Are Melbourne and Sydney set to perform in 2009?

[Joe]

This from The Age:


Melbourne's return to real estate boom time

Mark Armstrong
December 20, 2008

UNDERPERFORMING property markets, sharemarket instability, rising rents and falling interest rates are set to push Melbourne and Sydney into the lead of the property charge in 2009.

According to the Real Estate Institute of Australia, the Melbourne and Sydney property markets have been the worst performers in Australia over the past five years.

The median price of property in Melbourne had an average annual growth rate just over 4.5 per cent between 2003 and 2008. This compares with an annual growth rate of about 9.5 per cent between 1980 and 2003.

Sydney's long-term growth rate stands at 9.12 per cent, but in the past five years its median has not been able to manage an annual growth rate above 1 per cent.

The Melbourne and Sydney property markets have under-performed their long-term average by a long way. In contrast, the Perth market has been the stand-out over the past five years due to the mining boom. The median value of property in Perth has grown by more than double the long-term average, with growth rates of about 16 per cent each year.
More here: http://business.theage.com.au/business/melbournes-return-to-real-estate-boom-time-20081219-72eq.html


Thoughts anyone?

[kincella]

I doubt they will boom again until - several factors involved, sanity returns worldwide, instead of govts rushing to give money back to the very ones who contributed to the fiasco, the govt should be setting up and controlling a fed bank, car makers build small cars and curb huge salaries, rail infrastucture is fast tracked, road spending is attached to rail junctions (to encourage people to use public transport..rail) providing jobs in new infrastructure to counter the job losses in other areas...immigration is reviewed or curtailed in light of expected rise in unemployment, ( no need for further overcrowding in cities )

I believe investors will move back into the property markets due to housing shortages, low interest rates, and after the stock market losses most have experienced. Low vacancy rates Melb at 1.1% and increased returns from higher rents will attract a good proportion of mature investors.. Major superfunds and fund managers to invest in affordable housing programs, and be banned from short selling shares.

I do believe there will be a quiet and sustained property market as people quietly go back into the market and pick up bargains.(the term deposit rate to fall to 3% or lower will encourage this), but the media will miss it until its too late, they are too intent on looking at any fall and blowing it out of proportion.
A boom is probably further away than some predict...a recession for 18 months will not suddenly stop and turn around.
The huge spending of 38 billion pre xmas and estimated 14 billion post xmas will not delay massive job cuts....which will increase dramatically until at least mid year 09.
We do not have prudent or conservative management in charge today, hence the knee jerk reactions of stopping and closing contracts and future growth, managers are protecting their massive salaries at the expense of future income and growth.
On the other side, first home buyers who are assured of jobs and low interest rates will move into the market....not until the economy is settled and stabilised, will first home buyers have to compete with cashed up investors, which again will drive up prices.
I have been watching a regional city (have prop investments there) from jun 08 until end of nov 08, houses at the lowest end of the market have been selling at premium prices, which forced the median value down, the average house was not on the market, taken out, but a dramatic change took place in early Dec, houses above the median suddenly have been selling at the rate of 1.5 a day pm, prior to that it was 1 sale a day. I find that consistent with my views, but the drought was broken in that area with good rains in Nov, after 15 years of drought, which may also have contributed to the increase in above average houses sold.
I did see some bargain prices which I believed I would be able to acquire, but those houses sold.
I entered the property market in Jun 2000 after the tech crash, I expected to hold properties for at least 10 years, but the prices tripled by 2003 and mid 2004, so I sold some and reinvested in other properties.
I have believed exactly the same thing would happen again this time after the stock market crash, but the massive curtailing by employers will impact the timing. I doubt you can have a property boom with higher unemployment.

The building industry has been hit hard, but we have always had a shortage of builders, which will be snapped up for home extensions and renovations...which is the other alternative for property owners.
A hard question to answer...but that is just some of my thoughts
cheers

[Passive]

Whether they perform in 09 or 11 for that matter the scene is now being set for a mini boom in Syd particularly having been the basket case for so long.
Over 90% of the pop is still working and these rate cuts are an incredible bonus the likes of which are unparralleled in history in the actual relief or bonus it offers in dollar terms thanks to the size of mortgages. Add to that the lower cost in fuel, all the incentives/bailouts etc - when traction takes place and good news starts to flow the non resource states will fire first. Outer Melb will benefit more based on my research in Melb. Sydney will have it begin in the outer to mid outer thanks to fhb incentives.

