The future of Australian property prices

[white_goodman]

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



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.

.

i know personally many builder/developers who have gone bankrupt, also my lecturer at uni (who runs a large investment/valuation firm) used to give examples often.

How silly of me not to be buying property between the ages of 7 and 12... what a noob am I

 

[white_goodman]

for those younger members here is something to play around with if you want to know whether to buy the PPOR or rent

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

 

[tech/a]

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.

This is an excellent arguement.
Did you invest in either?
The gain isnt 100% for me (In your property scenario)

With property I bought in 1996 I paid $90K and put 20K down.
When I sold it for $ 360K in 2004 (Releasing funds to freehold others) so on my 20K
I made $270k or 1350%

Not that tardy
On another I paid 117k (using housing increased equity only---nothing out of pocket) and sold for $340K
Not that tardy either.

So I agree with you if you can find a Fortesque and put say $200K on it as a trade and hold it for the whole rise!!!
Reality is ---that this is just as unlikely as anyone doing extremely well in property---the 3%

OH
And let me know when the next Fortesque/Poisiden is ready for purchase.

Great in theory---just doesnt happen in practice---for the larger majority of us.

 

[awg]

looked at a few places recently and talked to some agents and buyers/sellers

( looking for a premises to run business out of, instead of renting)

the market here ( Newcastle) is very dichotomous, under 300k selling like hotcakes

over about 600k, sellers are being told, dont even think of listing it!

The biggest factor to me in owning at least 1 property, is seeing what happens to older persons who dont own..not good at all

as for investing the differnce between rent and mortgage, ok theory, but never seen in practice, my tenants always drive a newer car and TV than me

 

[tech/a]

i know personally many builder/developers who have gone bankrupt, also my lecturer at uni (who runs a large investment/valuation firm) used to give examples often.

How silly of me not to be buying property between the ages of 7 and 12... what a noob am I

Your at UNI and personally know developers who have gone bankrupt--- and your lecturer at uni---I see.

Perhaps then you will be able to use your youth to advantage in the future.
But dont be blinded by fear!!

If you never get out of your comfort zone---you'll never get out of the 97%

 

[FxTrader]

This is an excellent arguement.
Did you invest in either?

Both actually but did not hold them for 10 years. But then I am not a buy and hold investor. You generally make more on equities if you go short and long but there are definitely exceptions to this.

So I agree with you if you can find a Fortesque and put say $200K on it as a trade and hold it for the whole rise!!! Reality is ---that this is just as unlikely as anyone doing extremely well in property---the 3%

No need to put down anywhere near $200k to outperform your property portfolio. Property in general is for the conservative long term investor who believes that it will deliver over time while counting on history to repeat itself (at least in the Australian market.)

OH And let me know when the next Fortesque/Poisiden is ready for purchase. Great in theory---just doesnt happen in practice---for the larger majority of us.

Yeah, the future for all of us would be secure if we only embraced commercial property development as an occupation.

Ride the gravy train while it lasts tech. As for stock selection, that requires a bit more investigation and research than buying into the never ending property bubble which after all is a sure thing.

 

[tech/a]

Ride the gravy train while it lasts tech

Property is an off shoot from my principal business--Civil Construction.
Civil construction will always be in demand.
Some will come and some will go.

The challenge of business and the rewards of being entrepenurial just make life more interesting---in both good and very bad times---been at both ends---I know the end I like to spend my time in.

 

[Junior]

Tech/a one thing I don't quite agree with, is your hint that in order to be a self funded retire, you have to own multiple properties.

I know quite a few self funded retirees. So how have these people got themselves into a position to be able to fund their retirements? It's not via multiple properties, although the vast majority will own a PPOR.

In my experience, in the majority of cases, it boils down to being relatively successful in their chosen professions and working hard right up until age 60.

If both members of a couple remain in the workforce through their 50s this often results in a large amount of disposable income which can be contributed to super in the lead up to retirement age. Usually this couple will experience their kids leaving home, and their home mortgage being paid off, resulting in a lot of disposable income which can be set aside for retirement.

The baby boomers I know who hold multiple investment properties generally have a relatively high level of gearing as well.... in many cases, it seems that as soon as they have enough equity available, and the bank approves, they will rush out and add another property to the portfolio asap. I worry about how/when they plan on reducing this debt - higher interest rates will hurt someone in this scenario.

 

[FxTrader]

The baby boomers I know who hold multiple investment properties generally have a relatively high level of gearing as well.... in many cases, it seems that as soon as they have enough equity available, and the bank approves, they will rush out and add another property to the portfolio asap. I worry about how/when they plan on reducing this debt - higher interest rates will hurt someone in this scenario.

An excellent point Junior that's been generally glossed over or ignored by the IP bulls here in the past. They tend to ignore the fact that most property spruikers advise their gullible audience to gear to the max and buy their next IP as soon as the next bank porfolio valuation permits it. This is the wealth creation formula the masses have bought into. The fact that Australia is characterised by one of the highest levels of household debt in the world seems of little or no interest to the IP bulls here.

Problem is though that unlike in the U.S., jingle mail does not end the story and the banks will grab every other asset you own up to the limit the bankruptcy laws allow.

