Property In Adelaide - Investment

[SLED]

Are you planning on moving to Adelaide?

If not, why the interest in Adelaide for investment?

Reason I ask is that South QLD has far better opportunities for investment as the bottom has fallen out of their market, whereas up until recently, economists where stating that the Median price range in Adelaide Metro is over valued by approx 15% and still on its way down.

I bought another investment property (2 storey, 5Bed, 3 Bath) on the Gold Coast (Miami) last December which is walking distance from the beach. A property like this in Adelaide with the same proximity to one of our popular beaches would cost well over $1 Mill, yet I got it for 1/2 the price.

The other considerations in Adelaide vs South QLD is Stamp Duty (almost 1/2 the cost) & Land Tax (which can be 10 times more once you hit the $1 Mill threshold).

As far as booms go, I agree with Andrew that we're unlikely to ever see properties triple & quadruple in price again, like we did a few years ago but there's a reason for that, other than economic growth factors.

The 2 main reasons for the recent boom were:

1/. Cyclical

2/. Demand vs supply which was mainly fueled by the Baby Boomers all cashed up and getting ready to retire early.

An example of this is that me and a couple of similar aged close mates bought up close to 30 properties between us since the turn of the Century and most of them were positively geared but with prices the way they are now, all the buyers have disappeared, hence why Adelaide is still waiting for a correction in the market. Unlike South QLD that has already experienced this correction due to their market being flooded by apartments.

If 3 Baby Boomers averaged 10 properties each, 1000 Baby Boomers could've bought 10,000 properties. Now I know not everyone bought that many properties, but I also know that there were more than 1000 buyers out there in a sleepy hollow like Adelaide and I also know of some investors that bought whole streets in the Elizabeth & Hackham areas.

If you are moving here, come here 1st and rent for awhile before taking the plunge, otherwise there are better investment opportunities elsewhere.

Goodluck with it either way.

[andz]

If you are moving here, come here 1st and rent for awhile before taking the plunge, otherwise there are better investment opportunities elsewhere.

+1

[Luke_ENR34]

Should just get loans in Japan. Banks only charge between 1-2% interest.

[Nightcrawler]

Yeah good luck with that mate. Can't happen.

[Luke_ENR34]

way to ruin my hopes and dreams

Property next year for me

[jawrgy]

Property is the bogans way to wealth for the last 20 years. As has been mentioned buying property to live in will be one of the best financial decision you ever make. BUT!!!!! this means owning and living in the property for 10+ or even 15+ years.

Buying an investment property in this market, could be the worst financial decision you ever make. Im assuming you have a 30k deposit since you want to buy a 300k property(this means you need to pay LMI Lenders Mortgage Insurance). As has been mentioned the interest on your repayments is going to be higher than the income (rent) you will recieve so you will already be running a loss without factoring in all the other costs. YES you can claim this a deduction through negative gearing on your tax but it is only economical as if you are in the top tax bracket and you are running multiple capital gains in other investments like shares.

Below are my reasons as to why the property market is a bad investment: (remember an investment always has an opportunity cost for another investment)

-Australia is in a potential speculative bubble with concerns to housing prices. What has fueled this bubble is cheap credit and the notion that "property always goes up", "buy now or you will be priced out forever", or you see books with people claiming to own vast property portfolios in 2-5 years and teach you how to build "wealth" like them. Now at the moment all the factors that caused the increase in prices or bubble is drying up. Getting lending for a loan or to build is extremley hard and there is fear "speculation" that the property market may crash.

-People have listed that the baby boomer are retiring and are cashed up and are ready to unload their vast property portfolio they have amassed in the past 20 years. Now this is most unlikely to happen unless the property market is already crashing. In 2006 the ASX all ordes was 4600, today it is 4550. This means all that superannuation that has been invested and long term holders of shares have in fact got nothing to show for it over that period. Also the GFC wiped out billions of dollars of the share market. This means people wont be retiring early and will mean they need their investment portfolio to fund their retirement.

