- devo76 wrote:NOTE TO ALL PEOPLE READING THIS
Scamp wants to buy into the Australian market and therefore is trying his hardest to drive the market down so he can buy in cheaper. He has stated this on many forums. If this is not bottom feeding i dont know what is.Much of what he says is true but a lot of it is what he personally wants to happen.
Sure scamp is a bit extreme in his views, or at least in how he phrases them, but i think he is right on the basic principles. The economy is in the very beginning of what appears to be a long and painful economic crisis. commodities are plummeting, that means that the mining sector is going to take a huge hit. that means that nat’s husband–who apparently is in the mining industry–faces a real risk of unemployment or at least reduced employment.
the housing market has not tanked yet but that is primarily because there is no volume–buyers and sellers remain a long ways apart. we are getting more and more unsold inventory as buyers are (understandably) reluctant to reduce prices.
in this kind of market, with that kind of risk, i think she should bite the bullet and mark the house down significantly in order to ensure a speedy sale. i am sure that a 10% discount over comparative houses on the market would see real interest generated.
A quick sale is definitely the way to go. prices are dropping, so if you dawdle you may have to drop it even more later. and add to that the fact that you are already losing thousands/month anyway… it seems to me that half a bird in hand is better than 3/4 of a bird in the bush…
Devo,
You state that prices are falling, the house in question is located in Perth. Perth has some suburbs that are falling, some that have fallen but have started to turn around, some that are pretty flat and others that have continued to increase (although at a decreased rate) during this whole cycle. I think its imposible to make an acrose the board recommendation without considering all the other factors for this one particular house.
Scamp wrote:Wake up , there's a global market crisis which WILL affect Australia and which WILL cause a housing crash in Australia and which WILL cause massive unemployment. There's no doubt about it , just blind people choosing to put their heads in the sand and hope it all goes away.We're talking DEPRESSION here, not recession. Just google 1930's depression to get a hint of what's coming your way.
The DotCom recession is PEANUTS compared to this HUGE MONSTER OF A DEPRESSION.
Please put that in your head, recession + depression is coming to your doorstep.You will lose your job… so get out of debt before you are put on the streets. If you need explanations on what a recession is , please google it.
This is the worse case scenario and a bit early to call. While it is a possibility, AUS is in a good position at the moment compared to other countries.However I would not be holding your breath if you are waiting for housing prices to rise.
Macnatt
I dont think you need to worry about selling your house for 250k just yet. However, welcome to the realality of your current investments. Top end market property is not the place to start, to much to loose if things go wrong." My feeling is maybe we should cut our losses and offload this property as it is beoming a financial drain and we are starting to feel as though we are funding the lifestyle of our tenants."
What, as opposed to the tenant funding your lifestyle. Mate, you wanted to be the land lord and now your begruging the tenant of there enjoyment of the property just because your not getting rich as fast as you thourght you would.
You know you are loosing money, " I originally subscribed to the buy and hold strategy but surely there comes a time to cut losses."
If you could not afford to hold, why did you buy. What went wrong with your "original strategy". In my opinion far too many people (investers) have been driven by the faulce beleif that they will make a shit load of money when they sell. Now, quiet a few of them feel that potentual buyers should fund there poor investment desishions by paying what the property owes them and not what it is worth in the current market or what buyers are willing to pay. Again, as you said it only take one person to pay what you want and its sold. Recenty Ive made a few low ball offers for property I thourght was over priced and it was sold for the listed price. So dont get to stress out just yet. However, you are loosing far to much money in a falling market and you are uncomfortable in this investment so why not sell for as much as you can get and move on.
All the best Nat.
T…………………urchin wrote:devo76 wrote:NOTE TO ALL PEOPLE READING THISScamp wants to buy into the Australian market and therefore is trying his hardest to drive the market down so he can buy in cheaper. He has stated this on many forums. If this is not bottom feeding i dont know what is.Much of what he says is true but a lot of it is what he personally wants to happen.
