area and the LOWEST prices are usually the worste effected in times of trouble. I guess when you consider pricing structure then we have bought into what may be the slightly higher than normal bracket for those with good income. Does that mean anything – no not really as people from all walks of life can get themselves into trouble. We have done this deal as a no money down deal.
Originally posted by gmh454:….. I put it on the market and did not get a nibble. ……after Christmas. …….the market must “bounce ” back ……
……and another rise next year……
A friend who is also an agent has said that some agencies are “re-evaluating” client property prices in order to execute a faster sale. WA has been very much subjected to over inflated prices and people getting into bidding wars paying more than teh asking price. The area we bought in we have been monitoring for over a year and the “right” place just never came up. One came close but got taken off the market when I started asking for permission to get shire plans for all the improvements
The one we have bought is actually 119k cheaper and conservatively valued at 40k more than we paid for it. They didn’t NEED to sell, but we made it attractive with some concessions we made to them, mainly settlement times.After Christmas…..A lot of people make this assumption about share trading too (not saying its wrong or right btw). I consider that when I am looking at making a deal then I consider if what I am presented with now is fair, and if so, do it. I have no preconceptions that if I have bought high that the market will bounce back if it falls over. My rule of thumb is – where is my stop loss – that is the only true value of anything.
Another rise….interestingly, our mortgage broker said (in the particular product we were looking at) not to lock in a fixed rate just yet, go for a variable and by the time the loan comes through the new lower fixed rate should be in place. Although yes, there seems to be a good chance, or an undercurrent of thought, that the “advertised offical rates” may go up again next year – who knows? And if anyone does know can they also tell me when they will go back down so I can decide on a 1,3 or 5 year fixed contract – LOL
Can Am sounds nice and as always the educated buyer does much better than the masses.
Good luck with it hope it all goes well
Thanks GMH
Long live the big block stato
Oh yes, 1st acquisition for the new home – 2 post hoist so I don’t have to keep crawling under the race car! – and then slip in a shed extension as well – we’ve got 2500 sqm to play with.
Cheers
Some simple mathematics here, some one please correct me here as I cannot get my head around this!
IP in our area cost for example $300K has return of $300/w minus expenses land and running cost you get about 250/week if lucky. Which is about 4.5% return on capital.
If I put the same money on my bank account I get over 6% return.
Now the big question, why would you buy IP if market is flat or growing anywhere under 1.5% ??Originally posted by wealth4life.com:Several high level friends of ours are predicting worse to come.
Low Doc home loans forclosurers are increasing at an alarming level, with one mortgage management company telling us that the only department in their group growing is the bank closure department.
Credit card debt in australia is at new levels reaching over 30 billion dollars and people aren’t paying their cards off but opting to get new ones with lower rates then max them out as well, some thing has to give here!
The Perth boom is about to go the other way with reports saying that the average house sale is now dearer than QLD who has a larger population base.
Banks are tightening their lending criteria and the valuers are getting harder on vals of residential properties.
I am interested in finding out how many people that read these threads are really positive and what you believe is a good investment to get into.
D
[strum]
Originally posted by simple:Some simple mathematics here, some one please correct me here as I cannot get my head around this!
IP in our area cost for example $300K has return of $300/w minus expenses land and running cost you get about 250/week if lucky. Which is about 4.5% return on capital.
If I put the same money on my bank account I get over 6% return.
Now the big question, why would you buy IP if market is flat or growing anywhere under 1.5% ??That is very simple maths I agree. You need to know how to crunch a few basic numbers to compare apples with apples.
Now let’s look at a real comparison between a bank deposit and a property deal on say; $30k over 5 years. Let us also say I am on a 50% marginal tax rate, and inflation is 3% per year. Property increases in value at a realistic 5% per year on average (historically it is higher).
I put $30k in to a Bank Deposit @ 6.5% per year and reinvest the interest each year. After 5 years I have this result, and keep in mind I have simplified the calculations a little:-
compounding interest =$11,102
inflation = -$1,233
tax = -$5,551
NETT GAIN = $4,318 (not including bank fees).
cash on cash return of 2.8% per year. If I did nothing and put the money in a box under my bed the result would be nearly the same.
I have applied tax and inflation at the end of 5 years, but in reality, the inflation and tax would be applied at the end of every year, so the real gain would probably be less.Now, same $30k used as deposit on $300k property mentioned –
cap growth @ 5% per year compounding
purchase costs @ 6% = $18,000 (includes mortgage insurance).
rent return @ $300 per week ($15,600 per year)
allow 20% of rent for holding costs = $12,480 nett rent per year.
interest and bank fees @ 7% per year = $21,000 (I pay 6.72%).
tax return of $5k per year (not unreasonable).Result after 5 years:-
property value = $382,884.00 (cap growth of $82,884).
plus nett rent = $62,400
plus tax return = $25,000
TOTAL RETURN = $170,284.00Now, deduct purchase costs, interest and inflation of $134,486.00
NETT RETURN = $35,798.
cash on cash return of 23.8% per year.
