House prices to stagnate for 'years'

[chops_a_must]

Who would have thunk it? It's the cashed up bogans demanding more money that has made buildings more expensive than ever before. Not the states. Oh well. Im sure they will be put back in their proper caste in the impending apocalypse.

 

[Kathmandu]

The point of the bears (most of us anyway) is not that property is a bad investment, it's that there are good times to buy and bad times to buy. Of course property can be a sterling investment.

But people who buy at the wrong time, can, and do, lose shedloads of money. The argument is that this is not a good time to buy under many circumstances. Folks in the US are learning this lesson right now. Recent buyers in regional UK and Eire are also discovering that, with further pain ahead.

Oz has had a few problems here and there as well.

The key is availability of credit. With the mortgage apocalypse in full swing, borrowing capacity everywhere will be affected, with all the knock on effects that entails.

As I've said many times, bears are only bears so they can eventually be bulls.

Have I missed something????

This happen's with shares as well, and usually a lot faster.

Yes, I do understand that you can get out and in faster, but property historicaly comes back up, so the only loser's are those that need or feel that they need , to sell.

As property is a long term investment, it could be argued that any time is a good time to buy.

Dave

Dave

 

[Flying Fish]

The point of the bears (most of us anyway) is not that property is a bad investment, it's that there are good times to buy and bad times to buy. Of course property can be a sterling investment.

But people who buy at the wrong time, can, and do, lose shedloads of money. The argument is that this is not a good time to buy under many circumstances. Folks in the US are learning this lesson right now. Recent buyers in regional UK and Eire are also discovering that, with further pain ahead.

Oz has had a few problems here and there as well.

The key is availability of credit. With the mortgage apocalypse in full swing, borrowing capacity everywhere will be affected, with all the knock on effects that entails.

As I've said many times, bears are only bears so they can eventually be bulls.

what does it all mean though/ You get access to easy money now or latter. Anyone get in on hedleys float?

 

[wayneL]

Have I missed something????

This happen's with shares as well, and usually a lot faster.

Bloody hell, there's more straw men here than in a corn field today.

No you haven't missed anything at all, just created a point that was not made by me. Who was comparing to shares?

Yes, I do understand that you can get out and in faster, but property historicaly comes back up, so the only loser's are those that need or feel that they need , to sell.

As property is a long term investment, it could be argued that any time is a good time to buy.

Dave

Dave

Well seeing you have invoked the comparison to shares argument, the exact same thing can be said about shares. A balanced portfolio always historically comes back up, so the only loser's are those that need or feel that they need to sell.

If treated as a long term investment, it could be argued that any time is a good time to buy.

Utter nonsense.

 

[wayneL]

what does it all mean though/ You get access to easy money now or latter. Anyone get in on hedleys float?

I'm not sure of your point here.

 

[Smurf1976]

The point of the bears (most of us anyway) is not that property is a bad investment, it's that there are good times to buy and bad times to buy. Of course property can be a sterling investment.

But people who buy at the wrong time, can, and do, lose shedloads of money. The argument is that this is not a good time to buy under many circumstances. Folks in the US are learning this lesson right now. Recent buyers in regional UK and Eire are also discovering that, with further pain ahead.

Oz has had a few problems here and there as well.

The key is availability of credit. With the mortgage apocalypse in full swing, borrowing capacity everywhere will be affected, with all the knock on effects that entails.

As I've said many times, bears are only bears so they can eventually be bulls.

Precisely. There will come a time when Smurf is a property bull. Problem is, by that time I'll have trouble convincing anyone and will thus be in the minority once again. This forum will be chock full of property bears by then. Such is the ebb and flow of sentiment.

I'm thinking I might even have to start my own website to encourage others to take an interest in property investing by that time. I'm thinking of aussiepropertyboomforums.com or perhaps globalhousepriceboom.com ::

Seriously, do the math on an investment property in Sydney or the middle suburbs of Hobart over the past 3+ years and it doesn't look good. Butt it looked very good in the 3 years before that. You would be far better off buying today than 3 years ago. Even better if you bought 6 years ago. TIMING MATTERS!

 

[wayneL]

TIMING MATTERS!

A few years ago I was looking at a flat in Basingstoke UK on which the asking price was £30,000. The achievable rent at the time was £325 per month. That's a gross yield of 13%.

That was cash flow positive even with principle and interest loan, maintenance, insurance, the whole bowl of wax. It was an absolute no-brainer. (My mate bought it and I bought some larger, less yielding properties, but beside the point) Even without rampant HPI it was a great little investment.

