Is now a good time to invest in building a new property in Adelaide?

market is definitely flattening. I dont' think the next 12mths will do aswell as the previous 12mths

I have alittle info which i was going to pm you privately KatherineM so if you are interested in hearing my little piece of info then feel free to pm me.

Stay away, the bubble will burst really badly.  Australians can`t keep paying 6 times their income for houses.

Our next investing network meeting will be about the Adelaide real estate market. Anyone who is interested is invited to come along and listen to the experts. Please email me [email protected] for details.

You guys may find VERY USEFUL to read this report:

– The right mortgage ratio should be 3 times income. 4 times is pushing it. 6 times is plain idioticly high.
– Those that can't get into the market are people who borrow up to 10 times their wages, and even buy PI's.
You're right to say they "should not be allowed in the market" .. but sad truth is they get themselves into more debt than they can afford. At the moment, we're at the point that even 2 incomes can't keep up with the house prices. That's assuming you're a dink, and don't have kids. If you have kids, you're already outpriced now, no matter if you have 1 or 2 incomes in the household. Only dinks can afford houses now, but they have locked themselves into 10% mortgages for the next 20 years.
– Who cares about last year increase of 23% ? That figure by itself should be a BIG warning to stay out of the market. Never buy in a topped off market.
– The march results don't say anything. It's median houseprices. In the end of a housing boom , the houseprices go down but medians go up, I have already explained why ( less cheap houses sell, thus the 'median' will go up, but only because less houses are sold )

1/ The relatively well priced housing in SA …
It's not well-prices. Well priced compared to what ? Compared to Sydney CBD ? Relatively well-priced SHOULD be 100.000 median houseprice, they're unproportionally higher. Those who lived in Adelaide 20 years ago will remember the 10% unemployment, and houses worth squat.
2/ The increase in rental values…
Rental values are about to drop , because a massive amount of non-sold houses will flood the market , driving rental prices down.
3/ The Defense Contracts that are flurishing in Adelaide
Economy is slowing, this means defense contracts will end soon or be cancelled.
4/ The Mining Boom in Northern SA.
In what way does a mining boom affect a city 400 km away from the mining area ? And besides, China's economy is in a BIG recession and also plunged 8% in 1 day. What happens to Australia's mining boom when China goes into a fatal recession ?

Conclusion : Don't buy any housing now, ESPECIALLY not in Adelaide.

Scamp,

With the ratios I was quoting relative serviceability calculations that the banks use to determine the affordability …. I wasnt quoting what you 'Should' borrow … naturally you should borrow less rather than more, ideally no more than 80% if you can do it.
4 times borrowing ratios are the maximum you will getfor owner occupied and for Investment/Rental properties they will allow you a relative amount more since your receiving rental payments to pay for a large part of your costs and your main household living expenses are already calculated in the owner occupied scenarios (if you have a home loan and buy a rental property). The housing prices in Australia topped off well over 2-3years ago…. and if you look at the history of Median prices in Adelaide it is the most steady of all the capital cities …. it usually doesnt take the big rises like sydney, nor the big falls either.

For you to quote poeple borrowing up to ten times their wage is absolutely ridiculous!!! 

Don't forget too … here in Australia we have a serviceability factor of up to 3% above the market rate… that didn't exist in the USA …. they could borrow just about anything with virtually no evidence and at the ridicilously understated and unrealisticly low 'Honeymoon rates'…. that's why the USA economy bust …. because when these shark lenders offerred these 3% rates to unsuspecting home owners they had absolutely no way of affording their ridiculous debt levels at doube the rate in the 'real world economy'!

Besides the biggest critic of spending in Australia is lifestyle 'personal' credit spending.
I agree with you that the maket will continue to slow but I disagree that the prices will slump like the USA … the is NOT the USA and housing loans in Australia are nothing like the loans in the USA …… you cannot fool the banks and borrow too much like in the USA….even Lo Doc loans are under close scrutiny here, and only businesses can access them … and even then they have to show evidence and statements to show their business activity, and No-Doc loans are virtually next to impossible to find.  But that still hasn't slowed the market much in Many areas … best thing to do is follow the facts …. watch the reports and figures each quarter and judge for yur self.  Facts dont lie what ever the state of the economy.

