Should I be buying now?

I bought an IP last year, it was a brand new freshly built 4 bedroom place.  Back then I had planned to buy another property or two later this year and now am in the financial position to do just that but with the latest economic conditions I am wondering wether I should hold off or is ti right to take the plunge now?

I was looking at investing in some established homes possibly in the Townsville, Hervey Bay or Logan City areas...

Short Answer: No

Do some ecconomic reasearch from non mainstream sources and found your own opinion before you take the dive

And as for hervey bay,  That is where I live,  building has grinded to an almost halt and property prices are stagnating,  It looks as if the prices won't hold there ground much longer

I agree. Hold off unless you find a bargain. Even then bargain harder. If you get a good price for a property that does not go up for sale often then it might be ok to jump now.

It depends upon your own personal goals.  If you want to do a quick reno and flip, this isn't the time.  If you are looking at increasing your portfolio and hold for the long term and have the financial resources to cover any unexpected increase in interest rates it may be worth looking around for a bargain.  I personally believe that properties are getting closer to there low point but wont see great levels of growth in the short term.  Depending on what parts of Australia you are in, rental prices are increasing at a fairly steady rate.

whiteknightoz,
                         I think the general opinion of most is now is not the time to buy.
You only buy if you can get capital gains and an income to cover your expenses. Do you think you will get capital gains at the moment.... most likely not.    Will your rent cover your cost of borrowing.....most likely not.

             If you have some money then put it in cash and get 8% instead of buying a property and loosing say 5% .

Wait a few months , your cash will increase, properties will decrease, you cannot go wrong. Or put your cash into an offset account on your last loan till you can see property prices increasing....this may take a while...

            Good luck whatever you do.

Thanks for all the great advice..

Think I will stay put unless that real bargain comes along

How the people on this forum have changed. When I posted ( about 6 months ago ) that buying would be suicide , they all said "you can always buy, property always goes up". Now that it's too late they realize their mistake they made 6 months ago. Property will crash 50% within now and 3 years.

By that definition, a bargain must be at least 50% cheaper than what you think it's worth now.
People live in a bliss , in a dream , in a world of endless credit. That's all come to a halt now, people, businesses, banks are going bankrupt. What you should be doing is sell all your crap to people on this forum who still think they can 'make a bargain' and then buy 3 houses for that in 3 years, if by then you still think Property investing is a good thing. ( in time, and this won't take long, people's opinions about property will change from 'oh my god that's the best thing in life' to 'oh my god you bought a house ? Just hope that you don't go bankrupt then'.

yes scamp you did warn us, but you also told us interest rates were going to keep going up! 50% fall in house prices, maybe where you live, still seeing record prices in my neighbourhood in recent weeks and demand way above supply, that said, i would - be far more cautious about buying now, many areas will most likely see falls, but i would have thought 10-15..% to be more realistic, depending on location. Be worried if your highly leveraged 80+%

Sci Fi Horror flick,

In Scamps defense the interest rate thing hasn't finished yet....

In your defense, yes, the reasonably leveraged should survive.

Now i may be wrong but can you please point me in the direction of all these so called investors saying property NEVER GOES DOWN IT ONLY GOES UP. I for one have never read that. People say long term you will not lose. Say 10 to 20 years. I think even you cant argue that.

You listen to peoples best case senario ON these forums and you laugh yet you expect everyone to confirm to your belief which is clearly worse case. Be realistic. The truth lies in the middle somewhere. Yes we will have areas that will be hit hard with possible 50% losses or more. And im sure people like you will do your usual cut and paste of articles showing this and claim that it is Australia wide.  Many areas will not be this bad just as in America.You cannot pile the whole of Australias Property market into one percentage value.You clearly have your own agenda talking the market down.
Yes things are slowing
Yes people will be hit hard
Yes there will be massive value drops in some areas

BUT

Some areas will hold strong
Some areas will recover quickly
The credit crisis will end
Confidense will return
The cycle will continue eventually.

Interesting seeing this from the UK, about to put my own UK house on the market again after a messed up sale a few months ago. The idea is to emigrate to S.A.
Long story short, a gazundering offer we received only a few short months ago, before the recent financial storm, now looks like a missed golden opportunity.... Going back further, 2 years ago I could have sold my small house in the UK and with the relative property values and exchange rate - if I'd understood the market at that time - we could have practically retired to Australia into a decent sized house and a very small mortgage. Can't do anything like that now! Wondering how safe Australia is economically, surprised to see such a lack of confidence after such bullishnesss even recently, but I guess in the end this credit crunch really is hitting us all.
Even with the mining boom and much better fiscal controls on the banking industry Australia is still not totally immune it seems.
I still think you are safer than us Poms though, and good luck to you, we're in bad shape and just starting to realise it.