Today that flat would sell for £140,000 and achievable rent £500 per month. That's about 4.3% gross yield; not even enough to cover interest.

Wages in the area have not moved that much in the interceding time.

Today that flat is a crap investment.

 

[theasxgorilla]

As I've said many times, bears are only bears so they can eventually be bulls.

The Black Star Funds study into trend following in stocks showed that it was possible to make money in equities with a system that bought only stocks that were breaking out to new all-time-highs. I'd love to see the same study into property Impossible as it might be to carry out.

 

[wayneL]

The Black Star Funds study into trend following in stocks showed that it was possible to make money in equities with a system that bought only stocks that were breaking out to new all-time-highs. I'd love to see the same study into property Impossible as it might be to carry out.

Note: Black Star Fund's all time high system presumes the all time high is achieved following a substantial retracement; not just any old all time high

It also includes exit conditions.

 

[theasxgorilla]

Today that flat is a crap investment.

Agree, and disagree.

Depends on what you're trying to achieve. If you want cashflow...yeah, forget about it. But if you're happy to play the debt to equity game...convert someone elses debt to your eventual equity...then it might still make sense.

Buy in a rising market, buy in a good area that will be among the last to be affected by a slowing market and one of the first to recover, buy something that is due to be renovated and add value by renovating and doing more with less and you might have a deal worth doing.

These panic times can be the best times to buy. You can get places for below what people would have accepted just a few months earlier simply based on fear generated by perception.

 

[tech/a]

As property is a long term investment, it could be argued that any time is a good time to buy.

This is a very true statement

If treated as a long term investment, it could be argued that any time is a good time to buy.

So too is this.

TIMING MATTERS!

So too is this.


There ARE best/better times to buy BOTH property and shares if trading.
Some get it completely wrong.
Others get it sort of right.
Some get it spot on.

The only question to ask yourself is.
Am I a longterm investor or a trader---of both/either asset.

For the investor of both Property and shares the arguement of timing has little bearing.
For the trader it is the difference between profit or possibly loss.

In the end in both assets its the CAPITAL GAIN we are after.

 

[theasxgorilla]

Seriously, do the math on an investment property in Sydney or the middle suburbs of Hobart over the past 3+ years and it doesn't look good.

So don't buy there if your take on it suggests it's no good. It's hardly a representative sample. LOCATION MATTERS! Country, city, region, suburb, which side of the highway, which street, which end of the street, which side of the road.

Soooooooo much more to chosing a property than a graph which shows a spike in credit followed by a fall.

 

[theasxgorilla]

Note: Black Star Fund's all time high system presumes the all time high is achieved following a substantial retracement; not just any old all time high

It also includes exit conditions.

Can 2004 be a significant retracement, in the context of property relative to what we've had historically? Otherwise how long is a bear prepared to wait for the next '91-'96 period?

 

[theasxgorilla]

It also includes exit conditions.

Really good point. I should also comment on this. With property a key question to ask regarding your exit condition should be, "Who the heck are you going to sell your property to???". With shares, it doesn't matter, just drop your order in the market and let liquidity (or lack of) sort it out.

With property, liquidity matters if you're selling a fairly homogenous type of property in a fair homogenous location. The decision makers here are making decisions based around fairly homogenous reasons and if each house is more or less the same as the others they'll often be forced to buy what they can afford ("I'm sorry honey I would have liked that 3 bedroom two bathroom with a spa in development X, but we can't afford it, we have to buy just the 3 bedroom 2 bathroom one in the next street"). But at the end of the day, you still only need one decision making group (buyer) per property.

If you've got something unique then even in the flat market you can reasonably expect to hear this question, "How much do I have to pay to BUY this property, no negotiations". Music to a property developer/improvers ears.

People often fail to realise, that value means something different in property markets. You can use the scarecity factor to your advantage. And it is very much about how much money the person you are targetting has or can get access to. This is why the subprime sector is screwed. They targetted people with no money!

Beyond this if you plan to access the equity in a property without selling then its very much about how much you can convince the bank's valuer that your property is worth. That is yet another game of perception.

You see why property can't be approached with charts and numbers in quite the same way as shares?

 

[tech/a]

You see why property can't be approached with charts and numbers in quite the same way as shares?

ASX

I think it can both on a technical and fundamental level.

 

[Bushman]

So don't buy there if your take on it suggests it's no good. It's hardly a representative sample. LOCATION MATTERS! Country, city, region, suburb, which side of the highway, which street, which end of the street, which side of the road.

Soooooooo much more to chosing a property than a graph which shows a spike in credit followed by a fall.

