All Topics / Help Needed! / What the? Playing with peoples emotions

Viewing 11 posts - 21 through 31 (of 31 total)
  • Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Roodog,

    Ahhh – I have made the connection now.

    In terms of rental returns – the article I mentioned makes the point that rental returns and capital growth are generally speaking negatively correlated – that is, when one is going up the other is going down.

    If you investigate this point further it stands to reason.

    People who cannot afford to buy will rent and when more people have to remain as tenants there is greater pressure on rents and vacancy rates decline and rent (in real dollar and percentage terms) increases. At these times growth generall slows (fewer buyers) while rents increase (more tenants).

    On the other hand as more people can afford to purchase property there is increased pressure on stock and buying prices go up.

    These broadbrushed comments mirror recent (and distant) times in property.

    As it currently stands vacancy rates in most cities around Australia are generally at very low levels as investors close their wallets and the market stagnates. This is causing upward pressure on rents with the eventual result (all things being equal) that property will become a more attractive investment to the greater masses once again and they will return to the market.

    Perth is somewhat different – to a certain extent as we have enormous growth rates while at the same time vacancy rates are declining to a level where they are very low. The key point is that growth is staill far outstripping rental increases hence the falling returns.

    In a long winded way – yes renting in Perth and investing in the ES is not a silly suggestion. And yes – if you bought some time ago you would be appreciating the recent gains while now making a bit of hay with increases rents in recent months.

    Certainly in our case our portfolio has reached a point where it is almost neutral (based on purchase price). We have insured this position this with some cashflow investments in managed funds.

    Derek
    [email protected]
    http://www.pis.theinvestorsclub.com.au
    0409 882 958
    Skype – derekjones2113

    Profile photo of mickperrymickperry
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    @mickperry
    Join Date: 2006
    Post Count: 5

    Hello guys

    I am now living in perth after moving from the NT, and east coast (in the military so dont really call anywhere home).

    I must say this has been a very interesting thread!

    I have found exactly what you guys have been talking about here in Perth (RE agents suggesting 100,000 above the asking price), and yes I am very disillusioned by it all.

    I am lucky enough to have one IP here in Perth and one in Darwin, so its not all bad, but it is heartbreaking to see a dump in bayswater asking 650,000!!!

    I guess I dont really have anything to offer to the thread, just wanted to say I share your sentiments.

    It kills me to see fully renovated and very well presented houses in Melbourne, for example, asking around the 550,000 mark, when the same thing here would start at 7-800,000.

    I would love to move back there but, as i said, i am in the military so I dont have a choice.

    Profile photo of roodogroodog
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    @roodog
    Join Date: 2006
    Post Count: 28

    That is interesting about how normally as one is going up the other is going down Derek that would be a very useful tip to remember when trying to analyse a market.

    Hi Mick Perry funny you should mention Bayswater, About 3 months ago I was driving around the back blocks just behind Tonkin HWY there. I came across this 2×1 fibro place that looked like no one had lived there for 10 years. It was on top of a little hill and looked like it had an ok size block. With my palms becoming itchy I jumped on the mobile and called the REA, as usual I wasn’t the only one who had spotted it and saw dollar signs. The agent said “it is on 900m2 and would have no trouble being sub divided etc”. I Said “yes but are the titles etc in place yet?” he said “no” and so I Said “so what we have here is a dump 2×1 sitting on 900m2 with a very shabby backyard”. Well I couldn’t wait any longer and said “so what are they asking?” he said we are confident we will get 600 000+!! I nearly dropped the phone.

    The latest way of advertising here is that if anything is bigger than 500m2 they say “duplex size block $$” At the end of the day in my opinion it is what it is at that time, I could fit a motel in the back of one of my back yards but I don’t put it on the market for 15 mil. I am not saying there isn’t opportunity in sub dividing but the profit margin must be very slim when you have already had an initial outlay like that and it still hasn’t been titled let alone 2 houses put on it.

    Profile photo of gmh454gmh454
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    @gmh454
    Join Date: 2003
    Post Count: 537
    Originally posted by Derek:

    An article I read today mentioned that the rental returns in Perth are now the lowest of all Australian cities.

    “Lets do the time warp again …….its just a jump to the ….”

    Damm, Derek that is what happened in Sydney in 2003. We had clients coming in talking capital growth about litle units in Leichhardt and Annadale at approaching $700K with net returns of 1.8% if they had no vacancy or repairs…..HELLO.

