All Topics / General Property / “Buy When Others Are Fearful” or Others Are Justified in their Fear?

Viewing 12 posts - 1 through 12 (of 12 total)
  • Profile photo of gimleegimlee
    Member
    @gimlee
    Join Date: 2011
    Post Count: 3

    So Buffet’s advice is to be fearful when others are greedy, and greedy when others are fearful. With the “looming property crash” is it justified to be fearful or does this just open up amazing buying opportunities?

    I’ve been reading the forums for a while (a few years on and off in fact), and checking out a few other forums and web sites on this topic, but there are many conflicting opinions. Does anyone have raw data to back up their opinions? I mean, I’ve seen the chart of “real house prices” skyrocketing, but how is a house price measured? For example, a block of land in the middle of a city which once had a $300,000 house now might have 100 x $300,000 apartments. So is the measure on the current land value of $30 million, or of the single apartment of $300,000?

    Is this time different and properties are sure to fall or is it just another great buying opportunity?

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,850

    I look at longterm ‘like on like’ sales, ie resales of the same property. In truth, it is more difficult/inaccurate to compare 57 xyz st to 22 tuvalu rd than a resale of the same property.

    In my own LGA the stats show 7 or 8% pa, I see somewhere between 4-5%. Why?

    Disparity of comparability. The area has a fair degree of knock-downs & rebuilds. These resales combined with sales of refurbished & upgraded properties skews the median substantially.

    As for units, the construction & sales of 30-40 units is reflected as an increase in the basic price of all units

    Profile photo of gimleegimlee
    Member
    @gimlee
    Join Date: 2011
    Post Count: 3

    Thanks Scott, that sounds like a realistic way of looking at it. What do your stats suggest for the future? Would you agree or disagree with some that there’s a speculative price bubble and that Australian properties are overvalued?

    Profile photo of lifestylezlifestylez
    Participant
    @lifestylez
    Join Date: 2011
    Post Count: 61

    Hi gimlee,

    I say go with what Buffet says, get in when others are fearful…otherwise what sets you apart?

    As long as you do your research in the area and make sure the fundamentals are right, then you can be confident.

    Examples of fundamentals:

    – Is the population increasing in this area?
    – Is there infrastructure being developed that will draw people to the area in the future?
    – Is there public transport nearby?
    – Is the vacancy rate low enough that I will get tenants easily enough for the expected rental rate?

    Also, what is the definition of a property crash?  Is it a fall of 10%?  20%?  QLD prices have come back about 5-6% in the past year…is that a crash?

    Check out the past performance of property in Australia over say 20 to 30 years.  You will probably see a steady trend upwards with a couple of points where property has dropped.  But how long did that drop last? 

    I'm not saying a crash can't happen, but the economy generally has to crash too.  Eg.  Unemployment starts to increase, increase of foreclosures.

    As long as you are looking at the long term of 7+ years, you can be pretty confident that any crash will be ironed out with time.

    Profile photo of Andrew_AAndrew_A
    Participant
    @andrew_a
    Join Date: 2003
    Post Count: 392

    I like the following similar saying :)

    'When the time comes to  buy… you won't want to'

    Profile photo of gimleegimlee
    Member
    @gimlee
    Join Date: 2011
    Post Count: 3

    lifestylez and Andrew_A, I like your way of thinking. Cool quote Andrew! I might go with that.

    Mmm, a question, what about the people in the US who were thinking that before their houses went down the gurgler?

    Profile photo of fWordfWord
    Participant
    @fword
    Join Date: 2009
    Post Count: 471
    Andrew_A wrote:
    I like the following similar saying :)

    'When the time comes to  buy… you won't want to'

    Which leads to another principle.

    Q: When is it the best time to buy real estate?
    A: When you can afford to do so.

    Profile photo of emptyvesselemptyvessel
    Member
    @emptyvessel
    Join Date: 2008
    Post Count: 170

    I am keen to keep buying. "Feed the fear"! Puts me in a better buying position every day and I know it can't last forever.

    That said, I am currently spooked by all this talk about the government removing negative gearing. This would seriously damage my cashflow situation. See my other post on this in the finance area.

    Profile photo of fWordfWord
    Participant
    @fword
    Join Date: 2009
    Post Count: 471
    emptyvessel wrote:

    That said, I am currently spooked by all this talk about the government removing negative gearing. This would seriously damage my cashflow situation. See my other post on this in the finance area.

    And that's a fair enough concern. People who know me in person would say I'm an absolute stress head. However in situations like this, I try to think along the lines of 'live and let be'. We can only make a decision based on whatever information we have had at any one point of time. And of course we plan for success, not plan for failure. Whatever the govt does tomorrow is beyond our control. But it would be very interesting to see what happens when negative gearing is removed.

    Personally, I have done my sums and will manage even without the benefits of negative gearing. I'm sure that likewise, plenty of other investors also can. Investors that rely heavily on their tax witholding variation forms to survive day-to-day are geared to the hilt and probably shouldn't be so heavily invested anyway.

    Profile photo of lifestylezlifestylez
    Participant
    @lifestylez
    Join Date: 2011
    Post Count: 61
    gimlee wrote:
    lifestylez and Andrew_A, I like your way of thinking. Cool quote Andrew! I might go with that.

    Mmm, a question, what about the people in the US who were thinking that before their houses went down the gurgler?

    Well, before they went down the gurgler, it was not a time of fear.  It was a time of optimism when lots of people were buying and prices were increasing.

    If you buy along side everyone else in a time of optimism (eg. a boom) then you risk buying at the top of the cycle.

    Unfortunately, you cannot control economic conditions.  If I had bought in the US, as long my property was still renting well for the expected rental amount, I would be holding on to the property.  And think about it, they have practically 0% interest rates there at the moment.  If interest rates dropped that low here, my property would immediately become hugely positive cashflow.

    So I would actually be receiving more income whilst I wait for the property market to recover :)

    Profile photo of fWordfWord
    Participant
    @fword
    Join Date: 2009
    Post Count: 471
    lifestylez wrote:
    And think about it, they have practically 0% interest rates there at the moment.  If interest rates dropped that low here, my property would immediately become hugely positive cashflow.

    So I would actually be receiving more income whilst I wait for the property market to recover :)

    If interest rates dropped that low here, I'd be fixin'!

    Profile photo of naughtyjnaughtyj
    Participant
    @naughtyj
    Join Date: 2011
    Post Count: 17

    Hey, if interest rates dropped to closed to zero, I'd be looking at taking out interest only loans on all of my IPs. *grin*

Viewing 12 posts - 1 through 12 (of 12 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.