Sure scamp is a bit extreme in his views, or at least in how he phrases them, but i think he is right on the basic principles. The economy is in the very beginning of what appears to be a long and painful economic crisis. commodities are plummeting, that means that the mining sector is going to take a huge hit. that means that nat's husband–who apparently is in the mining industry–faces a real risk of unemployment or at least reduced employment. the housing market has not tanked yet but that is primarily because there is no volume–buyers and sellers remain a long ways apart. we are getting more and more unsold inventory as buyers are (understandably) reluctant to reduce prices. in this kind of market, with that kind of risk, i think she should bite the bullet and mark the house down significantly in order to ensure a speedy sale. i am sure that a 10% discount over comparative houses on the market would see real interest generated. A quick sale is definitely the way to go. prices are dropping, so if you dawdle you may have to drop it even more later. and add to that the fact that you are already losing thousands/month anyway… it seems to me that half a bird in hand is better than 3/4 of a bird in the bush…
I totally agree with what you say. I dont agree with Scamp stating so many things as FACT. They are what he believes MAY happen. They are what he WANTS to happen.
gibbo1 wrote:Devo,You state that prices are falling, the house in question is located in Perth. Perth has some suburbs that are falling, some that have fallen but have started to turn around, some that are pretty flat and others that have continued to increase (although at a decreased rate) during this whole cycle. I think its imposible to make an acrose the board recommendation without considering all the other factors for this one particular house.
I agree that the Australian market is more than one market. Sorry if i gave that impression.
Hi Tony,
Thanks for your response but just to clarify this property was not originally bought as an investment it was a ppor which we actually built ourselves and I never had the idea i would make shit loads from selling as that was never in my plans. However i did expect modest growth of between 4 and 7% would offset the holding costs of the property.
As a landlord i don't begrudge my tenants enjoyment of the property and I do everything i can to ensure their needs are met by the sometimes lazy and inefficient property managers that i am forced to deal with and believe me I have been through a few.
We actually can afford to hold but my question the experienced people on this forum was quite simply is it worth continuing to hold or in their opinion would they sell.
There seems to be alot of agro out there I am not sure if people are just frustrated at the market themselves but I would have thought this would have been a good time to share experiences and support one another rather than attacking each other.
I disagree with Scamp about massive job losses in the mining industry. The mining boom is underpinned by the asian markets which have esacped the financial meltdowns of the US and Europe virtually unscathed. Australia is indeed a lucky country at the moment as its economy is not underpinned by financial markets like the US and Europe but by the resource sector largely coming from WA where my properties are. We will have a degree of insulation from a complete meltdown due to this simple fact but that is not to say that we will not feel any further retraction in the economy as clearly we will.
Thanks to those people who have remained rational and tried to give a balanced view
Natalie
gibbo1 wrote:You state that prices are falling, the house in question is located in Perth. Perth has some suburbs that are falling, some that have fallen but have started to turn around, some that are pretty flat and others that have continued to increase (although at a decreased rate) during this whole cycle. I think its imposible to make an acrose the board recommendation without considering all the other factors for this one particular house.Ehm…
Let's look at the facts as we've been given them:
- Nat herself said "the values in the area have dropped by about 15% in the last 18 months".
- Nat herself said "we could expect between between 550 000 and 570 000 to sell" and "at the height of the boom the value was 700 000". That's a drop of between 18% and 21%.
- Nat herself indicated that she expects prices to fall further: "…as well as capital losses".
- From Nat's figures it looks like this house was renting for around $15k per year and valued at peak at $700k. A gross yield of around 2.1%.
- At $550k, assuming the $15k rent is about right (plus NG & depreciation bringing it up to $25k) the gross yield is 2.7%
Considering all these "other factors for this one particular house" as you put it, it's pretty easy to draw the obvious conclusion that the property is fundamentally waaaay over-valued (ditto for every other dwelling in Perth IMNSHO). If there's any positive in all this, it looks like there's a chance that Nat might still sell it to a greater fool for more than its fundamental value (I'm not going to personally disclose here what I think the fundamental value of a $15k gross yielding asset is… trust me, you'd heave up your lunch).
