Iron ore slide hits small property investors

Posted to my FB page Sin Fong Chan Real Estate on 11/2/2015 at 2:23 PM (The Age does not accept comment)
Commenting on "Iron ore slide hits small property investors"
http://www.theage.com.au/money/iron-ore-slide-hits-small-property-investors-20150212-13cieq.html

If one holds property indefinitely, it is only value of the property is only the book value. Profit is made if the property is sold. The current property market is completely out of whack, and many people buying properties during low interest rate are prone to default when the rate increases.

One must not forget that there are ongoing rates and charges, opportunity loss on better class of investment, maintenance costs, etc. Past recessions did send many property owners on tail spin.

Home prices continue downward trend

Posted to Sydney Morning Herald (31/10/2011) on 1/1/2011 at 9:42 PM (Not yet published)
Commenting on “Home prices continue downward trend”
http://smh.domain.com.au/real-estate-news/home-prices-continue-downward-trend-20111031-1mr9p.html

When you buy an investment property, you pay say 20% and borrow the rest. If the property is worth $250000, the total rental receipts breakeven after 7 years, and the property has increased by 10% in value, that is $125000, what is the return on investment? 50%? No, it is 250%. OK, even after deducting the opportunity loss for not putting the $50000 to receive compound interest, the net return is still far more substantial than most investment.

What most people forget is that when investing in property, they only pay a small proportion of the total initial cost, but reap all the capital gain before tax in the end. No bank deposit can give you this kind of return.

RBA rate cut sparks commercial response

Posted to Sydney Morning Herald (1/1/2011) on 1/1/2011 at 5:12 PM
Commenting on "RBA rate cut sparks commercial response"
http://www.smh.com.au/business/rba-rate-cut-sparks-commercial-response-20111101-1mte4.html

The benefits of FHOG should be tested by the Myth Buster team. The concept is nobly good, but in the real world where sellers of properties are out there to maximise profit or minimise loss, the amount of FHOG is normally costed it, that is, sold at inflated price. This is a double whammy for the buyers. Higher house price means higher stamp duty (in Victoria) and bigger loan.

Let say a property is $200000, FHOG $7500, and average stamp duty in Victoria 5% approximately. If the buyer requires borrowing 80% for the property value, and FHOG is not costed in, he needs a loan of $168000 (excluding other fees and charges). However, many house prices have already included the FHOG component since its introduction, the house price is in effect $207500, plus $10375 stamp duty. A loan of 80% of the total amount $217875 comes to $174300, or $6300 more than pre-FHOG day.

If FHOG is to increase, we can only see the house prices rising again, instead of coming down.

New house sales slump to 10-year low

Posted to The Age (1/1/2011) on 1/1/2011 at 12:52 PM
Commenting on “New house sales slump to 10-year low"
http://www.theage.com.au/business/new-house-sales-slump-to-10year-low-20111101-1mt1w.html

Interest rate is no longer the key factor. The "subliminal" messages in daily news about job losses, casualisation of workforce and saving up for a big deposit keep buyers away. Bank and lending institutions rely mainly on the PAYG summaries to determine the loan amount one can borrow. ABS has to produce new sets of data to reflect the true employment situation. It has to redefine the term "employed", because at present, one is considered employed if he/she receives payment for at least 1 hour of paid work during the survey period.

ANZ predicts house prices to keep dropping

Posted to Sydney Morning Herald (29/10/2011) on 30/10/2011 at 11:25 PM
Commenting on "Sydney up for auction: market faces litmus test"
http://smh.domain.com.au/real-estate-news/sydney-up-for-auction-market-faces-litmus-test-20111028-1mmm5.html

Posted to Sydney Morning Herald (29/10/2011) on 30/10/2011 at 11:36 PM
Commenting on "ANZ predicts house prices to keep dropping"
http://smh.domain.com.au/real-estate-news/anz-predicts-house-prices-to-keep-dropping-20111026-1mizi.html

It is unlikely buyers are rushing to real estate agencies or weekend auctions to buy properties. High interest rate seems to be coming down, but then this is no longer the determining factor to entice property buyers and investors. The fear factor is uncertainty in employment, due to international financial crisis and Australian governmental mismanagement.

Many organisations have been cutting staff numbers in hundreds and thousands recently, and Qantas will add over 1000. According to the latest ABS data, out of the 5.2% unemployed, 40% are in part time or contract employment. This excludes many who cannot get a job and are forced into operating their own businesses but making losses.

Even though there is more than enough cash floating around in the banks, many people are not qualified to obtain loans or obtain enough to buy a property. The banks treat the PAYG summaries as the holy-grail in determining the loan amount, despite some applicants may be asset rich.

While I hate to be branded as a doomsday prophet, I believe that we have not seen the worst of the financial tsunami hitting Australia yet, caused by more EU crisis, China’s soft landing, Australian industrial disputations, changing of guards in Canberra and more social uprising.

The property prices will continue to fall and may hit hard around the Christmas / New Year period. The next wave change will come round in March / April 2013.