-Recently there has been an increase in mortgage defaults and signs of mortgage stress. The last figures i saw yesterday I think showed that 2/100 households showed signs of severe stress and had the potential to default. The majority of people who this figure accounts for is the people who jumped in when Rudd doubled the FHOG, this was the single worst thing that could have happened to the property market and has only kicked the can down the road.

-Clearance rates are well below 50%. I work at a real estate agent. A couple of mounths!! ago at an in house auction room. 30 property were available for sale. 6 sold prior 10 withdrawn, 8 passed in and 6 sold. This means more property on the market as old stock just sits there unsold. (Demand Supply fundamentals anyone??)

-Interest rates. Now this is interesting. I personally believe they will not rise. Why you ask??, just the fear alone from the RBA is putting into people that they will raise interest rates has caused people to cut spending and save. This is the same effect that would happen if they raised rates but without the increased mortgage stress with high interest rates.

-Unemployment. This is another interesting point. Curently unemployment rates are showing under 5%. THIS IS A LIE well technically it is. When normal average australians think of unemployment they think full time employees. This is wrong. When a government comes into power they change the definition to a lot of words like "unemployment" to suit their dilemma (every government does this). Now the unemployment rate currently being boasted about is higher as the governments or ABS 5% mark. They include people who have come off full time work and gone into part time work. A lot of full time positions are drying up (job add numbers slowly decreasing.) Lots of jobs are around but are mostly part time. People with part time jobs generally cant get a loan, the bank wont even look at them without having a full time job. So what im trying to say here is people are losing their jobs and unemployment is rising which is only a BAD thing for the economy and housing.

-The government (federal)- i cant be bothered explaining, its not worth my time or yours for me to explain how their policies are rubbish and have will cause future problems for us.

To conclude, I think on a general scale in Australia, property prices will stagnate for the next 2-3 years. we will see falls of up to 20% on out lying suburbs but anything 10km from the CBD in the 200k-1mill mark in the major cities of Sydney and in Melbourne will hold ground and likely grow. Remember a lot of Baby boomers own 100% equity in their property so they can weather the storm. Its only forced selling and the fear of a crash that will bring prices down dramatically. But if Greece defaults(credit tightenss around the world meaning interest rates go up), Chinas government hikes up interest rates to slow their inflation (meaning less importing of our dirt), the carbon tax (manufacturing being complety demolished coupled with the high AUD meaning higher unemployment) or anything else like another natural disaster on the scale of the tsunami in japan in any major economic country, means rough times for Australia.

Dont invest in housing for now, there are so many other options.

(This is my opinion. I hope my words hold some merit as I am completing a Property Economics course and work in the industry so I do see the everyday workings of real estate industry)

[Munro]

I think a much more sound investment would be to buy a 2010 R35 GTR brand new

from one of the dealers still with 2010 stock to move and have awesome fun driving

that around, and just keep the rest in the bank till you find something better than

property to invest in.........

Or you could just go for it and buy a nice low kay Lamborghini Gallardo.......

with a tow bar to tow a campertrailer to live in when your missus divorces you!

Second thoughts.dont listen to me!

[DSTROY]

sounds like a great plan to me

[mid life crisis]

fk im glad my house is paid for no banks to worry about and no slumlords . i can wait it out if the prices go up or down

[Iron Chef]

Looks like the N1 is staying in the shed for a bit longer

[TUFF_350]

Investment properties have been done to death,

as has property development. Our parents and grandparents are the ones who have reaped the rewards, sadly i doubt we'll even come close. You're better off starting a regular savings plan whereby you direct debit whatever you can afford on a monthly basis into some high quality shares. My personal favourites at the moment are:

ING Wholesale Global Property Securities Fund

Perpetual Wholesale Geared Australian Fund

Perpetual Wholesale Industrial Fund

Platinum Asia Fund

Platinum International Fund

Zurich Wholesale Global Thematic Share Fund

AMP Capital Core Property Fund

AUSBIL Australian Emerging Leaders Fund

Schroder Wholesale Australian Equity Fund

Go see a broker or an adviser and watch this baby grow and be adjusted for long term returns averaging 9-10%pa if not more.

