All Topics / General Property / Where does the market go from here?

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  • Profile photo of MiniMogulMiniMogul
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    “The real risk is with those people who are handing over control of their money (sometimes $145,000) to people they have never met. These poeple are making incredibly dangerous claims that they can make 40-60% per annum by writing options. These people will be the ones that will truely be the biggest losers.”

    This is something I was wondering a while back. If you know what I mean. So, was I right, then? Despite all the bluster and denial? Because if I was right, it means people lied. To me, it not only made perfect sense, as it still does now, but bordered on the bleedin’ obvious.

    cheers-
    Mini

    Mini

    Profile photo of elveselves
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    “One thing this site has taught me is “Researching your purchases is paramount”.. it’s no good buying a + Geared property in a one horse town if the horse then leaves”

    REDWING

    – or closing the barn door after the horse has bolted

    On another note, I locked in interest rates before they increased.

    I think I will sit on some plateau, waiting to see the sun rise for my next wake me up call.

    Profile photo of Scarecrow7Scarecrow7
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    “To be forewarned is to be forearmed” – yes?!

    I am an eternal optimist when it comes to Australian RE in the long-run, but I am grateful for the passionate views of Bill etc forewarning the inevitable slide. I am 30 and came to Aust in 1988 – too young to take notice of 87 property boom anyway, but of significance I have experienced the dot-com boom/bust and realise all things do ebb & flow like the tides of the ocean. Oh, I paid to learn the hard way.

    With caution I continue to work on my first commercial property acquisition in Perth…with the doom & gloom I’ll just ask for crazy things :) I’m having fun devising the deal.

    I also have the luxury of considering property in Malaysia where the devaluation of US$ is bringing tremendous buying opportunities, so again with calculated risks, there is a selfish silver lining in the A$’s momentum for me.

    As China was mentioned, Re: China article below from Feb 2003, it’s long but interesting story of rentals boom…we may never experience it here, but hence always better to be the landlord, not the tenant.
    __________________

    The High Cost of Living
    Shanghai’s real estate boom means that finding a dream house is a nightmare
    BY HANNAH BEECH/SHANGHAI

    Monday, Feb. 10, 2003
    We began with lots of smiles. Our landlord, with trousers still tucked into his socks from having ridden his rickety bicycle over to our house, flashed a big grin and wished my husband and me a happy new year. We smiled back and wished him the same.

    Then he leaned in for the killer: he was raising our monthly rent, flouting our contract with the confidence that he, like so many other landlords in Shanghai, would pull off the price hike. My husband and I were astonished. To us, the rent we had been forking over was already far too high, considering the spotty electricity, gas and water.

    The place was so poorly heated that I, TIME’s Shanghai correspondent, would take coffee breaks from typing in order to warm my hands on a hot mug. Last month I was just about to check into a hotel to write a story—when the electricity finally flickered back on. We thought we were the only people gullible enough to pay such an outrageous amount for our little house. Turns out that there are plenty of others in Shanghai able and willing to pay a lot more, forcing us to seek a new home.

    So life goes in the world’s only remaining boomtown. Shanghai is reveling in a Gatsbyesque race to spend, spend, spend, and I, like many Shanghai residents who can’t quite keep up with the Wangs, am finding myself quickly priced out of the market. When I told our real estate agent our housing budget—more than an average Shanghainese’s yearly income—she shook her head and said it might be tough to find something suitable for such a paltry sum. Nevertheless, she offered up some extravagant options, hopeful that extra cash would somehow materialize in our pockets.

    First up was The Emerald, a pristine, gated community where a giant billboard invited us to “Live a Fortune 500 life.” Sadly, we couldn’t come up with the $9,000 per month Fortune 500 budget. Next was Le Château, a bargain at $13,000 for tennis courts, heated bathroom floors and—this being a château, after all—refrigerated wine cabinets. If that didn’t suit us, we could live in Contemporary Spirit Villas, Drama House Historic Villa or the intriguingly named Celebrity in Shanghai.

