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I'm not buying any property while Housing Affordability is so low, and I think this will get a whole lot worse, because interest rates are going to keep going up on top of over-priced property prices...
How do you own that many houses??
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I'm not buying any property while Housing Affordability is so low, and I think this will get a whole lot worse, because interest rates are going to keep going up on top of over-priced property prices...
And tech couldve just said "I'm not buying any property while interest rates are 18%". But he didnt. He still bought. And subsequently made a killing.
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I think Tech/A got caught out by 18% interest rates...
Julia
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Don't take 18% interest rates as a factor on their own.
At the time I was paying this, plus 22% for second mortgage on an investment property, inflation was so high that capital gains on the properties was huge, as were rents, so despite the high interest rates, the actual investment return was way, way greater than it is at present.
wayneL
VIVA LA LIBERTAD, CARAJO!
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Folks, many a property guru state that the profit in property is when you buy it.
In other words, you want to buy at, or less than the intrinsic value of the property. This is no different to any asset including shares.
Looking at shares, you can get away with buying over value if there is momentum in the market because you can readily sell at any point you think said momentum has ended. If you hold at this point it could be ruinous (if you bought over value). However the person who bought the shares at value (before the momentum)may hold through the ensuing bear market, comfortable with the knowledge that they bought at the right price.
This is no different to property. Those who bought at value several years ago can sit there with smug expressions, knowing they are safe. However those who buy todays over value are not in the same position. People have got away with it till now because of momentum in the market.
But when the momentum stops and reverses, there is not enough liquidity to make a quick exit. Those who are overleveraged with crash and burn. And anyone who doubts that momentum will stop are delusional. The only question is how long, if it reverses and by how much.
The fact that "most" people will be relatively unaffected won't help prices a jot, because never forget prices are set at the margins where the desperadoes are.
Those who implore folks to "jump in" to the market now (unless it is a truly stunning opportunity) should be severely beaten about the head and neck (figuratively speaking). You are not allowed to say the same thing about shares because of ASIC regs., and for very good reason.
Anecdotes of the past are nonsense in the current context and valuation.
NB These comments relate to residential property investment, not development. They could also apply to first time buyers. They do not apply to folks who could comfortably ride out a downturn.
In other words, you want to buy at, or less than the intrinsic value of the property. This is no different to any asset including shares.
Looking at shares, you can get away with buying over value if there is momentum in the market because you can readily sell at any point you think said momentum has ended. If you hold at this point it could be ruinous (if you bought over value). However the person who bought the shares at value (before the momentum)may hold through the ensuing bear market, comfortable with the knowledge that they bought at the right price.
This is no different to property. Those who bought at value several years ago can sit there with smug expressions, knowing they are safe. However those who buy todays over value are not in the same position. People have got away with it till now because of momentum in the market.
But when the momentum stops and reverses, there is not enough liquidity to make a quick exit. Those who are overleveraged with crash and burn. And anyone who doubts that momentum will stop are delusional. The only question is how long, if it reverses and by how much.
The fact that "most" people will be relatively unaffected won't help prices a jot, because never forget prices are set at the margins where the desperadoes are.
Those who implore folks to "jump in" to the market now (unless it is a truly stunning opportunity) should be severely beaten about the head and neck (figuratively speaking). You are not allowed to say the same thing about shares because of ASIC regs., and for very good reason.
Anecdotes of the past are nonsense in the current context and valuation.
NB These comments relate to residential property investment, not development. They could also apply to first time buyers. They do not apply to folks who could comfortably ride out a downturn.
wayneL
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Argumentum ad hominen.
Robots, you can't be taken seriously when you consistently play the man not the ball.
No analysis
No figures
No reason
No logic
It would be appreciated if you could offer up some of the above in support of your views, otherwise it is just ramping.
I can be taken seriously because I act, or don't act based upon on my valuations. I have a view and I invest to it.
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Good post Wayne.
People who bought properties and held them for 20 years in my neck of the woods, probably didnt realise they had lost money for the first 10 years.
Unlike investments in the stockmarket, you dont get reminded of your failure every minute and because you need a place to live, don't sell out.
Property has so many cheerleaders because so many mugs made so much easy money.
"I bought my first home in 1970 for $20K and I sold it for $400k" Blah blah blah
The entire holding period it paid no income, generated costs (rates, bills and depreciation) and the interest rate expense to buy such an asset fell by 60%over the time of holding.
A Ford GT HO Falcon went from $8K to $850K in the same time - should we all be buying cars based on such homespun logic?
Residential property has been a great asset class in recent history (due to interest rates falling from 18% to 6%), but what about going forward with rising interest rates?
I know my variable rates are now 200bps higher than when I locked 50% of my mortgage in at 6%. That is a 30% increase in interest expense. I know where I live, property was completely stagnant for 10 years during the 90s.
CBA shares are now 20 times their starting price and still pay gross yields of 7% - why dont we have CBA share buying seminars?
Mugs cant handle mark-to-market
One point brought up by some bulls I must argue with, is the point that property has always been expensive. This is BS
Seven years ago in the middle of my CBD you could buy riverfront apartments with views and a 6%+ gross yield and interest rates were 100bps lower than now.
