Maybe , who knows , wish I did !
With those two I do have no idea not knowing the properties and exact situations but speaking loosely more about properties I do know off.
See , in 2001 I was living at Coolum. I bought a great little 4 ac block 5 min's out for 70k and there were plenty around with views over the whole coast for 80k . Lately the same have been 250 and 300 last I looked – 12 mths back . So 3 to 400% in not even 10yrs
We also looked at dozens of nice little properties with houses at between 80 and 140k – between Maroochy to Kin Kin and everywhere in between there all now 400 and up. = 8 yrs
Then I have two rallies around Brissy that both bought around 98 -2000 .
One payed 82 , his place is supposedly worth 480 now =500% in 10yrs and he'd probly get it by the sounds of it – lucky shit .
The other payed 110 or something – I haven't spoken to him in years so where his is at I couldn't say .
I also have one of my best friends living between the Gold coast and Switzerland over the last 10 yrs – work – and have heard lots of numbers from them over the years since I left .So true , I'm no where near the place these days but I do realize the rampage it's been on . You would just assume that in all logic something would have to give .
Cheers
One of the more interesting ideas I have been watching is the Japan complex.
We have spent the past 20 years trying to be like Japan of the 60 & 70's from TQM through to restructuring public policy to attract investment.
Problem is Japan was in Recession from approx 1990 – 2003 with only 1-3 quarters in total where they recorded any growth above 0.
If we have followed we may at least be exposed in theory to 3 – 6 years. We will need cash rich countries to spend/invest and we learn how to save or pay off investments.
tony b. theres deffinitly lots of builders folding but theres still thousands able to survive but are struggle or they have there own savings to survive, but the reason builders and other tradies out there cant drop there rates is because they still need to go and pay for all their timber etc which is still at a high price
higher than a couple of years ago so they cant cut there rate or they will be working for free after they pay for all there expenses.
but then again ive just completed a property i bought and i managed to get 2 building crews in there at $35p/h each person charge up and i payed for all materials and i managed what was going on so they were not mucking around, both company's normal price is $60p/h and both had not much work on and only done it to keep there workers going.as for 40% drops that is more in the higher end of the market but then there are a few in the lower end but are hard to find
i just picked up a property 25% lower than a offer the owner had a year ago and turned down because they were to greedy and then became desperate to sell because there circumstances changed, that property was showing 12% return net but the tennant has just left which worked out good for me cause now i can reno it.
iam half way threw reno and had my mate put a valueation on it and it is showing nearly 40% more than it owes me so there are deffinitly deals out thereas for that property at $480k sold for $280k it sounds like the same property i was offered at a auction before christmas it was a 4 bed and it was offered to me for $300k by a guy standing on the sideline i think he was probaly an agent, i only seen pictures of this property but i would have thought it was worth around $400k
Hi
Interesting stuff. I'm a very successful property investor….one of the "smart arses" to have got in early I guess but my investments have always been very carefully structured based on the 4 x L's: land, location, loot flow and low debt (never having debt of more than 50% in total property portfolio). One property I bought in 1985 cost me $120k when interest rates were 17% and is now worth $1.5m……but of course my loan was only 60k so repayments were not a problem) To be sure I will lose capital gains in the few years ahead as we go through a predictable difficult period . I have always had concerns about the escalating house price ratio to income in Australia (up there with Britain, USA and Spain) . Only a few years ago it was 2.5 times income for the price of a house. At it's peak recently it went as high as 7.5 times income which in my view cannot be sustained even if we didn't have the credit crunch. House price increases have been fuelled by the capacity for investors and home owners to borrow at a low equity to debt ratio. My other big concern is that Australia is very dependent on it's export markets to countries especially China which again in my view has yet to suffer a lot more. Without an export market of significance Australia will have to shed it's labour which of course is not good for us including the housing market. The immigration numbers will be downgraded again reducing the number of buyers. From this I see that as house prices start to fall more people will be reluctant to sell so are likely to stay or temporarily rent their properties and as the rental supply increases returns on rentals will fall. To be sure if you're investing for the long term you will definitely be in for opportunities for bargains and with the interest so low it gives you a chance to pay off more and to improve on your equity at a higher proportion to debt. On the other hand I see blue chip shares being a better investment for the next 7 years…..but of course there is nothing better than a sensible balance in your investment portfolio based on a longer term perspective for both shares and property. All the best to everyone with your investments.