 

[trainspotter]

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.


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.

Let me see ........ when I was 21 years old and working as a mechanic my wage was $25,000 per annum. Houses were costing between $110,000 to $150,000 depending on location. Therefore housing affordability was between 4.4 to 6 times my wage.

Last time I checked THE FINANCIER has a very large duty of care to make sure YOU CAN AFFORD to buy the aforementioned property. Debt Servicability Ratios, Loan to Valuation Ratios, Uncommitted Income Ratios, Lenders Mortgage Insurance etc et al ad infinitum.

How many FMG and PDN's are there available to the average punter? Who holds them for 10 years? Can't quite relate to the analogy you are putting out there. I have had residential property (vacant land) that I purchased for $53,000 and within 6 months sold for $93,000. Have purchased commercial property (vacant land with DA's in place) for a similar rate of return within the same timeframe. DUE DILLIGENCE. I also have property that I acquired 11 years ago that has trebled in price comfortably. Sound familiar to the share market? You can buy and sell within certain timeframes in both mediums and make coin.

I for one have stated that property is going sideways AT THE MOMENT. Certain areas will drop and certain areas will rise. OVERALL we will see a slight downward trend. But then again this would have to be about the 100th time I have written this all to no avail. I for one have always advocated that you do not rush out and buy shares on a whim so why would you do the same with property?

 

[satanoperca]

Jingle Mail.

It would seem that everyone here assumes that "Jingle Mail" or Non Recourse loans applies to all states in the US. This is both misleading and incorrect.

The main states for non recourse loans are :
Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington

This may not be complete and other states do have some weird rulings on forecloser.

While we do not have jingle mail in Oz, people who find themselves overleveraged and in negative equity (main potential group being FHB) will simple do the same, hand back the keys and let the bank force them into bankruptcy.

Cheers

 

[FxTrader]

Let me see ........ when I was 21 years old and working as a mechanic my wage was $25,000 per annum. Houses were costing between $110,000 to $150,000 depending on location. Therefore housing affordability was between 4.4 to 6 times my wage.

Here we go again, housing affordability means nothing. Melbourne and Sydney deserve to be amongst the most unaffordable places to live in the developed world because it's a paradise - botty says so.

Last time I checked THE FINANCIER has a very large duty of care to make sure YOU CAN AFFORD to buy the aforementioned property. Debt Servicability Ratios, Loan to Valuation Ratios, Uncommitted Income Ratios, Lenders Mortgage Insurance etc et al ad infinitum.

You're not checking hard enough, banks are bending over backwards to keep the bubble inflated and loan origination turning over by now effectively allowing up to 97% LVRs.

How many FMG and PDN's are there available to the average punter? Who holds them for 10 years? Can't quite relate to the analogy you are putting out there. I have had residential property (vacant land) that I purchased for $53,000 and within 6 months sold for $93,000. Have purchased commercial property (vacant land with DA's in place) for a similar rate of return within the same timeframe. DUE DILLIGENCE. I also have property that I acquired 11 years ago that has trebled in price comfortably. Sound familiar to the share market? You can buy and sell within certain timeframes in both mediums and make coin.

You and tech seem to find it necessary to roll out capital gains figures from sales to justify just how profitable it can be to speculate in property (like you flipping a land purchase in 6 months for a $40k, before tax and expenses, profit.)

Trading options and FX I have made 50% to over 100% on my account in a month in some months but I am not going to publish my trades here or declare how much coin I'm making so as to suggest everyone here should do what I do. Your profit figures don't impress me at all as a speculator.

 

[explod]

Trading options and FX I have made 50% to over 100% on my account in a month in some months but I am not going to publish my trades here or declare how much coin I'm making so as to suggest everyone here should do what I do. Your profit figures don't impress me at all as a speculator.

Well said and the assertions do sometimes make one wonder.

Oh, and dont' you worry about poor botty, he's onto silver now and already up a percentage point today.

 

[white_goodman]

the myth of property doubling every 10 years.. at current rates of wage growth, the median wage to buy the median house in Sydney will require the owner to shell out 90% of gross wage in debt servicing roughly for that to be true 10 years from now.

 

[medicowallet]

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!

Depends upon the crowd you are involved with too.

In my profession, it is probably around 10-20% who will "make it"

In my circle, it is around 75-85%.

Surround yourself with successful people (and I do not mean high income, I mean high wealth), and listen, learn and appreciate their experience.

Oh, and another thing, be VERY careful about going into business with people, especially people big on ideas and low on $$$

 

[tech/a]

the myth of property doubling every 10 years.. at current rates of wage growth, the median wage to buy the median house in Sydney will require the owner to shell out 90% of gross wage in debt servicing roughly for that to be true 10 years from now.

I paid $30k for my first home.
Now 30 yrs later now 10-15 times that.
In 30 yrs time I can see wages at $5k a week and housing priced accordingly.
My father retired "wealthy" 30 yrs ago and he didnt see that in 30 yrs time he'd be a struggling pensioner.

Most people here think $500K would give you a comfortable retirement!!!
It will for 5 yrs then your Knackered!

Carry on though---just keep renting--no problems!!