Cheers,
F. [cowboy2]
Macnatt wrote:I disagree with Scamp about massive job losses in the mining industry. The mining boom is underpinned by the asian markets which have esacped the financial meltdowns of the US and Europe virtually unscathed. Australia is indeed a lucky country at the moment as its economy is not underpinned by financial markets like the US and Europe but by the resource sector largely coming from WA where my properties are. We will have a degree of insulation from a complete meltdown due to this simple fact but that is not to say that we will not feel any further retraction in the economy as clearly we will.You seem like a nice landlord and we need more of those. I must note, however, that the Chinese economy is based around producing stuff for America. US recession = Chinese downturn = less raw material purchased from Australia.
China will be the next dominant global power but not until the shakedown is complete.
Hi Foundation,
Yes your figures above look correct and give me some food for thought from an objective perspective. Thanks. The fact is this though, this house would never be sold to an investor it would be sold to an owner occupier as that is what the property started out as and it is what it should be.
Asset yield doesn't really come into the equation in that instance, it is more about whether a person could build a comparable property for less and I can gurantee they can't so from an owner occupiers perspective it would be worth $570 000 as this would be below replacement cost. And before scamp starts raving I know this because I am heavily involved in both the building industry and realestate markets.
Thanks
NatalieMacnatt wrote:I disagree with Scamp about massive job losses in the mining industry. The mining boom is underpinned by the asian markets which have esacped the financial meltdowns of the US and Europe virtually unscathed.
Natalie the mining industry is fine so far, but if you look at the effect that the drop in commodity prices has had on the share price of the miners, the fund managers are betting that asia will slow as the US contacts.
The job cuts have already started with the Indian IT industry.. what that will do with whose individual job I cannot tell but there will be a shrinkage in the mining sector somewhere.
and yep there are some pretty forceful opions being expressed on both sides,
As far as asian markets go, the SSE is currently sitting at 2163, down from 6092 last October. Either the market is wrong, or they're headed for recession along with the rest of us…
Cheers,
F. [cowboy2]
I think we are in the verge of recession…small to medium mining companies will collapse sonner or latter .. look at Dow Jones future index on copper/iron ore etc… it has the worse decline in the last 50 years… yet asian market is also get in trouble with Shanghai index/Hangseng/Nikkei all drops to 4 years low…. Time will tell… hopefully RIO/BHP will back to their pre-booming price again… Good luck like Babcock and Brown back to the duck where they suppose to be.
Most of our big commodity markets are in Asia in countries such as China. BHP, RIO TINTO etc are strong and very profitable companies. They are great investments at the moment. The share market reflects human panic. Profitable companies aren't going to go belly up. When people panic in the share market, they invest in real estate. Bricks and mortar. The interest rates were slashed today by the RBA. Interest rates are on the way down again.
Macnatt wrote:I disagree with Scamp about massive job losses in the mining industry. The mining boom is underpinned by the asian markets which have esacped the financial meltdowns of the US and Europe virtually unscathed.You clearly do not know how the Asian market works. Asian markets do not come out of this unscathed.
In fact , yesterday the asian markets crashed again, just like the US, just like Europe, just like Australia.
To think that mining ( oh my god.. ESPECIALLY MINING !!! ) is going to be unaffected, you are blind to say the very least. Commodities are crashing.. It's perfectly logical they do , everyone saw it coming MILES AWAY.
It's cause and effect. Something happens, then you see a result and something else happens.Mining will crash, end of story. This is fact, not my opinion.
Recession will come to Australia, this is also fact, not my opinion.As to buying my own home in Australia : I am not going to buy at these prices because I know that houseprices will drop. I will rent and invest my cash and get a good positive 8-10% revenue on it, rather than losing all of it in property.
foundation wrote:gibbo1 wrote:You state that prices are falling, the house in question is located in Perth. Perth has some suburbs that are falling, some that have fallen but have started to turn around, some that are pretty flat and others that have continued to increase (although at a decreased rate) during this whole cycle. I think its imposible to make an acrose the board recommendation without considering all the other factors for this one particular house.Ehm…
Let's look at the facts as we've been given them:
- Nat herself said "the values in the area have dropped by about 15% in the last 18 months".
