Forum Replies Created
thats not bad….
Cabo Wabo
i reckon 15% under is a pretty good spot to come in at. Don’t tell the agent what you are gonna offer. Go out to the car, sit and write an offer, go back in, give it to the agent along with ur card if u have one, and leave.
Give em the impression u know what u are doing, that u have good finance, that u are prepared to purchase if they are interested, but that u are just as happy to walk away. Be very subtle, and make sure you write the offer. That way u don’t waste the agents time.
Cabo Wabo
i’ve a great relationship with my accountants. I send em emails asking lil q’s all the time and they happily reply to all my ramblings.
They’re great.. and fun too.
Cabo Wabo
Well i’ve my wettie and rubber duckie all packed…
Cabo Wabo
Originally posted by foundation:In 1990, the average person earned $24,440 (ABS), the labour force was 7.9 million and the total mortgage debt was $78 billion.
In 2006, the average person earns $42,500 (ABS), the labour force is 10.1 million and the total mortgage debt is $780 billion.
At 16.35% in 1990 (and remember very few people actually paid more than 13%), the national Debt Servicing Ratio* (DSR) was 7% of pre-tax income.
At 7.5% now, the DSR* has jumped to >13% of pre-tax income.
ï‚· DSR does not include over $150(?) billion of personal debt and >$36 billion of credit-card debt which largely didn’t exist 15 years ago. DSR is calculated from the figures given, and differs from many other estimates.
And then, to top it all off, it’s only been 2-3 years since prices jumped up so significantly. This means that even if house prices level off, total mortgage debt levels (and therefore DSR) will continue to climb for somewhere between 14-17 years.
As DSR levels climb, the money used to service the debt is quarantined from it’s potential productive use as savings, investment of consumption, all of which add to our national economic well-being and GDP. Instead it is paid into the deep pockets of bankers, and half of it is sent directly off-shore to repay foreign borrowing by Australian financial institutions…
Trust me, we are much worse off (individually AND as a country) today than we were in 1990. When the party music stops, we’re going to have a very long time to look back and think about where we went wrong.
F. [cowboy2]
Interesting numbers. I’ve added ur debt numbers for personal and credit card debt in there at 9% each and it takes the proportion of gross national income to meet interest repayments from your number of 13.6% to 17.5% … and to think, that does not take amortisation into account at all….just the interest owing on the loan… crikey!
Foundation, did u get the figures 78 bill and 780 bill from the ABS as well ….or are those estimates?
Cabo Wabo
Ok, i’ve picked my accountants brains, and he reckons he is now doubtful SD can be avoided. Back pedalling a bit…
Well, there u go, u guys were right. Bloody Johnny Howard and the tax department huh?
Cabo Wabo
It gives me the absolute SH%TS. Really pisses me off.[skull]
I’m in Perth. When i model purchases in excell, i put in 18% of rent as the overall management fee.
Personally i want nothing what-so-ever to do with the tenant side of investing, so its an annoyance/serious grievance i have to put up with.
Cabo Wabo
There’s a difference between dropping a very bullish asking price by 10-15K to adjust for a slowing in the market, and having the median settled sales value of a suburb drop by 15-20%
I see as yet no-one has replied to my ideas a few pages back regarding the differences between Perth’s situation and that of Sydney…..
If my ideas don’t hold water, tell me why. [baaa]
PS: Greed is spelt with 2 E’s.
Cabo Wabo
i’ll ask… does it make a difference?
Cabo Wabo
I want one of those big Imperial Star Destroyers from Star Wars….[fear]
Cabo Wabo
My accountant reckons he’s done it before for a client and didn’t have to pay SD. Maybe i should pick his brains more about it….
Cabo Wabo
I’ve some best friends that come from Norseman, 3 brothers who grew up there. I’ve been there a few times and with all due respect to my mates, i don’t think much of the joint. A real one horse town… and it is seriously far away.
I wouldn’t buy there for all the tea in china. My mates have all left and don’t think there’s much future in the place… even with the price of gold being what it is.
