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Chronic Oversupply: Landlords hit by apartment glut and falling rental yields; Without rental growth or capital growth, the prospects for many investors are bleak
Topic Started: 21 Aug 2014, 10:18 PM (10,353 Views)
John Frum
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miw
22 Aug 2014, 05:17 AM
I think you could replace "property investors" with "stock market investors" or "hobby farm investors" or "small business starters". Most people are naiive about what they are doing when they first start.
Not really - the first two are often done for love not money - think of wealthy 50 somethings migrating to Tasmania to set up a truffle farm. Many have large amounts of existing equity then can draw on, and can afford to run their business at a loss.

You won't find many people who'll openly admit to being passionate about property investment - wealth accumulation is the primary focus. And most are highly leveraged.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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goldbug
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Jimbo
21 Aug 2014, 10:59 PM
"The real estate agent assured him he would have no trouble finding a tenant"

:lol
Brisbane was the only eastern capital city where apartment yields dropped over the last quarter as higher prices offset falling rents...

Well what use is that when you depend on yield to repay the loan. Rents to the basement in the future I'll wager. The last leg of the stool the bulls have been sitting on is getting kicked out from under them.

I can't imagine what it must be like to have several hundred thousand in debt hanging around your neck in this disastrous economy. Must be a few stomach ulcers out there Jimbo.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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Jimbo
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goldbug
22 Aug 2014, 10:23 AM
Brisbane was the only eastern capital city where apartment yields dropped over the last quarter as higher prices offset falling rents...

Well what use is that when you depend on yield to repay the loan. Rents to the basement in the future I'll wager. The last leg of the stool the bulls have been sitting on is getting kicked out from under them.

I can't imagine what it must be like to have several hundred thousand in debt hanging around your neck in this disastrous economy. Must be a few stomach ulcers out there Jimbo.
Like any investment, ultimately you are relying on someone paying more in real terms than you did for the same thing.

So anyone who leveraged to the hilt to buy an investment portfolio is relying on others to leverage themselves even higher in the future.

So like any investment, you have to try and asses the future demand for your investment and the wealth of potential future buyers.

If you buy when demand is at record highs and wages are amongst the highest in the western world due to a one off boom in mining infrastructure spending, you would need conditions to be even better in the future to realise a real terms capital gain.





Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Veritas
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Elastic
21 Aug 2014, 11:19 PM
He gave him a pat on the shoulder, told him not to worry and to sign right here.
Last seen burning off in his leased BMW.
Posted Image
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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miw
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newjez
22 Aug 2014, 05:33 AM
How many first time stock market investors spend $600000 on their favourite company?
Not relevant, really. The average time for a stock trader to go bust the first time is about 18 months.

The fact is, people who do something are naiive and ignorant for a little while. The people who stand around and scoff but do nothing are naiive and ignorant forever.

John Frum
22 Aug 2014, 10:11 AM
Not really - the first two are often done for love not money - think of wealthy 50 somethings migrating to Tasmania to set up a truffle farm. Many have large amounts of existing equity then can draw on, and can afford to run their business at a loss.

You won't find many people who'll openly admit to being passionate about property investment - wealth accumulation is the primary focus. And most are highly leveraged.
You are talking about motivation, not expertise.

I am sure the 50-somethings who go to start the truffle farm are even more naiive about truffle farming when they start, if the ignorance of hobby farmers I have met is anything to go by. But they will learn if they survive. Just like this guy who was shocked when he could only get the market rent.

I'd say all successful PIs and stock investors are passionate about what they do, because if you aren't, you will probably not do well. This goes particularly for stock investors/traders. The money you make is how you keep the score, not necessarily the primary end. In fact, in a study of successful stock traders, a comment that came up many times was that as soon as you started thinking about the money as money and not the score you were screwed.

goldbug
22 Aug 2014, 10:23 AM
Brisbane was the only eastern capital city where apartment yields dropped over the last quarter as higher prices offset falling rents...
If you look at the last two quarters or the last year, I think you will find that yields have dropped very significantly in Sydney and Melbourne as well. There is no way rents have gone up 10-15%. Yields always drop when prices are on a roll.
Edited by miw, 22 Aug 2014, 04:10 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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van
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Quote:
 
Like any investment, ultimately you are relying on someone paying more in real terms than you did for the same thing.


Different with property, all you need is the rent to cover most of the mortgage repayments which lowering of interest rates have done, the place will be paid off in a number of years, the place does not have to go up in price for you to come out ahead, you now fully own a house.
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miw
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Jimbo
22 Aug 2014, 10:45 AM
Like any investment, ultimately you are relying on someone paying more in real terms than you did for the same thing.


That is only true for a purely speculative investment like commodities or currencies that have no yield.

For yield-bearing assets it is perfectly possible for the ultimate resale value to be zero for them to be profitable.

DCF analysis is your friend.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Jimbo
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miw
22 Aug 2014, 04:01 PM
I'd say all successful PIs and stock investors are passionate about what they do, because if you aren't, you will probably not do well. This goes particularly for stock investors/traders. The money you make is how you keep the score, not necessarily the primary end. In fact, in a study of successful stock traders, a comment that came up many times was that as soon as you started thinking about the money as money and not the score you were screwed.
Again this goes back to the amount of dumb money in property.

It was dumb money that chased gold up the last leg of its recent bull run and it is dumb money that has chased WA investment property.

That is not to say that everyone owning investment property in WA is dumb, but we have more than our fair share.

Similar dumb people bought Spanish timeshares and will no doubt be rushing to buy apartments in Alkimos for $69 a week (after factoring in above market rate rental incomes).

I wouldn't buy anything without doing a lot of research into it first. I treat property the same as shares in a company or futures on a commodity.

I don't just buy because some bloke says "buy, this, you can't go wrong" especially if the bloke telling me this is the one selling it to me.

You have to ask yourself, why would a complete stranger sell you a money making machine?
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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miw
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Jimbo
22 Aug 2014, 06:18 PM
Again this goes back to the amount of dumb money in property.
Money goes in dumb and comes out smart.

With property there is enough margin for error to recover from your initial mistakes and come out OK in the end. Even the guy in the OP will do OK if he holds for 10 years or so. Not so perhaps with the dumb money who pushed gold up to $1800.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Jimbo
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miw
22 Aug 2014, 06:30 PM
Money goes in dumb and comes out smart.

With property there is enough margin for error to recover from your initial mistakes and come out OK in the end. Even the guy in the OP will do OK if he holds for 10 years or so. Not so perhaps with the dumb money who pushed gold up to $1800.
If he bought Gold for cash at $1750 and held it for 10 years, he would see growth.

Edited by Jimbo, 22 Aug 2014, 07:11 PM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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