    But think of the capital growth they said as they scurried off and bought, …how to drop a $100k without really trying.

    WE WERE ONCE KING OF THE LOW RETURN AND YOU GUYS HAVE TAKEN IT OFF US.

    And when Perth becomes the MOST EXPENSIVE city in OZ we will be left with nothing,,,,nothing…sob sob.

    Profile photo of InterceptorInterceptor
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    @interceptor
    Join Date: 2005
    Post Count: 10

    I think the Perth market will continue along these lines for another year or so possibly up until the Beijing 2008 Olympics.
    Growth in China at the moment is unbelievable (10.5 % in the last quarter)
    The mineral boom will continue however we will see lower prices for commodities such as iron ore in the next 6-12 months. The last negotiations with the Chinese for a 17% increase in iron ore prices was tough and I suspect the Chinese will make moves to curb price increases in commodities in the immediate future.
    I think the greatest worry after the 2008 Olympics is a slowing of Chinese demand for raw materials such as iron ore. I can see big trouble for the Chinese economy after this time as I don’t believe their government is capable of managing such a huge economy in a transparent and fiscally responsible manner.
    Any trouble in China will have an impact on W.A. and hence the property market may slow. India will play a more important role after this time and could prope the W.A. economy up.
    My 10cents for what it’s worth.

    Profile photo of roodogroodog
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    @roodog
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    Post Count: 28
    Originally posted by Interceptor:

    I think the Perth market will continue along these lines for another year or so possibly up until the Beijing 2008 Olympics.
    Growth in China at the moment is unbelievable (10.5 % in the last quarter)
    The mineral boom will continue however we will see lower prices for commodities such as iron ore in the next 6-12 months. The last negotiations with the Chinese for a 17% increase in iron ore prices was tough and I suspect the Chinese will make moves to curb price increases in commodities in the immediate future.
    I think the greatest worry after the 2008 Olympics is a slowing of Chinese demand for raw materials such as iron ore. I can see big trouble for the Chinese economy after this time as I don’t believe their government is capable of managing such a huge economy in a transparent and fiscally responsible manner.
    Any trouble in China will have an impact on W.A. and hence the property market may slow. India will play a more important role after this time and could prope the W.A. economy up.
    My 10cents for what it’s worth.

    Boom! have you checked the share prices lately?

    Oxiana came out last week and said at this stage they are not going to achieve the budget they had planned on this year after all the hype 3 months ago! BHP hasn’t hit $30.00 since before all the negotiations with China, I doubt they are ever going to fall for that again (16%)…the ball might be in their court next time! the shares are heading for the red(resources) if bought 3 to 4 months ago and any where you would like to read they will tell you that investors will not see the same returns this year as last…property included! Am I missing something???

    Lets not go counting the chickens yet!

    On the ABC last night they said Perth has officially gone past Melbourne and is now the second most expensive place to buy RE…

    Profile photo of gmh454gmh454
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    @gmh454
    Join Date: 2003
    Post Count: 537
    Originally posted by roodog:

    On the ABC last night they said Perth has officially gone past Melbourne and is now the second most expensive place to buy RE…

    Wow heard that yesterday on ABC radio…

    I thought it was just my meds kicking in early

    Profile photo of perthmanperthman
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    @perthman
    Join Date: 2006
    Post Count: 19

    Well at last we have some serious intelligent conversation from various parties on this issue (the bigger issue), and by reading the comments I can see that like myself -you can take an objective view of the market and see the various economic factors that are affecting our great city of Perth. I hope people are taking note of what is being said here because speaking as a professional, this is the kind of advice that people do pay for. If you want advice that tells you what you want to hear then go speak to a
    RE agent who has a degree in the art of selling and a PHD in knowledge of their own suburb.
    If more people could understand these fundamentals and be educated then we wouldnt be in this situation of the fear and greed emotions which drive most people to buy or sell, and the so called professional RE persons who take advantage of this and whom consumers still seem to listen to for all their worldly investment advice.

    The whole reason for starting this topic was to get reactions from contributors like GMH and to show that the signs are the same in any cycle in any capital city. Yes granted, Perth has a few other factors – but all they are doing is delaying the inevitable.

