I had a group of would be/could be investors from QLD and VIC with me yesterday and today. Whilst a couple contracts were exchanged (on second hand property) a large percentage were keeping quiet and some were just plain negative. This is fine, everyone has their own take own the current climate – hence this post – but I just thought it was strange how so many would be willing to outlay the cost of coming to my area and rental cars, motels etc then show absolutely no enthusiasm for any property what so ever. Maybe just an excuse for a short holiday, i dont know. BTW the properties they were shown were sent to them prior to their coming, so it wasn't that they didn't know what to expect.
I am just interested in people views on what their strategies are now, if any, or are you sitting on your hands for the time being. Is it because the newspapers are telling everyone it's recession time, you are going to lose your job or some other horrible occurance is certain to befall you. On the other hand interest rates are the lowest they have been in decades, vendors are willing to negotiate more than previously and the government is throwing money at people, in particular FHOG, although that strictly doesnt affect the investment market as such.
I would love to hear all sides views, so let me know.
Results1 wrote:I am just interested in people views on what their strategies are now, if any, or are you sitting on your hands for the time being. Is it because the newspapers are telling everyone it's recession time, you are going to lose your job or some other horrible occurance is certain to befall you.Hi Tony,
I don't know if any of us are quite that stupid. I certainly know that my investment strategies have very little to do with what the media say. It is really very hard to find any objective or useful information in today's media. My hesitiancy to purchase at the moment is based on a combination of factors, which is summarised by the idea that rental return is generally insufficient given the current climate and risks associated. Moves by the government and the banks are artificially holding the market up. I'm expecting a market correction, for all sorts of reasons, but no one will let it happen yet. I'm certainly not eligible for the FHOG, so it's only a pain in the bum because it is causing further inflation of the market. If anything, I might be swayed to sell at the moment as I have property that suits that FHO market and I think I could sell it quite well at the moment (if it weren't for the recently signed 12 month lease).So, generally I beleive that property value growth (at least in my target market) is going to be very unexciting over the short to medium term. It may even be negative, depending upon what happens with interest rates and fhog and unemployment rate. Yet, prices are still generally too dear, compared to rent, for the property to return a satisfactory ROI based on the rental income. So, if the value is going to fall or at least be quite stagnant for a while, and the rent is not enough to satisfy my requirement of ROI, why would I buy?
At the moment the numbers are just not good enough to justify the risk. I'd rather stay close to debt free and be ready to buy something when the numbers start to make more sense. At the moment I can get better returns out of other investments.
SaraHi Tony,
I think that for some of us the negativity in the media which many people in RE think is imaginary is, in fact, a reality.We sold property in California, bought and sold in Victoria and everything was going fine when whoosh! there go the jobs. Not only the jobs but a prospect of another mortgage, and dramatically depleted investments because of the financial crisis.
So here we are in our 50's, no prospect of work, sitting on cash, no debts, renting, and trying to figure out what to do. For us, we have to use this time to work hard at educating ourselves about every aspect of RE we can. We are trying to work out what vendor financing is here in Australia, what the risks are, where the best prospects for capital appreciation are; Should we continue renting and buy an IP? ; Should we just wait for the retirement money in the USA to be released in a couple of years? etc, etc.
I think that those investors who came to you from QLD and Vic are probably like us – wanting to know as much as possible about RE so that they are ready to jump in when they can.The other thing which is interesting to us is the similiarity between what was said in the USA before the RE slump there and what is being said now in Australia. There seems to be a disbelief that things could get really bad. Maybe the situation really is different and that everything will just choof along on its merry upward swing as before, but I feel a great sense of deja vu.
One example: "there isn't enough housing in Australia for all the people wanting houses". Same thing was said in the USA. And yet , in the US, on every street that we lived on and our friends lived on, there was at least one empty house. Since moving back to Australia in various rentals and our own home, the same thing….always at least one empty house in the street. Total up all the empty houses in Australia and it's a heck of a lot.I also question the actual statistics of the numbers of houses in Australia being "needed", and who is compiling the figures and what their motivation is. If the numbers are accurate, so be it, but if they are wrong, then we are in a very large bubble about to burst. I hope so, because then what is not affordable to us will become so.
Anyway, Tony, that's just a couple of things to think about what's going on in the heads of some of us would-be investors.
Hi Sara and Singer,
Thanks for the replies. As the main jist of the topic was the effect of media, it just shows two very different views. Both of you have also made excellent comments on the state of affairs in RE. Although i would like to point out to Singer, it is not only RE agents that have opinons leaning towards the beating up of facts by the media, far from it. I guess though in my industry you have to maintain positivity.
Sara you are absolutley right the government and banks (begrudgingly perhaps) are holding up the market and are obviously doing so with the hope of an economic turn around and a return to an economy of days gone by. Fingers Crossed.
