The end of property investing as we know it

[Dazz]

A lot of people wish to be right, poor but right. Think of the bucket that contains all of your experts - Economics professors, RBA Governors, Token Funder, credit and risk people in Banks. All of 'em don't have two brass razzoos to rub together, but they couldn't care less about that. That just want to be acknowledged as the smartest in the room.

Others in the productive bucket roll with the punches, adapt, survive, flourish, and couldn't care two hoots about being right....they just want to have more money in their pocket than when they started.

 

[Propertunity]

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

Looking at Qtr to Qtr trends in a RE market that only has 40 sales is nuts IMO.

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?

If you look at year on year trends - yes I think you can get a 'feel'.

The whole 'median price' movement thing is fraught with danger as you'd be aware. My own suburb, is "off the chart" at the moment looking like it is shooting for the moon, but on the basis of only 2 sales this year

Much like your Summer Hill chart with a selected range to June '12 - when no sales have been reported yet via Land Titles office.

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

This too has issues:
1. Most of my clients buy to reno and hold (or sell). Therefore the renovated price is not a true representation of the suburb CG.
2. Most resales in "a few years" generally (not always) represents a distressed sale.

Residex looks at resales of the same house over time (but can't look at the effect of a reno).

I can do some research, but it will take a while.

 

[Rockstar]

RBA Chief G. Stevens said that property investing is no longer profitable

That would be of comfort to those who invested/speculated a couple of years ago! Maybe Glen could have warned everybody back then before the market peaked in most areas.

 

[hobo-jo]

Residex looks at resales of the same house over time (but can't look at the effect of a reno).

I can do some research, but it will take a while.

So you would agree then that your comment "Prices since then (2008/2009) have risen substantially (in Summer Hill)" probably wasn't a fair comment to make without further consideration?

 

[MaxwellSmart]

Recommended Reading: "Fit to print" - Joris Luyendijk

"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"


Where in the monetary statement does he say this?


http://www.rba.gov.au/media-releases/2012/mr-12-13.html


It seems as if our nation holds a similar, pessimistic view to the one shared so far in this thread.

Reasons?

Yet the nature of public discussion is unrelentingly gloomy, and this has intensified over the past six months. Even before the recent turn of events in Europe and their effects on global markets, we were grimly determined to see our glass as half empty. Numerous foreign visitors to the Reserve Bank have remarked on the surprising extent of this pessimism. Each time I travel abroad I am struck by the difference between the perceptions held by foreigners about Australia and what I read in the newspapers at home.

http://www.rba.gov.au/speeches/2012/sp-gov-080612.html

Why are we so gloomy?

Do not let what is printed in the newspapers guide your decisions. Discern truth from opinion.

 

[hobo-jo]

That would be of comfort to those who invested/speculated a couple of years ago! Maybe Glen could have warned everybody back then before the market peaked in most areas.

July 2009

"A very real challenge in the near term (for Australia is) how to ensure that the ready availability and low cost of housing finance is translated into more dwellings, not just higher prices," Mr Stevens said.

"Given the circumstances the economy moving to a position of less than full employment, with labour shortages lessening and reduced pressure on prices for raw material inputs, this ought to be the time when we can add to the dwelling stock without a major run-up in prices.

"If we fail to do that, if all we end up with is higher prices and not many more dwellings, then it will be very disappointing, indeed quite disturbing."

http://www.news.com.au/rba-warns-of-housing-bubble-risk/story-0-1225755565845

March 2010

“These (house) prices are getting quite high,” Mr Stevens said. “I’ve got kids that within not too many years are going to want somewhere of their own to live and you wonder how is that going to be afforded.”

"It's a mistake to assume a riskless, easy, and guaranteed way to prosperity is just to leverage to property," he said.

http://www.smh.com.au/business/rbas-stevens-warns-against-housing-speculation-20100329-r5y5.html

 

[evand]

I don't think that's in his job description.

Maybe Glen could have warned everybody back then before the market peaked in most areas.

 

[Aaron Sice]

he has to say it's dead to stop the housing growth (boom, bubble....whatever) he's been trying to stop all along.

i take it this means you should jump into property now?

 

[Propertunity]

So you would agree then that your comment "Prices since then (2008/2009) have risen substantially (in Summer Hill)" probably wasn't a fair comment to make without further consideration?

No, I would not agree. The median price in Summer Hill in that dip of 2008/9 was $721K on the basis of 54 sales. (In the year preceeding it had been $800K on the basis of 45 sales).

The median in 2010 on the basis of 37 sales was $795K
The median in 2011 on the basis of 41 sales was $940K
The median in 2012 on the basis of 24 sales so far is $970K

So on that basis with a 3yr trend showing a substantially rising median, I'd stand by my initial comments.