Blind Freddy can see what foundation is being laid for property. I salivate at the thought of 4% rates - what will it do for those with 500k mortgages?
Fixed high rates will start to mature by 2011 and b4 - just funny how overspendin and credit got us into this mess and that is now the medicine to get us out. May be time to take control of the economy away from bankers and their foolhardy control of rates!

[lord elpus]

Hi Kincella and Passive,

I have joined this forum at the suggestion of kincella and at first glance I like what I see.

I hope it is a forum where we can discuss opportunity rather than have endless fights over whether the end of the world is coming.

I am very intent at the moment on a path that I discussed with kincella ie the student boarding near the major universities.

My wife and I will be putting a toe in the water with one property (and we'll probably make plenty of mistakes) but after learning the ropes our intention is to do it with multiple properties.

I am keen to do this as I am a little tired of the standard negative gearing arrangement. Whilst we have made good capital growth on our properties I do look forward to positive gearing with the student properties. The cash-flow impost grew when interest rates where higher during 2008 and it had a material effect on our available cash.

It wasn't all that bad, it just meant some compromises elsewhere, but I am looking forward to being able to grow my asset base without too much of a cash-flow load on my earnings. Sure, there will be an effort increase as it will mean more input of time and energy but we'll see how it goes.

Looking forward to getting some great tips on this site.

[kincella]

the banks have proved they are not up to the standard expected....all 4 of the big ones poured money into the centro, babcocks. allco and all the other bad companies....but charged ordinary accounts 2 billion in fees...

I believe we should have state owned banks....purely for the average person...only deposits and home loans available....a fixed interest rate of say 2% on deposits and 3% on loans...limit of 500.000 for home or investment loans etc....absolutley no derivatives or loans to companys.....set salary for managers.....
this bank is not for everyone....limitations on income to access these low rates....so only the average person looking for a home or investment loan has access to these benefits
let the merchant banks take the risks and play their nasty games....with each other
I doubt we will get any sense out of the banks or the govt...until this ridiculous situation of govt and depositors pouring money into the banks and the banks holding out on loans to builders, developers and small business..
and the fiasco the banks borrow short term money market to lend long term finance...oh and executive salaries for doing fthe worst possible things they could do.
the banks have a lot to answer for...so does current govt with the inflation con and high rates.

[kincella]

Hi Lord Elpus.....hurray, am glad you came over...welcome....I have set you up as a friend so we can chat on private messages.....and you can edit your posts after they are posted too....
am hoping we can get some of our other positive friends over here to chat

am sure we will have a stack of ideas to play with and discuss in 2009.....

ps sent you a private message
cheers

[kincella]

lord, forgot to mention...believe the student accommodation is a terific idea....and you or the wife should be out shopping at those lovely boxing day sales to buy everything you need.....is the going rate for room only about 150 pw....
I have stalled on the idea of serviced apartment for now....been offered a higher rent from family and will see how that works out....had intended to be in the country by now...and doing a big buy up at ridiculous prices for the linen, and everything I would have required....have my doubts the company running it would achieve what they said...think its mainly only over the xmas hol periods....
anyway have another renter being kicked out of his prop due to forthcoming sale and wants my other prop a few doors away....

and spending my first ever xmas in Melb....been here 20 years and always go back to the country

good luck with the student accommodation...believe there is a big shortage,
recall discussing ideas with you...and being lamblasted by the knockers with ridiculous statements....
c heers

[Passive]

Hi LE

Good to see you on this site. We have a newish suburb here called Joondalup - where a huge number of 3/4 story complexes were being built ostensibly to provide accomodation for this new decentralised city - 25 ks or so from Perth CBD -most residents students at the local ECU - UNI - Tafe - Police Academy and more. I was cynical but hey this thing moved and real success. Many rent out rooms etc - foreign students tend to be a little more respectful etc -cashflow good -I missed out but many have done well . Only prob is the holidays - but a good earner.

I feel like you do that the next wave will be investing for cashflow - ie - positive gearing is about to come into its own - a 3-5 year window of opportunity will present itself with these low rates thanks to fixed interst loans - and then capital growth will kick in. Therefore I will focus on good city sites, avoid regional unless like Kincella that rail line comes in.

One big lesson I have taken from all this, when you buy in resource driven states always consolidate , I did, not because I am clever but tend to be risk averse and want to keep what I have. Cities like Melb obviously have a different dynamic but a flexible strategy pays off and I am with you - my hunt is on for positive gearing thanks to low rates.