SInger, I am one of these people that don't believe the USA market can be directly comparable, the banking institutions over there were in a terrible mess where as the Australian banks were/are still reasonably strong in comparison. The one thing I totally agee on is who does these facts and figures regarding the housing statistics that are reported on a regular basis, it seems experts are plentiful but few seem to agree with each other, it's like certain magazines and subscription services have to come up with Hot Spots each month, and the ones from the month before disappear of the radar. Just gathering figures off RP Data dosent strike me as real research. Good luck with your search for answers, I am sure i dont have to tell you be careful around vendor financing, what ever your end result is I really hope it works out for you.
However, as some of my clients were quoting the press as the reason for being a bit gunshy, i really just wanted to gauge other peoples thoughts on the topic and don't want to turn this post into pro's and con's of buying into this market, so i do appreciate both of you sharing your opinions.
Hi Sara
What other investments were you referring to as being better at the moment? I am investigating a property development company called Custodian. Their strategy is sound and they seem ok. I would have a number of properties to chose with new houses to be built on- good locations, large land content, new building so good depreciation. BUT I have also bought shares.My delema is that I am debt free at the moment- owner/occupier very close to centre of major city ( small but cosy)- have ajob in health profession so not likely to lose it. If I go ahead with this property puchase i will have an IP with a $440,000 mortgage
Hi Annies Dance,
Beef cattle. We have some cattle. They have outperformed our RE over the last 4 years, and while cattle prices in our area are somewhat depressed at the moment, you don't have to sell, you just keep breeding more of them. You can always sell later, or just sell what you have to for now. Unfortunately, few people are in a position to invest in beef cattle. Lucky us.
SHi Tony,
If we were to listen to the dooms day media all the time at the moment, (which I think a majority of investors are because there are very few investors buying at the moment) then we would believe that the property world was caving in (and I guess in some areas it has … Like those mining towns where people were singing the praises of a couple of years ago…. and have now seen their populations dive due to mining cut backs .
We invested in a 2 bedroom unit in Sydney Eastern suburbs last year and have received a small capital growth already without touching the unit and with interest rates down it is almost positively geared. So by investing in areas where there are large populations (Syd, Melb, Bris) and buying property that the average person can afford to rent in these cities and close to good infratructure and the cbd… then there will always be people willing to pay rent there.
I myself have chosen to focus on the positive side of investing at the moment. The positives I see are :
There are great bargains to be had out there with very little competition from other investors,
Rents are rising due to population growth in our capital cities and a lack of new housing being built.
Interest rates are low which gives much better yields.
And we are in it for the long term.
After all, as they say…. be greedy when others are fearful and fearful when others are greedy.
There is money to be made out there despite what the media feeds us.We should all turn the news off before it begins every night.. after all they only ever focus on the negative….. and to every negative there is also a positive!! they just don't report that stuff!!
Cheers.
Hey Jas,
Staying positive is definately the right way to go. I like your thinking!! lol.
Thanks for your input.
Cheers Tony,
Good luck with your business. looks like your doing ok by your web site!
My wife and I are hoping to move to the gold coast later this year so we may even give you a call about some property then.
All the best.i think tony that there is alot of people that just don't no what they want and when one person works it out the rest follow, the way i work is when every one is tracking threw the paddock and pushing threw the gate to make 50cents iam going in the other direction and i pass people on the way scratching there heads wondering where iam going, if only they new iam going to get a dollar.
Thanks Jas,
Small operation and low overheads keeps me floating and i do have a lot of return clients which hepls immensely. By all means give me a call if only for some guidance.
Keiko,
it's amazing how right you are, I have slow periods when you can't give a property away, then one goes and itseems to go crazy again. Lets hope we catch up on the same path one day, going the same direction.
"…interested in people views on what their strategies are now, if any, or are you sitting on your hands for the time being. Is it because the newspapers are telling everyone it's recession time, you are going to lose your job or some other horrible occurance is certain to befall you. On the other hand interest rates are the lowest they have been in decades, vendors are willing to negotiate more than previously and the government is throwing money at people, in particular FHOG, although that strictly doesnt affect the investment market as such."
Buying properties at better discounts, more qualified (retail) buyers (because the banks are knocking them back they come to us for vendor finance), investors looking for my wholesale deals… what's not to like?
e.g. I put an option on a property yesterday. 4-bedroom house with a great position. Badly needs a cleanup. Just $5k down and a year to completely control the property until we sell it. Put an advert on the local supermarket noticeboard around lunch time, and have calls from two potential renovator-buyers already.
Plan to have it onsold for a nice profit within 6 months. Or perhaps flip it for a small quick profit in a week.
Like I said: what's not to like?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
