House prices to keep rising for years

[chops_a_must]

My replies aren't for the Chops of the world who are experts in everything without ever taking part---but those who genuinely want to know how those who are involved actually do it.
On this site being experienced and successful in what you do is seen as flagrant self indulgence.
Fortunately there are enough genuine people who appreciate the efforts of those willing to show the rare glimpses into their experiences.

Something you regularly attack and rarely contribute.

So get off my case and have a Great and Safe 2009.
See you next year.

WTF are you on about? I find it most ironic you post that, in comparison to your attacks on TH.

Developing and what most people do are two completely different kettles of fish. I've PM'd you about property, and where I get my opinions on it from.

To keep it simple. Entry conditions would be, near neutral or positive gearing equivalent from outset. Ideally on land that is capable of further development. That's exactly what I've spoken about in PM's to you.

Simple enough?

 

[2BAD4U]

These property threads make me laugh.

I have noticed alot of the perma bulls in these threads are already well established in the property markets with multiple properties. Now I don't blame them for being bullish because if I was in the same position with good gearing levels and nice income from property brought before/at the start of the boom I too would not be selling and have a positive outlook.

What most of the perma bulls can't seem to get their heads around is there are people out there in different circumstances to them and the fact for someone out of the market or people earning average wages the property market is currently expensive whether you want an investment property or a home to live in.
Not everyone has $100,000 to put down for a deposit, not everyone can afford to pay $650+ a week in repayments for a $350,000 house, not everyone earns $75,000+ a year.

Perhaps people should get off their a55 instead of complaining. Do you think everyone with investment properties where born with a silver spoon in their mouth? The argument about housing affordability has been going on for decades and will continue. Most of the people I know with investment properties have taken risks and made sacrifices to get to where they are. Likewise most of the people I see complaining earn the same amount of money but choose a different lifestyle that affects their capacity to purchase.

We all have choices to make in life. I was one who never thought I would own an investment property. I didn't suddenly come into money or get a massive pay rise. I simply worked my butt off to get what I wanted and listened to the advise given to me by others. Perhaps it would serve you well to listen to the advise offered by others in this forum.

 

[2BAD4U]

Vacancy rates in Perth have typically been between 5-10% from memory.

Crap. Try a long term average of 3%.

 

[chops_a_must]

Crap. Try a long term average of 3%.

No.

That's an arbitrary measurement used to assess squeeze levels.

I'd love to know where you got the historical figures of rental vacancies in Perth.

With commercial, I'm confident it would be well above 5%, which is one of the factors we have had such a monumental run up.

 

[finnsk]

There is a very very big difference.

(1) Inventory. In the US there was at the beginning of this 9mth supply of housing given its "CURRENT" demand. Now with VERY LITTLE DEMAND,inventory has stretched out even further. Unlike Australia large builders in the US and Europe build large subdivisions of 200+ houses BEFORE they sell them.
We however have more brains and build ON DEMAND.

(2) Record levels of rent demand and with so called "unaffordability" its only getting worse.

(3) We dont have anywhere near the number of low doc loans per capita.

So you belive that prices will keep going up because of the reasons you stated thats fine by me.
Some years ago an old friend of mine and his wife, moved here to Australia (Sydney) one day he told me a little story.
In his home country they were able to buy a house with a mortgage and live on the biggest pay "including paying of the house" and save the smallest pay, both of them worked in the printing industry, they looked to buy a house here "Harbord" but they was not able to save much, still working in the same industri, his opinion there was only three solutions to the problem.

1) More pay, did not belive that would happen
2) House prices to come down in price, did not belive that would happen either
3) Go back to his country, so thats what he did.

Spoke to him few months ago, they have a nice house, 2 kids, few pets, and still able live on the biggest pay, and yes he is getting more pay now different job, but still.

I dont know what the future brings, I am looking to buy property but not for the prices that we have now, for me it is very simple, if they come down I will buy if they dont I will not.