Here’s a funny story: My mates family come from holland to begin with. When they arrive at fremantle all those years back they made a choice, either go to the booming gold town of norseman, or to the booming asbestos town of Wittenoom (spelling?). God knows why they chose between these 2 towns as there were probably about 50 booming lil towns around the place at the time? But any way they chose between them and picked Norseman because my mates great grandmother thought it was pretty on the map and had lots of lakes like they have in Holland. They thought it would be really beautiful just like back home. When they go there, here was this dusty town on the edge of the nullabor surrounded by bloody salt lakes. HA!!! What a bummer![baaa]
Cabo Wabo
Ok folks, time to report back, done my sniffing around now regarding the bottom end of the Perth market. Just to recap, 2 weeks ago I stated that for a lil while now I'd been purchasing the crappiest houses in the worst suburbs of Perth ,as I thought it was the safest place to be when the heat comes out of the market. (I forgot to mention that I was reno'ing and holding).
The response I got back from my fellow forumites was that the experience of Sydney was in fact quite the opposite, and that the bottom of the market was the most risky, the general reason stated was that the bottom of the market gets swamped with investors during a boom, but then they all sell up when the heat comes off and the bottom end freefalls.
To re-evaluate my position and get a better understanding of my risk going forward, I emailed some estate agents I know and also chatted to a couple of investing buddies of mine. Here's what I reckon:
I agree with all that was stated about Sydney – can't argue with it. And yes, the bottom of Perth is full of investors – can't argue with that either. But I've come to the conclusion that Perth is indeed a “different kettle of fish†to Sydney for a number of reasons – and those reasons will help buffer & protect the bottom of Perth's market.
I've always figured that when a market softens, and interest rates go up, the most attractive place to buy will still be at the bottom because it is there that mortgages will be the smallest. If someone in a middle tier suburb sells their house because they can no longer afford it, then they would have to go buy in the bottom tier, or rent.
Either way, I've always figured category 1 would consistently be in demand. What I believe I have been missing is: I've always looked at the Perth market as a “closed†loop. That is, if the bottom was the cheapest, no-one would bail out of the bottom,. BUT investors, especially interstate investors are able to bail out and go to more profitable markets.
1) My confidence in Perth is based on the fact that Perth is driven by the commodities boom. So long as there is the commodities boom there will be positive migration into WA, good employment prospects, a housing shortage and good rent.
What drives the commodities boom here in WA? – a booming China. I'm a firm believer that the demand from China for Australian commodities will be sustained for years to come. The rest of my argument is based on this premise.
2) In Sydney, when the market softened and investors bailed, people also left the state in search of jobs and cheaper houses. This was a double blow to the bottom sector. Here in WA, if things soften, and it will, there will still be +ve migration into the state by workers associated with the mining sector to help fill the gap left by bailing investors
3) When Sydney and Melbourne went up, comparatively other states looked cheaper (considerably) so people went to those cheaper states. The thing with Perth is, because we lag behind in the cycle, when we have a bull run and prices increase to what we West Australians think is exorbitant, we are simply equalling the affordability, or lack thereof, of the eastern states. Sure WA has edged in front regarding median house prices, but not but a large margin.
What I'm saying is an interstate investor who bails on WA, will not do so due to the promise of a much cheaper investment property in another capital city – as they don't exist. They may be lured away in large numbers due to promises of higher returns, but not by better affordability.
4) While Perth HAS to slow so that West Australians can adjust to the change in affordability, the commodities boom will maintain steady appreciation.
5) Interest rates affect the whole country. As the average mortgage in Perth is similar in size to the average mortgage in the other states, the interest rate hike wouldn't make Perth any less affordable or less attractive than over east.
6) If interest rates went so high that many investors sold their bottom tier investment properties, then many middle tier PPOR owners would also be forced due to affordability issues to downsize into a bottom tier PPOR, or look at renting.
Rising interest rates would create increased rental returns as more people sold up and rented. Many investors would sell their rental properties to those who were down sizing PPOR's. The rental pool would diminish as rental demand increased.
