It's Time to Sell Property

I think it could well be an excellent time to sell property.

I'm old enough to remember the early 90's when residential property at very healthy yields (great by today's standards) could sit on the market for months and even years in Brisbane.

Long term I'm a believer in Australia and would like to hold all of my property forever, that would be in an ideal world where I had no debt and unlimited servicing power however. Not living in a perfect financial world personally I think I have chosen an excellent time to sell a property, though time will tell. I'm keeping what I consider to be my best properties.

Anybody else taking the opportunity in the present market to sell down some of their property to reduce debt, diversify, or for whatever reason?

yep... similarly it would be ideal to hold them all but realistically it is not viable. the yields on resi are just too low to keep accumulating so am keeping some of the ealrier ones with larger in built profits, flick on the newer ones and pay down some debt then move on and do it al again!

Had lunch with the CFO of a significant Australian insurance company yesterday (after riding the Brissy to Gold Coast fund raiser).

He reckons there's more upside to stocks than property currently, even considering leverage differences. But then, he is an accountant by trade and conservative by nature.

He will launch several IPOs in the next few years. I tend to agree with him. I think the domestic market cannot absorb much more in the way of rent rises or debt servicing.

I don't see the same constraints on selective stocks, especially those not hog tied by the domestic economy.


It seems US commentators think Australia and Canada are safe bets, due to our commodities trade with Chindia. As the USD slides, as directed by their Fed, will be interesting to see where the world wants to park its trillions, or rather, what they want to buy with it. Seems private equity buyouts will be heavily funded by China in the future. I reckon BHP Bill must be high on the list of targets.

Andrew_A said:

Anybody else taking the opportunity in the present market to sell down some of their property to reduce debt, diversify, or for whatever reason?

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I sold most of my mine in the past 6months.. I kept my PPOR and Holiday House only.. I'll buy back in when the yields again justify the asset values. Whenever that may be..

in the meantime I'm just looking around for something else to invest in, or a business, or something to buy and sell..

It depends on the individual properties you hold. I definitely would'nt be selling any of mine.

Andrew_A said:

Anybody else taking the opportunity in the present market to sell down some of their property to reduce debt, diversify, or for whatever reason?

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yep - one currently going thru the exchange process, and another goes on the market in a week's time.

reason? various. the first will be a headache with council to develop for reason we didn't find out until after purchase, and although the returns are okay at 6% we would be better of investing the money elsewhere. the second is an expensive rebuild that is costing us to much to hold, and will do so for at least another 5 years - so we're better off pulling out our gains now and reinvesting elsewhere.

we are doing this to consolidate, and narrow our focus down to our choosen investing path - creating small developments to hold.

Of course, property with significant development upside is a different bowl of laksa....

I wouldn't be selling anything with rezoning potential or other form of density increase...or even with significant infrastructure or council improvement nearby.

And the other alternative in a choppy uncertain market is to:
- decrease holding time risk
- but still capture growth

Easily done by quickflick speccies which require an in/out BA...no time consuming doubtful DAs from enviro obsessed LGA drongos.....

Will be interesting to see how a Labor victory effects PI sentiment....
Krudd's 50,000 tax funded affordable dwellings is bound to set a cat amongst the free market pigeons....and Guillard will put her feminazi footprint all over it too.

WinstonWolfe said:

Of course, property with significant development upside is a different bowl of laksa....

I wouldn't be selling anything with rezoning potential or other form of density increase...or even with significant infrastructure or council improvement nearby.

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i concur with that completely...there are parts of north brisbane that if i had a spare quid at the moment i'd be buying property in a few pockets very heavily...there are some rb3/4 zoned areas that are very undervalued at the moment IMHO and if it wasn't for the stupidly high council contributions charges i'd be jumping in as a developer too!!

however i agree that some parts of the market around here are overcooked and if/when a correction or flat spot occurs it will be interesting to see how many people get caught out...


cheers
UC

urban cowboy said:

there are some rb3/4 zoned areas that are very undervalued at the moment IMHO and if it wasn't for the stupidly high council contributions charges i'd be jumping in as a developer too!!
cheers
UC

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Hi UC

could you explain these terms please for a non developer?

Hi all,

I tend to agree Andrew. In fact we have recently sold 2 IP's. One in Victoria, settled a couple of weeks ago, and one in Brissy (Tanah Merah) it settles end of November, has gone unconditional.

I still think property is a good investment, and we are keeping 2. Our reasons for selling were more than just the state of the market.

When will we be buying more/again? Ahh the future, very hard to see.

bye

Im surprised that a few experienced investors here are taking profits... Nothing wrong with it, just a bit surprised thats all

Do you see property as stagnating in those particular areas for a period?

Im curious, as this forum is often a leading indicator for property trends.. is the smart money preserving capital and taking profit in adavance... If so, maybe the herd will realise sometime later??

Never sell.

Well we won't be selling ANY of our flock. Just adding to them as best we can as the opportunities arise in Victoria and S.E Qld.

LL

trendsta said:

Im curious, as this forum is often a leading indicator for property trends.. is the smart money preserving capital and taking profit in adavance... If so, maybe the herd will realise sometime later??

