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Hang on to your hats - if this is anywhere near to reality

Discussion in 'Investor Psychology' started by Numbers_man_numbers, 16th May, 2016.

  1. Numbers_man_numbers

    Numbers_man_numbers Member

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    Hi Guys,

    After reading this, if I had bought an apartment in the last year, I would be scared .

    Yes, its over! Property prices to fall…

    Please share what you all think, is time to get out of apartments or will that only make things worse?

    Cheers.
     
  2. alexm

    alexm Well-Known Member

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    Roger Montgomery is a smart cookie however i don't ever recall him being a fan of property. He made his millions via the share market which I believe is still his primary focus.

    Sounds like abit of a scare tactic to drive people away from property and into the share market. Although he's not alone in doing this.
     
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  3. Blueskies

    Blueskies Well-Known Member

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    I like Roger Montgomery, and his philosophy in general with investing of finding quality assets at a discount to intrinsic value. I think his blog is well worth reading for anyone looking at share investing. I can recall him making very similar predictions regarding iron ore prices no long before the end of the mining boom that turned out to be correct also.

    The article mirrors what a lot of other people are saying more and more about apartment oversupply. Me personally, no way I'd be signing up at the moment for a new inner city apartment. Even if long term I thought it was a good investment, there are much better places to put your money today. It seems almost certain there will be minimal or even negative CG on a lot of these for the near future.
     
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  4. Hodor

    Hodor Well-Known Member

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    The figures in the article appear to look at build rates at the height of the boom, from my understanding construction rates will normalise as prices go through a period of stagnation as per the expected property cycle. Hence supply and demand will fall into line.

    Lots of people here have been saying look out for over supply issues with everything currently been built.

    Over the next 15 to 20 years I expect property prices to be up, even if at slightly below historical growth rates, which is my horizon.
     
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  5. Numbers_man_numbers

    Numbers_man_numbers Member

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    Thanks guys for the thought through responses. too often we get a shallow reactions we get here.

    @alexm and @Blueskies I would have to agree with you on Roger being a likable and smart operator and also that he is probably trying to scare people away form property. It seems to be working too, the share market is defying gravity against the economic woes. Low interest rates inflate all asset prices not just property.

    @Hodor, I expect the building activity to slowdown as well. I am pretty sure that the author of the article would be of the same view. The question is, and the article is affirmative on it, have we already built too much? Majority of the places that have been sold OTP will be built. There may be some developers that will hit the wall but in an advanced economy like ours we will not see un-finished building in our capital cities. If one developer folds the project will be liquidated to someone who can finish and accept the lower return, or it will be liquidated at a price point where the return is acceptable to a more capitalised developer.

    I feel we are going to see a dip in the apartment prices, that was my view before I red the article and before the major banks came out and said they will limit lending to overseas investors.So I believe we might be in for a ride.

    Cheers
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    As presold development (OTP sales) settle and are not backfilled by sales of new properties and construction commencements dry up, the apparent (or sensationalised median ie lazy person's median) will drop - history repeats itself.
     
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  7. JacM

    JacM VIC Buyer's Agent Business Member

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    It is interesting that councils can approve more dwellings and alter zonings to increase density, and enjoy all the extra council rates money flowing in, without correlation to matters of supply or oversupply. The fact that can reduce values to property of existing property owners... it is surprising nobody has had a go at a class action against a council.
     
  8. Numbers_man_numbers

    Numbers_man_numbers Member

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    it is surprising nobody has had a go at a class action against a council.

    ..
    Sorry this is a bit off topic but I couldn't hep my self.

    The councils will have plenty of money to defend themselves with, least the ones in Sydney. Majority of the councils use the NSW Valuer General's valuation to determine rates. I was going through valuation data and (for the purpose of land tax) and found that the state government and the councils will be getting a decent windfall, as in some cases, entire suburbs' lot values go past the $480k threshold for the 'progressive' land tax.

    Cheers
     
  9. MTR

    MTR Well-Known Member Premium Member

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    Not sure what is happening with OTP apartments in Sydney but cycles are changing and I expect there will be an oversupply coming your way as the market is turning.

    This is exactly what has happened in the Perth market it went gang busters from 2013-14, OTP apartments flying out the door, prices increasing rapidly due to demand, today/now we have an oversupply everywhere and they are just sitting on the market with price reductions of at least 10% and still going south.

    OTP apartments can work well but you must offload prior to peak.

    Apartments may be worth more in 15 years time but that is totally irrelevant when you are holding onto stock that is falling and where rents are also on the decrease, lots of pain for those stuck with this stuff till the next cycle.

    MTR:)
     
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  10. Numbers_man_numbers

    Numbers_man_numbers Member

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    .
    You are so right,

    people do not account for type of dwelling being sold when throwing out median numbers. Although its self fulfilling as the REAs quote this artificially inflated median to sell old stock.
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    The problem lies not with council but with state pushing increasing density and urban sprawl. The north shore blue ribbon suburbs of Sydney didn't want swathes of large estates & grand old homes bulldozed and replaced with units at the behest of a Labor state government vs leaving areas with good train links like Canterbury/Bankstown LGAs untouched.
     
  12. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    How far do you reckon did the contagion (in Perth) spread beyond the OTP apartments to units and houses ?
    The reason for the question is that the property prices are relative. E.g. If a new 3BR OTP apartment in CBD is say 20% cheaper than a similar 3BR unit 20 kms away, it will be appealing to some OO and renters who work in CBD or want to retire near CBDs. Hence the property prices outside the location of OTP apartments are also likely to be effected by the apartment supply.
     
  13. MTR

    MTR Well-Known Member Premium Member

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    Property market in Perth has dropped at least 10% in most suburbs and not just OTP stuff.

    Higher end blue chip >$1M+ has still not recovered since the crash of 2007.
     
  14. headsonbeds

    headsonbeds Well-Known Member

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    From councils point of view an oversupply is an advantage, to a point a atleast. They'd rather attract people with cheaper rents, vals. Investors are down the list of priorities.
     
  15. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Councils dont care if its sold that the developers problem. They have density and revenue targets set by State Govt and its their job to approve complying devs. Council has no duty of care to other developers who may lose if over-supply occurs.
     
  16. mrdobalina

    mrdobalina Well-Known Member

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    It's not the council's job to dictate demand and supply and what the equilibrium price points should be. That is the market's job. Council puts planning policies in place, and apply them when developers submit their applications.
     
  17. JacM

    JacM VIC Buyer's Agent Business Member

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    It might not be the council's job, but for the sake of being sensible, there should be some correlation between demand, and permission to increase density.
     
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  18. Angel

    Angel Well-Known Member

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    Same as councils taking the fees when developers build extensive housing estates in mining towns.
     
  19. Omnidragon

    Omnidragon Well-Known Member

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    Yes but if you had listened to the smart people here, you wouldn't have bought an apartment.