Don't Buy Property in 2019

Discussion in 'Property Market Economics' started by MTR, 23rd Dec, 2018.

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  1. MTR

    MTR Material Girl Premium Member

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    If its your primary residence then I guess its not so much of a concern. However, you have purchased in the downturn of the cycle, so in 5 years times you may still not see any growth whatsoever, dependent on the area etc?
    Look at how long bust cycles went for in Syd I think last one was about 10 years.

    We just don't know how its going to play out.
     
  2. MTR

    MTR Material Girl Premium Member

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    I keep hearing this argument... no competition, no other offers? what does this actually mean? no buyers... ... supply vs demand, prices will very likely continue to fall?

    If you are buying at the beginning of the downturn I believe its a huge risk because bust cycles last much longer than boom cycles.

    We know when the market turned because we have these stats ie auction clearances etc, so why jump in at the beginning of the downturn, easiest way to lose money IMHO.

    I think its important to be strategic, no rush when a market has just started to turn from boom to bust. Bust cycles last much longer than boom cycles.


    What I would do........ patiently watch targeted market and monitor sales/volume and prices. If the trend is south continue monitoring. What you think is a bargain today could be you paid too much tomorrow
     
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  3. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    We never know how things are going to turn out, but we do look at past cycles to get a sense of how people and policy makers respond to things.

    Surprised to hear that you think now is not a good time to buy. Everywhere I look, I hear doom and gloom. Sounds like a perfect time to buy.

    If you are saying to wait, that makes me nervous. As you say, we just don't know how this is going to play out. It seems like the buying opportunity we were all calling for 2 years ago.
     
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  4. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    I would add, that when the market drops, two things happen:

    1) more buyers come in; and
    2) sellers leave the market.

    So the conundrum in a softer market is actually that the available stock is not very good, even if you can get it at a good price. Like everything, there is a trade off.
     
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  5. Illusivedreams

    Illusivedreams Well-Known Member

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    A good family friend put an offer on a Semi today.
    Brighton Sydney area.

    He does not mind if market eased in long term loves the place he put an offer on and will live their for a few years. He was not in the market for this type prior (his budget only allowed apartments) now market has eased he has put offer in.


    Not every one is trying to time everything.
    Some just want a good quality home to live in.
    People forget houses property is for people to live in. He is moving in with his partner they are looking forward to starting a family reno the usual life staff.
     
  6. Bill Williamson

    Bill Williamson Well-Known Member

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    Sellers leave the market then they come back again later even more stressed.
     
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  7. PMC Property

    PMC Property Sydney, Brisbane, Newcastle, Toowoomba Business Member

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    I agree there will be a bit of turmoil this year however those brave enough to do their research and have some patience will still pick up good bargains in different markets. The risk of course is that no one can pick the bottom in Sydney or Melbourne particularly so I would be cautious in these markets.

    Buying a PPoR of course is a different story as these purchases are driven by more than money.

    - Andrew
     
  8. MTR

    MTR Material Girl Premium Member

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    I am not against the strategy of buying when property is off the boil but it has too make sense, its way too early to be buying, especially with current conditions. It makes no sense whatsoever.

    Last time I looked Average Australian rental yields are around 3-4%.

    So investors will not achieve any growth, these yields are woeful, in fact investments will be going backwards because it is not even keeping up with inflation.

    Seriously if investors need to invest, stick it in the bank, less risk of eroding your capital

    We are in the middle of a credit squeeze and its a falling/flat market, Australia wide.

    We buy property to make money, what are the chances of doing this today in Sydney and Melbourne in particular??

    If we look at history, cos this is all we have most bust cycles can go on as long as 7 years. Is it really a good idea to buy in 2019, when the peak was late 2017 and prices are still falling? and auction clearance rates dropping

    Currently I have re agents phoning me from Melb they can not offload the development sites? what does that tell you? there are no takers, I would expect the same is happening in Syd.

    I have heard from some developers that they can not source finance, more supply will come to market, which in turn will push prices further south.

    For things to improve we need the credit squeeze to ease.

    Until I see this happening I am certainly not interested in increasing debt, servicing debt with no foreseeable growth and not even keeping up with inflation, in real terms I will be going backwards and putting my capital at risk. Not my idea of investing.
     