When your 65 and paying $2500/week with no income your $500K nest egg wont be going far. Let alone medical bills living expenses---blah blah.

 

[KurwaJegoMac]

I wonder just how many people on this thread actually own investment property or have been involved in buying investment property.

All these arguments about 97% LVRs, gearing to the hilt, economic doom, high prices, FHBs, etc.

Funny how a lot of this is encountered in the stockmarket - Margin lending (can be geared to the hilt there), CFDs and other derivatives, economic doom, high prices (P/E of 12 - most stocks are around this level), FHBs are the noobies of the stock market (plenty of those around)

Not to mention most people buy a stock/option/whatever and sell it for capital gain after (speculating on a price increase). Different to property flippers? Nope.

There are a lot of similarities yet you don't see the same level of immature nonsense being spouted in the sharemarket threads.

YES some people are over leveraged.
YES there are economic forces that could impact supply and demand.
YES prices can come down.
YES there are some people who speculate.
YES there are some people who earn a steady cashflow.

So what? Doesn't mean YOU have to be over leveraged, or at 97% LVR or face bankrupty from a major economic event. The reality is that EVERY investment vehicle will suffer from similar issues. Supply, demand, economics, leverage, etc.

The key is to devise a plan to minimise your risk in the event that things go against you. Instead of attacking every damn post that goes against your own fearful nature, stick a sock in it and listen to the people that have "been there, done that" and learn from them.

People need to shift their attitudes from focusing on what could go wrong to how they can make it work given the conditions of today.

If this is how people react to a long term, relatively stable investment vehicle then I shudder to think how emotionally wrecked you must be from the emotional roller coaster that is the share market.

 

[sinner]

So what? Doesn't mean YOU have to be over leveraged, or at 97% LVR or face bankrupty from a major economic event. The reality is that EVERY investment vehicle will suffer from similar issues. Supply, demand, economics, leverage, etc.

Errrr are you serious? That is exactly the point?

Property is not different to any other market of supply and demand yet people act as if the rules are different? If you recognise that the property market is the same, how on earth can you believe it will continue to go up providing these absurd returns ad infinitum?

The key is to devise a plan to minimise your risk in the event that things go against you. Instead of attacking every damn post that goes against your own fearful nature, stick a sock in it and listen to the people that have "been there, done that" and learn from them.

Are you serious *2? No **** I need a plan? No **** I want to minimise my risk? But why on earth wouldn't I want to seek out and discuss perceived market imbalances with other people interested in the same market and meanwhile not be interested in the opinions of those who say nothing but "going up"? You honestly think I am looking at the huge drops in house sales volume across pretty much the entire country over the last 12 months and not curious as to the future of that?

Guess what, long only systems fail in the stock market during a bear, and long only systems fail in a property market during a bear. Therefore the only argument certain people seem to be claiming here is that there will never be a property bear market again. At worst, we range, apparently.

In which case I must be a fool for not having invested in property, except as we have already run the numbers in this thread (thanks Tysonboss) it turns out that remaining in rental has been marginally more profitable over the last 10 year period with increased citizen mobility to boot! i.e. I could hop into property market tomorrow and not be any more "behind" than if I had invested 10 years ago (all other things considered equal).

 

[tech/a]

In which case I must be a fool for not having invested in property, except as we have already run the numbers in this thread (thanks Tysonboss) it turns out that remaining in rental has been marginally more profitable over the last 10 year period with increased citizen mobility to boot!

That you are.
10 yrs ago property was at the levels you WISH they were NOW.
Many friends thought I too was a fool.
Fancy leveraging 90% on $4 mill of property!!!

Now 14 yrs later with $2.6 mill Freehold-----I'm a very happy fool.

Frankly I dont care much for this arguement I call back every 3 mths or so--and it is still the same.
Agrue your selves to oblivion while a few of us get on with it.
Fear---a terrible cross to bare.

 

[sinner]

That you are.
10 yrs ago property was at the levels you WISH they were NOW.
Many friends thought I too was a fool.
Fancy leveraging 90% on $4 mill of property!!!

Now 14 yrs later with $2.6 mill Freehold-----I'm a very happy fool.

Frankly I dont care much for this arguement I call back every 3 mths or so--and it is still the same.
Agrue your selves to oblivion while a few of us get on with it.
Fear---a terrible cross to bare.

You are just putting words (or in this case, the emotion of fear) in my mouth tech, you don't even know me. To me, it's obvious you are projecting your arguments with your so called "friends" onto the bears of this forum.

The numbers show clear as day there is no opportunity loss to have PPOR'd vs renting in the last 10 years if anything a slight profit advantage is retained by remaining in rental not to mention mobility!

I am sure all those in the Gold Coast who leveraged 90% on 4mio are very happy with their choices right now pfffft.

As a trader, to me the price is the price. I don't wish the price was anything! If I'm in I'm in if I'm not I'm not! Plain and simple! As an Australian citizen, I don't wish the price was anything but unsupported with taxpayer subsidy. Plain and simple *2!

I am not afraid of investing in property. Why on earth would I be? I am afraid what the current idiocy exhibited means for the future of our country and people.