Location matters, security of income matters and asset class matters. My company buys and holds retail property at the trust level. We also have a corporate funds management side to out business for which we are paying in the market at the moment. When buying a shopping centre, we look for two things -
1. initial yield based on the leases on the properties books. If you have a major tenant with a long term lease, lease negotiated rent reviews and specified terms, you have security of income and investors are willing to place a premium on that. This locks on your distribution.
2. Then comes in factors like demographics (ie location, per capita income, infrastructure and the like) and development potential which locks in distribution growth.
3. Obviously this all operates within the cocoon of the strength of retail, industrial, commercial sales.

Equally important in our game. To only look at location is simplistic depending on the property class.

If it is your own home, the game changes. Hard to determine a cap rate when there are not too many homogenous sales to compare it to (as has been said elsewhere in this thread).

 

[MyNameIsEarl]

Been reading for a while- first post.

Just thought I'd add my own Gen Y financially naive view on why I bought a house (could be useful to see how people who aren't "in the game" financially may think).

Two years ago it was still the same talk as today- housing unaffordability etc. etc. everybody saying how hard it was to buy a house etc. I was able to buy a 300K house on my own with a below average salary (<50K). And it is a comfortable 3 bedroom brick home, decent yard etc. basically what everyone wants as a starter (and has realistic expectations). I figured if I am able to buy this property (i.e. the bank has confidence in me repaying the loan), and most other people buying property in my age group have a much larger spending capacity (i.e. professional couples 100K+) then shouldn't the natural market tendency be for prices to increase?

Basically I couldn't see an affordability problem if a single 25YO on crap money could afford a block of land with a house on it.

As I said, probably a very naive view but I just thought why should I assume that all average earners will be able to afford to OWN a house one day without waiting for the olds to pass.

 

[theasxgorilla]

ASX

I think it can both on a technical and fundamental level.

I'll hedge and say that I did say quite like shares

You could be right...but I don't think the property market is anywhere near as refined or efficient as the equity markets, which is what makes stuff like charting possible. There just isn't enough data to 'read the tape' with property, so to speak. And you're not comparing apples to apples with each piece of data anyhow. But the mechanisms which make it possible to do this with shares also also make it difficult to get any more for a given share than something close to the current offer price. And there-in lies the opportunity with property, IMO.

 

[numbercruncher]

Been reading for a while- first post.

Just thought I'd add my own Gen Y financially naive view on why I bought a house (could be useful to see how people who aren't "in the game" financially may think).

Two years ago it was still the same talk as today- housing unaffordability etc. etc. everybody saying how hard it was to buy a house etc. I was able to buy a 300K house on my own with a below average salary (<50K). And it is a comfortable 3 bedroom brick home, decent yard etc. basically what everyone wants as a starter (and has realistic expectations). I figured if I am able to buy this property (i.e. the bank has confidence in me repaying the loan), and most other people buying property in my age group have a much larger spending capacity (i.e. professional couples 100K+) then shouldn't the natural market tendency be for prices to increase?

Basically I couldn't see an affordability problem if a single 25YO on crap money could afford a block of land with a house on it.

As I said, probably a very naive view but I just thought why should I assume that all average earners will be able to afford to OWN a house one day without waiting for the olds to pass.

I cant understand how mortgage repayments of a 300k loan of 470 a week before any other out goings rates/food/power/car etc etc can come even come close to being affordable on a 750 a week take home pay.

I have to assume you have lodgers etc, you surely cant service that loan with no other income , when you got this loan did you tell the bank youd have rent coming in too or that it was an investment property ?

Who are you bankers ?

 

[MyNameIsEarl]

I cant understand how mortgage repayments of a 300k loan of 470 a week before any other out goings rates/food/power/car etc etc can come even come close to being affordable on a 750 a week take home pay.

I have to assume you have lodgers etc, you surely cant service that loan with no other income , when you got this loan did you tell the bank youd have rent coming in too or that it was an investment property ?

Who are you bankers ?

300K house but 240K loan- I wouldn't buy until I had 20%. I got the loan on 47K gross income plus around 1.5-2K investment income from shares (still under 50K per year). I have had someone in some of the time, but got the loan on the assumption there was no rental income. Any bank at that time would give me a loan for that amount- I was approved very quickly. This was 2 years ago and I am on a higher income now so things are easier at the present r.e. lifestyle, but the point is I still lived on that income paying the mortgage (even in times when I didn't have a boarder). Not on dog food either- just don't have the plasma, the leather lounge, the car loan etc.