Strangely, your pessimism about your own property market gives someone like me the faint hope that if a bit of luck goes my way we can still "Pommiegrate" to your great country, will need to be careful with the exchange rate timing, and hang in for your own property market to slide a bit.

Watching Steve McKnights recent videos, your recessions of the 80's and 90's timed in exactly the same as ours. I seem to remember they lasted a long time over here, not a couple of years, but several long years.

Anyone done any comparisons between the average wage and the average house price over a few decades?
Let me know if you have any interesting charts to look at! Would make interesting comparisons ;-)

I am a total newbie when it comes to investing so please take it easy on me for asking the following questions:

1. What makes the housing market drop in value by figures of 20% odd?

2. What does this mean for land sales and new buildings - I take it new housing will dry up if established homes are a lot cheaper or the builders/land developers will have to drop their price?

3. From a rental point of view - will there be more chance of finding +ve geared properties if the price is dropping or will rent also decrease?

4. From the info provided above it appears residential is not he way to go at the moment - is commercial investment a safer alternative?

That should cover it for now ...

2/   Correct, it goes back to the supply/demand thing. 

3/   I don't think rents will be affected anything like property values. Strong demand for rentals in australia generally, even if the a$$ fals out of the market. Positive geared, I doubt prices will fall that far, but we could get close.

4/    I don't know much about commercial, but i would have thought  it would be higher risk, higher rewards. No guts no, glory. 

I have generalised a bit here, but different areas will perform better and worse than others.

Good luck

Whiteknight, with regards to commercial property - firstly you do not have the protections afforded by the residential tenancy acts/tribunals (if you call them protections either for tenants or lessors).  The assumption is that if you are able to own a commercial property, you are able to afford a solicitor to prepare/review your lease, you have the waywithall to understand commercial dealings, undertake due dilligence etc.

As for risk, each class has an associated different level of risk & consequent return. That is, capital city residential may have a lower rental yield but have substantial capital growth potential whereas commercial property will have a higher yield but lower capital growth.

Vacancy factors are more closely related to market conditions eg recession will lead to longer term vacancies (unlike resi where people will always need somewhere to live), unrelated factors can cause vacancies eg a manufacturer moving offshore and all of the related suppliers not needing to be located near their main purchaser.

The other factor to consider is that the LVR is also much lower ie you will require at least 30% equity to purchase and your rate for borrowing will also be higher (possibly 1-2%).

As far not being the right time to invest – I disagree.

Injections of capital into banks and other corporations will help the current economic turmoil. (Which is currently occurring) and right now, the greatest investor in the history of the world has spent US$15 billion on investment within the last week and is set to spend another US$25 billion in coming months. He has invested heavily in General Electric, Goldman Sachs and Constellation Energy, in addition to huge investments in Wells Fargo Bank and US Bancorp. Yes, the world's smartest investor is ploughing billions into the US banking system! Is he crazy? Yeah!… like a fox. Warren Buffett knows exactly how this will play out.

History has shown it is possible not only to survive -- but to prosper -- in these times.

During the great depression, huge fortunes were made by many. The Kennedy, Rothschild and Rockefeller families all dramatically increased their fortunes throughout the depression. But it wasn't just the rich who got richer -- many ordinary citizens found a way to not only survive but thrive during a poor economy.

Aussie banks profit from credit crunch
“The average profit margin for the major banks was 54.8 per cent in the March quarter, more than double the long-term average return of 26.9 per cent, according to official figures from the Australian Prudential Regulatory Authority. That equals more than $1 profit for every $2 in interest and fee income charged.

Currently I am seeing (and buying) some absolute bargains out there in the property world. If now is not a good time – I wouldn’t know what was!

Chris White
Prosper Group

T 1300 664 373 | F 02 9966 5608 |
E chrisw@prospergroup.com.au | W www.prospergroup.com.au

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I have to say,  Don't listen to misinformed people,  Or people who have a ulterior motive

Firstly I have to say that its quite possible that property might fall 50% like Scamp says,  Unlike what most people assume will happen if there is a crash,  Property prices won't go down to a more realistic value,  They will go down beyond there true market value,  It will swing as hard down as it did up,  You will see property at totally unrealisticly cheap prices.

