The future of Australian property prices

[tech/a]

i think the falling of China bubble and world baby boomers retiring will bring value back, im sidelined till i see some rationale

Personally I Dont think your alone.
With many permanently sidelined---petrified with fear of loss.

Thats why only 5% of the population will end up being self funded in retirement.
The other 95% sidelined by fear----will remain ---sidelined by fear.

There will NEVER be a good time to buy!

Hasnt been---according to the majority---for the life of this thread.(Thats 95% taking part in the thread) 5 % of us have always maintained---BUY NOW!

Anyway back to sleep.

 

[white_goodman]

Personally I Dont think your alone.
With many permanently sidelined---petrified with fear of loss.

Thats why only 5% of the population will end up being self funded in retirement.
The other 95% sidelined by fear----will remain ---sidelined by fear.

There will NEVER be a good time to buy!

Hasnt been---according to the majority---for the life of this thread.(Thats 95% taking part in the thread) 5 % of us have always maintained---BUY NOW!

Anyway back to sleep.

ill be sure to reiterate your comments to all the recent property buyers in US, Ireland, Spain, NZ over past few years...

this is a comment of the aging population where stupidity, gambling and speculation were rewarded the past 40 years with the luck of being in the biggest boom in history.

when the numbers make sense ill invest, not buying for the sake of buying cos it MUST go up. If you can make an investment case then by all means invest now...

and for the record I am investing in property just not Australia, id like to thank a painful 4 years at uni for that one doing property economics

let me guess your of the line of thinking that your PPOR is an investment?

 

[wayneL]

There will NEVER be a good time to buy!

Not while western economies rely on resi property sector to supply "growth".

Sometime in the future... could be next year (which I doubt), could be 10, 20, 50 (which I doubt) years... the game will change.

Until then it's a speculators and not an investors game, unless you value add.

 

[tech/a]

let me guess your of the line of thinking that your PPOR is an investment?

Yes

Its one of 10
Its valued at 7 figures and is freehold.
I can use the capital---if I wish and have done so---much like a small bank-- and when I'm old and grey I Dont need to live in a 7 figure home
Half that would be fine---I can if I wish move.

But right now I can --enjoy it and--want to.

Why then is it NOT an investment?

 

[prawn_86]

Why then is it NOT an investment?

One side of that argument could be the fact that you either have to sell, or pay interest in order to unlock the value.

If you sell, then you have to pay the same or similar for a house of the same size in the same area (hence pointless), and if you take a loan against the value you have to generate a return large enough to cover the interest costs, plus your required rate of return.Doesnt sound like an investment to me...

 

[FxTrader]

Its valued at 7 figures and is freehold.

Appraised value is one thing, but what really matters is what you will be able to sell it for in the future. Sounds like your investment portfolio is heavily exposed to property, good luck with that when the bubble bursts. Probably safe for now while the Chinese are taking up the slack in certain markets (primarily Melbourne and Sydney).

Why then is it NOT an investment?

An IP and PPOR are quite different "investments" obviously, for PPOR the only tax break subsidy is no CGT on sale otherwise it generates no income except hoped for capital gain on sale minus your buying and selling costs (depending on where you live and the selling price of your PPOR these costs will be many tens of thousands of dollars.) At least if you sell an IP for a loss there are some tax concessions.

Thats why only 5% of the population will end up being self funded in retirement.
The other 95% sidelined by fear----will remain ---sidelined by fear.

I must remember to share this wisdom with my sister who is in the courts in the U.S. trying to stop a finance company from evicting her from her home (it's now worth only 50% of what she paid). Literally millions of property investors in the U.S., U.K. and Ireland thought as you do, property investment is a sure fire wealth creation vehicle - most are financially ruined, in bankruptcy and starting from scratch.

If I were going to buy another property now it would only be for lifestyle reasons and not because I think it would be good time to do so. Let's see how those valuations hold up after the RBA slugs a debt laden public with a few more rate rises.

