The future of Australian property prices

[tech/a]

2010 "The Peak":


Maybe you should be more specific in ya riddles, someone might start to think that you're saying 2012 is the time to buy!.......

Ok.---No Riddles.

I'm not saying now is NOT a time to buy property in fact the exact opposite.
Now is an excellent time to buy. If your developing.

Why am I selling.
Well I'm selling 3 IP's Each are positively geared but not by a great deal.
So looking forward Im not seeing a rise back to the old highs for many years.
If I hold then my properties depreciate---the banks love me as I pay their interest and take all the risk.
Thats dumb investing in my view. If I have capital gain then fine---if I dont then I'm just serving as an investor for the banks.

By selling I realize profit that can be better used elsewhere.
if I cant find anything straight up then I have it set ready to go with pretty well all else freehold.

Industrial is all returning far more /1000 than domestic.
Costs way way less to develop and Tennant s pay ALL outgoings.
They are much better tennents and once established are there for years.
I can determine the property value on rent return.

The latest is small 120-150 square meter sheds for tradies.Each sell for $130K or rent for $15K a year.
Cheap but great return. I can fit 8 on the 2200 square meter block I hold currently.
Thats where part of the proceeds will find a home.

So not a contradiction as some would have "hoped".

 

[Mr Z]

Never people have realised property is not an investment but a neccessity property is reverting back to its fairly valued 100 year mean from there it will be impossible for property to ever print a positive return in real terms again, it is a depreciating asset after all. it is well documented in this thread property prices are depressed in both inflationary and deflationary times due to being leveraged you cant win best to buy gold it goes up in both win win! Everone knows the true way to increase your worth is through precious metals sure its miles of its highs and dont yeild a thing but precious metals have great fundamentals just wait till the world ends youll see!

Now you are just getting silly!

You know that MOST of the time property is a no brainer, you simply have to recognize the conditions under which it will not preform. In most of the western world we are there now, in Australia we have all the precursors but we have not quite buckled yet. To think that we will be impervious to the same factors that have savaged the worlds property markets is getting a little naive, the question we need to solve is more by how much will we correct. I think we will fare much better than most but then again most have had a really hard time of it.

It is amazing how gold polarizes people... if you find yourself hating it or loving it you are probably dangerous and should not handle your own money. It is an asset that has its time and place... since $250 it has been gold outperforming almost every year, that is no accident, it will come to and end and there is more to go ---> you can take that to the bank.

 

[Julia]

What? You don't know anyone with kids? That is two for a start.

Well, if you're going to include dependent children your argument is irrational from there.
If you are discussing two or more generations living in the same household, you would surely assume said generations are both going to be adult.

 

[Mr Z]

Well, if you're going to include dependent children your argument is irrational from there.
If you are discussing two or more generations living in the same household, you would surely assume said generations are both going to be adult.

Irrational? How so, it was more an observation than an argument and as is typical we are focusing on the throw away lines and not the actual argument.

Let me frame my actual argument it a different way as we seem to be hung up on the minutia.

As pointed out by 'im sparticus' housing has become far more aspirational than utilitarian, house sizes have increased and in many instances the number of people in them has decreased. The bottom line is that we now appear to have (guesstimation here sans stats) what should be a high in the ratio between square meterage of domestic housing and residents. There is room, under financial pressure, for that ratio to head back down and for people in one way and another to consolidate making better use of the resources available to them. This is a factor that is not taken into consideration when stats are done on supply v demand as the stats are done in a 'static accounting' fashion, that is my actual argument. Do you find that irrational?

I simply believe that housing supply is a little more elastic than people think. It reacts more to monetary conditions, economic conditions and confidence factors than it does straight out theoretical supply and demand numbers.

 

[im sparticus]

Now you are just getting silly!

Mr z if you think that is silly you really need to go back and read what some of the nutcases are posting posting scm is the star poster on this with numbercruncher not far off. Enjoy the laugh i know i have, almost as much as i have enjoyed watching them defend their bs.

 

[medicowallet]

By selling I realize profit that can be better used elsewhere.
if I cant find anything straight up then I have it set ready to go with pretty well all else freehold.

Industrial is all returning far more /1000 than domestic.
Costs way way less to develop and Tennant s pay ALL outgoings.
They are much better tennents and once established are there for years.
I can determine the property value on rent return.

The latest is small 120-150 square meter sheds for tradies.Each sell for $130K or rent for $15K a year.
Cheap but great return. I can fit 8 on the 2200 square meter block I hold currently.
Thats where part of the proceeds will find a home.

So not a contradiction as some would ha

ve "hoped".

Very wise.

Showing that not getting emotionally attached is very important.

However, I don't think the majority of property "investors" have a clue what could happen.


If you have 3+ properties, and haven't gone into damage control since the GFC first raised it's head, then you only have yourself to blame.

MW

PS Where is Robots?

 

[im sparticus]

Very wise.

Showing that not getting emotionally attached is very important.

However, I don't think the majority of property "investors" have a clue what could happen.


If you have 3+ properties, and haven't gone into damage control since the GFC first raised it's head, then you only have yourself to blame.

MW

PS Where is Robots?

what do you suggest as damage control? Property prices would have to depress quite alot to make this worthwile and thats if you nail the top and bottom. have not seen this as a viable option for any of the markets where my properties are located even now with the advantage of hindsight, without it your dreaming

 

[tech/a]

what do you suggest as damage control? Property prices would have to depress quite alot to make this worthwile and thats if you nail the top and bottom. have not seen this as a viable option for any of the markets where my properties are located even now with the advantage of hindsight, without it your dreaming

What sort of equity do you have in your properties?

 

[im sparticus]

What sort of equity do you have in your properties?

