The end of property investing as we know it

JohnHenry

JohnHenry

Hi People,

So I read from the news and probably most of all know it that recently there is no sign of positive growth in the Australian housing market, this can be seen from the following official news:

RBA Chief G. Stevens said that property investing is no longer profitable and the reason he cut the interest rate down is for helping the household mortgage payment:
Code: 
http://www.heraldsun.com.au/money/property/rate-cuts-not-aimed-at-house-prices-rba/story-fnbpe2tv-1226389116197

and this news also shows that the real estate industry suffering -5.3% downturn:
Code: 
http://www.yourinvestmentpropertymag.com.au/news/australian-property-values-drop-129808.aspx

What's your comment about the current situation ?
 
JohnHenry said:
Hi People,

So I read from the news and probably most of all know it that recently there is no sign of positive growth in the Australian housing market, this can be seen from the following official news:

RBA Chief G. Stevens said that property investing is no longer profitable and the reason he cut the interest rate down is for helping the household mortgage payment:
Code: 
http://www.heraldsun.com.au/money/property/rate-cuts-not-aimed-at-house-prices-rba/story-fnbpe2tv-1226389116197

and this news also shows that the real estate industry suffering -5.3% downturn:
Code: 
http://www.yourinvestmentpropertymag.com.au/news/australian-property-values-drop-129808.aspx

What's your comment about the current situation ?
Click to expand...


Passive residential property investing is no good. However, if you have building skills then i think you can still make money from active residential property investment.
 
"as we know it"

Over what period of time? 50, 30, 10 years??

Which states/area?

Different people probably know it to be somewhat different to each other.

Met up with a distant relative in Perth the other week who lives in Sydney (we were there for a wedding), and told me her PPOR cost her 720K in 2002.

Stated that at some point a few years later it dropped in value to around 500K, and say's it's now probably valued at around 750K (western suburbs, but don't know the suburb).

My Adelaide PPOR bought in Jan 2001 would have MORE than doubled, on it's pre renovated state, but would be down 10% now.

My Perth relatives where listening on with interest, and one put in an offer on a development block the morning of the day we left.

Me personally... I think the market will remain slow for a couple of years at least.

Btw, we were discussing the housing market, not comparing wealth :p.
 
I am in no means an experienced investor and I have only been really looking at property as a vehicle for wealth creation over the past two years. So these are just my thoughts, and some could find they disagree.

I can see where you are coming from - it does seem to me that in the past people could buy pretty much any property and find that in 10-15 years it had grown substantially in value. I mean look at all the people who bought a house for 70k 'x' years ago and are now worth 500-600k+. I know 70k was a lot more back then and interest rates were as high as 17 percent or so.

Personally, I am not the biggest fan of searching for cash flow positive properties. But I guess this is a way of adapting to a changing market where people feel safer with high yields producing small amounts of income instead of gambling on CG.

My strategy is as follows. I do feel that investing in property is going to take a lot more research and education in the future. You won't be able to just buy any old property and expect strong capital growth. I do not believe that you can keep spinning the line that property doubles in value every 7-10 years anymore. Well some might - but the clever investor will need to identify these excellent properties and the number of these will be far less than there were in the past.

We are at the bottom of the cycle - and I do believe we will return to better times within 5-8 years. Don't listen to all the negative doom and gloom by the media and others. We have a strong GDP, low unemployment, strong resource drivers and are relatively stable and will survive these turbulent times and Australia and the world will recover in time.

I am keen to acquire properties within 15km of major cities that have potential for development to add 2-4 more dwellings. I feel with our strong population growth and trend to smaller households these have a good chance of continuing to see capital growth and when it comes time for myself to develop them I hope increase my wealth by acquiring the end products at wholesale prices.

I guess my overall view is that I don't believe the extreme CG that was seen in the past will be seen again on the same scale in the foreseeable future. But there will always be profits to be made in every deal. Don't lose hope. With no risk there is no reward.

'Be Fearful When Others Are Greedy and Greedy When Others Are Fearful' WB
 
YPG said:
I am in no means an experienced investor and I have only been really looking at property as a vehicle for wealth creation over the past two years. So these are just my thoughts, and some could find they disagree.

I can see where you are coming from - it does seem to me that in the past people could buy pretty much any property and find that in 10-15 years it had grown substantially in value. I mean look at all the people who bought a house for 70k 'x' years ago and are now worth 500-600k+. I know 70k was a lot more back then and interest rates were as high as 17 percent or so.

Personally, I am not the biggest fan of searching for cash flow positive properties. But I guess this is a way of adapting to a changing market where people feel safer with high yields producing small amounts of income instead of gambling on CG.