 

[tech/a]

Sounds like you're investment portfolio is heavily exposed to property,

Yeh First property bought for $90K now $550K
Have Commercial Property bought and developed for $330K now $950K
and thats 2
Gearing 38% on total portfolio.

I'm not your average investor.
A 20-40% drop in property value is of no consequence to me as then all property's will be similar,I will be no worse off due to gearing and Serviceability.

All this scare mongering (Wishful scare mongering) only concerns those who Dont know how to take advantage of investments and mitigate oneself from catastrophic risk.

Money does make money (a sad but un failing fact) and those who Dont know how to safely use the stagnant capital in their PPOR will always struggle.

If it crashes and burns Ill crash and burn with all of you.
But have a mattress always at the ready----I keep adding to it regularly and heavily---SMSF you gotta love them.

 

[medicowallet]

I'm old and grey I Dont need to live in a 7 figure home
Half that would be fine---I can if I wish move.

And what will happen when the baby boomers start to do this all together?

Who is going to pay for the 7 figure house?

I am more comfortable with a low 6 figure house, and my finger in many growth industry businesses, shares and low 6 figure investment properties.

 

[medicowallet]

Yeh First property bought for $90K now $550K
Have Commercial Property bought and developed for $330K now $950K
and thats 2
Gearing 38% on total portfolio.

I'm not your average investor.
A 20-40% drop in property value is of no consequence to me as then all property's will be similar,I will be no worse off due to gearing and Serviceability.

.

Yet you will still have the loans you have, and have lost over 50% of your net worth.

Rental prices will likely drop and you could find yourself in an interesting position.

 

[FxTrader]

Gearing 38% on total portfolio. I'm not your average investor.
A 20-40% drop in property value is of no consequence to me as then all property's will be similar,I will be no worse off due to gearing and Serviceability.

I would venture a guess that the vast majority of IP investors over at least the last 5 years or so are negatively geared to the hilt in property. You may be insulated from a price decline but the vast majority are probably not. But then who sits by comfortably watching their wealth being destroyed, no matter how low the gearing ratio, when the warning signs where there for them to consider for some time?

All this scare mongering (Wishful scare mongering) only concerns those who Dont know how to take advantage of investments and mitigate oneself from catastrophic risk.

Yes, well I clearly remember how people like Peter Schiff, Michael Panzner and others who forecast the GFC and property bust in the U.S. were called scaremongers, doom sayers etc. only to be proven right. Listen to the property industry spruikers if you will, there is always positive spin to be had from them no matter how much evidence exists to the contrary.

 

[tech/a]

I would venture a guess that the vast majority of IP investors over at least the last 5 years or so are negatively geared to the hilt in property. You may be insulated from a price decline but the vast majority are probably not. But then who sits by comfortably watching their wealth being destroyed, no matter how low the gearing ratio, when the warning signs where there for them to consider for some time?

I see it everyday.Fundamental traders watching price fall rubbing their hands together at the next buying opportunity as their stocks become Under valued.

Most arguements against property are from those who dont own extensive property and dont understand the positive implications of some who need negative gearing. Sure there are some who are over committed but by no means masses. I was around when interest rates were 18% and blood didnt flow down the street. I lost my properties at the time --- Im not 25 any more and my business is 20 times the size it was in the early 80s. gearing is 38% not 85%

Yes, well I clearly remember how people like Peter Schiff, Michael Panzner and others who forecast the GFC and property bust in the U.S. were called scaremongers, doom sayers etc. only to be proven right. Listen to the property industry spruikers if you will, there is always positive spin to be had from them no matter how much evidence exists to the contrary.

This is an old worn arguement. The GFC has come and gone---demand remains---Rentals are less than 1% vacancy rates-----I have 15+ out bidding each other for rentals---If the S hits the fan I will remain liable for debt---in the US you just hand in the keys---so the incentive to struggle through is lost.

Look around you---those with serious wealth will have a base of property.
Most of those in the US who have serious wealth STILL have their base in property.
I dont see Trump on the poverty line.

And what will happen when the baby boomers start to do this all together?

Who is going to pay for the 7 figure house?