No alot 70-80% lvr

 

[medicowallet]

No alot 70-80% lvr

No wonder you are in here trying to talk yourself into a position of confidence..

BTW Do you own any properties in Ballarat

At that LVR, doesn't take much movement to lose 50% of your equity.

MW

PS where is Robots?

 

[Mr Z]

No alot 70-80% lvr

You are a high risk then, like a margined stock player.

 

[tech/a]

No alot 70-80% lvr

The problem you have is multiple.
Without increasing equity your Losing most of your interest.
Rent which off sets the interest is wasted ---- the bank loves it.
You take the risk and loss --- they take their risk free interest.

So if your interest is say $60k a year in 3 yrs you'll have lost
Most of $180k Taking a loss from the highs now would be better than
Bleeding to death.

So as you can see your the banks patsy.

 

[im sparticus]

The problem you have is multiple.
Without increasing equity your Losing most of your interest.
Rent which off sets the interest is wasted ---- the bank loves it.
You take the risk and loss --- they take their risk free interest.

So if your interest is say $60k a year in 3 yrs you'll have lost
Most of $180k Taking a loss from the highs now would be better than
Bleeding to death.

So as you can see your the banks patsy.

Im only loosing what they generate so its not quite as bad as that (this isnt the full story anywho) work through the sums on liquidating dont forget tax and cost of reentry. how much further does the market have to fall to make it worthwhile? I understand you have found outher opportunities but lets say you havnt your just joe average having held for however long youve held them for?

 

[medicowallet]

Im only loosing what they generate so its not quite as bad as that (this isnt the full story anywho) work through the sums on liquidating dont forget tax and cost of reentry. how much further does the market have to fall to make it worthwhile? I understand you have found outher opportunities but lets say you havnt your just joe average having held for however long youve held them for?

Kind of like how the sharemarket invertors held onto their bluechips as they didn't want to trigger capital gains, and exit and re-entry costs.

Yeah, I can see the benefit in that.

 

[im sparticus]

Kind of like how the sharemarket invertors held onto their bluechips as they didn't want to trigger capital gains, and exit and re-entry costs.

Yeah, I can see the benefit in that.

All depends on your approach and how long you have been inprobably why after tax etc the accumulation index is so hard to beat.
Easy in hindsight very hard to do practically most that try end up behind. me i try not to have my trader goggles on when dealing with my properties or my super (100% indexed btw) you know my super is worth alot more now than it ever was at the highs almost double most my age cannot say the same

 

[MR.]

Hi Z,
The implementation of the 50% CGT (from near no deduction in the shorter term) would have encouraged more investment into property (fuelling higher prices).

Hello Tech,
“The best time to buy is NOW” that was the peak, that was 2010! You’d have to be very lucky not to have done some dough, developer or not even with research undertaken.

It was not fear that kept people out of the market at that time as you preached; it was the fear of missing out that was luring them in. Now you are going to sell that very foundation of their investment as an example, for greener pastures. The bread and butter and they're even positively geared….

Wonder what the painful game plan would be if these properties were purchased more recently as the apparent preaching? How about Kincella? Oh, I see, IM SPARTICUS should take a loss??? That would mean prices have further to fall, and the specifics of IM’s investment aren’t even known….. The tune has definitely changed and it’s a contradiction alright!

“Witness the unwinding of propety”

 

[MR.]

On a lighter note. Development land should be priced very attractively as demand for this asset would have been low. Project builders doing anything for your business is not a good sign for actual development though! Have you thought of selling the industrials?

 

[Julia]

Irrational? How so, it was more an observation than an argument and as is typical we are focusing on the throw away lines and not the actual argument.

Let me frame my actual argument it a different way as we seem to be hung up on the minutia.

As pointed out by 'im sparticus' housing has become far more aspirational than utilitarian, house sizes have increased and in many instances the number of people in them has decreased. The bottom line is that we now appear to have (guesstimation here sans stats) what should be a high in the ratio between square meterage of domestic housing and residents. There is room, under financial pressure, for that ratio to head back down and for people in one way and another to consolidate making better use of the resources available to them. This is a factor that is not taken into consideration when stats are done on supply v demand as the stats are done in a 'static accounting' fashion, that is my actual argument. Do you find that irrational?

On the contrary, it's entirely rational and I thank you for 'reframing' with such clarity.
What I was objecting to was your uncharacteristically silly suggestion that including dependent children in a household as a 'second generation' made sense. Yes, literally it's true, but it doesn't make sense in the context we are discussing.
So, good you have explained now so well.

I simply believe that housing supply is a little more elastic than people think. It reacts more to monetary conditions, economic conditions and confidence factors than it does straight out theoretical supply and demand numbers.

Yes, I agree. Perhaps especially confidence which seems at a pretty low ebb at present.

 

[tech/a]

On a lighter note. Development land should be priced very attractively as demand for this asset would have been low. Project builders doing anything for your business is not a good sign for actual development though! Have you thought of selling the industrials?

Firstly from the peak to sale now sure I've lost potential profit.
But it's all part of the business of property for me. Profit in all business I'm involved in is well down on past figures but we still continue doing business.

No not selling the industrials as I own them and the return on investment is excellent.

By the way demand for good development property is always very high.
GOOD property is difficult to find.
Number of dwellings or sheds is king on a property.
You'll make a lot of your profit at the front end so important to get you numbers right.

 

[im sparticus]

As this elasticity in property plays out seems to me its gonna place more demand on smaller places whilst lowering median (as the median gets redefined) and bigger properties loose value seems like appartments and such could have an nice increase in real terms... actually this has already been playing out for the last few years appartment overall have been outperforming house (im talking capital cities).