    Touring these swank digs, it’s hard to remember that this is the same city where 15 years ago the richest folks found delight simply in a new icebox. The pace of change in Shanghai (double-digit growth rates for the past decade) is so rapid that my real estate agent had upgraded her Nokia cell phone between our first and second meetings—the third mobile she’d got in as many months. Sure, most people aren’t living in the châteaus of Shanghai, but incomes have increased so fast that 60% of the city’s households now own their own homes, up from practically zero a decade before. Demand is so voracious that housing prices have doubled in three years in parts of central Shanghai. Dusty villas in the fashionable French Concession are selling for millions of dollars, even if they have rotting floorboards and cracking foundations. In December a 1,110-sq-m penthouse complete with an indoor pool and a 21-inch LCD TV in the bathroom made headlines when it sold for a record $4.3 million. Just the right to tour the lavish apartment in Shimao Riviera Garden cost $600 per VIP ticket.

    Even the giddiest high-riders are beginning to question how much real estate speculation Shanghai can take. Yes, luxury-residential rents increased 15% last year, but in the next three years the number of new apartments in the city will double due to frenzied construction, leading to a surefire property glut.

    Shanghai officials aver that there is no property bubble. But such assurances meant little for me as my husband and I struggled to find a new home. We decided to downgrade from a house to an apartment, but even that didn’t help much. An almost-done deal fell through because a South Korean diplomat as well as a banker at Standard Chartered suddenly outbid us by at least $1,000—the agent delicately informed me that we were “too small potatoes” to be pinning our hopes on such a nice apartment. Another potential flat, which had cost $3,000 last June, was listed at $4,500 when I visited it. By the time I’d got home, the agent called to announce a teeny change: the price was actually $5,000. By the time I called back to tell her we might still be interested, the price had risen to $5,500. Not even the Turkish lira inflates as quickly as rent for a Shanghai apartment. In the end, we finally settled on a unit in a 1930s apartment building built during Shanghai’s last great boom. Once, the Grosvenor House was one of the most prestigious buildings in town, known for its sweeping garden and Art Deco touches. Today it’s been eclipsed by the behemoth modern villas that dot the city. But for us, it’s home—until it, too, becomes too rich for us.

    Profile photo of thefirstbrucethefirstbruce
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    Interesting that Steve is getting into franchise businesses. BTW, is this thread the first time Steve has mentioned he cashed up significantly last year???

    I have struggled on what to do with cash over the last 10 months. I put a bit into property last year. Anyone with a brain I spoke to couldn’t see the share market moving until June 2004. And I thought the only other thing to do with it apart from bonds, was to throw it into a business.

    After talking with mates, I decided to finance a mate who wanted to get back into building residential and commercial rock walls. He was saying everyone is busy and demand is still rising. So I bought a bobcat and truck, and it worked out really well. This is SE Qld though. And there is heaps of dev’t going on. My mate focuses on the domestic market. A lot of bobcat operators won’t bother with rockwalls cos they don’t have the experience. This leaves us ripe to charge what we like.

    The other business I have looked at is buying a few acres with PPOR on the fast growing northside of Bris, and starting a landscape supplies business.

    We have also looked at starting our own quarry.

    Other opportunities in Brisbane at the moment are:
    – anyone with a building trade has raised their rates by 50% in the last 6 months. you can’t build for under $1200 a sq.m. Renos are up around $1600.
    – building supplies have also gone up considerably.
    – I am lookig at building guest house/hostel type accomodation in the outer burbs. There are a lot of people unable to afford rising rents. They are getting kicked out of areas that have skyrocketed in price. If I can get council approval for a hostel, I expect to net a return over 18%.

    It would be good to have a brain storming session here about other investment opportuities. There must be some diverse experience amongst posters.

    I am all ears.

    Bruce
    Mooloolaba, Qld

    Profile photo of graemehgraemeh
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    Originally posted by Scarecrow7:

    I also have the luxury of considering property in Malaysia where the devaluation of US$ is bringing tremendous buying opportunities, so again with calculated risks, there is a selfish silver lining in the A$’s momentum for me.

    Good luck Scarecrow7. I’m sure you’ve seen the number of abandoned houses and abandoned construction projects in Malaysia.

    It just amazes me that while all these completed houses, half completed houses and partly completed buildings are slowly falling down, some developer is building 500m up the road. It’s also scary to see how much land reclamation goes on. I certainly wouldn’t be paying for a sea view in Malaysia, who knows where the sea front will be in a couple of years time.