I'm not saying “come buy in Perth now†as I think we are near the point where we will see a slowing, but what I am saying is that I do not think Perth will experience the hardship now being felt in Sydney etc. Perth will level out, not drop, and if the bottom of the market does drop, it won't be by much.
If the commodities boom ended tomorrow, then in the short term, we'd be royally screwed, , but it WON'T, of that I am certain. It will be around for a long time propping up and maintaining our property prices.
As such, I once again feel relatively safe in my position. I've half at the bottom and half in the middle so I'm still hedging my risk I guess. This posting is part of my way of doing my “due diligence†on my “risk†so I welcome all comments and arguments to the contrary please. Go on, let me have it!
Back on cars, I've been restoring an XJS for years now. Before I pulled it apart I and chopped it up (literally) I remember the glee of doing 220kms on the long straights between Kalgoorlie and Southern Cross. Great fun in the middle of the ass end of nowhere! wwhhhoooooosssssssshhhhhhhhhhhhhh! [strum]
Cabo Wabo
A friend of mine put me in contact with another friend of his who was being foreclose on. The bank had given him 6 weeks to sell the joint or they’d take it. I purchased the property for slightly underrmarket value and got a good deal and some very helpfull equity.
He didn’t feel he was ripped off as i gave him a reasonable price. He was very very pleased and happy i was there to purchase the property from him. I solved his problem and he appreciated it. We did it without the need of an agent so that also saved him agents fees.
I think the trick is, if you come across a foreclosure, offer a reasonable price, but make sure there is enough in it for you to make it worth your while – that way both sides win.
So long as you don’t screw the poor vendor for very penny, then there’s nothing unethical about it. someone wants to sell, you wanna buy, give em a reasonable price n ur done.
Cabo Wabo
Thanks GMH454.
I can definately see where ur passion is. As for me, for the past 9 years i’ve driven 308 HZ Prem. She’s a beaut. A real sharp runner. Very clean, very straight. i’ll never sell her.
i’ll get back to you guys in the near future regarding my thoughts on the effect of the investor spread in bottom of Perth’s market.
I’ve currently got a few email discussions going back and forth with a few agents i’m friends with, so i’ll let you know in due course…
Cabo Wabo
Hey GMH454,
Could you please restate your previous post as you lost me a bit. “Knock down buzz?” and … where was it that people were buying 10 or more proerties because they could only offord it there?
Walk me through it mate?PS, what does ur Alias GMH454 mean? Have u got a big block Torana or something?[exhappy]
Cabo Wabo
Hmm, thanks guys… gives me something to think about.
What ur saying is be very carefull of the suburbs where prices have been driven primarily by investors.
You believe those suburbs to be careful of are the lower end of the scale as opposed to the middle tier suburbs. U are saying that in sydney there was a larger proportion or investors in the bottom end than in the middle tier.
I’m gonna do some homework on this and find out what the investor spread is across the property range here in perth.
Good feedback… thanks
Cabo Wabo
damn!
Cabo Wabo
I agree with Terryw about getting the valuation as high as possible (only if it has been you PPOR up until now.) If it was an IP i’d say get the valuation as low as possible.
By the way, I have a question:
I was under the impression that if you sell a property to ur family trust (and that property was originally in your name only),
…and you are the sole director of the trustee pty that is purchasing the property,
….and you are the principle benificiary of the trust,
….then you would not need to pay stamp duty on transfer as the property was upon sale, still of financial benifit to only one person – that being you
…. and you could avoid SD based on this technicality…???
Thoughts?
Cabo Wabo
Guys,
I’ve been buying in the very bottom of the housing market here in perth. The crapiest houses in the cheapest suburbs. I think when the heat eventually comes off the market its the bottom of the market that will be the safest.
My question is: when sydney cooled off, what did the very bottom of the market do? Did it experience as strong a drop in house values at the middle tier suburbs?
Just by the way, i believe perth’s market still has another good 6-8 months left in it as strong levels of appreciation… but thats just my thoughts.
Cabo Wabo
