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Perth Construction Boom
Topic Started: 4 Sep 2014, 10:01 AM (9,617 Views)
Jimbo
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Mike
4 Sep 2014, 07:37 PM
It is entirely possibly that by waiting prices may fall a bit over the next 2-3 years.
Does the cost though outweigh the risk.

Sometimes it does.

The great thing today, is that you can carry out searches on the Web and watch trends. It isn't like 20 years ago when you could be caught out by a sudden price surge.

Prices are flat in Perth at the moment and you don't have to wait a month to read about it in the paper.

Set up a few searches on realestate.com.au and save them as push button links in your browser. Pop some search results into an excel spreadsheet. Look at how many 4x2's are on sale in your target suburb and how many of them are beneath your maximum budget.

See if the % goes up or down over time. Also look at rental vacancies in the same suburb. Track them. Increasing vacancies and falling rents will deter potential investors and reduce competition.

Look for houses you would like to buy and follow them. See how long they take to sell and if possible, how much they sold for.

Pop along to a few home opens and see who you would be up against. How many people, what type of people.

Find a property that you believe is overpriced. Follow it and see if it sells.

Follow local RE agents and see if new listings of the same type are asking more or less than previous listings. In a strong market, RE's will always try and push the market up by adding to the asking prices of new listings. In a weak market they will advise the vendor to be "more realistic" with their asking prices.





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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Mike
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Veritas
4 Sep 2014, 06:57 PM


Not at all.

Even a modest fall in house prices equals a ton of rent.

House price growth is stalling and the falls are on the way.

Even if the median FTB price fell 5% in a year, that's about 25k saved off the new purchase price, probably more.

You would be mad to enter the market now as either and FTB or an investor unless you had a massive equity stake in a property you would be happy to live in come what may.
Ok lets do the maths.

Median house price falls 5% over the next 2 years. You decide to buy into the market once the data reflects as you think it is a good time to buy.

You are currently renting at the median rental price for a house at $460 per week. This is $23,985 rent in one year. 2 years rent is $47,971.

I will use the Landgate Median price for the last full month of data which is April 2014 at $559,000. A 5% fall would be $27,950. So alittle more then your estimate.

https://www.landgate.wa.gov.au/docvault.nsf/web/PS_FPS/$FILE/WAMetro.pdf

On a variable interest rate of 4.54% from Loans.com.au the interest payment on a median property at $503,100 loan (-10% deposit) is $22,840 per year in interest. Still cheaper to buy then rent on a variable interest rate.

http://www.infochoice.com.au/home-loans/interest-rates/?ref=ICH_S_G_mortgage-rate-comparison&gclid=CPfj5vKWx8ACFVckvQodFW8AVw

So while waiting a few years for prices to fall, it has acutalycost you an extra $20,221 in rent then the price fall of 5% over the time period.

To make close to even you need prices to fall 5% over the next 12 months while renting at a median price. If you dont get this you are going backwards for each and every month you wait.

Or you need prices to fall further and faster which is highly unlikely. The maths just does not add up to wait and rent rather then buy at present.

You can even add in 3.99% fixed rate for one year which saves a further $2,500 over the first year if you like.

Look at the most likely scenarios. Interest rates are set to remain stable, could fall alittle or might rise alittle over next 2 years. In a low interest enviroment property prices are not going to fall by much if at all. That is the most likely outcome.

I think Perth will have a further 5% growth, then stable market for a few years up or down a few % points and bob around that for a few years.

It makes perfect sense to anyone sitting down and running these figures, hence why so many people are buying or building new houses then renting. Rents over shot during a tight market. Interest rate cuts have made buying the better option then renting if you can afford to do so.

Just think Veritas you could have bought 3 years ago in 2011 when the Median price was $93,000 cheaper at $466,000. You would now have been in a low interest enviroment since as rates started to fall end of 2011. This is the same time rents started to increase rapidly. The amount of money you could have saved in rent, plus buying at cheaper prices and actualy paying down your mortgage. You would be in front by 6 figures with a 2 at the front of it. If only you had made the move, how much more time do you wait another 2-3 years? What then if prices have not fallen much, what if prices are up a further 10-15% in 3 years time, entirely possible.