My strategy is as follows. I do feel that investing in property is going to take a lot more research and education in the future. You won't be able to just buy any old property and expect strong capital growth. I do not believe that you can keep spinning the line that property doubles in value every 7-10 years anymore. Well some might - but the clever investor will need to identify these excellent properties and the number of these will be far less than there were in the past.

We are at the bottom of the cycle - and I do believe we will return to better times within 5-8 years. Don't listen to all the negative doom and gloom by the media and others. We have a strong GDP, low unemployment, strong resource drivers and are relatively stable and will survive these turbulent times and Australia and the world will recover in time.

I am keen to acquire properties within 15km of major cities that have potential for development to add 2-4 more dwellings. I feel with our strong population growth and trend to smaller households these have a good chance of continuing to see capital growth and when it comes time for myself to develop them I hope increase my wealth by acquiring the end products at wholesale prices.

I guess my overall view is that I don't believe the extreme CG that was seen in the past will be seen again on the same scale in the foreseeable future. But there will always be profits to be made in every deal. Don't lose hope. With no risk there is no reward.

'Be Fearful When Others Are Greedy and Greedy When Others Are Fearful' WB
Click to expand...

Nicely and succinctly put.

Just a few questions.

Why do you think we are at the bottom of the cycle?

Why do you think australia is immune to the natural economic cycle and be different to every other major property market in the world, meaning drops of 20% of prices?
 
Markets go through cycles.

Do you think a similar outlook and similar media reports were published at some point during the previous cycle?

What makes this particular cycle different than the past 100 years?

Ypg's buffet quote applies very well here. Fearful when others are greedy. Greedy when others are fearful. Which do you think fits this scenario?
 
matto_ said:
Markets go through cycles.

Do you think a similar outlook and similar media reports were published at some point during the previous cycle?

What makes this particular cycle different than the past 100 years?

Ypg's buffet quote applies very well here. Fearful when others are greedy. Greedy when others are fearful. Which do you think fits this scenario?
Click to expand...

Yes, I am not sure whether to be greedy or fearful right now. I don't know where we are in the cycle in the Australian economy and housing market. I have a suspicion we have more downward motion to go and/or will stay down for a long while.
 
All I know that it is a great time to buy in my area with prices and IR's having dropped. Yields are improving and opportunities abound in this buyers market. More supply than demand and some unfortunate people getting desperate. I don't know what the fuss is about? Go with the flow and take action according to the current conditions.
 
china said:
Yes, I am not sure whether to be greedy or fearful right now. I don't know where we are in the cycle in the Australian economy and housing market. I have a suspicion we have more downward motion to go and/or will stay down for a long while.
Click to expand...

If you listen to chartists talking about stocks, they always talk about buying stocks AFTER a RISE above a certain price. That is, they wait for CONFORMATION of a trend.

I think this is good advice for all investment classes.

Having retired I will never go back into property but even you younger folk should be more patient and not try to be heros and pick the very bottom. Personally, I do not believe property will have across the board price appreciation above interest rates again for another generation. [generally considered 25 years]

I don't expect that opinion to be widely accepted here though :D:D but it is honestly given. I am also very concerned about the macro economic situation. I somehow doubt both Europe and The US will "muddle through" their current predicament, which seems to be the prevailing thought [or lack of it] among investors today. Egon von Greyerz [just another opinion among many] calls an inflationary depression in his latest interview with Eric King. I have no idea how that would work and would prefer to be a spectator and NOT in the ring bleeding.
 
Sunfish said:
If you listen to chartists talking about stocks, they always talk about buying stocks AFTER a RISE above a certain price. That is, they wait for CONFORMATION of a trend.

I think this is good advice for all investment classes.

Having retired I will never go back into property but even you younger folk should be more patient and not try to be heros and pick the very bottom. Personally, I do not believe property will have across the board price appreciation above interest rates again for another generation. [generally considered 25 years]

I don't expect that opinion to be widely accepted here though :D:D but it is honestly given. I am also very concerned about the macro economic situation. I somehow doubt both Europe and The US will "muddle through" their current predicament, which seems to be the prevailing thought [or lack of it] among investors today. Egon von Greyerz [just another opinion among many] calls an inflationary depression in his latest interview with Eric King. I have no idea how that would work and would prefer to be a spectator and NOT in the ring bleeding.
Click to expand...

You have clearly been around a long time. So based on your view that Europe and US will struggle for a long time, is it then a good idea to short sell stocks as the best way to make money? - especially if property isn't going to be a winner for the next 25 years.
 
china said:
You have clearly been around a long time. So based on your view that Europe and US will struggle for a long time, is it then a good idea to short sell stocks as the best way to make money? - especially if property isn't going to be a winner for the next 25 years.
Click to expand...
IMO the problem with shorting stocks is that the central banks and regulators will likely continue meddling in the markets, so that could mean violent rallies (following QE programs for example) to the upside taking out your stop losses before crashing again, could mean bans on shorting stocks, etc. IMO shorting stocks is not "investing", it's trading and shouldn't be attempted by the novice.
 