I have not included that I would re-invest the tax return into the property loan to reduce debt. This would improve the return even more. AND, I would not buy a property for $300k with only $300 per week rent – I can buy 2 x $150k properties @ $200 per week rent each easily, so my returns are even better.
Hope this helps.Cheers,
Marc.
[email protected]Originally posted by simple:why would you buy IP if market is flat or growing anywhere under 1.5% ??
the hope is that in the future, mortgage repayments will be the same, but rent will have increased with inflation.
eg: bought house 30 years ago for $50k. mortgage for next 30 years = $50/wk
30 yrs ago, rent was $50
20 years ago, rent was $100
10 years ago, rent was $200
today, rent is $400…..but mortgage is still $50/wk, so thats positive cashflow of $350/wkIf you put $12.5k (25% deposit on $50k house) in the bank 30 years ago, it would still only be paying $15 a week in interest
http://www.posigear.8k.com
Positive Geared Share InvestingMarc where and what type of properties are you buying for $150K with $200+pw rent. Ive found one but want to know your thoughts.
LAAussie includes a factor for capital gains which is probably the historical 2 to 5% realized in the past. It is unlikely that this can be taken as a ‘given’ especially in the short term, say 10 to 20 years. It may work in selective investments but the key word is, of course, selective. In fact, the true immediate factor is probably a negative!
His ‘simple maths’ tumble in a heap when one takes a more realistic view of capital gain possibilities.Originally posted by marsden:LAAussie includes a factor for capital gains which is probably the historical 2 to 5% realized in the past. It is unlikely that this can be taken as a ‘given’ especially in the short term, say 10 to 20 years. It may work in selective investments but the key word is, of course, selective. In fact, the true immediate factor is probably a negative!
His ‘simple maths’ tumble in a heap when one takes a more realistic view of capital gain possibilities.Hi Marsden,
The true immediate factor is not a negative (maybe for some). If you look at the AVERAGE ACROSS THE COUNTRY for property right now, you can say the market is flat, or maybe even negative, but property is always LOCAL.
The capital gains factor I included is not even the National Average – it is less. Even if the figure was as you quote – 2 to 5%, the end result still beats any bank deposit return. Do the numbers.
To be on the conservative side, I always underestimate expenses, over-estimate returns/income. It is a successful rule that I live by, and I wouldn’t quote blown up figures to ill-advise ‘simple’. The numbers I quote are easily achievable and I’ll bet that there are several other better investors than I on this forum that do even better than I illustrated.You are correct on this point I will admit; ‘selective’ refers to various local markets that are performing badly – Sydney for example.
But it can also apply to selective areas that have done well; what about Perth, Kalgoorlie, Carrum Downs, Dromana, Frankston, (to name a few) over the last 2-3 years?? These areas where I own property have ALL gone up, and are ‘selective’ in a market that has been widely reported as being flat or negative across the country.A well selected property in the area will usually outperform the local market as well.
A realistic view of any investment vehicle is always long term, and historical, as this gives you the broad picture of how an investment vehicle has performed and how it is likely to perform in the future.
If you listen to media reports, or look at inner city Sydney or inner-city Melbourne over the last 2-3 years, I would agree. But that is the view of the uneducated and unsophisticated investor (and most reporters).
‘Simple’ has taken the ‘selective’ view and I think so have you.Cheers,
Marc.
[email protected]“To be on the conservative side, I always underestimate expenses, over-estimate returns/income. It is a successful rule that I live by, and I wouldn’t quote blown up figures to ill-advise ‘simple’. “
Hello L. A . Aussie
I’m a bit puzzled. This is the second post that I have seen you say the above. The first time I just thought that you had mixed it up but now I am not sure.
Don’t you mean
I always over-estimate expenses, underestimate returns/income.
Sorry, I’m not trying to nit pick. Maybe I am missing something?
Thanks
ElkaOriginally posted by elkam:“To be on the conservative side, I always underestimate expenses, over-estimate returns/income. It is a successful rule that I live by, and I wouldn’t quote blown up figures to ill-advise ‘simple’. “
Hello L. A . Aussie
I’m a bit puzzled. This is the second post that I have seen you say the above. The first time I just thought that you had mixed it up but now I am not sure.
Don’t you mean
I always over-estimate expenses, underestimate returns/income.
Sorry, I’m not trying to nit pick. Maybe I am missing something?
Thanks
ElkaSorry everybody – this is a typo.
You are correct elkam.What I want to do is make sure I expect more expenses than I receive; I over-estimate expenses.