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  9. muller23

    muller23 Well-Known Member

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    MTR you nailed it
     
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  10. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Most of the things you have said are true, but aren't you looking in the rear vision mirror. As a buyer or investor, we need to look around the corner.

    Plus, buying a property is a process, not a transaction. Say you decide today to buy a property. I am guessing you exchange in around May/April. This is further along in the cycle already.

    I would just pick up on two things:

    1) Yes it's a credit crunch, but it's a regulator lead credit crunch. Easier and faster to reverse course if bureaucrats get nervous. It's not like 2018 from that perspective.

    2) Most corrections don't last 4 years. The cycle tends to go: 6-7 years up, 2 down, 6-7 years up, 4 down. The market went down from 2008 - 2012, so we are in the 2 year correction point, not the 4 year. Well, that is how I am playing it for myself.

    Cheers,
    John
     
  11. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Great post @Illusivedreams. We are all trying to be too clever about all of this.
     
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  12. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Agree,
    The issue is many still view the current fall from rear view of past syd/mel cycles of last 3 decade and extrapolate how things will pan out in future.

    Cliche as it may be 'this fall is different' in syd/mel from many past cycles, we never had several headwinds acting in parallel in past cycle.

    Its just a start,
    • Even after the current fall the P2I is still at record high (higher then even at peak of past cycles),
    • OTC forced selling is yet to fully impact,
    • lending based on what you rally spend rather then what you claim to spend is here to stay,
    • external funding pressure is real and here to stay for a while,
    • IO2PI forced selling full impact is yet to play out until 2021 unless banks blindly start extending the loans which is highly unlikely
    • NG/CGT long impact is yet to play out, if anything when implemented as proposed it will make property investment a long term yield game for it to be a worthwhile investment for new investors
    • Surplus supply is yet to hit the market,
    • rents have just started to fall
    • Even if the fall is to stall at 20% we are in a period of long stagnation I would be surprised if we cross 2017 peak even by 2025
    So why should FHB/PPOR buyer be in a hurry to buy in Syd/Melb?
     
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  13. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    I thought Sydney was down/stagnant from late 2004,
    besides past cycles are not some kind of gospel even if you are a believer.
     
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  14. MC1

    MC1 Well-Known Member

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    FHB aren't because they can't afford it. Cheers
     
  15. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    The biggest problem in real estate is (a) inaction, followed by (b) buying the wrong property. Yes, timing is an issue but it is not the key reason people fail.

    So, I don't have a problem with any of the opinions on this website. It's great that we can discuss these things and the quality of the discussion is really very good.

    My main concern is that I don't think people need any encouragement to not purchase property.

    Not doing anything is generally the default position in real estate.

    So telling people to wait just gives intellectual validation to people who wanted to procrastinate anyway. The better move for these people would have been to buy something good, in a metro area, and risk making a mistake.
     
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  16. Herbert

    Herbert Well-Known Member

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    Hmmm, a buyers agent recommends buying!.....I wonder if the barber thinks I need a haircut?

    Shane Oliver thinks a haircut of about 20% is what you'll be getting.
     
  17. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    @Herbert: 20% from here, or 20% from the peak in 2017?

    I would say that 20% falls make sense, but not in nominal terms. Currency will absorb much of the hit. Watch the gold price.
     
  18. MTR

    MTR Material Girl Premium Member

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    At the end of the day hope this thread helps investors gain insight on how markets work, what they do with this information is their choice
     
  19. Shogun

    Shogun Well-Known Member

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    I can see it's a great time to buy a PPOR/forever home.

    I can see the sound advice to consider very carefully before buying investment properties.
     
  20. rizzle

    rizzle Well-Known Member

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    I disagree with this sentiment. I'd rather wait for a market to turn to positive territory, or for leading indicators to turn the corner at minimum before jumping in.

    It's my first proper downturn since entering the workforce ('09) but data on market declines shows that they nearly all run for a lot longer than we've seen in this downturn thus far.

    [​IMG]
    Edit: What Have Periods of Decline Looked Like Over Recent Years and How Long Have Markets Taken to Recover?
     
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