Hi,
Ive been dabling in property for the last 4 years. Ive made some modest profits renovating and re-selling some small appartments.
I was thinking about moving onto a bigger project next year and building a suburban house.
Im familar with property markets in South East Queensland so I'd look there first but ultimatley ld like to build where the highest margins are.
Im a bit unsure about the way the property markets are heading next year.
On the one hand peoples borrowing power has been cut and unemployment is on the up but on the other the government is expanding the money supply with future fund hand outs, grants and interest rate cuts.
I think the days if capital growth are long gone but the whole point of building is to profit from value add. If the land and house can be puchased and build cheaper than the current market price then I win.
Providing of course there is sombody to sell to at the end.
There are many notable economists predicting up to a %40 crash in the Australian property market . Marc Faber who predicted the 1987 crash the 1997 asian finacial crisis and the current credit crunch was on late line a month ago predicting a crash.
Australia is still the only developed country in the world were the property market has not crashed yet and still maintains 7-10x avereage earnings for a house.
Then theres the issue of inflation. If the government keep giving out money the way it did this month the money supply is going to expand much fast than the amount of real goods.
Its going to punsh everybody who has been responisble and saved up by making their dollars worth less.
At the moment inflation looks like its gone down because of the petrol price but in reality food clothes etc have not gotten cheaper. People are talking about defaltion and a drop in demand but I dont buy it. I think any deflation will be temporary and the expanding money supply will eventually kick in and we will hit double didget inflation buy the end of the year.
Mabey thats how the property market will return to sane values of 3-4 x average earnings for a house. It might just stagnate and then after 5 years of high inflation bread will cost $20 average joe will earn $150k and then everything will be affordable again ?.
In that case there wouldn't be a crash ?
Mabey the government stimuls will hold up the market for a couple of years before the crash comes ?
That way I could get in get a share of all the new money the government is inventing and giving to first home owners
and then get out.So what do people think is it worth attemping to profit from building houses next year ?
Has anybody completed a project recently ?. What sort of profit margin was there ?Thanks,
Mark.
See the thing is, People are waiting out for some magical big event, But that's not how it works, If you want a look into the future then look at America, We are very similar to them, Only a few years behind.
I don't think the property markets will suddenly drop down 40%+ next year, But overall if there's less then a 10% drop in 2009 then I will be very surprised. A few years of -10% adds up very quickly.
Marc Faber sounds a lot like Gerald Celente, He has been very successful in predicting the same things, His current prediction is food and tax riots by 2012… very scary stuff, But not really over the top when you consider all the facts. http://www.youtube.com/watch?v=46MEqEgdLTg
Also there is Peter Shiff who is a very well known guy who says the dollar will crash and we will probably experience hyper inflation. Go to Wikepedia and look at the list of countrys that have experinced it. http://en.wikipedia.org/wiki/Hyperinflation
Like I say in all my posts the economy's of the west are fundamentaly very bad, Based on consuming rather then producing and building of credit and debt, Its inevitable for them to be cease being sustainiable for much longer. Every day I read the news there is a big list of companys either going broke or having mass layoff's. The spring can't be held down any longer, But our criminal government is insisting on throwing us deeper into the depression pit by masking the symtoms and not allowing the problem to resolve itself, Each bailout/Interest Cut/Handout and Money Print puts the cancer into the next stage.
Then there are the greedy, slimy, smily liars who know the economy is headed for the pooper but tell everyone now is the best time to put all your money on the line because the "Mother of all booms" is comming, Our economy is "Awesome" fundamentals are "Great" and they discredit everyone who says otherwise dispite the facts by calling them Doomer and Gloomers, Negative, Ignorant ect ect.
My Advice is to absorb as much information as you can, Learn economics, trends and current events, Read books, Articles everything you can, watch documentaries and try and stay away from the crap spread accross the mainstream media, Use alternative sources of information as your main guide.
Maybe if the crisis gets much worse the queen will Disolve Australian parlament like she just did in canada and set up her own dictatorship ? Can anyone say Lord Rudd……or how about Lord Harry ?
A few things – building costs are starting to come down (price of steel is dropping), lack of work for builders is following & property prices are depressed.
If you buy, build & hold, then it can be profitable ie buy & develop whilst it is cheap. If you are looking to buy, build and sell then you will be selling in a market which is still undergoing correction & some fragility (prices are still dropping for properties so you may make a loss).
Analysis, analysis, analysis.
Mark76g
Most house builders are now going broke because it costs them more to build a house than they can sell them. Houses only a few years old are now much much cheaper then new houses, why would anyone buy a new house?
You may be lucky and get someone who cannot resist the look and feel of a brand new house ( or unit ) but most people will see the near new house down the road with all the extras and go for that.
