Hi folks. Been lurking a while and just signed up for my first post.
I'm pretty keen to get into property investment in Sydney (and elsewhere) and have been doing plenty of background reading in the past couple of months. I feel ready to dip my toe into the market except for one thing... there is a lot of conflicting talk about whether the market is over-valued or not.
For those of you who invest in shares, you'll no doubt be aware of a similar argument in late 2006 and early 2007. There were plenty of articles in the paper and on forums discussing whether shares were overvalued. A common line of reasoning was that although the prices seemed high, they probably weren't too far off fair value because the economy was doing well and Australia was different (China etc).
After considering all the arguments, I concluded that this argument was reasonably convincing. In addition, I was investing with a long-term buy-and-hold strategy and it's "time in the market" not "timing the market" right? So invested a chunk of savings (dollar-cost-averaged in) starting at the beginning of July 2007.
Well, we all know how that ended. I am still 20% down on my initial investment, having almost perfectly picked the peak of the market.
So when in comes to investing in property, I am wary when people argue that although prices seem overvalued, they are in fact "fair". Similarly when people point to the opportunity cost of sitting on ones hands, I point to the real cost of entering the market at the wrong time. Even if you buy-and-hold, the fact is that you may lose 5 or more years of time just to get your investment back to its original 'value'.
It's all very well for folks who are already in the market to talk about jumping in and taking action. They have mostly been fortunate to take action at a time where prices have risen steadily. Which of course means, that if prices fall many folks here will still be heavily in profit.
Anyway, to my question... does anyone here advise caution for the next year or two? And what are the best ways of minimising losses in the event of a fall in prices? Obviously on the micro-level you need to buy well. But are there particular types of investment which are likely to fall less.... eg. suburban areas within 15km of the CBD and prices in the $200k-300k range? I'm wondering if I might be better holding off till 2011 and just see what happens in the meantime.
Your thoughts are very much appreciated. Let me tell you, it's not fun saving up for an investment only to watch years of savings disappear steadily from the balance sheet. Investment Rule number 1 for me is definitely: do not lose money!
I'm pretty keen to get into property investment in Sydney (and elsewhere) and have been doing plenty of background reading in the past couple of months. I feel ready to dip my toe into the market except for one thing... there is a lot of conflicting talk about whether the market is over-valued or not.
For those of you who invest in shares, you'll no doubt be aware of a similar argument in late 2006 and early 2007. There were plenty of articles in the paper and on forums discussing whether shares were overvalued. A common line of reasoning was that although the prices seemed high, they probably weren't too far off fair value because the economy was doing well and Australia was different (China etc).
After considering all the arguments, I concluded that this argument was reasonably convincing. In addition, I was investing with a long-term buy-and-hold strategy and it's "time in the market" not "timing the market" right? So invested a chunk of savings (dollar-cost-averaged in) starting at the beginning of July 2007.
Well, we all know how that ended. I am still 20% down on my initial investment, having almost perfectly picked the peak of the market.
So when in comes to investing in property, I am wary when people argue that although prices seem overvalued, they are in fact "fair". Similarly when people point to the opportunity cost of sitting on ones hands, I point to the real cost of entering the market at the wrong time. Even if you buy-and-hold, the fact is that you may lose 5 or more years of time just to get your investment back to its original 'value'.
It's all very well for folks who are already in the market to talk about jumping in and taking action. They have mostly been fortunate to take action at a time where prices have risen steadily. Which of course means, that if prices fall many folks here will still be heavily in profit.
Anyway, to my question... does anyone here advise caution for the next year or two? And what are the best ways of minimising losses in the event of a fall in prices? Obviously on the micro-level you need to buy well. But are there particular types of investment which are likely to fall less.... eg. suburban areas within 15km of the CBD and prices in the $200k-300k range? I'm wondering if I might be better holding off till 2011 and just see what happens in the meantime.
Your thoughts are very much appreciated. Let me tell you, it's not fun saving up for an investment only to watch years of savings disappear steadily from the balance sheet. Investment Rule number 1 for me is definitely: do not lose money!