 

[Aaron_C]

I wouldn't listen to a career-bureaucrat for investing advice. His job is to work the interest-rate lever, not to make you rich. Make your own decisions.

 

[Rockstar]

July 2009

http://www.news.com.au/rba-warns-of-housing-bubble-risk/story-0-1225755565845

March 2010

http://www.smh.com.au/business/rbas-stevens-warns-against-housing-speculation-20100329-r5y5.html

Well done Hobo.. I take it back.

 

[JohnHenry]

Well done Hobo.. I take it back.

Thanks for the encouragement guys, I was under the impression that RBA is always right about the prediction about the investment advice.

 

[Bigtone]

Thanks for the encouragement guys, I was under the impression that RBA is always right about the prediction about the investment advice.

I have been thinking this for awhile but have not said it but I think the time has come. Johnhenry you really should not be investing in property. I have never seen or heard someone so ripe to be ripped off and exploited, while its great to ask questions your naivety is truly frightening and I fear you and your money will soon be parting ways. A good mentor could save you but you are likely to choose a shonk so its probably best to read this forum for another 3 years or so before doing anything. No need to rush into anything.

 

[JohnHenry]

Seems to me that property demand has fallen off a cliff. Prices are yet to fall further.

Shame that our governments are so addicted to the property economy that they prop it all up with tax payer dollars. I believe now it is time to remove negative gearing & clean up the industry.

You dont need to be a cynic ... this property market is problematic, unregulated, manipulated, disguised & subsidised too heavily with the recent new FHOG.

 

[Aaron_C]

Seems to me that property demand has fallen off a cliff. Prices are yet to fall further.

Shame that our governments are so addicted to the property economy that they prop it all up with tax payer dollars. I believe now it is time to remove negative gearing & clean up the industry.

You dont need to be a cynic ... this property market is problematic, unregulated, manipulated, disguised & subsidised too heavily with the recent new FHOG.

Maybe in your local area but in Melbourne's inner-city ring prices are still holding up very well.

 

[Dazz]

Maybe in your local area but.....

This is one of the biggest downsides of commentary regarding "the property market" and conversely why there are so many opportunities for those willing to get their heads out of the clouds and start sniffing around in the weeds where all of the real deals are.

All of your high level commentary stay up in the clouds, where there aren't any real deals. You cannot buy a 'Victorian median house' that has risen 3.6% pa.

You can only buy something like # 18 Rose Street in Box Hill....the one across from the road of the train station with a nice front garden, but it has a funny shaped backyard with a two storey neighbour that sort of overlooks it.

Other than **** returns and a management nightmare, this is one of the reasons why big institutions and funds and Banks never buy residential.

 

[HotRod]

Seems to me that property demand has fallen off a cliff. Prices are yet to fall further.

Shame that our governments are so addicted to the property economy that they prop it all up with tax payer dollars. I believe now it is time to remove negative gearing & clean up the industry.

You dont need to be a cynic ... this property market is problematic, unregulated, manipulated, disguised & subsidised too heavily with the recent new FHOG.

Not this chesnut again.

There is evidence what impact this clever idea had.

 

[Ausprop]

Other than **** returns and a management nightmare, this is one of the reasons why big institutions and funds and Banks never buy residential.

a few lessons there for all of us really

 

[JohnHenry]

.....
Other than **** returns and a management nightmare, this is one of the reasons why big institutions and funds and Banks never buy residential.

In one occasion, I was rejected by the mortgage broker when I was looking to finance a studio unit. They told me that the bank doesn't like it

 

[BayView]

I love these threads.

Why? because I'm an old b@stard like Sunfish, and we've been around long enough to see a lot of property stuff happen; good and bad.

One thing that is for sure; not one single house I've ever lived/owned is worth less than when I was in it/owned it. They have all gone up; some more than others, some stayed flat for a time, then off they go again.

What we are experiencing right now is a part of a cycle; albeit there seems to be more outside influencing factors than you'd normally expect such as post-GFC, the Europe/Spain scenario, perceived lack of affordability and so on.

I tend to agree with others that it's simple maths; if the wages haven't gone up at similar rates to the houses, then a lot of properties will be hard to afford for many, and property will have to slow down for a while for the incomes to catch up - unless the Banks start throwing money at folk again, and this won't happen anytime soon I reckon.

Will this part of the cycle be a long period? I don't know.

The good news out of all the bad is that if you are in a position to buy, then the climate will be good for this in the short/medium term - I don't expect prices of houses to go up much in the next coupla years.

There will be pockets that will, and if you can find them then good luck to you. Purchase for cashflow, but with the anticipation of cap growth would be my tip.

This is not a doom and gloom post either; just stating my take on how the cycle goes; it will go up again - as sure as yer bum points to the ground, but maybe not in the next 2 year window.