As for buying now,  anyone who recommends that is telling you lies,  Remember the rule:  Buy low,  Sell high

you only need look at a chat of property prices since say 2000 and it will clearly tell you that you should have sold your house half way through 2007,  Now is certainly not the right time to buy,  The charts don't lie!  only people do.

Someone noted how well our banks are doing at the moment,  But the elite money masters of the world at the privately owned RBA are putting there plan into 5th gear,  Interest rates will continue to fall,  But that won't result in a recovery in the property market,  Inflation will rise,  jobs will be lost and people will start defaulting on there debt in continuing greater numbers,  Banks profits will shrink up and eventually they quite possibly could go bust,  People don't realise how similar to the americans our story is folding out,  We are just a few years behind.

How many people on this forum know that the Rudd government has commited to spending 4 billion dollars of tax payer money towards backing so called "AAA" Mortgages ?  The government told us that intervention was needed to allow banks to continue to loan out more money !!!   Do people realise how this works ?

Those 4 billion dollars that back private banks will turn that into 10x that figure through the magical process called "Fractional reserve banking"  So basically the banks will create 40 billion dollars   "Not necessarily more home loans,  But anything the banks wish to do with that money" through 4 billion dollars of current debt.

This is what a strong ecconomy is all about ?,  Debt compiled apon debt and more debt and more and more,  Everytime its compiled its 10x greater then the last.

Anyone who wishes to make money in these critical times should look at investing in gold,  Everything points towards gold hitting a minimum of $1500 in the next 6 months,  And its arguably been one of the best returning investments in the past decade.

Your post doesn’t make a lot of sense.

You make it seem like there is a conspiracy theory out there that only you know about.

I would like to see more fact behind these posts. A little information is dangerous.

There is a lot of money being made whilst you continue to wait for property prices to fall 50%.

Chris White
Prosper Group

T 1300 664 373 | F 02 9966 5608 |
E chrisw@prospergroup.com.au | W www.prospergroup.com.au

Subscribe to our free newsletter at www.prospergroup.com.au |

Visit our weekly property market updates - www.prospergroup.com.au/blog

You make a valid point on how low house values will go. If they were to drop on average 50% then in most case this would be far below there true value. They would just be suffering due to the current climate. When things improve and sentimate changes to a more positive outlook. Then values will head back up and more likely than not pass current peaks.
 It just spins me out when some gloomers are jumping on this like it is a new thing and they want pats on the back for calling it first. Its crazy. Good times lead to overvaluation. This brings on a slump possibly leading to undervaluation. So what. This is not a new thing. Just be prepared and dont over extend in times like this.

There is never really a right or wrong time to buy, it depends on the deal, your strategy, goals and financial circumstances. The last few months I have purchased 15 properties, and building a few homes also, and the buying has been very good, and decent margin in all of the purchases. A lot of it comes down to finding the deals, contacts, strategy. There are always good buys in the market, but you must be ready, finance approved or cash, short clauses, quick settlements,and know your market inside out where you are buying.

I have been in property  for nearly 15 years now, and found the last few months has been some fantastic opportunities out there, dont follow the sheep and run for the hills afraid, research, speak to highly specialised people, investors buying up now, speak to buyers agents, advisors, valuers, and switched on agents to gather your info, and facts.

Always make sure you have enough cash to back you up if needed, dont buy others problems if you dont know how to fix then, no matter how cheap and try to learn from others that know or own more than you.

Goodluck- assess each deal on its merits, location, price, value, potential, demand and pain thresh hold - if you can hold in worst case scenario, then it can only get better.

Watch the flow of money, I am fortunate I know a lot of greeks, lebanese, italians and have a lot in my family so I watch and listen to whats going on, where, and try to learn from others that have been doing property nearly 40- 50 years.

Stay positive, and if something doesn't feel right, well don't do it, there are opportunite's out there daily, you just have to get off the phone, net, out of the cafe, unchain yourself from the office desk and pound the streets looking for opportunities and talking to the locals and ask lots of questions to educate yourself whats really going on in the market, and where the deals are.

Bye-

Kylie,

What areas are you investing in at the moment? 

You mentioned you are building a few is that the house/land packages or are you finding your own land then building?

Paul