CarpeThanks for the helpful perspective carpe . Um is that the fish or ?
I've had a big problem with our prices for 3 or 4 yrs now too . Lack of sustainability was a no brainer our prices were stupidity and there'd be nowhere left for the country to go .
A 4 or 500k suburban house now would have to = 1million in 10 yrs , 2 million in 20 , ain't doable .Cheers
Tony B,
I just wanted to say that I really enjoyed your posts. From the beginning I found it pretty hard to reconcile the spelling, with the fact that you didn't sound foreign, and the fact that you did sound educated. I guess that one's solved. At the airport this morning I picked up a copy of Australian Property Investor mag, which is not usually something I do. It has an article that I think you'd enjoy about the health of the Australian Property market. It makes alot of the same points that you do, and basically says that sharp rises in unemployment is probably the main threat to the property market at the moment, and that the markets in the capital cities in the $200K – $600K house sector have probably bottomed out. Top level RE to take some more hits. The reasoning was all pretty sound.Where I have trouble with all this conjecture, though is that I really feel that all the averages bandied around by commentators are pretty useless. I have property in country SE QLD and NW QLD. What happens specifically in these centres is what is important to me, not averages based on Syd, Melb, Adel, Bris, Perth etc. I reckon that property demand in an area is pretty dependent upon who wants to live there. And that is pretty dependent upon the LOCAL economy, not the average of all Australian cities. Someone with a house in St Kilda is likely to be affected by different economic circumstances than someone with a house in Townsville, and they are in turn affected by different economic circumstances than someone with property in the North Western suburbs of Sydney. I just don't think you can say wether or not it is a good idea to buy property now, unless you specify WHERE. There are a few knowledgeable people saying it is a good time to buy in the North Shore of Sydney. And then, it is also a bad time to buy in say, Dysart (at a guess) – a mining town in QLD.
You've sparked a good discussion and I look forward to more of your posts.
SHi all,
Not sure if I'm in the right forum but wanted some advice about a potential investment. My husband and I purchased our first home in 2004 for around $250K a 3 bedroom townhouse about 7km from the city in Adelaide. We've since had a baby and I've had 12months off work and will be returning in a months time part-time. I recently came across a great property in Aldgate in the Adelaide hills and are seriously considering putting an offer on the place and keeping our townhouse as an investment…here comes the question….is now a good time to be purchasing a larger property given the economic conditions? The property was last sold in 2006 for 370K and has had about 50K of improvments done, they are asking 495-510 for the property so it is a substantial increase in debt for us but we have approval to borrow up to 510K for the new property as our townhouse has incrased in value since we bought it. I guess I'm unsure about taking on more debt with everything going on in the world but am also thinking now could be a good time to get a good value property (3bedroom + study on 1/2 acre block) and borrow while interest rate are low. Any thoughts, advice about starting out investing and upsizing the house you live in would be greatly appreciated.Hi Walpy
There are certainly overall trends indicating ongoing difficulties in the housing market but notwithstanding this there are still and always will be investment opportunities for those who do their sums and those willing to make sensible risks. As I said in my previous note I am very strong about keeping debt relatively low especially in times like this when the bubble on inflationary prices that we have experienced in real estate is under pressure. You have not indicated how much in percentage terms you have in equity on the current townhouse and how much equity you will have after you pay the deposit on your new place. My stance is 50% equity across a property portfolio because I'm a conservative but your circumstances