I honestly think it is a very bad move by waiting if you want to live and own your own home. Buy when you can afford it, not when you think prices may rise or fall as like you now you never end up making that leap to actually buy.
http://mike-globaleconomy.blogspot.com.au/
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Jimbo
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Mike
4 Sep 2014, 08:14 PM
I think Perth will have a further 5% growth, then stable market for a few years up or down a few % points and bob around that for a few years.

Mike,

Where do you get your coming 5% growth from?

Perth price growth in the last twelve months was only 3.13% and in the last quarter only 0.37% (or annualised 1.48%).

But we are seeing rentals vacancies rising and rents falling at the same time as migration is falling. We are also seeing increasing supply as new houses are being built.

All of these things are not conducive to rising prices.

So why should prices rise 5% before they flatten out?
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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Foxy
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Zero is coming...

Just talking to a builder in Margaret River, he is shell shocked by the amount of work he has in front of him.
Very busy.
Peter
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Mike
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Jimbo
4 Sep 2014, 08:57 PM
Mike,

Where do you get your coming 5% growth from?

Perth price growth in the last twelve months was only 3.13% and in the last quarter only 0.37% (or annualised 1.48%).

But we are seeing rentals vacancies rising and rents falling at the same time as migration is falling. We are also seeing increasing supply as new houses are being built.

All of these things are not conducive to rising prices.

So why should prices rise 5% before they flatten out?
That is my opinion.

Growth over the past 2 years is 15.7%.

Stock on the market has been falling the last month. Rental stock has been falling the last month.

It is normal for stock to increase over winter.

Interest rates are low, unemployment is low.

You are correct, we are increasing supply but be careful what you wish for the last time we had a mini construction boom during 2009 due to Rudds changes to the FHBG this was the result http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/1E9F7DAF8C4AB131CA257774001AF7C9?opendocument

Prices up 15% in one year in Perth and even higher in the east, all due to new construction.

Perth just recorded a 23% increase in building approvals.

3 months prior to Perths 15% growth in 2009/10 we had this http://www.treasury.wa.gov.au/cms/uploadedFiles/_Treasury/Economic_Data/building_approvals_jan2010.pdf?n=1897
Large increase in building approvals, up 47%.

While our building approvals are not as large it is still very strong growth by any measure.

Be careful what you wish for.
http://mike-globaleconomy.blogspot.com.au/
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newjez
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Mike
4 Sep 2014, 08:14 PM
Ok lets do the maths.

Median house price falls 5% over the next 2 years. You decide to buy into the market once the data reflects as you think it is a good time to buy.

You are currently renting at the median rental price for a house at $460 per week. This is $23,985 rent in one year. 2 years rent is $47,971.

I will use the Landgate Median price for the last full month of data which is April 2014 at $559,000. A 5% fall would be $27,950. So alittle more then your estimate.

https://www.landgate.wa.gov.au/docvault.nsf/web/PS_FPS/$FILE/WAMetro.pdf

On a variable interest rate of 4.54% from Loans.com.au the interest payment on a median property at $503,100 loan (-10% deposit) is $22,840 per year in interest. Still cheaper to buy then rent on a variable interest rate.

http://www.infochoice.com.au/home-loans/interest-rates/?ref=ICH_S_G_mortgage-rate-comparison&gclid=CPfj5vKWx8ACFVckvQodFW8AVw

So while waiting a few years for prices to fall, it has acutalycost you an extra $20,221 in rent then the price fall of 5% over the time period.

To make close to even you need prices to fall 5% over the next 12 months while renting at a median price. If you dont get this you are going backwards for each and every month you wait.

Or you need prices to fall further and faster which is highly unlikely. The maths just does not add up to wait and rent rather then buy at present.

You can even add in 3.99% fixed rate for one year which saves a further $2,500 over the first year if you like.

Look at the most likely scenarios. Interest rates are set to remain stable, could fall alittle or might rise alittle over next 2 years. In a low interest enviroment property prices are not going to fall by much if at all. That is the most likely outcome.

I think Perth will have a further 5% growth, then stable market for a few years up or down a few % points and bob around that for a few years.

It makes perfect sense to anyone sitting down and running these figures, hence why so many people are buying or building new houses then renting. Rents over shot during a tight market. Interest rate cuts have made buying the better option then renting if you can afford to do so.