I am more comfortable with a low 6 figure house, and my finger in many growth industry businesses, shares and low 6 figure investment properties.

To my knowledge not ALL baby boomers own 7 figure properties.
Who will buy it---Id say some 35-45 yr old high flyer who wants the lifestyle. Plenty of them--they knock on the door a few times a year wanting to know if I'm willing to sell.

Yet you will still have the loans you have, and have lost over 50% of your net worth.

Rental prices will likely drop and you could find yourself in an interesting position.

No issue.---if it happened.
I would be in exactly the same boat as everyone else.
50% drop in capital value would STILL see me positive.
Many other irons in the perpetual fire.

Having said that.
I never hear alternatives to the housing dilema.
Always interested in how Joe average is going to retire self funded---without taking control of his financial future.

Which according to those here is NOT PROPERTY.

 

[prawn_86]

I dont see Trump on the poverty line.

If i recall correctly he is in huge amounts of debt and very close to declaring bankruptcy (one of his companies already folded last year). Probably not the best example, he is all bluff imo.

Triguboff is a better example of a rich property man

 

[tech/a]

If i recall correctly he is in huge amounts of debt and very close to declaring bankruptcy (one of his companies already folded last year). Probably not the best example, he is all bluff imo.

Triguboff is a better example of a rich property man

There are 1000s most who arent public figures.

 

[trainspotter]

Fighting a solo battle there Tech/a I see. A lone voice in the wilderness of property.

I talk to people who do not have a share portfolio and they are stricken with "fear of buying" the same way as people without property are. But but but ... "It might go down in price" I hear them bleat "It has before, look at 1987 and what the GFC did to stocks" they cry in disdain. Sound familiar?

Polarised into inaction or stupified into idleness they are the first to whinge as to how well I am doing when they pay their hard earned pay packet over to me in RENT MONEY. God bless their little cotton socks I say. Property ownership is not for everyone. Afterall ....... you have to live at the parents house first for as long as you can before you go and rent somewhere. LOLOLOL.

 

[FxTrader]

Most arguements against property are from those who dont own extensive property and dont understand the positive implications of some who need negative gearing.

Nonsense, property has it's place in asset allocation and for many the majority of their wealth is committed to it. I always find the argument that negative gearing, losing money every month to fund your property investment, is somehow a good thing amusing.

Since property always goes up (in Australia only of course) then it makes sense to spend extra money each month funding one's property investment portfolio. No point in paying attention to cycles, trends and valuation just get in there and buy buy buy, there's never a bad time to enter the property market.

This is an old worn arguement. The GFC has come and gone---demand remains---Rentals are less than 1% vacancy rates-----I have 15+ out bidding each other for rentals---If the S hits the fan I will remain liable for debt---in the US you just hand in the keys---so the incentive to struggle through is lost.

Sorry to rain on your parade but the GFC is still with us in the form of massive sovereign debts. Pushing the can down the road with massive debt does not solve the problem, just delays the consequences. The only "old worn argument" is that Australia is permanently immume to the global correction in debt inflated asset values and cities like Geelong, VIC deserve to be more unafforadable than London. What a joke.

 

[white_goodman]

its not a question of people for property vs not owning property...

the debate is buying blindly and ignorantly vs being aware of drivers and economics/numbers behind it. With a side debate on those that confuse dumb luck with shrewd investing.

I can tell you now, that the baby boomer generation should start to look to drop their leverage before the flood gates open because Gen X will not be paying the prices they want...

the problem is the mantra of buy now, buy at all costs actually worked in previous decades, to repeat anything like that is unsustainable at best or near impossible at worst

tech/a reminds me a lot of the 'builder/developer' crowd with no basis in understanding the numbers that are now back renting after being multi multi millionaries, luckily the LVR and gambling doesnt seem as rampant

 

[tech/a]

Fighting a solo battle there Tech/a I see. A lone voice in the wilderness of property.

I talk to people who do not have a share portfolio and they are stricken with "fear of buying" the same way as people without property are. But but but ... "It might go down in price" I hear them bleat "It has before, look at 1987 and what the GFC did to stocks" they cry in disdain. Sound familiar?