Good Luck whatever you do.Mark,
Unless you can get very good deals on the land component then new houses may not be the best option right now for all the reasons mentioned in the other posts. But as previously metioned there are more builders looking for work and some materail costs may have dropped in price so never a clear cut argument either way. Your net worth and appetite for risk and time devotion will also have some bearing on the suitability of this strategy for you. You could say spend a lot of time on some development and if you charge your time at the end you may make a small loss the question is would that wipe you out if not then maybe the risk is okay and if you make a small profit overall a worthwile project but not a wipeout if you dont. I take it that you are not interested in develop and hold.
With respect to some of your other big picture economic comments I to dont buy the deflation thing either that we are being bombarded with. How can the central banks be embarking on unprecedented printing campaigns and that not result in inflation ? I underatnd the theory of the velocity of money and right now it may be low velocity as the banks are hoarding the extra money but sooner or later the extra money must spill into the economy and that equates to inflation.
Central bankers prefer inflation to deflation and only by creating deflation fear can they by stealth create inflation.
With respect to theUS $ I have heard both sides of the argument on whether it will fall or not both extremely well argued I might say.
Not being in cash and being in debt my preference would be for inflation and US $ weakness.
House prices to drop 40% is a very general statement to make. Some overpriced high end props may do this but it is hard to see how say a $350K starter home will drop to $210K in my view.
I have been looking into the whole building a house thing. And with the prices on existing houses that are only a few years old; in my area are about on average $320k.
If I build about 35 mins outside of Melbourne it will cost me around $220k including FHOG; with some added extras such as Alfresco and interior extras. So in my mind building a house is far more appealing than something for a similair design that is a couple more years old and $100k more.
Im new to all this so maybe I am wrong.
dank78 wrote:I have been looking into the whole building a house thing. And with the prices on existing houses that are only a few years old; in my area are about on average $320k.If I build about 35 mins outside of Melbourne it will cost me around $220k including FHOG; with some added extras such as Alfresco and interior extras. So in my mind building a house is far more appealing than something for a similair design that is a couple more years old and $100k more.
Im new to all this so maybe I am wrong.
Well I think you are right on the building cost estimate but what about the land to build it on? I know that land 35 minutes outside of Brisbane is more than $100k so maybe the existing property isnt so expensive after all?
Hi all
Some great comment and insight in all your posts. As to building prices dropping, National Builders (one of, if not the cheapest in Vic.) just put the price of my house up $12,000 in Jan. Along with several price rises before: March 3k, July 9k, Nov 5k and Jan 12,000 so Ive not met any builder that has dropped the price of their product based on the price of steel and I will not. I cant find any builders who are chronicly unemployed. The one of the major costs in a house is the labour. Until we see a real slow down in building and higher unemployment that's when we will see a price reduction. If I may where in Melbourne is it in the west as that's my area also.Its going to punish everybody who has been responsible and saved up by making their dollars worth less.
Mark you make a great point with the above. Im in a similar situation as you. This govenment will continue to give out money to those freely and tell them to go out and spend it on anything. Man what kind of PM does that. And now his planning to do it again. I did not get a cent. I paid my tax bill of 5,300 just before the money was given out. I met a guy with 4 kids & he told me he was getting 5k tomorrow from the government. They sent it in about 3 days on shit, DVD players, Ipods and take away food and dope. You tell me thats the way to stimulate the economy. Lower intrest rates, FHOG boost, Cash hand outs. All these people who got into debt now expect the Government to help out, the reason or part of it is people have no money to spend because they owe the bank and got in too deep as you said been Irresponsible. 4 bedroom house, 2 cars, flat screen TVs in each room. and they are only 21 years old. Did our mum & dad have it so easy. No way. Now we pay for it.I feel you are taking a risk by building new and selling in a short time, you are punting. If the sh-t hits the fan, who will buy it. After selling cost etc. you may loose. I'm sure you are a smart person but do your sums on this one man.
dank 78
I agree building is most of the time cheaper. You only pay stamp duty on the land. Big savings. Every thing is new, new, new.
But don't forget the other stuff in you calculations. Drapes, shed, tank, land scaping. et al. People who have over capitalized now put thier place on the market for that it owes then but you can only sell it for what you or I will pay and vendors don't like it when you tell them that you can build the same house new of 5k more and its new. If I may, where in Melbourne is it in the west as that's my area also.
WJ Hooker
Most builders are going broke I wish that was true, I know of one on the news of late now in receivership. Plenty of houses left unfinished. Most builders are working as subies under a company and if they don't get paid thats it game over. Might be a good sight to owner build. As labour may be cheaper. However I feel we will see more in the future.
bardon
House prices to drop 40% is a very general statement to make. Some overpriced high end props may do this but it is hard to see how say a $350K starter home will drop to $210K in my view.
I totally agree, anyone who suggest that has no idea. This would lead to a poverty stricken country and we would be better all shifting to a 3rd world country asap. The banks would not sell them up for that. I attend mortgagee sale allot and most of the banks want more that its worth. I think we can safely say this will not happen.
I posted a similar topic in the need help section on the global recession and house prices have a look and tell me what you think.
Kind regards to all
T…………………
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