Don't Buy Property in 2019

My view is that now is not the time to buy property in Australia for obvious reasons.... bit like the nose on my face.

This may generate anxiety, as it is a property forum after all...

But its just my opinion, but based mainly on some important factors that I believe will impact significantly on market conditions.

So for anyone who disagrees where and what would you buy?

MTR

 

Geelong and Ballarat haven’t really experienced price falls. I mention these areas because they’re what I follow most closely.

The biggest threat to property investors is the election of a Labor government in 2019.

 

CGT and NG? Depreciation has already been touched in 2017, I wonder how much further they plan to push us (including themselves? or not)

 

@MTR, If Labor brings in changes to the CGT discount with buyers pre-July 2020 being able to lock in a 50% discount (vs 25% following) would it not be a good time to buy if you were investing with a long term view to hold (e.g. 5-10+ years)? If Labor wins the election and is in power by mid 2019 it may make sense to buy before their planned changes even if it meant riding prices down another 10%...

 

Actually it might be great time to pick up bluechip properties in Perth....go counter cyclical...

I would say that now would be a bad time to buy in the USA... with the Fed looking to push up rates up twice...some US economists are predicting a slow down in the US housing market.

 

Great question!

Hmmm to answer, I would be purchasing based on:

- well established suburb within 10 maybe 15km out
- existing housing, bit of land if possible, otherwise small complex
- redevelopment/rezoning potential
- decent yield (for the LGA) for cf
- and absolute crucial point is to lowball the **** outta the offers - 2019 be the year to do so imo,

I truly believe you make money when you buy and chances are, those vendors who list in 2019 REALLY need to sell for the 4 D's (debt, divorce, death, disaster) "licks lips".

And I also believe that the credit crackdown and falling house prices represents an AMAZING opportunity to create generational wealth, in fact sorry to say but as a net buyer with a multi-decade time horizon - I want prices to drop further.

Just my opinion, but that's my strategy in 2019!

 

Yes blue chip, but if buying in Perth its inner city for growth, period homes you need $1m, numbers wont stack up to hold but growth will be great. Strategy of buying product in demand on a low. Good for those upgrading, not sure it makes sense for investors..... cashflow negative, need deep pockets

 

Its dependent on numbers imho

I would not be rushing in

 

Fallacy... you make money when you buy?

 

Actually there are deals where you can manufacture equity and also go techically CF+.

 

I guess that would always be the case though

Let's say that Sydney property has fallen another 7% by the end of 2019, Labor won the election, they have announced the policy change to reduce the CGT discount on July 1st 2020.

You buy a property for $1M in December 2019, you secure the 50% CGT discount for this property (grandfathered).

Alternatively, you buy the equivalent property after prices have fallen another 5% by mid-2021 (so you pay $950k, ~22% lower than peak in 2017), but as you bought after the cutoff the CGT discount will be only 25%.

The year is 2030 and the value of the property is now $1.8M and you decide to sell.

Your profit if you purchased in 2019 is $800k. You will need to pay tax on $400k. Using a 40% tax rate, you pay $160k in tax, walking away with $640k net.

Your profit if you purchased in 2021 is $850k. You will need to pay tax on $637.5k. So you pay $255k in tax, walking away with $595k net.

There are some missing details here e.g. higher stamp duty if you purchase when it is more expensive, also perhaps some holding costs in the first couple of years compared with the later purchase, so perhaps both scenarios would end up with similar outcomes.

Obviously the aim would be to buy somewhere you don't think prices will continue falling in value (from 2019 prices), so perhaps Brisbane, Adelaide or Perth would be the safer bet if a deal stacks up.

It could be worth buying in advance of a reduction to the CGT discount, it's a fairly substantial increase in tax to be paid. Obviously it's not going to be the only consideration.

Perhaps even if Labor does change the CGT discount a future Liberal government will roll it back, but you'd be taking a risk to make that assumption.

 

For me you can make money in any market and there's a lot more out there than Sydney and Melbourne, even within these markets there's opportunities.. Comes down to each individuals situation and there's some good bargains out there, as the great Buffet says "be fearful where others are greedy and greedy where others are fearful"

Happy investing all in 2019 and beyond!

 

this ^

 

Cheers Matt! Having heard a few people talk over the years about when to buy and timing the market, while this is all good and well, if we knew when the "best" time to buy was we'd probably be sitting on a beach in the Bahamas

Having said that with the throw-away comment that's not a reason to go in blind and it's where experts such as yourself can come in handy!

 

Just bought in Goodna. Settles end of Jan 19. Should be 7% gross yield. Will have 20% + closing costs from cash. Will pay for itself. Dont care about short term price fluctuations( no plans to sell, i already a pay rediculous amount of tax without adding CGT to it).
I agree if you are buying for growth and negative gearing in Syd or Melb i would be very hesitant, unless it is a rediculously good deal, but if a property is self funding with no desire to sell in the short term why wait for what may or may not happen.

 

I've looked at some auction results lately and thought "hmmmm only $1.6m for 300m2 in XYZ (on high side of the road along waterfront reserve, overlooking water etc....Bargain. Even if you had to pull it down in the medium term). Sites like that will never be built out.

 

Just a question and no cheek intended. I have heard Labor talking about grandfathering NG, but nothing about grandfathering the CGT discount. Is this stated or are you assuming the CGT discount will remain for currently owned assets? I get the feeling Labor are being deliberately quiet on this one.

 

Downturns can be a great time to upgrade.
Marg

 

I am basing that expectation on their ~2016 policy.

Positive plan to help housing affordability

 

Lots of variables here. and it may never happen.

I guess my point is why reinvest if you don't know what the market is doing when we are in the middle of a credit squeeze, easiest way to lose money IMHO.
Perth is currently oversupply. Certain product is selling fast (inner city period homes) however, its not rising, still has not caught up to 2007 prices. Those on the ground will understand this.

For the other markets, I say the timing is wrong, unless you can add value then its a different story. Otherwise you will be holding for growth, servicing debt while waiting for the credit squeeze to ease.