[kincella]

Hi Passive...I have a love hate relationship with the regional....but its my old country town where I grew up and it has made me a packet so far....that local knowledge I keep going on about is the answer.....
Melb is my first love....family used to travel down here quite often...my first real memory was when I was 4, I told them I did not want to go home....but eventually after marriage etc then divorce I up and left...been here 20 years and I love it.....
and have family there to check out the real situation versus what the agents and media tell me......
here is a copy of a post I made on that other site today.....
I get excited about the facts I find with my diligent researach
.................................................. .......................
I posted recently..past 2 weeks, the suburb I watch took a dramatic turn beginning Dec, all the first home buyer prices and houses had sold or dissapeared, the medium houses taken off the market, and the higher priced homes were selling at the rate of average 1.5 per day, compared to jun 08 to sep 08 of lower priced bottom properties selling at one a day...and at a premium to their true value.
Am guessing what I have suggested previous what might happen is already taking place, disgruntled stock /super investors have gone back into property, with lower interest rates, lower vacancy rates, and the prospect of low deposit rates....have turned the tide.

Even I was expecting to pick up some bargains, but the houses I watched have now sold....I was waiting for the next rate cut and further bad news before making a play....

Booze, the media and majority of players will not recognise the facts, too busy listening to the screaming headlines, and assuming a one size fits all house and economies world wide.
ps there is another forum for prop investors...aussiepropertyforums....you might like to take a look
cheers

--------------------------------------------------------------------------------

[Passive]

Regionals on the East Coast are substantial - in the West with the exception of 3 or 4 they are one horse towns. Seems logical with the size of Melb/Syd some East Coast regionals are good.

Notice Barry2007 joined -did not post much but enjoyed what he said.

Puzzled why Booz got moderated - definite bias with dub. Tin god!

[Passive]

The key to real estate investing is to watch and wait for the right opportunities in the right climate. Climate is right and opportunities are a coming.

Like Kincella said drive around, search etc etc

We have a town called Bullsbrook which 7 years ago you could buy a selection of houses for under 90k and get rent to cover easily. Semi rural and advised not to touch. Only 20 ks out of outer Perth and values were way behind Perth itself. Whilst I was city centric I looked at this place - 3x1 on 733sq m - bought for $1000 down - used equity -airforce base nearby and meatworks and developments taking place -positive geared day one -spent 2 days max there fixing up. Right away from my usual mo.
Sold 3 years later great profit - gone up again double that -but happy with my profit. Great days drive - as a result of coming back from there saw another opportunity in the Swan Valley that made me excellent return in 3 years as well.

My point is have a very open mind - do my research on the ground -trust the gut too and my gut is telling me we are moving into opportunity time yet again. Will change my mind happily and no town/district/city are the same as opportunities are many and where one suburb may be doing well -the neighbouring one may be faltering and thence arises a good buy.Also in that suburb there may be a ripper bargain because of a multitude of circumstances which have to be hunted out. So much variety and opportunity you have to look for cause it aint coming to look for you.

[kincella]

you hit the nail on the head re biased on that site..and booze ??? the mod is a bear of all markets...scaremongering news on a daily basis, but if one questions him..you get no warning just left out in the cold....last week was saying the stock market to fall another 50 points, and cash in everything, then turn it into silver...everyone will use silver to buy food etc.....I was tempted to reply that obviously no one was takling any notice of him...but knew what the result would be
cheers

[Passive]

My compliments to the people who set up this site and for Administrator Joe.
Will do our best to support this sites advertisers and believe this site will become increasingly relevant for the right reasons as property takes centre stage again.


Great not to have bears on this site because they are bears.

I know I have not always agreed with some of the other posters but always based on genuine conviction. I was saying that beware of the resource states
including SA for example for very good reason and that was before resources broke as it were. They will have their day again but have enjoyed their run up.

As for the govt stimulus policy I did say it may be a circuit breaker and I hope to hell it does work. A lot of young folks are buying - admittedly with incentives and I hope the economy does not go into recession. Don't want them to burn and hope them all the best - gutsy people we need.On some other sites you would swear we are in the middle of a depression.These sites are controlled by ideology that works against the supporting advertisers and bans anyone who has a contrary view based on technicalities -so much for freedom of speech!

Also Perth is where it is because of the massive surge - a suburb that has received attention is City Beach because a cruddy house worth $1mil is not selling and is only 3x1. On the face of it seems ridiculous - but the figures and those in the know will tell you it is a terrific suburb -median price $1,850,000 and gone UP 4% in last 12 months. Had I the money I would climb in based on the adage - buy in the worst street in the best suburb.

People bereft of resources, despite the persona they develop online will damn paying 400k for such a house as they don't comprehend the basics.

Some very good signals are emerging in this economy and I for one believe it is not going to be as bad as some say and many will be caught with their pants down thinking they will pick up a bargain.

