Is now the worst time to buy?

Discussion in 'Property Market Economics' started by Fortune Favors the Bold, 25th Apr, 2016.

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Is now a good or bad time to buy?

  1. It's a good time

    16 vote(s)
    16.3%
  2. It's a bad time

    42 vote(s)
    42.9%
  3. It's not about timing the market, but about time in the market

    40 vote(s)
    40.8%
  1. MTR

    MTR Well-Known Member

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    There is such an oversupply of this type of product in Mandurah at the moment, still has not recovered from the crash of 2006/7. Its possibly dropped back 20-30%.

    Rents are also off, once again too much stock.

    It needs to make sense today for me to consider buying, I personally still see this area as high risk. You also need deep pockets to hold this stuff and you can not add value and you are potentially hoping you can achieve CG, the problem is the fundamentals for this area are not stacking up.

    There is also a huge over supply of development blocks, once again not making any sense, no buyers and figures don't stack up.

    MTR)
     
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  2. Perthguy

    Perthguy Well-Known Member

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    @MTR is spot on. I am putting in an offer tonight on a property that is currently a 3x2 with major issues with the floor plan. I believe that it can be converted to a 4x2 within the existing building. This will result in an uptick in the value, plus a higher rent.

    In about 12 months time, I will build an additional dwelling out the back.

    Converting to a 4x2 and building an additional dwelling will increase the value without an capital growth as such. In this area I would not really expect any real price increases for maybe 3 years?

    I expect the value to drop but it's difficult to find decent retain and build projects, so I'm jumping on this one.
     
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  3. MTR

    MTR Well-Known Member

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    be interested to know more about the deal when you settle if you care to share:)
     
  4. larrylarry

    larrylarry Well-Known Member

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    what are the regions in Perth that are worth a look? Say max $400k for a house? my knowledge of perth property only confines to south of perth only... stops just before freo. what's like in joondalup now? I could only recall mcMansions and big roundabouts in Joondalup from my last visit in 1995.
     
  5. Perthguy

    Perthguy Well-Known Member

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    For sure. All I have to do between now and then is negotiate a price and get a loan approved ;)
     
  6. Perthguy

    Perthguy Well-Known Member

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    Depends what you are looking for. Prices are still dropping in many areas, so you would have to be careful. Personally, I think Beckenham has some potential. I haven't checked out prices for a while though, so I don't know where they went.
     
  7. Perthguy

    Perthguy Well-Known Member

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    Step 1: offer accepted :)
    Step 2: meeting with the broker on the weekend

    Do you ever have that "oh ****, what have I done?" moment just after you had an offer accepted?

    Interesting side note. Multiple offers on this property. First time for me.
     
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  8. Gockie

    Gockie Life is good ☺️ Premium Member

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    No...I think i'm either way too stupid to realise i've overpaid or otherwise I think it's an amazing deal. :)

    Nice thing about the North Epping home, I tracked the market to see what else was on the market and sold in the next 12 months after buying and I thought there was only about 1 house which was sold at a better price for a buyer in that whole time. So that made me feel great. And I could see the market rising too.
    The new PPOR I still feel was a steal... the only market weakness since 2013 was in November and December 2015 and that's when we bought.
    It's such a unique home, and suits us to a T. Perfect for where we both want to be, easy access to our workplaces (Macquarie Park and Parramatta) and everything else. Easy access to trains, buses.... i'm just so happy with it :)
     
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  9. Azazel

    Azazel Well-Known Member

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    Buyers remorse? No ;)
    Shouldn't you meet with the broker as step 1?
     
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  10. Perthguy

    Perthguy Well-Known Member

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    I would rather ask for forgiveness than permission ;)

    But really, all the finance is in place to do this deal, so it was a low risk buy. I could end up just using existing borrowed funds to do the deal and sort the rest out down the track. I will get him to run the options but this is shaping up as the best strategy so far.
     
  11. euro73

    euro73 Well-Known Member Business Member

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    Yet. They all warehouse with the majors...so it's only a matter of time before their warehouse providers tell them to pull it back... might be several months yet, but it will come.
     