Edited June 17, 2011 by TUFF_350

[SLED]

Jawrgy, you make 2 or 3 good points and seem to be in touch with what's happening around us

+1

andz, you've obviously heard that a picture speaks a 1000 words.......you've pretty much encapsulated everything I was trying to say

Dames, without getting into a big debate about bricks & mortar vs shares, you'll find that there are still a few bargains out there if you're savvy enough.........just not in this state.

As for shares, I haven't seen 1 single share in the last 10 or 20 years that has outperformed property........the money that has been made in as little as 2 or 3 years in property would take 20 or 30 years to do the same in shares.......show me a share that can return you $100K PROFIT with only a $70K investment........I had 4 of them.

And we won't go into today's News Ltd Business headlines which say; "Global fears wipe $28 Billion off shares".......and that's just the Aussie market.......the rest of the world is 100 times worse.

The old saying that says; "as safe as bricks & mortar" still exists today.......just alot harder to find the bargains.

Those of you that know Gavin Leathley should have a chat to him sometime.

[mid life crisis]

plus the fact how many people have had almost half there super wiped out by the share market in recent times ..........i know i dropped 50g thats bloody hard to make up esp the older you are when that crash happens.

[TUFF_350]

plus the fact how many people have had almost half there super wiped out by the share market in recent times ..........i know i dropped 50g thats bloody hard to make up esp the older you are when that crash happens.

The GFC was a freak thing, yes it was expected cos of the way the business cycle works but WOW to fall the way it did basically over night was ridiculous! From your profile your 52yo, you may not be able to fully recover what was lost as well as add returns but if you implement beneficial strategies such as salary sacrifice (if appropriate), look at moving your super into a pension at 55 as part of a Transition To Retirement etc etc you'd be pleasantly surprised how much ground you can make up.

Edited June 17, 2011 by TUFF_350

[ISC-Performance]

As above, shares will go back up with out a doubt...it will just take time. The ASX was at approx 7800 a few years ago and is now sitting at approx 4500, now is a great time to buy up some bargain shares and let them sit there for 5+ years. Make sure you purchase shares that also pay dividends so if they don't grow quickly your still getting a return.

Agree with SLED that there is still bargains out there for property BUT I would be looking at shares for the next 5 years and then see where the property market is after that.

[Damo_R34]

I bought shares through salary sacrifice with my previous employer, in around 2-3 years they have tripled in worth, I wish I had have bought more when I had the chance!

[craig R33]

Pretty glad I bought my place when I did..

Fair enough it's not in a world class suburb, but ATM

It's working for me and my young family

Bought it for 235k last year,

With a 52k deposit our repayments are only 282 bucks a week! That's less than any rental property I have seen lately...we are choosing to pay more, but that's the minimum.

This works pefect while we will be living on just my wage while the wife is back on maternity leave with the second child...

In 5 years time when the kids are in school an the missus can go back to work full time, we will rent this out and get

a bigger home somewhere else...

Start small, no point going balls deep into a property and screwing yourself over with a 600 $ + pw mortgage for a first home IMO

My 2c

[mr_rbman]

built an investment property 18 months ago.

costs me only $70/week (after tax breaks/rental income etc.) which I don't even notice, looked into shares but felt a lot safer with a house.

also building is better with the tax man, depreciation etc so look into it but you can, especially now pick up some good value established houses.

Edited June 17, 2011 by mr_rbman

[SLED]

Craig, that's possibly the best advice on here....well done

[andz]

Totally agreed with Craig ^^^

I'm glad I'm not paying someone else's mortgage (rent)