may be different to enable you to enter comfortably into the investment with less equity. A lot has to do with affordability particularly in the context of your starting out with a family and the impact this will have on your income to service the debt. To be sure the interest rates are low at the moment but they won't stay down for ever so this has to be considered (what if it was 9%?). You have to also consider the impact the credit crisis will have on your income/employment. At the same time it seems wise to move into a large house that you love with a growing family…..and it will be a house you will be in for many many years so it is not really an issue of whether the capital gain does fall for a few years after you buy it and it doesn't matter…..as one thing is certain it will increase in capital gain in the long term. As "Mister" says in his note above the notion that house prices will keep on doubling every 10 years as many say is definitely a myth and in fact it is a ridiculous concept that it can be ongoing for ever. Some of course will double and most won't but they will all go up as incomes keep rising. Whether the capital gain is inflationary or real is another matter …..the former being fuelled by easy access to debt eg no doc loans. So as long as your debt is not going to be crippling as you gain a larger family in the context of above then this might be your decider. If it becomes too difficult later on then you can always bail out by selling the townhouse or even sell the townhouse now if it makes it easier.All the Best
Carpe (no not a fish …short for carpe diem or "seize the day")SHales
Thanks mate. I just contacted the bank today re. cash investments, man forget it , the rates are that low you may be better off putting it in the back yard. The feeling in the bank is next month they will even go lower, and I agree. This puts me in a real difficult spot, as Ive invested in other areas than property mainly cash ( as Ive needed it for my business) and I would like my own PPOR and the FHOG. So, what do I do. The uncertainty of the economy ???? falling intrest rates for cash investors and the lack of safe investment options. Do I go for the bricks & mortar and pay what I think is too much (current market price) say $400,000 and then next year when our Reserve Bank drops the rate to 2 % which is possible if not likely my house is worth 350k. I was told my the bank today that the UK has 0 % intrest on some savings accounts.
There seems to be a consensus on this forum that house prices in Australia are too high, currently. So, do I buy now and forget about that it will be worth in 2 years. Or wait for a bargain to appear ( the 400k house for say 365K ) as a few people point out do exist. I also believe you are correct it seems to be area specific as to the price and the price drop. People will always need a place to live, affordable housing ( that means housing say 200-400k ) even if its not worth it, but, compared to 550,000 for the same place closer to the city it is worth it. So as you said the lower priced ( by comparison) homes most likly may not fall that much more.
Location specific:
I'm in a country area (by choice) I see the Mac Mansions for 600,000 (no way) and the ex. government small 3 bedroom places for 135,000 big difference, same town. However, the Mac Mansions sit in the window for a long, long time and if they sell its for 70-80k under asking price.So, do I buy now and forever hold my peace if the prices fall. Or wait for the 30 -40% drops as mention on this forum. For me Im lucky as I have a choice, but like you all Ive had to work for it. The Global economic cricis has now made its way to Australia and what has happend in USA & UK should happen here also. Im sure there is no clear & certain answer only opinions and time will tell.
Cheers
T………………..Tony B,
As you say – interest rates are so low its too tempting not to buy. And with interest on savings also too low it also pushes us to buy.
But, as you also say – house prices are falling so why would you buy and see your capital go down.Its all too hard.
I personally think mid range and high range houses will keep falling, but low range houses should mostly hold there values as first home buyers keep jumping in to the cheapest place they can afford.