 

[gfresh]

$100k @10% compounding over 5 years = $161k...................$61,000 up
Pay tax = $42000 profit

$100k as deposit for $500k property at a conservative 5% over 5 years = $638,000.........$138,000 up TAX FREE

Come on Lancelot, you know that your given property equation is grossly simplified with no regards to running costs or interest expenses which would tip it to very even. And if it's an IP there are a lot of other costs such as stamp duty and disposal costs (if sold) which are not deductible, plus capital gain would be payable. You are relying on those 10%+ p/a growth years to come along which makes it all worthwhile...and that is why most people are in property, which is probably fair enough.

Anyhow, I have New Years to celebrate 2009 shall be very interesting either side of the fence.

 

[Lancelot]

Come on Lancelot, you know that your given property equation is grossly simplified with no regards to running costs or interest expenses which would tip it to very even. And if it's an IP there are a lot of other costs such as stamp duty and disposal costs (if sold) which are not deductible, plus capital gain would be payable. You are relying on those 10%+ p/a growth years to come along which makes it all worthwhile...and that is why most people are in property, which is probably fair enough.

Anyhow, I have New Years to celebrate 2009 shall be very interesting either side of the fence.

You made a mistake

I put a conservative 5% in, not 10% like you say

Quote:
Originally Posted by lancelot
$100k @10% compounding over 5 years = $161k...................$61,000 up
Pay tax = $42000 profit

$100k as deposit for $500k property at a conservative 5% over 5 years = $638,000.........$138,000 up TAX FREE

If its a PPOR, it is tax free, the OP did not stipulate it had to be an IP

 

[Julia]

Perhaps people should get off their a55 instead of complaining. Do you think everyone with investment properties where born with a silver spoon in their mouth? The argument about housing affordability has been going on for decades and will continue. Most of the people I know with investment properties have taken risks and made sacrifices to get to where they are. Likewise most of the people I see complaining earn the same amount of money but choose a different lifestyle that affects their capacity to purchase.

We all have choices to make in life. I was one who never thought I would own an investment property. I didn't suddenly come into money or get a massive pay rise. I simply worked my butt off to get what I wanted and listened to the advise given to me by others. Perhaps it would serve you well to listen to the advise offered by others in this forum.

I completely agree with this and with comments from Tech/A. Beej, Lancelot and others.

Whenever I read this thread I remember 'Stop the Clock' who ad nauseam trotted out all the same stuff that Chops posts. I doubt that anyone would be surprised if we're all still on this forum when Chops and Stop the Clock are 95 and they're still sitting on the fence.

I can clearly remember the doom mongerers at the time I bought my first IP.
"Times are uncertain", they said. "Interest rates could go higher".
(Already 22% on IP).

"If there's a real downturn in the economy, you might not be able to get tenants".

"Tenants will give you all sorts of problems. They're all irresponsible".

Etc Etc.

Never had a single problem with a tenant, never was that place vacant, inflation pushed rents higher all the time, and the capital appreciation was excellent.

 

[wayneL]

Perhaps people should get off their a55 instead of complaining. Do you think everyone with investment properties where born with a silver spoon in their mouth? The argument about housing affordability has been going on for decades and will continue. Most of the people I know with investment properties have taken risks and made sacrifices to get to where they are. Likewise most of the people I see complaining earn the same amount of money but choose a different lifestyle that affects their capacity to purchase.

We all have choices to make in life. I was one who never thought I would own an investment property. I didn't suddenly come into money or get a massive pay rise. I simply worked my butt off to get what I wanted and listened to the advise given to me by others. Perhaps it would serve you well to listen to the advise offered by others in this forum.

Timing can be important.

BTL landlords who entered the market here in 2005-2007 are falling over like ten-pins in a bowling alley.

There are even margin calls here and there.

Julia's comments above are valid, but there is a point where overvaluations can seriously hurt the investor.

I'm about to turn moderately bullish for the long term, as value is starting to appear here and there... and I mean "real" value . Add in that there will probably be an episode of high inflation after the depression and RE will make sense again. But not quite yet.

* Comments obviously refer to UK

 

[Whiskers]

I agree with Tech/a and Julia and others along the same lines. You'll never achieve, if you keep telling yourself you can't do it or get overly concerned with the wrong or relatively minor issues.

I mean this rather trivial arguement about vacancy rates means little if you follow the basic's of property investment because you'll have a good property in a good position with good tennants... ie minimal vacancy time.