Just think Veritas you could have bought 3 years ago in 2011 when the Median price was $93,000 cheaper at $466,000. You would now have been in a low interest enviroment since as rates started to fall end of 2011. This is the same time rents started to increase rapidly. The amount of money you could have saved in rent, plus buying at cheaper prices and actualy paying down your mortgage. You would be in front by 6 figures with a 2 at the front of it. If only you had made the move, how much more time do you wait another 2-3 years? What then if prices have not fallen much, what if prices are up a further 10-15% in 3 years time, entirely possible.

I honestly think it is a very bad move by waiting if you want to live and own your own home. Buy when you can afford it, not when you think prices may rise or fall as like you now you never end up making that leap to actually buy.
That doesn't add up.

Where did you get that diploma from again?
Edited by newjez, 4 Sep 2014, 10:56 PM.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Mike
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newjez
4 Sep 2014, 10:53 PM
That doesn't add up.

Where did you get that diploma from again?
Tell me what does not add up, be specific.
http://mike-globaleconomy.blogspot.com.au/
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newjez
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Mike
4 Sep 2014, 11:00 PM
Tell me what does not add up, be specific.
Correct me if I'm wrong, but you seem to be saying that it will cost jimbo money by waiting, even if prices fall. But you haven't included the mortgage interest costs.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Jimbo
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Mike
4 Sep 2014, 10:51 PM
Rental stock has been falling the last month.

Where do you get this data from? (I asked this earlier and you haven't responded?)

I see rising vacancies across the whole of Perth?

SQM shows a vacancy rate of 2.5% and vacancies just below 5000 at the end of July.

A simple search on realestate.com.au (for greater perth) shows 6654 vacancies (this number has been climbing consistently for two months). http://www.realestate.com.au/rent/in-perth+-+greater+region,+wa/list-1?activeSort=suburb&includeSurrounding=false

Why do you think Rudds building boom contributed to house price increases? Could it not have been other factors pushing up prices?

To say that building more houses will cause price rises in an environment of reducing capex, migration and state revenues, is counter intuitive.

I don't get it.


Edited by Jimbo, 4 Sep 2014, 11:53 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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cintamami
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1st timer, but have been reading for quite sometime.

Re-running Mike's no, with the assumption of 5% price falls in the next 2 yrs.

Rent for 2 yrs - $47,971.

Owning for 2 yrs - $27,950 (5% reduction in price) and 5% on loan of $503,100 + 3% Lmi for 2 yrs, I take up 5% as it is what's been offered out there at the moment. Give or take 0.5%.
Totalling $79,770 give or take, plus councils, waters, land taxes and maintenance.

You will be looking at $40k - $50k losses in 2 yrs.

However, as a 1st home owner to be, at the moment, land is just selling like hot cakes. I kinda agree with Mike, you buy when you can afford to, don't go borrowing to your limit, assume 8-10% interest rate, and whether you will still be able to afford it then. Then close your books.

Your numbers can look a bit better, if you were to, rent your newly build property out after 6 months, you have massive depreciation and you rent somewhere cheaper than $460/WK. I know you can, with all these apartment in CBD empty, just dont go after the shiny ones, if you cant find any, then find the next best suburbs, vic park / mt lawley, basically just find one.

As much as I want house price to go down, I have to admit:
1. the game is currently rigged favoring into home ownerships (negative gearing, jeebus fkin christ, if i were to rent my 1st home out and me renting in a good apartment for lets say $350/week for a 2 bedroomer, or even 1 bedroomer for me and my spouse), it is about 2 monthly repayments in tax return every year!!!
2. if you were to take my no1 point into consideration, this will actually minimise the cost, even when house prices go down by 5%, do you then still wait? what's the risk of Perth's market going crazy like Sydney?
3. from what I gathered (again just personal observation on the burbs that I ideally want to live in when I have kids), house prices in area above $700k havent really moved anywhere.
4. If shits gonna hit the fan, the property that I currently will be buying in will be less hit and the property that i want to live in (my area went down 5%, but the area i want to live in went down 10%, in this case I am still up??)

Again, perhaps out of you all, I am most confused, I am about to commit $450k for a home and house package, and I am thinking like 5-10 times before committing, even now, I haven't committed yet, but I am just about to.

Then you read the news about some poor immigrant families camping out in Sydney to buy a block of land for $515k before anything else.
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