Hindsight mindset: collapse/correction

so, like every time when property prices overall start to fall, virtually every article in the media is doom and gloom of why the property market is about to collapse or correct, attached with some graph or stat that makes it a definite

and like every time, many/most property investors are of the belief that a small drop will occur, but this is all part of cycles, and that all this media hype is just that hype/exaggeration/sensationalisation

my question is, if there is a more than a small drop, by way of correction or collapse

i believe that most investors in the 90s crash were saying the same thing

What will your mindset be?

 

For Sydney it will a large correct but not crash....a mid level correction in Melbourne...

Business as usual....as I have interests in more than just Sydney and Melbourne. Adelaide and Brissie should have steady growth this year.

I would be very careful about Hobart...it is over primed at the moment....

 

As the above poster pointed out, there will be a correction that will be quite substantial in both Melbourne and Sydney. I believe we will see prices correct in Sydney by up to 20-25%, and Melbourne 15-20%. The financing restriction along with a probable 2019 recession will obviously place a weight on prices before the next cycle.

 

I have watched the following video from the Digital Finance Analytics tosay. It makes sense to me. Not sure what do you guys think ?

Sage Advice From Our Property Market Insider Edwin Almeida

 

But we KNEW this was coming!
I honestly don’t get it!!! Sorry for the exclamations but honestly it’s doing my head in.

Planned and well communicated changes to servicing, increased rates on investment AND interest only loans, changes to lending and tax on overseas investment.......like come on people!

I’m actually gobsmacked some people are surprised by declining house prices and surprised people are blaming the economy when their are many strong growth indicators.

Any “investor” who didn’t cash-out prior to the “correction” and is sitting here shocked I would strongly reccommend to re-read every post ever made on this forum.

 

You’re right, there has been a lot of discussion/warnings on the forum about a correction.

However, quite a few posters have consistently said that they wouldn’t be affected - with phrases such as ‘there are markets within markets’, smart buying etc. Not surprisingly, some people didn’t know who to believe.

The tone/mood of posters on the forum seem to have decreased sharply over the last few months as the correction kicks in.

 

Most of what has come and what is coming is nothing new and investors have had a lot of time to consolidate, reduce debt, and plan for upcoming opportunities. I have found over the years that my own mindset switches through phases as property cycles occur. Pre market corrections (many signs on the wall) I move to a debt reduction/consolidation mindset. As markets correct I move to a 'look for opportunities' mindset. As markets take off I tend to move to a 'how can I now get the best return on these assets I've acquired' mindset. When markets start to get over heated I move to portfolio review and decide what I want to offload, how to tighten finances and not be over exposed in any way.

I firmly believe that 1 person's crash is another person's great opportunity. For me what's crucial is, how you buy, when you buy, where you buy, and what stock you buy that greatly impacts the narrative you put on an asset when markets start to correct. That's why you can get 10 investors who all bought roughly at the same time. And when markets correct they can all be affected differently.

 

Ditto....some people just stuck their head in the sand.

 

Imo the influence property chat (or any forum) has on the housing market is way waaay over estimated.

From what i saw at some investment seminars, I would consider them to be more influential, to the point of being pretty scary

 

In November 2017 I sold a Melbourne IP for almost exactly double what I paid for it in 2009. At the time I felt I was pulling the trigger 6 months too early, as the talk around the Melbourne market was still positive.


The day we put the sold sticker on, an identical property, same agent, same price range went up for sale. It never sold (still hasn’t).


Retrospectively I wish I also sold Melbourne PPOR at the same time, rented for a year and then geared up to buy next PPOR mid 2019.


However, no regrets, as the sale of the Melbourne IP enabled us to purchase new IP in Brisbane (Dec 2017) and development site in Melbourne (Dec 2018).

 

this is my 2c,
its hard to sift through the tons of articles saying the same things, some have valid points, some are fluff,

the pessimist in me is not surprised by the drop/plateaue in prices overall and is expected

but like previous cycles, there is always doom and gloom of up to 50% drop in prices, so called experts putting out some graph that shows why this time is different

im not smart enough to know if this time is different

the "property doubles every 7 year rule, will not apply any more" comment still sticks in my mind since hte last cycle, so the "this time is different" comment may apply

 

It's not that simple. I know you didn't suggest this but I think it's worth re-iterating that it is possible to both expect a correction and decide to sit on one's hands:
- What if you are sitting on big historical capital gains? CGT would put a big dent in your wealth if you sold.
- What if you knew there was likely to be no way to get the same exposure / leverage back again, once you let it go? And that one day, when the direction is north again, it's this exposure that will really drive your wealth?
- What if you added up the cost of that CGT as well as the cost of stamp duty and agents' fees etc to get back in when you think the tide is turning and conclude that it's still unlikely to be worth it?
- What if your properties are outside Sydbourne and are at different points in the cycle?
- What if your property got smashed underwater immediately in the GFC and still hasn't recovered and you can't afford to sell? Think Gladstone / Pilbara etc.
- What if your portfolio is really quite tax effective, easy to manage, all the debt is deductible and self servicing anyway?
- What if the time required for such active investing would take time away from a highly remunerated job / business? Or you don't actually enjoy the process of finding an buying IPs (anymore)?

There are plenty of active investors who make a lot of money and enjoy it but some of us don't want to pay all that money to the State and Federal governments. For those people, property is meant to be a long term, passive investment to help fund eventual retirement / provide a foundation for family wealth / whatever. Buying a 30 year asset and selling it in 5 or 10 years just because they can see a bit of a dip coming up doesn't make sense to those people. And fair enough. Particularly when they know that if the excrement really hit the fan in the market then APRA / RBA will just change the rules back again...

 

Haha, that phrase seems to have trailed off on here in the last couple of months hasn't it.
Even the most staunch head-in-the-sand property bulls are quietly coming to accept that Sydney/Melbourne markets were completely overvalued and even their portfolio can and is losing serious value.

 

Couldn't have said better.

If only I could know "for certain" that:
1. prices will drop another 10 or 20 or whatever %, and
2. I can get back in when it happens (e.g finance is available, owners willing to sell), and
3. I know when the true bottom is hit (i.e it won't fall another 10, 20%), and
4. price of the property I buy again will move back up substantially when I want/need to sell, so I can still make a tidy profit after deducting all the costs

Apparently lots of experts think this is all too easy/obvious to see and act on, I'm not so sure.

Only thing obvious is that, if you know for sure you can't afford to hold an I/O investment property when it resets to P/I in a few years, sell now to reduce exposure rather than wait till you have to sell. A forced sale is usually very expensive (to the seller).

 

Lots of people knew the correction was coming, so they would have sold some and got a bigger cash buffer. Theyll take a hit to net worth, but cgt and lending changes may make holding worth it.

If this is just another cycle, theyll come out the other side even wealthier.

Investors in their second or third cycle are in a different position to those trying to get into the market or in their first cycle.

 

Some of us have not seen the values of our properties fall at all in the past year.

 

have not heard one person sell their real estate assets in prepartion of a correction,
(not saying they dont exist)
just seems to be something people talk about doing hypothetically eg what they would do if they won $50 million powerball

 

a lot of so called experts seem to forget the existance of stamp duty, and agency selling costs

 

Just a question.

If you are a long term holder wtf is the difference.

As in let's use me as an example all my properties are rented getting same or higher rent than last year albeit at values 2/4% less valuable than last year.

Because of APRA I'm tied for 2 year or so. Than I'm back on track. Either APRA will relax more or I will repay enough to continue.

Important to me is 10-20 years performance not 5/6.

 

Is a 4/5 bedroom home in Liverpool area over valued at 700k? If so why?