Are we in a Bull Run!

I follow a few property commentators/economists and even buyers agents. They all went into hiding (except DFA- Martin north) when the media was reporting property values have fallen in Melbourne and Sydney.
Now that the media is reporting a spring rebound in 2019 they are out in full voice saying the bottom has passed.
Currently to buy in Melbourne and Sydney you need 8x and 11x average income to buy the “median property.”
My question is are we in for a crash? And if so by how much? I can’t help but observe Japan, Ireland and USA.
Would you buy now or wait for cheaper days?

 

I think you should read this forum say 2 years back and form your opinion.

 

Illusivedreams is right. I think the history of this forum which discusses this topic ad nauseum, is that everyone has an opinion, but noone knows - and more importantly, everyone who puts their stake in the ground and makes big loud calls .... will be wrong.

With real estate, I think the key is to not worry too much about the market, and focus on the deal itself. You do need to be invested, because time can quickly get away from you, and the biggest regrets are usually sitting on the sidelines (rather than making a sub optimal purchase).

Lots of people will chip in with their views, and you should read them all, and then discount them and make up your own mind.

 

With banks lending again and rates dropping/availability of credit we will not be seeing a crash anytime soon.
My opinion only

 

Prices in some Melbourne suburbs are up 20 percent in less than a year, I think the steepest rise has already gone.

 

I can't tell you how many people I have heard this from over the last 15 plus years. Probably collectively they've had 10s of millions of dollars lost by inaction and fear.

The answer? Self education. It is the key.

 

I totally concur with Sackie.

Just to add: the valuation of anything changes the minute interest rates change. So you should be constantly re-calibrating the very concept of "cheap" vs "expensive" the moment interest rates change.

This is because of the obvious net present value of future cash flows model .. yada yada

But also because interest rates change the value of the money itself. It take more or less dollars to buy the good.

So just because something feels expensive, doesn't make it so. And the market is constantly tweaking and adjusting to find its fair value, never more so than right after a change in interest rates.

 

Data is a lag so expect continued optimism on growth in the media.

Am wondering what the catalyst will be this time to disrupt the status quo (there is always something). I can't see what it'll be at this point.

 

Property crash and prices dropping 50% has been "right around the corner" for decades now.

Economic factors and wage growth (or lack thereof) are more of a concern

 

I can tell you that Mt Druitt property prices are showing more signs of life than it's inhabitants.

 

I agree with what you’ve said only that I think asset selection is more important than the deal. Education on what asset to buy will serve better in the long run and survive poor market conditions better than a solid negotiation.

 

For me the deal is the most important. You could pick a 'good asset' and pay a terrible price. When the next boom happens you probably won't net much of the benefit.

Whereas focusing on the deal as a whole, which for me is price relative to value, OO demand in location and add value ability - generally has the potential to perform much better with less risk, imo.

 

Agreed, you don’t want to pay more than the value in the next cycle, thats a decade of stagnation. For most people who will own a maximum of two properties, a good asset will secure their future. I think OO demand, add value potential etc is all asset selection? You could get a great deal (BMV) on a property on a main road in an undesirable market and when the economy drops the stinkier homes just get stinkier. I.e you can get rid of it if you tried

 

For me that wouldn't be a good price relative to value because I would take into account the main road.

I think our definition of a deal may be similar then.

 

Hmmm, the deal vs the asset selection. Good question:-

Which is better: to over pay for a quality asset, or under pay for a poor asset?

 

Seems like the answer depends on your time horizon.
Over the short term, if you can flip the poor asset for a profit then good.
Over the long term, the quality asset.

Warren Buffet went from buying good companies at great prices, to buying great companies at good prices. Seems to have worked for him.

 

I think you are right about time horizon being the determining factor. If you have a time horizon greater than 5 years, buying a quality property is a better strategy than being a cheap chaser methinks.