- Nat herself said "we could expect between between 550 000 and 570 000 to sell" and "at the height of the boom the value was 700 000". That's a drop of between 18% and 21%.
- Nat herself indicated that she expects prices to fall further: "…as well as capital losses".
- From Nat's figures it looks like this house was renting for around $15k per year and valued at peak at $700k. A gross yield of around 2.1%.
- At $550k, assuming the $15k rent is about right (plus NG & depreciation bringing it up to $25k) the gross yield is 2.7%
Considering all these "other factors for this one particular house" as you put it, it's pretty easy to draw the obvious conclusion that the property is fundamentally waaaay over-valued (ditto for every other dwelling in Perth IMNSHO). If there's any positive in all this, it looks like there's a chance that Nat might still sell it to a greater fool for more than its fundamental value (I'm not going to personally disclose here what I think the fundamental value of a $15k gross yielding asset is… trust me, you'd heave up your lunch).
Cheers,
F. [cowboy2]
Thanks foundation. I guess your fundamental value of the 15k gross yielding asset would be closer to my property valuation of 250k than a property valuation of 570k.
Although, I think you won't even get close to 200k ( just a guess ). My valuation wasn't based on the 15k gross yielding. To expect to sell it for 570k in this market is just silly and ignorant.Scamp, you sure are a panic merchant. What's it like living in fear? Man up
CHIS wrote:Scamp, you sure are a panic merchant. What's it like living in fear? Man upI don't live in fear. I have made cash on the housing bubble myself.
Luckily I didn't invest in shares because I saw that bubble miles away too.
The ones who live in fear are the ones with mortgages and / or big debts.
I could retire if I wanted to ( that was part of the plan to moving to Australia )
And my wealth has increased by 30% thanks to the RBA and declining AUD.MACNATT,
You have two properties.
(1) What would be the difference if you sold the other property (if it has equity and put that towards the one you are having problems with now?
(2) Have you checked what refinancing options are available to you? IO, Longer term. Anything that will help lower your payments.
(3) You have identified a cash flow problem and are there any other things you can do to help alleviate this shortage?
One main thing that appears to have been over looked and currently is helping Australia avoid the recession or depression that hit Australia previously is immigration. As we open our doors to more immigrants they create jobs whilst also putting money in to the economy.
Personally, I think it would be better if members tried to give options or suggestions to help the situation rather than focusing on the negatives of the situation and commenting on doom and gloom. This member has stated they are facing difficulties so don't need comments that berate them and belittle them. Some of us here believe things will turn around and some of us here think harder times are ahead but none of that is needed now.
What is needed is solutions, suggestions and ideas and not sprouting for the sake of sprouting.
Scamp wrote:Thanks foundation. I guess your fundamental value of the 15k gross yielding asset would be closer to my property valuation of 250k than a property valuation of 570k.In a word: Yes.
I bought some shares in a well run, profitable company which operates with zero debt, is recession-resistant, has grown earnings and dividends every year for the last 5, whose management is busy snapping up their own shares etcetera early this week. For a $15k dividend (and slightly higher NET earnings) I would have paid a little over $100k. My parcel was smaller than that, but you catch my drift I'm sure.
I bought this stock because I believe it is undervalued. Too cheap. A bargain. Double the price and I reckon it's fair value.
Quote:Although, I think you won't even get close to 200k ( just a guess ). My valuation wasn't based on the 15k gross yielding. To expect to sell it for 570k in this market is just silly and ignorant.I disagree. In this market a house priced 10% below other similar ones around it (which are not selling and only growing in number – what is it with houses in WA? They seem to be breeding like rabbits!) will sell. And in 12 months when the other sellers have got sick of holding/waiting and reduced their prices by 10%, somebody who prices a similar house 10% below their (lower, but still wishing) prices will sell (while the others don't – this is simple market economics). The important thing in a declining market is to sell early. Selling today will still bring a price that is completely disconnected from fundamental value.
It is a brilliant time to be a seller, regardless of media tags like "buyer's market". Sellers have never been able to sell at prices so far above fundamental value. There may never be another opportunity this good in my lifetime!
Cheers, F. [cowboy2]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