Thus I conclude that we should consider buying cheap houses or units or townhouses that show at least 5% return, borrow as much as you can to keep them positive or neutral geared and just hang on to them for a few years. Even if house prices do fall, you still have a positive or neutral position and there is a limit on what they could fall relative to high cost housing. The land and position is always worth something.Hi Tony B
There is no better investment than a PPOR. Any capital gains made are not taxable. Find the worst but livable house in the best location at the lowest price and deposit into it whatever you can afford with enough cash to run your business (it won't be easy but all gains cost), Try and pay extra off the loan and/or fix it up a bit until you decide to sell it in say 5 to 10 years when it's value has increased if you feel you don't want to live there any more. No tax on the sale so you are then in a much stronger position to buy something better perhaps in a better location. The location of a property is what gives you a much better chance of capital gains. To be sure as you also agree the price of the property might decline a bit during these times but it will recover that's for sure. To have no debt on your PPOR should be a primary focus as quite honestly if you're paying interest it's not a tax deductable so it is money going down the drain as like paying rent.
Anyway, I'm sure you know all this so I guess I"m just reinforcing it.
Cheers
CarpeTony B
Carpe makes some great points. And, the best course of action has something to do with what sort of lifestyle you want too. Would you like to live in your own home? Are you simply trying to make the smatest money move you can at the moment? If the first is correct, go buy one. I'd agree wholeheartedley with Carpe's criteria on property selection. Buy at the lower end. The fact that you are in a country area, and you can get housing for $135000 means to me that even if values do fall, you won't loose much. I'm very doubtful that that end of the market would lose 40%. If you want to make the smartest money move, then lots more research is required about wether you would live in the property you buy or rent it out. Issues like FHOG, your marginal tax rates and the amount of cash you can put down (and consequently how much interest you will pay), achievable rent etc are all part of that equation. Renovating may be a great way to have your own home, and still make a good deal of money, even in the so so market that we have at the moment. If you bought now, agressively negotiating a good deal, renovated prudently and tastefully, you could do very well. I do think that the property market is a bit like a never ending rollercoaster. There are ups and downs, but you only truly miss out if you completely fail to jump on. Cheap interest rates and buyers market means to me, buy (carefully though).I am hoping to buy again quite soon. I think the conditions are favourable. (regardless of how attractive other investment avenues may well be due to this 'global financial recession')
Prices are on the slide now, near bottoming out. If i get everything moving now I should still be in favourable conditions at purchase time.
With current interest rates it makes finance aquisition easier as well. With the cash rate at 3.5 i dont see how the reserve bank can continue to make huge 1.0 slashes. most predict that further slashes will be more modest, in the .5 and lower range.
Once rates bottom out i will be looking to fix anyway.
By doing so i can still take advantage of lower rates after i have bought.
(depending on if the financial institution offers this ability on the loan)I agree, a PPOR has many benefits, the least of which is monetary. It is such a long term investment, i think it is almost always a good time to buy a PPOR if the person is smart about it, especially due to the nature of capitol gains tax favouring owner occupiers.
With rates how they are though, i would want to make sure not to borrow to the extent of my capapbility, for when rates go back up (and they will) servicing the loan will become harder. either that and/or have a fixed rate or the ability to fix the rate.
I know many will be tempted to enter the market by the current favourable conditions and could be in for heartache in the years to come if they dont make sure they enter in a solid fashion and stay smart about market conditions.
G'day Tony
Same dilemma . We're waiting on our new place right now, painful but I guess the longer the better .
We are watching one at 360 and it is very good value even now and a very classy property. On a few ac's and cheap compared to matching it oretty well anywhere really .
But if it doesn't move in the next mth or two , things will be looking worse and they will probably have to drop from there if they really wanna sell , which is where I'm hoping to come in .
I'm not so concerned about it's value dropping as it is a classy place with everything going for it and should bounce back well when things improve .
But I do wanna get it at the best price I can not only as a just incase but the other obvious reasons so .
At the mo we're trying to sit it out another few mths , see where they take the price if it hasn't sold , before any offers.You sound like you have enough on hand to put onto a place covering any downturn so as long as you get a good buy I wouldn't be too worried about it dipping short term.
A home being a long term prospect should bounce as long as we don't pay stupid prices .
But it probably would well pay to wait if you could just to get something at a better price than now and so a nicer situation all round for yourself and as above if it's something we can improve or ad to even better .