I also want to make sure I get more in come than I expect; I under-estimate income.
This is part of my number crunching when I am researching a property, and it ensures that I don’t encounter an unexpected short-fall of cashflow after the purchase.
Cheers,
Marc.
[email protected]I know I am a bit late coming in here re: perth property but I have to laugh at some of the theories as to why Perth is different to any other market in Australia.
In the last six months property listing have increased 300% (thats right 300%). In the last three months the average time to sell a property has increased to 65 days.
Some of the outlying suburbs of Perth have reported falls of over 10% in advertised to sale price.
Agents have stopped using the “expression of interest tag” when trying to sell a property. (Though there a still a few out there that have not faced a reality check yet).
There has been no less than an average of three main articles a week in the paper stating from the experts in the know that the property boom is over and the facts that support this.
Yes there are still agents writing articles refuting this. (Note: Agents do have a slight conflict of interest in in this area).
I believe that this does offer opportunities to those investors that are cashed up and are prepared to start offering ridiculous offers to nervous sellers.
It is quite interesting to note that in the last six months we have gone from buyers feeling nervous about missing out on a property to now sellers nervous about whether they will be able to sell their property.
Heaven forbid – There might just be something in that term called a “cycle”.
Hi perthman.
I too am in Perth and keep an eye on movements. The great thing about press is, it may not be true, but can become self fullfilling and work in our favour, ie; we can buy property cheaper. My thoughts anyway
Originally posted by perthman:average time to sell …….65 days.
I hadn’t seen that one, the Sundry Crimes
reported 30 days yesterday I think it was?Originally posted by perthman:….. falls of over 10% in advertised to sale price.
Yippee!! Now maybe I can get some of tose rejuves I’ve been missing out on because of all the bulls in the market!
Originally posted by perthman:……the experts in the know that the property boom is over and the facts that support this.
…….still agents writing articles refuting this.
Hmmm, and the experts are??? Agents, developers, property investors etc etc….none of them have a vested interest in picking up property cheaper do they?
Originally posted by perthman:I believe that this does offer opportunities to those investors that are cashed up and are prepared to start offering ridiculous offers to nervous sellers.
See “Yippee” above – LOL
Originally posted by perthman:Heaven forbid – There might just be something in that term called a “cycle”.
For sure.
Because I trade the share market as well I can’t help but draw similarities between the two. Every time the “All ords” takes a dip the doomsdayers appear. I guess the only trouble with either market is ‘the little guy’ or should I say ‘the uneducated’ are the ones that get tanked not realising that the press is most likely the least reliable source of information. If they react to every change then they just get burnt and end up spending a fortune on ‘operating costs’.
R/E or Shares – no plan – then quite likely no future.
Every investment should be assessed for its value today, and then, where do I step out. That’s BEFORE I buy it – not how much am I going to make out of this as as far as I know no-one has got their flux capacitor working yet
Originally posted by roachy:Originally posted by wealth4life.com:Several high level friends of ours are predicting worse to come.
Low Doc home loans forclosurers are increasing at an alarming level, with one mortgage management company telling us that the only department in their group growing is the bank closure department.
Credit card debt in australia is at new levels reaching over 30 billion dollars and people aren’t paying their cards off but opting to get new ones with lower rates then max them out as well, some thing has to give here!
The Perth boom is about to go the other way with reports saying that the average house sale is now dearer than QLD who has a larger population base.
Banks are tightening their lending criteria and the valuers are getting harder on vals of residential properties.
I am interested in finding out how many people that read these threads are really positive and what you believe is a good investment to get into.
D
[strum]
Hi Roachy.
This one is not solely directed at you but anyone that can tell me.
BANK FORCLOSURE DEPARTMENT – is there anywhere in Aus that you can get details on this? ie; advertised properties that are going through forclosure?
Bank valuations – nto sure what state you are in but interestingly I just had one of my properties valued to use against another purchase and it came in substantially better than I thought it would. That’s not to say its the same across the board. Interestingly, the same company undervalued it (I consider) when the ‘boom’ was about 1/3 the way through. I guess there’s that human eliment again
Positive – yep – me. Always positive as it doesn’t matter what’s happening I just follow my plan. If the market does fall then a) new or different opportunities will present themselves and b) some other part of the economic clock may be booming so its time to jump aboard that one.
Originally posted by simple:I am trying to keep a close eye on retail sales figure. I have access to sales $ of one of the upper marker fashion retailer chain ($1000 for pair of shoes).
So far market have not waken up for Christmas spending. Sales are flat.A bit of update here, as off the last week there is a steady increase of sales on daily basics (averaged data). Most of purchases are done on credit cards.
So as wealth4life.com commented “go Aussie go, you little beauty!!!â€
You must be logged in to reply to this topic. If you don't have an account, you can register here.