    Last edited: 7th May, 2016
  12. MTR

    MTR Well-Known Member

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    @euro73 you mentioned I/O only loans in another post. Is this on the cards for 2017? if so this will be the nail in the coffin for investors IMO.

    MTR:)
     
  13. Gockie

    Gockie Life is good ☺️ Premium Member

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    If its considered ok for the banks to lend IO to investors but not to OO's that would mean i'd see more buying by investors over OO's. House prices are getting to all time highs therefore the principal repayments would be substantial but the interest portion of repayments are next to nix.... big advantage to investors over OOs if this was the policy.
     
  14. MTR

    MTR Well-Known Member

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    Oops, I am getting confused what I meant and possibly wrong that the banks will be changing policy to interest and principal loans in 2017, not IO???? Perhaps I have it all wrong
     
  15. Gockie

    Gockie Life is good ☺️ Premium Member

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    All I know is that i've heard interest only loans are being used by many owner occupiers and that's being frowned upon.
     
  16. MTR

    MTR Well-Known Member

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    Right. I get it. thanks
     
  17. euro73

    euro73 Well-Known Member Business Member

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    What I was referring to is the issue around those who already have I/O lending ( whether its secured by PPOR or INV security) being able to secure extensions to their I/O periods after their current arrangements expire.

    Take any investor on here for example, who might have several loans due to roll out of I/O in the next year or three, or four... there have been some posts on the forum raising the concern that if the APRA 10% speed limits on I/O lending stay in place over the medium term, many who have I/O arrangements in place may face difficulties when they ask their current lenders to extend their existing I/O terms. If , for example, they are required to be re-assessed ( as many banks are already requiring and others will likely start requiring ) and don't re-qualify under the new servicing calcs, the banks will force them to move to P&I.

    The first obvious solution if that were to occur would be to try and refinance to another lender and secure a new I/O period elsewhere, but because most servicing calcs and HEM's are fairly much homogenised these days, if those investors cant qualify under the new servicing calcs anywhere else either, they may be forced to move to P&I. Of course, the exceptions to this may be the small handful of lenders who haven't adopted higher assessment rates yet as they arent directly APRA affected, but I don't expect those handful of lenders will be able to avoid the sensitised assessment rates indefinitely as some of them are under APRA's jurisdiction already ( Heritage and Qudos bank) and the non banks ( Pepper, Liberty etc) ultimately have their funding warehoused by APRA regulated ADI's anyway ( authorised deposit taking institutions- ie banks) so it seems likely ( to me at least) that they will all eventually inevitably have to fall in line .. perhaps not..could be wrong.... but I would think its going to play out that way.

    This obviously has the potential to create a significant increase in monthly repayments for those forced onto P&I , and therefore has the potential to make holding costs unaffordable for some (or many) which is where some forum posts have started discussing the fallout that could create...

    What I'm saying is that if that were to occur ( and we really dont know yet whether it will, or if it does, how many it will affect) it may not be as big a problem as some are concerned by if P&I rates have fallen to 3 or 3.5% by then ... that may just be the saving grace in all of this.

    But whether it's to take best advantage of these lower rates, or to try and create buffers against I/O access issues in future... or to counter the servicing ceilings - the arguments for debt reduction being a focus for these next few years remain sound...
     
    Last edited: 7th May, 2016
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  18. Perthguy

    Perthguy Well-Known Member

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    Funny story. The mb can't get us a good loan so we are going to use an existing loan. Meeting the settlement agent on Monday and likely to instruct her to move to settlement ASAP. Exciting! :)
     
  19. Perthguy

    Perthguy Well-Known Member

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    I agree. My investment partner and myself decided not to take on additional debt for our latest purchase when we can fund from existing credit. After looking at the options, it does not make sense to take on more debt at this stage if we don't need to.
     
  20. Azazel

    Azazel Well-Known Member

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    That is funny.
    Do you mean using equity?