To risky to buy in this market?

'Beginner' investors are driving the market at the moment. Investors are buying now, investment demand will show big swings upwards and the % of new housing commitments to investors will be significantly larger across the country shortly. NSW is near a third again, and I wouldn't be surprised to see this rise to 40% (unless new FHB incentives kick in) as they replace other segments of the market slowing down (FHBs).

Lending calculators allow for this, it's quite easy to leverage up for those without much investment debt. There's been a big % increase in borrowing capacities in the last 24 months from assessment rate & tax cuts, that allow for higher nominal debt amounts to be absorbed.

With confidence levels high and affordability strong, more and more resi investors are using this leverage opportunity to purchase/add to their portfolios.

Nonetheless, advanced investors will be aware that buying now is riskier than it was not too long ago. It generally is when everyone else is.

 

I would consider myself a very very advanced investor with 20+ portfolio (used to be 25+ several years ago but had to throw some money at my businesses).

If I could get any sort of money from any bank I would be buying right now as an experienced investor and I know many would be and are actively doing so. Not saying I would be buying in Sydney or Melb but I definitely would be buying. I see opportunity everywhere.

I guess I'm a complete Noob then.

 

But experienced investors have the advantage of an existing portfolio.

 

OK @thunderstrike888, this is a forum for sharing. If not SYD or MEL, where has not peaked/peaking in next year and will stagnate when interest rates start to rise in 2 or so years and investors stuck with properties that are not growing faster than what it costs to hold them? (NSW/QLD suggestions would be great )

 

@thunderstrike888 - definitely no noob with that portfolio! I didn't say experienced investors wouldn't be buying, but risk levels are different today. If you can allocate capital well then you're likely to do well in most markets I think.

Personally, i think I can get a little more specific on the risks I see and how to potentially navigate - I'm only buying now opportunities that I think can hold up to these two assumptions:

• 4-6 interest rate rises by 2024 (not 1) & fixed rates back above variable. I.e. market OO rates around 3.5% and INV rates above 4%.
• APRA changing assessment rates back up to 7%+

My macro crystal ball has probabilities of both reasonably high for 2022/2023, perhaps a little earlier for the second assumption.

I don't hold the view that this policy setting will remain for years to come. If I did, then I believe prices still have a reasonable way to go.

Nonetheless, I also see plenty of great opportunities, albeit with a little higher risk than earlier in the year given the rapid price growth.

 

Great post.

Isn't it always a beginner market in real estate though?

 

Sophisticated investors don't get to choose the market they invest in either.

 

For me, choosing a favourable market sentiment to invest in is very important. Ultimately, I believe sentiment change is the final marker which propels market movement. Everything else before sentiment change is only commentary.

 

There is EVERY possibility forecasts are wrong!!.

They were on April 2000 when we decided to buy. At that point we had to factor in a potential 30% drop ( according to Westpac ). Also valuations for equity were pretty awful.

How wrong everyone was.

So we can also be wrong this time too! Just factor that in.

I have got more out of going against opinion than following the flock. Especially in Brisbane...

I love it when everyone is wrong! There must be something wrong with me !!

 

What complications will a 50c-US dollar have on the housing market?

Because we have largely avoided inflation until... now.

IMO markets topped around the first week of this month. I expect a little air to come out of the bubble (10-12.5%) & that will be healthy. Debasing the currency is by design but all QE eventually has consequences. I am thinking we will see a 5-10 year period of stagnation.

Iron ore isn't going to prop the economy forever

 

I guess one can always choose, but then whether the choices turn out to be as predicted is another matter. For example, someone might have chosen Tokyo and Osaka for investment in envisage of the Olympics only to be wrecked by Covid. Or SE Asia only to be destroyed by Covid and political instability. Or China only to see the Oz-CN dogfight getting worse. Anyway, even within Australia, the property clock is not always accurate. So... I guess however sophisticated an investor, the crystal ball is never crystal clear...

 

Yep, I suppose I meant more that investors gets to choose what they buy and where, but not necessarily when they buy.

Real estate is a bit different to other investment classes which makes timing the market a luxury you sometimes don't have or even plain uncessesary:

1) It is accommodation, which means people at a certain stage of life are going to buy no matter what the market is doing; and

2) Real estate comes with a 30 year mortgage. And every year you wait it out for a good time to buy, actually chips away at your ability to pay the loan off, and chips away at how desirable you are as a client of the lender. This is why waiting it out, sometimes just isn't an option.

Waiting 5 years for the "right time" to buy an asset that will take 30 years to pay off is an eternity.

So, ultimately, buying real estate in the major capital cities, will come down to a choice, not between buying high or buying low; but buying high or buying higher. Property is usually moving up in price, and the only thing changing is the velocity at which prices are going up.

I know the "property always goes up" trope is a bit simplistic, but I speak to so many people that never get their act together waiting for the right time, and they would be in a much better spot if they just tuned everything out and understood the above basic principles.

 

Got to love property

 

Sorry, agree also that the property clock is usually wrong. 18 year cycle is more helpful.

 

Totally agreed... Over the last 18 months. I look at my property investments vs. shares (mainly through super), I am grateful for the non-super investments are in property... particularly now in hindsight I bought when everyone was fleeing Perth and caught some falling knives.

 

Yep, I have been on this forum for long enough to remember people 18 months ago saying not to buy in Sydney (and Melbourne etc etc) because it's too expensive. It's way up since then. You just never know, so best not to be a spectator.

 

Are these guys right about Perth? If so, why is it not booming like elsewhere?

What's up with Perth's housing market? - MacroBusiness

 

FHB market has been booming
Certain areas have no or little stock

I think we are seeing more supply come to market. But still very strong market. In my suburb 6 offers on one property, sold first home open

apartments, still oversupply

 

Provided unemployment stays low, inflation doesn't run riot and affordability still exists - Perth is a beautiful place for FHBers.

 

We have the best beaches in Australia