    For all those out there that wish to be successful investors – look outside the square and look at other locations far removed from sunny Perth. What you might find is different scenery but the same story, its just that our story (Perth) isnt finished yet. Once you have a wider appreciation for what goes on in the rest of the country and for that matter the world, taking advantage of investment opportunities becomes alot easier and less risky and what you will find is that you will have more to talk about over a sunday BBQ besides what your house is worth.

    Anyone agree with me?

    Profile photo of kmiddletkmiddlet
    Member
    @kmiddlet
    Join Date: 2005
    Post Count: 22

    Here is our story.

    We started off in Victoria where we live back in 2000. We watched it race away so cashed out and moved our focus to Brisbane. We bought and renovated up there and watched QLD race away. Again we cashed out and then moved our focus to Perth in 2003.

    Having watched Victoria and Queensland get caught in a wave of hype and making money out of them, we went aggressively into the Perth market and lined up 6 properties on long settlements and little money down by offering over the asking price. The greed button of the sellers kicked in and they were happy to take our money. This meant we were buying in Mandurah for low 200’s, Maida Vale under 200, etc etc.

    The long settlements allowed spectacular growth in the WA market that we had previously seen over here in the East. By the time settlement came we were often borrowing 100% of contract price.

    However, being mindful of what happened here in the East, we began to exit our position in Perth earlier this year. We have one left and will shortly be exiting that as well.

    An earlier poster predicted that the Beijing Olympics will ring the bell to end the WA boom. I am not sure but the signs of pending downturn that we saw here in the East are all big and bold in the West:
    – Real Estate agents arrogant beyond belief
    – this business of Expressions of Interest and lately For Sale By Tender
    – agents not returning calls
    – hysteria in the press about “unconscionable behavior” by agents and buyers EG: paying backpackers to camp out at land releases
    – speculators all over the market
    – distress in the mums and dads looking for PPORs.

    There may only be 6 months left in the boom or there may be 18 months left. But a wise investor tries to go for the bottom of a cycle instead of trying to pick the top of a cycle. If it hits the top and you haven’t sold, you are left holding and have to wait for the next cycle to recoup your losses.

    Personally I think Melbourne and Sydney now represent the better value having hit the bottom of their cycles, particularly Melbourne. When I see houses in Bedford going for $600k plus it makes Melbourne look very attractive!

    My $0.02 worth.

    Profile photo of ManojManoj
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    @manoj
    Join Date: 2006
    Post Count: 2

    Hi [erthman !

    emotional distress is always there when it comes to investing . Its the matter of how you can handle it is more important. I totaly believe that agents do sometimes try to bait buyers to increase the sale price or in some cases there actally are more than one buyer interested in the given property..in this case the higest bidder buys the property..so this means your offer should be the best one. you really dont have to put the top dollar to get the sale.or be scared to loose the deal…have a exit strategy with the research you have done before you leap into putting offers. if you miss it forget about it dont stress man..Apportunities will allways exist no matter what the market does its the matter of time and research. Sometimes you think that you have missed the best apportunity to buy an investmet property and so regret not getting it and in doing so you miss the present apportunities which exist right there in front of you..down the track you find a better deal and with relief of sigh you say gee this is owesome..it happens all the time.right in cbd of perth..perth market is doing pretty well but remember with every boom comes a bust..hang on there if you cant find the right deal today it will surley come sooner or later..just dont overcommit yourself..the RBA is already on the corner…to hit us again..ouch!

    Warm regards

    MANOJ

    Manoj

    Profile photo of roodogroodog
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    @roodog
    Join Date: 2006
    Post Count: 28

    Hi kmiddlet

    That is an excellent post you are thinking and talking like a true investor not someone who has jumped on the band wagon at the peak of a cycle. The most important part of any investment strategy in my opinion is buy low and sell high. The RE market is a slower version of the share market; you buy at the lowest price set your sell price, watch it run and sell when you said you would at entering the trade. Yes the price may keep climbing and there will be a sense of what if I let it run a bit longer but all you need to care about is the profit margin that you needed and then getting out and allowing you time and money to enter the next. While the hopefuls all sit around the BBQ on the weekend talking about what big time investors they are because they were lucky enough to get on the back of a cycle, you have already taken a position on your next move.

    I couldn’t agree more on the signs you are talking about, yes REA being arrogant and not returning calls etc I cant wait to catch up with some of them in a year or two and watch the coffee flow like it should do…well it is me that parting with the hundreds of thousands of dollars!

    Again great post! I give it 6 months……

Viewing 11 posts - 21 through 31 (of 31 total)

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