Although I did turn over a few tennants, for the most part they left the property in good order. With one exception (which was two days) I always re-let the property the day after it was vacated. So in something like three years I only lost one day's rent.

What makes you think it wasnt exactly the same as it is now in our day.
It was! We needed 2 wages to buy our first home. We DIDNT get a 1St Home owners grant either! We didnt have interest rates at 6.5% either! Try 12%!

I did without some so called necessaties, that many young people feel they must have, to be able to built my own home. It was a conscious decision to build somewhere I could afford.

In the eighties a change of circumstances took me away for work, but I decided to borrow at about 21% I think it was, to buy a second house, rather than sell my home or rent for a couple of years. The job didn't last as long as forcast but still refinanced at 15% after about 12 months and rented for some time before selling for almost 50% gross gain... which brings me to tech/a's next point.

Every 15 or so years market conditions like those seen in the late 90s will come around---just wait! (Being sarcastic!).

As some wise old timers I respected used to say there's a time and a place for everything... be prepared, bide your time and make it count, ie once you make the plan exercise it with commitment. Half hearted poorly though out plans rarely work out... but have a contingency plan, don't burn your bridges behind you.

For successful investment housing though, sound judgement doesn't just mean financial judgement... you or the property manager must have good people skills to evaluate the best tennants, which you should then treat as a valuable asset, just as your property.

 

[Glen48]

I read about a bloke who sold a house at Broadbeach on the Gold Coast I can't remember the exact figures but it averaged 3% OVER about 50 yrs before inflation.
Yes RE does go up & down ..but any one who hasn't sold now will be left with a time bomb due to go off in 2009

 

[kincella]

Glen, that is not possible for property to remain at 3 % for over 50 years....someone is pulling your leg.... a house on the gold coast....
even if the house was unliveable...the land would have increased 5 fold

and the statement if not sold now... a time bomb to go off in 2009.....

you may be surprised...it could go upwards like a bomb....
generally property will not go down.....but individual props over 2 mill etc could be sold cheaper ..due to a margin loan or some specific problem with the owner...

 

[Bill M]

I doubt you'll ever see a 40% decline in eastern suburbs property prices either. However if we've learned one thing this year it is that history isn't as good a guide to the future as most people believe, regardless of whether you've been investing 30 years. I wonder if you still think CBA was a good buy at $50 back in February?

Hello dhukka, good memory but I don't know why you bought up CBA in this thread. I made a wrong call but so did 90% of other people on 90% of other stocks available to buy. Who would have ever thought RIO would drop by 80% or even BHP by 60% or WPL by 60%, people on this forum were calling them good buys at their high prices. Anyhow as I mentioned back in Feb, I am a long term holder and as such I still hold CBA and collect very nice tax paid dividends. The end game isn't over until you sell.

Back to the thread now, has anyone ever experienced such catastrophic losses on real estate like 80% or 60% or even 43%? I never have.

Another reason why I'm annoyed with investing in some stocks is the CEO's and Directors get the jump on shareholders on info and sell their own stocks before the market gets the bad news. Hence they get out at higher prices and we get hammered when the announcements come out. How can they legally get away with that?

At least with property you are in direct control. You decide who manages it, who lives in it and how much rent you charge. There are no CEO's flogging stocks behind your back 1 week prior to sensitive announcements. So "House prices to keep rising for years"? Of course they will, too many people and not enough dwellings. With rents rising year after year, share markets falling over a cliff, dividend incomes dropping, people are looking for more certainty. Real Estate as an investment or for somewhere to live without ever increasing rents can provide that certainty.

 

[Bill M]

Probably here already, note the date

That article dated 1970 is a beauty (click here for that), nothing has changed, nothing. People are still complaining about the same things.

Some 15 years ago a mate was whinging to me about the price of real estate. I said to him it is not that bad, all you need is 10% down and borrow 90%. Think small and just buy a 1 bedroom unit to start with. I said all you need is 25K, you can save that in a year. He said he could never live in a one bedroom unit, he wanted 3 bedrooms at least, he never saved that 25K. That guy is now paying rent of $650 per/week in a very ordinary suburb in Sydney. The 1 bedroom unit in the mean time has more than doubled. By making small sacrifices now can pay off very well for the future, we all did it the hard way.