JohnHenry said:
So I read from the news and probably most of all know it that recently there is no sign of positive growth in the Australian housing market.....
Click to expand...
2 things John:
1. Cut out reading the "news" as investment advice. That's for the herd. If you follow the herd, you'll end up broke and on the pension.:eek:
2. There is no single "Australian property market". There are many markets and markets within markets. If you look at the CG chart attached for one of my favourite Inner West Sydney areas - Summer Hill, you can see there are plenty of signs of positive growth there.
There are many other examples, you just have to look :)

JohnHenry said:
this can be seen from the following official news:
RBA Chief G. Stevens said that property investing is no longer profitable and the reason he cut the interest rate down is for helping the household mortgage payment
Click to expand...
3 things John:
1. How many IPs does RBA Chief G. Stevens own? ....and do you want to emulate his success in investing? :confused:
2. RBA Chief G. Stevens has an agenda to keep inflation under control, not to provide investment advice.
3. I'm pretty sure he said that before, a few years ago. Just as well the investors in properties in Summer Hill and other growth suburbs (and there are many), did not listen to him then. :rolleyes:

JohnHenry said:
What's your comment about the current situation ?
Click to expand...

http://www.youtube.com/watch?v=WjQZNAfxaTw :)

+ "I've never heard so much BS in all my life". Well actually that's not true, I did hear similar BS in 2008/9 mid-GFC. It was all D&G then too but we were buying in what proved to be one of the best buyers markets as fear drove prices down and fortune favoured the brave. Prices since then have risen substantially.
 

Attachments

  • SummerHillHouses.jpg
    SummerHillHouses.jpg
    46.8 KB · Views: 95
Propertunity,


You concentrate on the fine details within individual property markets and seem to make money.


Others concentrate on the generalised chit-chat and Australia wide data gabfests like the RBA, ABS etc etc.....and they never seem to make any money.


I'm in your camp mate.
 
Propertunity said:
*snip the usual*

1. How many IPs does RBA Chief G. Stevens own? ....and do you want to emulate his success in investing? :confused:
2. RBA Chief G. Stevens has an agenda to keep inflation under control, not to provide investment advice.
3. I'm pretty sure he said that before, a few years ago. Just as well the investors in properties in Summer Hill and other growth suburbs (and there are many), did not listen to him then. :rolleyes:

*snip the rest*
Click to expand...

Glen Stevens : Runs the Reserve Bank. Masters degree in economics and ex-Visiting Scholar at the Federal Reserve Bank of San Francisco. Yet to provide evidence of IP ownership. Ergo, opinions can be dismissed.

Buyers agents: Vested interest in others buying property. Qualifications unknown. Ergo, hubris level 11.
 
well after reading the news and compare it with the independent report from
Code: 
http://www.eurekareport.com.au/
by Monique Sasson Wakelin

there seems to be a cycle of growth and decline, am I right ? and the cycle is around a decade more / less.

So the conclusion is that property is still a good investment despite doomsayers, we just need to know the timing by actively doing the research about the market and going out in the field.
 
Token Funder said:
Glen Stevens : Runs the Reserve Bank. Masters degree in economics and ex-Visiting Scholar at the Federal Reserve Bank of San Francisco. Yet to provide evidence of IP ownership. Ergo, opinions can be dismissed.
Click to expand...
Not so much 'dismissed' as much as 'taken with a grain of salt'. He's been wrong before.

Token Funder said:
Buyers agents: Vested interest in others buying property. Qualifications unknown. Ergo, hubris level 11.
Click to expand...
Hence, the full disclosure of where I am coming from by putting "Real Estate Buyers Agent" in my title, so people can form their own judgements. ;)
 
Propertunity said:
+ "I've never heard so much BS in all my life". Well actually that's not true, I did hear similar BS in 2008/9 mid-GFC. It was all D&G then too but we were buying in what proved to be one of the best buyers markets as fear drove prices down and fortune favoured the brave. Prices since then have risen substantially.
Click to expand...
Hey prop, I took a look at Summer Hill via PF.

Having a look at the 36 month chart for Summer Hill shows a much choppier price range.

Do you really think that a suburb with 40 house sales a year is going to provide a median which accurately reflects price changes in the area?

Can you provide any repeat sale examples which reflect a decent price increase over the past few years?
 

Attachments

  • SummerHill.jpg
    SummerHill.jpg
    51.8 KB · Views: 64
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