    Having said that, I wouldn’t mind a few good houses in KL but with a price tag in the millions I think I will make do with Queenstown, the view is better and apart from the food it’s a better holiday destination than KL.

    Profile photo of Scarecrow7Scarecrow7
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    hi graemeh,

    I did not expect a comment on Malaysian RE, and an educated one at that…yep the scars of dodgy or incomplete developments can be in your face, however if you proceed with the golden rules of real estate, fear not. They apply here and there much the same. Stick to quality areas like Klang Valley (Bandar Utama, Taman Tun etc the equivalents of Richmond, VIC or Five Dock, NSW etc. Break it down I would be paying around A$150-200K for a 2-storey terrace on plots around 200sqm, freehold. Granted, rental yields are not great but I sniff a property upturn there soon.

    My double play is in the forex. If markets don’t rise, I am hedging to A$ falls ie if it falls 20-30%, theoretically my investments in M’sia will appreciate by that much in A$ terms. Gives me diversity to Aust markets. Yes I may get my money stuck there, but that’s fine i will have Plan B & C in place. I have a 3-5 year timeframe at a minimum.

    It is going to happen…globally US and much of Europe has had good property gains along with Aust & NZ. China has moved however South East Asia is yet to move. Consider this flipside…what do you think parents of M’sian (or other nationalities with devaluing currencies) students who bought Aust properties for the child to live 3-4 years ago would be thinking in light of gloomy Aust RE and strong A$ combined? The global movement of unvestor funds may begin to shift delicately again.

    This must be boring to others but hey anyone care to comment about UK, Canada, US, South American or South African property markets??

    Scarecrow7
    “In times of crisis, both danger and opportunity are present”

    Profile photo of thefirstbrucethefirstbruce
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    scarecrow and graemeh, can you give me an idea of what medical services are like in KL for the elites? I looked into setting up a physiotherapy practice there a few years ago. Some KL friends living in Sydney told me when their wealthy KL based father got sick, there was a lack of quality health care, especially in allied health field.

    Bruce
    Mooloolaba, Qld

    Profile photo of graemehgraemeh
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    That’s a difficult one. I think to find out the true situation you really need to visit and do a proper assessment.

    The blurb below is trying to illustrate just how different things are in south east asia to Aus/NZ.

    Medical care in Malaysia is very different to Australia and NZ. My wife’s uncle has diabetes and had problems with some of his toes. The family took him to see specialists in Singapore who stuffed around taking one toe at a time off. He had a bad turn back home in Malaysia and the public hospital took off his leg (just under the knee), his recovery was spectacular and has not had a problem since.

    People in Malaysia would say that the specialists were dragging things out to make more money. I’m not a doctor so I can’t say things would be done differently here.

    Doctors in Malaysia and Singapore tend to give antibiotics like lollies. The ones they mostly give are about as strong as lollies but they are still antibiotics. They do this because patients will shop around and if they don’t get antibiotics they will just go to another doctor. We were told this by a GP in Singapore and also saw an example of it in Malaysia where the doctor said it’s a virus and then proceeded to supply antibiotics and panadol.

    The people I know in Malaysia tend to get medical treatment as a last resort, they will then expect instant results.

    I think a lot of the medical professionals in Malaysia are very good but people have very high and often unrealistic expectations.

    I suspect most people visiting a physiotherapist would expect an instant recovery and would not be happy to be told what exercises they need to do.

    I’m sure you could make a good business for yourself. I’ve seen it in lots of countries, people with lots of money seem to like foreign medical professionals. There is a swedish dental practise in Kenya that charges something like US$1000 for a root canal, the local dentists (UK trained and very good) charges around US$150.

    I’m sure if you marketed yourself well in KL and delivered excellent service you could almost charge anything you wanted. Remember that the patients you would be targetting normally believe the more expensive you are the better you are.

    Profile photo of thefirstbrucethefirstbruce
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    Thanks Graeme, that fits and then there is the language barrier. I know lots of Chinese Malays in Sydney, but have only visited KL briefly, so am unclear about the language thing.
    exactly with what I thought.
    Not trying to sound partonising, but I understand the local elites can be incredibly naive re health. Like you say, ignore problems until the last minute, then expect a miracle cure, without changing lifestyle.