Polarised into inaction or stupified into idleness they are the first to whinge as to how well I am doing when they pay their hard earned pay packet over to me in RENT MONEY. God bless their little cotton socks I say. Property ownership is not for everyone. Afterall ....... you have to live at the parents house first for as long as you can before you go and rent somewhere. LOLOLOL.

Its a sad state of affairs.

Im just average scholastically--finished year 12
But wish everyone to take advantage of what this great country offers.
Life is for living and if you strive to better your life its a great place to be when you even START to succeed.

Statistics show that around 3% will ever "make it" (Self funding retiries).
So if my ramblings influence only 3% of the ASF audience then thats great.

The others can and do influence the 97%!!!

Personally I prefer being a minority!

 

[trainspotter]

its not a question of people for property vs not owning property...

the debate is buying blindly and ignorantly vs being aware of drivers and economics/numbers behind it. With a side debate on those that confuse dumb luck with shrewd investing.

I can tell you now, that the baby boomer generation should start to look to drop their leverage before the flood gates open because Gen X will not be paying the prices they want...

the problem is the mantra of buy now, buy at all costs actually worked in previous decades, to repeat anything like that is unsustainable at best or near impossible at worst

tech/a reminds me a lot of the 'builder/developer' crowd with no basis in understanding the numbers that are now back renting after being multi multi millionaries, luckily the LVR and gambling doesnt seem as rampant

Ooooooooooeeeerrrrr ....... you have not been following this thread then for very long? This argument has been done to death about indicators as to when and what to buy and sell about 30 pages ago? Several people including myself and Tech/a HAVE NOT asked anyone to buy buy buy without performing DUE DILLIGENCE on the property in question. Quite the opposite in fact.

Gen X are already paying the prices being asked for BTW. And baby boomers with their IP's will more than likely assist their kids into property by using one as collateral for the loan. Oh well ........

The same shrill comments I read on here about DO NOT BUY as the economic indicators are telling me it is going to fall is hilarious. If I listened to them I would not have bought my first house in 1991 when interest rates where just coming down from 18%. HOWZAT for an economic indicator?

 

[tech/a]

tech/a reminds me a lot of the 'builder/developer' crowd with no basis in understanding the numbers that are now back renting after being multi multi millionaries

You wouldnt happen to have those figures handy for reference would you?
Or is this just another hypothesis?

there's never a bad time to enter the property market

I see that you missed the Perfect opportunity to buy property late 90s early 00s

So please be sure to let me know when its a good time to enter property.

On an aside


Settlement on the latest commercial property was finalised last week.
I already have 2 of the 5 sheds rented. The sheds/Development will be built by end June.
Property return 11%---upon completion.
Capital appreciation from development $550K to $765K

There were 35 blocks available all sold within 1 mth of listing.
There is no mortgage on the property---
Perhaps I should have waited?

Currently looking for more suitable property.

 

[FxTrader]

Several people including myself and Tech/a HAVE NOT asked anyone to buy buy buy without performing DUE DILLIGENCE on the property in question. Quite the opposite in fact.

Due deligence is all about analysing current and potential risk factors that will impact on the investment. In the case of property that would include consideration of many stats including household debt, affordability, prospects for future capital growth etc. Few of the property bulls here seem to think such information is worthy of consideration since the primary focus is always that property has gone up in the last 50 years (in Australia only) and hence should go up over the next 50 so jump in and a secure your future by buying IP.

In 10 years your IP should be (hopefully) worth twice what you paid for it originally (excluding expenses). Wow a 100% gain in 10 years, fantastic. But then had you invested in Fortescue or Paladin 10 years ago you would have outperformed the market by 61,429 per cent and 12,475 per cent respectively. Still prefer property, I don't.

Gen X are already paying the prices being asked for BTW. And baby boomers with their IP's will more than likely assist their kids into property by using one as collateral for the loan.

Sure GenX with their 95% LVRs and massive debt burdens can pay for now, let's just see what happens when interest rates continue to rise and Chinese buyers stop proping up the market.