 

[kincella]

Bill M,
my thoughts regarding the stock market are similar to yours...and agree about the control over your property.....plus 70% of the population are home owners, and another 30% of homeowners are also property investors.....ie they provide the 30% of renters with a property ( my rough figures...govt public housing provides x% etc)...compelling case that property is a favoured asset and investment....

The majority of those prop owners are unlikely to swap and change on mood swings...which is what the CURRENT stock market relies on ....providing volatility for the PLAYERS...the stock market used to be marketed as an alternative for conservative investors.....good stocks with good dividends......its been volatile since the 1930's....its more high risk than property ever was, there have been good years....like 2003 to 2007 but that has all been dissolved in 2008.....

None of us need the stress of watching a good stock plunge in price on a daily basis....with only the insiders aware of the new rules they play by...and shareholders being the outsiders, oblivious to their rules.

Some people mock the idea that at any local house auction a reasonable number of neighbours turn up to watch the prices....the neighbours have a good reason for this....they have an asset that needs protection....

I believe money is already flowing through to property, and a lot more will flow in, come 2009. There are a lot of investors with money in superfunds, and in the sharemarket, and cash in the bank...who are very angry with how their investments have been manipulated and managed.....they will opt out for a safer , lower risk investment that property offers.

Reminds me...an associate was planning on retirement Dec 08....originally had 300,000 in super...plus property on his own account....he was intending to use some of the super to reduce the loan on the investment property....super is probably worth half of that now....the prop loan was less than 40% LVR....imagine he would be stalling his retirement...but he may be angry enough to take what money is left and run....the interest on the loan will reduce...not much of a problem.anyway.....and will ease the burden....

his wife has several properties....funding her own retirement....very little super for the females over the years when they only ever worked part time..
he was a reluctant property investor in the beginning...but over the years the little property he did purchase has grown significantly, and returning a good cash flow income..at the same time he salary sacrificed into super and then added an extra 10,000 pa to the super.....I can just imagine how angry and dissapointed he will be....years of hard work and then on retirement to see it diminished.....I have other friends and associates in similar circumstances....there will be a backlash....I cannot see them sitting idly by and leaving funds in super or the stockmarket....most have an active approach regarding money...so a term deposit with the bank is not an option either....
I was right in reading the aftermath of the teck wreck and funds flowed into property....I believe we have a similar situation here...except its far greater than the teck wreck...and interest rates falling now..which was not the case then .........I will be very surprised if its different this time....

The younger readers may doubt me..they have...30 plus years to recover....but most of the older generation have too much to lose....right now either into retirement or on the brink of retirement....
cheers

 

[robots]

hello,

but chops, prawn, NC and others are doing well man as they saving hard, putting it away

thats the game rent and invest nothing wrong with that, people will do well

thankyou
robots

 

[numbercruncher]

No saving here, Investing, oportunity galore .....

Whats your guys big tip on RE Medians this year ? 2008 sucked for team re permabull, what sort of % + are we talking ?

 

[robots]

hello,

but chops, prawn, NC and others are doing well man as they saving hard, putting it away

thats the game rent and invest nothing wrong with that, people will do well

thankyou
robots

hello,

team robi done well St Kilda units up 14.8%, probably just kick back and continue to focus on income where the real risk free mega dollars are made

anything else a bonus

thankyou
robots

 

[Lancelot]

2008 sucked for team re permabull,

Not for all of them it wasnt, some did very well thanks

Dont believe everything you read in the paper NC, ever heard of confirmation bias?

 

[Bill M]

Lancelot got me thinking of some of the old clippings I cut out years ago. Here is one after the early 90's recession, dated 1994. Note: exactly the same arguments then as now.

Quote from article:

"The table on this page shows how off the mark the doom and gloom merchants were, when, as they did in 1983 and more recently in 1992, they predicted that price increases were a thing from the past. Whilst caution is wise, undue caution could see some buyers miss out on excellent opportunities."

Now the Sydney median house prices are around 550K.