    Hence the demand for rhino horn and tiger’s blood etc.

    I got turned off with S11. Is it reasonably safe up there on a long term basis these days? I understand Australians don’t have as much trouble as in Indonesia, but things can change quickly.

    Bruce
    Mooloolaba, Qld

    Profile photo of thefirstbrucethefirstbruce
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    Sorry that last post got scrambled…..

    Thanks Graeme, that fits exactly with what I thought.
    Not trying to sound partonising, but I understand the local elites can be incredibly naive re health. Like you say, ignore problems until the last minute, then expect a miracle cure, without changing lifestyle. Hence the demand for rhino horn and tiger’s blood etc.

    I got turned off with S11. Is it reasonably safe up there on a long term basis these days? I understand Australians don’t have as much trouble as in Indonesia, but things can change quickly.

    Bruce
    Mooloolaba, Qld

    Profile photo of CarLoverCarLover
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    Back to the market in Australia…

    I live in Sydney south west, about 15 km from the CBD. After the hard to believe price increases of the last few years, I have seen asking prices to be a bit lower, and fewer auctions. The market is definitely flattening. Afte the large increase we had in the last few years, I wouldn’t be surprised if it started to drop a bit. My strategy at the moment is to wait and see what will happen over the next few months…

    Cheers,

    CarLover.

    Profile photo of kay henrykay henry
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    Carover- there’s been a number of murders in sydney south-west recently. Do you think that might affect your average investor? Given that prices in sydney are so expensive, it wouldn’t surprise me if the murder thing put people off a bit.

    kay henry

    Profile photo of CarLoverCarLover
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    Most of the buyers around my area seem to be owner-occupiers.

    With yields below 3%, there is plenty to discourage investors.

    CarLover.

    Profile photo of MiniMogulMiniMogul
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    Carlover, badabing! that’s right, you’ve just reminded me of something I forgot, but which we should all remember, which is that it’s FIRST HOME OWNERS who drive the market, primarily. They are not necessarily ‘investors’, meaning they don’t care or know about yields, they just care about buying the best house they can afford.

    the market used to be 92 percent driven by owner-occupiers a few years ago and it’s probably less now, but it’d still be the biggest buying group in the property market – NOT investors. Much as we’d like to feel all influential and important and stuff.

    this person Kay talks about, AKA ‘your average investor’, is a person with ONE house. Their own.
    THAT’s the average investor. If you have 3 or more, like moi, you’re in the top 0.5 of investors.
    ( not the ‘average’ investor)

    Profile photo of wealth4life.comwealth4life.com
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    Going back to Steves origional question I think that proper and thorough due diligence will aid the sophisticated investor.
    The gloom merchants who have their blinkers on do not see the savy investor making a motsa in another area.

    Remember in gloom the RICH boom … regards Phil

    Profile photo of BillfromozBillfromoz
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    Mini & Westan and a handful of other novices….

    You are sadly mistaken. A forumite cotacted you Westan for a second opinion on Option Writing…. what would you know? In any case the prson concerned dismissed your comments as uninformed and lacking in any real Knowledge.

    I am fussy who I do business with and Don’t do business with anyone I have not met. The option writing has had to take a back seat as I am putting together a venture with Govt, subsidies that will employ jobs for those in Country towns and Regional areas.

    To date there is no one writing options via me and in your denial of 40/60% returns you are only displaying your ignorance as you both are in investing in high yielding Dumps in NZ that confirm your lack in investment skills. Talk to other option writing exoperts and they will confirm my experience…ask Wayne and otherrs withthe knowledge that you lack.

    You are therefore both guilty of capitalising on Newbies that think that this R/E Mkt has more to come…it does, but as a disaster. What’s more I am not negative and never suggested taht anyone “sell all theit R/E”…. just don’t buy today as you will buy cheaper in 18 months to two years.

    Mini… you are so wrong in your assessment of me… why not so a canvass on those that requested a meeting with me in Canberra at Xmas time?… but of course, you have both made up your minds.

    In time, you will both find that you have confused your ambitions with your capabilities. A handful of properties bought in a rising Market… will be a lesson in life and hardly makes either of you experts or even experienced.

    You have both had your say re my integrity without being censored…I trust I am given the same latitude.