I must say I definitely would not overcommit myself in this market…. and would only buy property myself if it is under market value and repayments are comfortable.  Afterall it is a buyers market.

You did however fail to comment on the housing demand in many Australian capital cities which we will struggle to meet… and the record number of migrants over the last 12 months.

If you are going to buy property Adelaide would be one of the first regions you would consider …. a mining boom has many repercussions on the whole ecomony and infrastructures …. surely you understand these economics since you seem to know everything about everything??  Besdies the mining boom is more like 600-800 kms from Adelaide, which is irrelevant anyway.  The mining companies are set to house their Head offcies in North Adelaide.  There are many jobs created by both Defense and Mining, not just in the heart of the mining.  Pt Augusta, Pt Pirie and Whyalla are set to be the supply hubs for the mining projects.

To quote housing prices 20 years ago is ridiculous …. why dont you quote the price of bread and wages ….eg the ecomomies of scale from 20years ago also ??? It's all relative.  Houses worth squat in Adelaide were worth a bit more than squat in Sydney and so on.  Relatively low prices in Adelaide compare to therest of Australia especially Perth and Brisbane which have always thru history been very similar sized economies … Perth is still similar to Adelaide but has a much higher median price thanks to the Mining Boom there and now Perth is paying the price for the unrealistic Median prices.  Brisbane also had a mining boom and prices went up.  There is also a loto fmigration to Queensland fueling prices.  It's all relative.  Next you'll say we're headed for 19% interest rates agin from 20 years ago??? And how does a non-sold house drive down the rental values??  Dont families remain living there if they dont sell?  And not everyone has high mortgages or even a mortgage!

I agree with you … people have to enmasse stop buying houses for the prices to crash …. its all about supply and demand!!

Scamp… even you stated that the economy will recover by 2011.  Do you really think that the economy will change that much in 2.5years? Lets watch the reports ….

Having read your responses you dont actually quote anything or use any facts or even any relative common sense…. only dooms day fear tactics!!!  I will lsten gladly to your comments when you start to show evidence of your dooms day theory.  Try not to be so general in your responses .. grow some balls and lay something meaty down huh??

Hi Katherine

I have heard some fantastic snippets of advice along my investing journey.  One of them was something to the effect of:

"In 10 years time you will look back at the investment property you bought and think that it was a bargain and you should have bought more of them".

Property goes up in price.  Sure it may go up and down along the way but it will always go up, just like the share market.  Property today is worth more than it was 10 years ago.  In 10 years time it will be worth more than it is today.

I don't have a problem at all with Adelaide (I live here).  House prices in other cities may increase in value more than Adelaide or Adelaide may see better growth.  I don't know.  But GENERALLY SPEAKING, properties double in value every 7 – 10 years, whether it is in Adelaide, Sydney, Bunbury or Mt Isa.

If you can afford, get in the market.

Cheers

K

Oh Please scamp …. tightening of credit is a normal economic policy in times of an overheated economy.  We've had tighter credit for the past few years and over the past 12 months it has been more difficult to get loans with poor credit.  But that is logical right???  The Australian market is NOT like the USA market …. but yes people are spending way too much in persnal credit and expenditure …. so people do need a lifestyle wake up call.  Besides you have never been able to get personal credit (apart from Home Loans) with poor credit score.

Also, in oyur calculations on capital growth … you neglect to state that your capital investment in the property is often about $50K  and in the course of a property cycle you would double your money if you were to realise a reral growth of $100K after costs right???

Again … Scamp …. it's all relative ….. the idea is to look at ways that will grow your parcel of money … and in different times in different economies there are different measures and results from different sectors.

With people like you spreading dispear and fear … that's when and how the economy does crash!!!  Idiot!

Excellent advise. Or you could listen to the doomsayers, wait 3 years and pay 20-30% more.