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Maybe sales now can be compared to technical analysis' relative strength indicator.....i.e. property has been overbought and therefore overvalued.....

So sales now are a form of dollar cost averaging.

The pool of buyers who can afford more than current prices is shrinking.....that's a given...if PI was a Ponzi scheme, the number of suckers who are prepared to buy in (at these prices) is on the wane.

It seemed not only a short time ago, everyone was talking about flat property prices with the continued troubles in Western Sydney, affordability crises, increasing rates will lead to increased bankruptcies, liquidity issues drying up finance sources all dampening factors on property prices. All of sudden we are talking about another boom!

One big difference from the late 90's and early 00's ramp up of property prices was that rents were stagnant or only achieved slight increases in that time, with yields falling dramatically. Today, rents are up significantly, hearing increases of rents by $20-30 is now the norm in many areas. So purely based on yields I can see prices being sustained, as long as employment, confidence and immigration levels remain at the levels they are today. Let's not forget the ongoing land supply issue (or lack thereof)

Substantial increases in property prices in specific georgraphical areas/suburbs does not necessarily mean this is an across the board increase and could be a symptom of catch up for some of these areas. So not sure if the hype is as broad-based as we might think...

However I do acknowledge there are prices paid for some properties which are too much IMO. (But aren't there always in all markets!) There are examples of a number of commercial properties I have seen in the eastern suburbs of Melbourne, selling for yields of 3%...

As for me personally, I am still bullish about property, based on what I believe to be good pre-existing conditions for capital growth & yields. I settled on a property in June and will hopefully be purchasing again (if the deal is right in the next few months).

buzzlightyear said:

Today, rents are up significantly, hearing increases of rents by $20-30 is now the norm in many areas. So purely based on yields I can see prices being sustained

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Sources please. Last I heard the ABS was giving ~4% yearly rental increases though ASKING rents were up 12-20% (though there is a big difference between the two)

Yield on my house is 2.5% way less than 1/2 the cash rate. I wouldn't be suprised if yields are at an all time low (though maybe not in Sydney as they are having falling prices + rent rises)

I wouldnt even consider selling right now, give it another 10-30 years for me, then Ill reap the true rewards of real estate.

HiredGoon said:

Sources please. Last I heard the ABS was giving ~4% yearly rental increases though ASKING rents were up 12-20% (though there is a big difference between the two)

Yield on my house is 2.5% way less than 1/2 the cash rate. I wouldn't be suprised if yields are at an all time low (though maybe not in Sydney as they are having falling prices + rent rises)

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My sources is what I am actually seeing in the market in suburbs Sth Melbourne, Southbank, Northcote, Preston, Frankston South and other anectodal evidence of actual increases from people who own property in Brisbane and Sydney. This forum is another source! Commentary in the press about rents (see below). I don't have industry sources to quote, however I base my comment on what I see today in the market.

There will always be examples of lower and higher yields (compared to average), that is contrary to what the market is seeing.


http://www.theage.com.au/news/BUSIN...up-rents-report/2007/10/04/1191091199599.html

http://www.theage.com.au/news/natio...go-through-roof/2007/10/02/1191091114712.html

I was thinking of Brisbane when I posted this, I understand there are different markets operating at the moment such as Sydney which might be different.

When there are such things happening as multiple offers on properties over list price then I think you can safely call that a 'sellers market' in Brisbane, my post was probably not much more than a suggestion that it could well be a pretty good time to sell the worst X% of your property and divert the cash to other investments, could also be a terrible time.

I read a lot of property related material and don't know of even one pundit who predicted what we have seen in Brisbane this year, so you never know what will really happen in the future.

Andrew_A said:

I
I read a lot of property related material and don't know of even one pundit who predicted what we have seen in Brisbane this year, so you never know what will really happen in the future.

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IMHO..
Andrew,BRW in February this year in their residential property quarterly
15th /21 issue seems to me to be spot on as normal,they were talking
about Brisbane above the 10%in several inner area's,in 2004 there were
only 18 suburbs that went 10% in c/g,2006 33 suburbs saw pricing growth
above 10%,this year who knows but when you see properties selling for
above 800k with a rental return of $400.oo it does make anyone that
controls properties think something is wrong in the balance of value..
Good Luck with sale, i too have seen properties stay on the market
for years in Brisbane in the early 1990's,Real Estates agents can only play
their dirty games when you have a sellers market,it will be different when
the tide starts to run and it will run the other way in time....willair..

coolie21 said:

Hi UC

could you explain these terms please for a non developer?

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Hey Coolie...

all that really means is that the property is zoned for a higher residential use than housing...i.e. you can potentially put units and townhouses on them. I actually used the wrong terms there - in Brisbane its now LMR - low-medium residential, MR - medium residential...and a whole swag of others.

the short point is if you have something in brisbane that is zoned other than Res A (LR - low res) look at it seriously in terms of potential before you flick it!! and if you are going to flick it let me know - i have a big pool of developers screaming for stock!!!!!!!!!!!!!!!!!! hehehehehe


Andrew, doesn't matusik and yardney and co still have us at the bottom of the cycle??? if they are right - things could be very interesting over the short term.


cheers
UC