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[kincella]

just wondering what the last two posts are about...one seems to be advertising US insurance and the other one clocks ???

[kincella]

Since I bought my first property late 1969 think we moved in for Xmas...and then survived all the worldwide drama's of the 1970's and 80's.....I have decided this year 2009, will be a piece of cake, compared to those days.....

Reading Greenspan's book at the moment and all the memories come flooding back.....it was crisis after crisis, either in recession or on the brink of recession....and am only into the late 70's so far.......

The current crisis is more similar to the 1970's rather than the 1930's....and every time they change presidents...there is a change in consumer sentiment...that eventually sorts itself out.....

I am being rather simplistic here...but believe I can put my feet up and just relax...get on with my life, catch up on lots of things that require my attention...and keep up my research in what is really happening in the world of property.....rather than listening to the media...screaming and glossing over the facts....

I do hope you can encourage more members to join, and make it a popular site
cheers

[2BAD4U]

I'm with you kincella, although I'm not an old fart like you and didn't buy my first property until 1994. :biglaugh::biglaugh: In fact I was born the year you bought your first property.

I base all my optimism on research and history. Studied finance at uni last year because I wanted a better understanding of economics and money given that a lot of what I was doing was based on emotion and gut feel rather than having an actual understanding.

But, my dad was a great mentor for me and I also took a lot of advice from an accountant and others already in the property market.

[kincella]

2bad4u, I would prefer not to be called an old....., if you dont mind...can you edit it and change it ???
you are almost 40 so thats not exactly young.....(tit for tat)
my parents were my best mentors....in all aspects of life....parents taught me basic bookkeeping when I was quite young....loved figures so went on to become a tax accountant.......tax law I found enjoyable....but now boring...
whats next....just play around with property, until I get bored...
have enjoyed doing nothing for the past 10 days
always been up for a challenge....mental not physical....this getting old is boring...done most things I wanted to in life.....
cheers

[2BAD4U]

Sorry about that, never intended to offend.

Joe - could you edit my post please.

[Passive]

Heading off to NZ tomorrow with wife and daughter.

Get back mid Jan - sure will be tempted to look at real estate - discreetly of course for the sake of my wife - who knows what I will learn. May be an idea to set up a special thread for this as we have for each state - altho Tas has done little.

Looking forward to it and see if Kiwiland is really emptying as stated.

[barry2007]

Hi there Guys,

Good to see everyone here on the more friendly version.... It's a pity the address got kincella suspended but at least it was there long enough for a few to see. I'm only just starting to have a good look around on this site now that time permits and am enjoying the threads so far. NZ sound's great passive, How sly do you have to be so you dont get "caught out" looking for RE potentual??? Ha ha! Oh and kincella I sent you a private message also.

Cheers

[kincella]

Hi Barry, I keep trying to slip the message in ..to come on over here..., note all the positive ones were having some fun over the other side last night.....its good to see....

I keep posting positive news over there, to counteract the bad news...simply to keep a balance to the arguments....if the newbies only saw the bad news...it could sway them against props as an investment....

Its going to be an interesting year for property, I am planning on keeping a builder in work for an extension job...doing my bit for the economy....but I don't know, until I start making calls...I could be up against a whole lot of others doing the same thing... I do believe it will only be a year or so before its back to normal and growth,,,,,although I have seen signs already of interesting activity in the suburb I follow
cheers

[bluelabel]

Heading off to NZ tomorrow with wife and daughter.

Get back mid Jan - sure will be tempted to look at real estate - discreetly of course for the sake of my wife - who knows what I will learn. May be an idea to set up a special thread for this as we have for each state - altho Tas has done little.

Looking forward to it and see if Kiwiland is really emptying as stated.

Just had a quick peruse of a well known realestate website in NZ and it definitely looks like you could get more bang for your buck over there investment income wise. Although you say NZ is 'emptying', where are they going and what are they leaving?

And yes, maybe an NZ thread might be something to look at; I must say I never thought about looking over thata ways until reading this.

Enjoy the trip; make sure you bring back some nice photos

:bier:

blue

[kincella]

extract from the article below...more rates drops and property to hold up

"I think first-home buyers and investors are going to find this the most attractive time in this decade to buy," REIV chief executive Enzo Raimondo said.

http://www.news.com.au/heraldsun/story/0,21985,24929623-661,00.html

[kincella]

Former RBA economist and property developer expects prices and rents to rise significantly by the end of this year.... that window of opportunity might start to close sooner than you think

btw its very quiet on this site ???? everytime I look there is half a dozen viewers...but no comments ????



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