That's one problem with the one we have in mind , it is totally finished to perfection and there's not much I can ad apart form personal tastes.
If there's anything you like , follow it for awhile and see where the price goes , they may well need to drop it a fair wack to move it at all before too long and the new price will give you a great head start in the offer and more leeway in any downturn .I can't decide what drops over all to expect but I do agree that the upper ends will cop serious hits .
But from my view like the guys above have said , I very much agree with. The lower end good value places seem to be holding up quite well so far all things considered , unless they're being greedy and will be searched out for more and more as time goes on.
Personally I feel good properties , good areas and well valued will take a hit but not the 40% stuff , 10 -15 -20 maybe .
I've already seen and heard of plenty in the upper ends copping very nasty wacks .Still , kingdom for a crystal ball !
Cheers
WJ Hooker
"As you say – interest rates are so low its too tempting not to buy. And with interest on savings also too low it also pushes us to buy."
After my talks at the banks I feel I have no choice as I'm not going to see my cash disappear at such low intrest rates and inflation + tax eating the ass out of whats left. You are correct other people that went the safe option "cash" now are forced, pushed, to look for something and it will be property. Just like the government wants, to put the money back into the working economy.
A 5% return does not get me excited at all, I mean not one bit, but compared to "cash" it's much better than a -1 or -2%. However I do feel that I am being pushed to buy as a result of the major global economic changes. I think we should make the best of the situation and take advantage of the low borrowing rates, my employment is safe (or as safe as it can be right now) Its just a matter of how much to borrow and then when & the right location to buy.
Cheers & Good Luck.
T……………..Carp
Yes, having a PPOR has many advantages as you say, and not just economic ones. However, it always been a good place to hide / Insulate you cash from inflation and taxation. With no CGT when you well. As I have worked OS allot Ive never been able to settle in one place, should have brought and rented it out while I was away, but that's history.I feel I can keep the business going OK ish and still buy a PPOR as you point out the obvious good points. I'm not a greedy person, very have never will be, so I will not be to disappointed if it value drops a bit , provided I buy it at a price I'm happy with, as I can't see myself being forced to sell.
The worst house in the best street. Yes, I will have to be mindful of the location and future development of the area. I intend to do a lot of shopping round in the next month aimed at places that need to be sold, I have heard that there has been a few real good buys even in my local area, which surprised me 50 – 60 k under asking price.
Thanks for your reply .
Cheers
T………………..SHales
Correct, all good stuff. I really am being forced to make some major decisions and many things come into the equation. PPOR or "the bargain of the year" with the intention of punting it on latter. You may me able to help me If you don't mind. I will go back to my accountant, but real estates not his thing. Tax deductions on investment properties, I need to get the full picture on my ROI if I go that way. The places for 135,000 are not what I would choose for my PPOR and would need to be renovated to make them stand out, new kitchen, bath, floor coverings, renovated prudently and tastefully as you say and its not that hard.
This is an option I'm considering "There are ups and downs, but you only truly miss out if you completely fail to jump on." I feel you are right no matter what I buy as long as I can pay for it and I don't over pay "aggressively negotiating a good deal" In fact Im looking forward to that part. It wont matter what happens in the economic climate. The lower end, I over heard a guy in the bank saying he just brought a few country properties, I mean way out in the bush but mega cheap. With a bit of a reno you could still make money as long as you can find the right person who likes to life that life style. Cheap interest rates and buyers market means to me, buy (carefully though). I feel the time may be right and provided I do the research carefully things should work out.
More has been lost in hesitation that speculation.
Cheers
T……………..Mister
Hi hows it going, I just left you a personal message on this forum.
Cheers
T……….
Tony B, what part of the country are you in?
G'day Tony , no worries.
Actually I might even post the link to the one I want on the forum to see what people think of the situation , getting anxious .
Cheers
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