    Billfromoz.

    Bill O’Mara

    Profile photo of Michael RMichael R
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    Bill

    I am not usually one to bother with debates of this nature, however..

    Having read your comments I would consider you nothing more than a pessimist [possibly burned in the past, or not quite as knowledgeable as you suggest].

    There is nothing substantial, or substantiated, in your response to this post – specifically your so-called “predictions”, which are common views in the media/analytical world. And quite frankly, on the basis of your ongoing input, I question your knowledge and understanding of investment in general.

    Your apparent emphasis on historic trends is an opinion/strategy you can abide by, but should not dictate to others in this forum without justifying the rationale in today’s market.

    As for your personal attack on “Mini” and “Westan”, I consider this unnecessary, and a direct reflection of your professonal integrity and level of professionalism when confronted with other opinions.

    I certainly hope the parties you are soliciting conduct their due diligence before entering a financial or other business relationship.

    — Michael

    P.S. I am far from a “novice”.

    Profile photo of richmondrichmond
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    Hi Bill

    I’m young (29), and never claim to be expert at anything, but I’m certainly not a novice, even though I enjoy learning new things.

    I’m not in denial of 40/60% returns… I took an educated punt a couple of years ago and more than doubled 30k into 75k in the Asian markets, took my cue and left the building just before it all went to s__t again… Through various decisions I’ve made, I’ll be paying off my 400k house in full before I’m 30, while I still have a number of IPs in various places… I’m sure others have done a lot better, but then again, I’ve done a lot better than the “average” man on the street, so I’m happy enough.

    I don’t know you, Westan or mini from a bar of soap apart from what I read on the boards, so I don’t have any vested interest in keeping any of you happy.

    I’ve seen one copy of an email where you requested a large sum of money (over 150k from memory) from a forumite, promising to deliver 40-60% returns.

    I’ve seen another copy of an email where you denied to your legions of fans that you were soliciting any kinds of deals with anyone.

    I’m not judging you, but if you feel like explaining how the two emails don’t quite “gel” it’d be great.

    On the one hand, in so many of your post, you are portraying yourself as the saviour of the newbies… on the other, you’re telling these newbies to trust you with enormous amounts of money… how many other people did you try and solicit money from? How many went through with it? And have you delivered the returns you promised?

    I remember you said something along the lines of you can always trust someone who’s played cricket for their country, fought for their country and something else… I can’t quite remember… to me it felt like you played the Vietnam vet card a bit too much when you were last here… I’ve got relatives who’ve fought in WW2 and Vietnam, and they don’t go on about it like you used to… by the way that doesn’t mean I don’t respect people who’ve put their lives on the line for the nation. But to suggest blind faith or blind trust should be put in anyone is ridiculous… and the thing is, there are people here who’ll believe ANYTHING they’re told about real estate, options, shares, whatever, which is what I worry about.

    You know I work for channel 9, as a journo and producer, we’re taught to be sceptical about the claims anyone makes… until they present their side of their story to be judged.

    I’m not interested in options or anything like that, I just want to be in position where I can choose not to work by the time I’m 39… but please Bill, don’t address the entire forum as though we’re imbeciles… we’re not all running around buying dumps, we’re not all buying at 100% LVRs, I just think you should give a little more respect to the collective intelligence… it’s not MENSA, but it’s not pre-school either.

    Cheers
    r

    Profile photo of Still in SchoolStill in School
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    Well Said Richmond…

    [^][^][^]… Sorry guys, but i also agree with both Richmond and Michael R on this perspective and totally agree with what has been said.

    Cheers,
    sis

    People 4get that by saving just $3 a day & investing it sensibly
    over a working life, you’ll end up with around $1 million

    Profile photo of PropertyGuruPropertyGuru
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    [^][^]richmond and Michael R [^][^] Well said both of you

    Having read your comments I would consider you nothing more than a pessimist [possibly burned in the past, or not quite as knowledgeable as you suggest].

    Bill why do you think you know every thing about investing and other people are stupid? Going to War doesn’t make you trustworthy or honest person![:(!]
    Even I never read in Steve post that he knows every thing but your every second post trying to say that.
    [V][?]

    Cheers
    [:)]
    PropertyGuRu
    I want to be billionaire! [;)]

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