This was 10 years after any residential property had actually moved in value and everyone thought property was a waste of time.
I remember commercial and office property syndicates at the same time paying 10%+ yields
Compare those yields to the 3% gross yields similar residences trade at now and the 7% yields being fetched by office or the maniac 6% yields on retail and anyone who is a rational investor can see the massive overvaluation.
Worst of all - consider the 6.25% available RISK FREE lending to the RBA for 90 Days and the fact the spread property investments now have in relationship to this 'litmus test of risk' has never been skinnier (let alone a discount)
Fear hasnt held me back from buying more property - being a rational investor with a memory longer than 3 years has.
People who bought properties and held them for 20 years in my neck of the woods, probably didnt realise they had lost money for the first 10 years.
Unlike investments in the stockmarket, you dont get reminded of your failure every minute and because you need a place to live, don't sell out.
Property has so many cheerleaders because so many mugs made so much easy money.
"I bought my first home in 1970 for $20K and I sold it for $400k" Blah blah blah
The entire holding period it paid no income, generated costs (rates, bills and depreciation) and the interest rate expense to buy such an asset fell by 60%over the time of holding.
A Ford GT HO Falcon went from $8K to $850K in the same time - should we all be buying cars based on such homespun logic?
Residential property has been a great asset class in recent history (due to interest rates falling from 18% to 6%), but what about going forward with rising interest rates?
I know my variable rates are now 200bps higher than when I locked 50% of my mortgage in at 6%. That is a 30% increase in interest expense. I know where I live, property was completely stagnant for 10 years during the 90s.
CBA shares are now 20 times their starting price and still pay gross yields of 7% - why dont we have CBA share buying seminars?
Mugs cant handle mark-to-market
One point brought up by some bulls I must argue with, is the point that property has always been expensive. This is BS
Seven years ago in the middle of my CBD you could buy riverfront apartments with views and a 6%+ gross yield and interest rates were 100bps lower than now.
This was 10 years after any residential property had actually moved in value and everyone thought property was a waste of time.
I remember commercial and office property syndicates at the same time paying 10%+ yields
Compare those yields to the 3% gross yields similar residences trade at now and the 7% yields being fetched by office or the maniac 6% yields on retail and anyone who is a rational investor can see the massive overvaluation.
Worst of all - consider the 6.25% available RISK FREE lending to the RBA for 90 Days and the fact the spread property investments now have in relationship to this 'litmus test of risk' has never been skinnier (let alone a discount)
Fear hasnt held me back from buying more property - being a rational investor with a memory longer than 3 years has.
hello,
all my posts never once have I said "go and buy property", I have consistently said the market is solid and never once forecast the direction
yet others are constantly saying things are going to fall over or stagnate, and neither has happened and thats why I post what I do
so call it what you like
thankyou
robots
all my posts never once have I said "go and buy property", I have consistently said the market is solid and never once forecast the direction
yet others are constantly saying things are going to fall over or stagnate, and neither has happened and thats why I post what I do
so call it what you like
thankyou
robots
wayneL
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I reckon the sun is coming up tomorrow morning too. But that hasn't happened yet.
By your logic, it never will.
By your logic, it never will.
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This is an important point, just as we can be certain the sun will come up tomorrow morning, we can be certain that every boom will bust.
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Robots, this is how you post something that actually means something.
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It all depends on what you read.....
Todays news.com.au
http://www.news.com.au/business/story/0,23636,21533340-31037,00.html
Some say the downturn is over. From what I've seen, there's a huge shortage of affordable rentals in a lot of parts of Australia including my own area. That has meant that property owners are increasing rents and cashing in which also means rental returns are again becoming attractive.
Todays news.com.au
http://www.news.com.au/business/story/0,23636,21533340-31037,00.html
Some say the downturn is over. From what I've seen, there's a huge shortage of affordable rentals in a lot of parts of Australia including my own area. That has meant that property owners are increasing rents and cashing in which also means rental returns are again becoming attractive.
Thanks for those articles Sultan and Kimosabi. The existence of these apparently differing viewpoints simply highlights the enormity of the housing market and what is constantly happening at either extreme of the market. You will never find an article in a paper shouting headlines of "VAST MAJORITY OF HOMEOWNERS PAID THEIR MORTGAGE THIS MONTH".
Though I would like to see TT/ACA attack this story in their usual style....with a reporter, foot jammed in the door, yelling sanctimoneusly at the mortage payer "How can you afford to pay your outrageuous, immoral mortgage repayments each month? How can you sleep at night? How can you look at yourself in the mirror?
But seriously, a story concerned with increasing defaults, repressents the actual situation of the whole housing market, as effectivly as a story screaming about the increased values of waterfront properties.
Though I would like to see TT/ACA attack this story in their usual style....with a reporter, foot jammed in the door, yelling sanctimoneusly at the mortage payer "How can you afford to pay your outrageuous, immoral mortgage repayments each month? How can you sleep at night? How can you look at yourself in the mirror?
But seriously, a story concerned with increasing defaults, repressents the actual situation of the whole housing market, as effectivly as a story screaming about the increased values of waterfront properties.
