Which Capital City Could Boom Next?

Commenting on “Which Capital City Could Boom Next?”
https://www.yourinvestmentpropertymag.com.au/strategy/which-capital-city-could-boom-next-258086.aspx

This news article was published in January 2020 before the coronavirus pandemic. I wonder how this deadly virus can change the the real estate prediction.

Please note that this prediction should be taken with a grain of salt!

Thank you for reading.

Global economic shock caused by coronavirus pandemic

Post to Facebook on 22/4/2020 5:11 PM
Commenting on “Global economic shock caused by coronavirus pandemic”

A few months ago, Australians were more concerned about declining in housing financing and weak income growth, but now the coronavirus pandemic bring forth two gigantic nightmare, namely unemployment and population decline.

The pandemic kicks start a depression, and this could trigger loan defaults and foreclosures. This would exacerbate price declines.

This is the first time Australia is facing the biggest population decline in history. More than 300,00 tourists, temporary workers, and students have already departed Australia this year. It is expected another 300,000 people could leave the country to return home by year’s end.

In 2018-2019, international education contributed $37.6b to the Australian economy.

The decline in international students coming to study has a negative impact on the survival of the higher education sector, as well as on accommodation demand, especially in the CBD areas and near the institutions.

Due to loss of employment or reduction in income, many young people move back to stay with their parents instead of living out in rental properties.

This is a global economic shock, and the recovery will take quite some time. However, for the cash rich, the opportunity has arrived!

Thank you for reading.

Why negatively geared landlords are going to struggle the most with reducing rents for tenants

Post to Facebook on 18/4/2020 9:44 AM
Commenting on “Why negatively geared landlords are going to struggle the most with reducing rents for tenants”
https://www.domain.com.au/news/why-negatively-geared-landlords-are-going-to-struggle-the-most-with-reducing-rents-for-tenants-948993/

From what I have been tracking, out of all the members reading my blog, less than 20% actually read my blogs in detail, or believe in what I said. The rest probably take my words with a grain of salt, or just being nosy.

At the primary school I volunteer in, the teachers and school children call me a mathematician, but I advise them I am not a mathematician, but I love mathematics.

Since the days I set my eyes on property investment, I rely heavily on mathematics to work out my potential risk of not being able to sleep soundly at night, worrying whether I could repay my loan.

During the early days when credit was freely available, I was asked why I did not borrow to buy properties and shares. I did not follow the norm, because good times never last forever, and if the trend reversed, I could be in deep financial strive. If everyone was to rush in to invest, how could I get the best value for my money?

We need to learn about breakeven and worst case scenario, the latter was discussed in my earlier blog. I do not invest unless I know I can afford to ride out a financial storm, at least for 6 months. Now that I am not in employment, it is more critical to have an watchful eye over my bank balance.

During my online chat, I explained one of my conservative investment strategies - if I had a million dollars to invest in property, and also what I would invest in with a bucket of money.

I am not in agreement with those gurus who have been advising that a successful strategy that an investor adopts in negative gearing should be replicated in the future investment. What these gurus fail to understand and advise accordingly is that the strategy may be conceptually valid, but the financial commitments and dynamics of the investor would have changed after the initial investment.

Circumstances could not be replicated easily by some artificial or mathematical means. In most cases, the mathematics does not stack up that people invest in a business should make a loss in order to get tax benefits.

In my earlier blogs, I talked about a number of property owners would have to let go of their properties after the coronavirus pandemic. Among these will be those involve in negative gearing. I sincerely hope the reason of their selling the properties is not due to their loss of their high income.

Thank you for reading.

A brief report on the first online real estate chat

Post to Facebook on 12/4/2020 5:58 PM
Commenting on “A brief report on the first online real estate chat”

A big thank you to those members who participated in the first online video chat session with me for more than 2 hours.

Questions were raised related to the coronavirus crisis from whether to lock in mortgage loan at fixed interest rate, to when in the foreseeable future the industry will recover.

I also explained why many people misunderstood Return on Investment ROI for real estate investment, and what I would do for a given sum of money.

There are other topics about buying a new home versus an older house, and whether to demolish an existing home and build two units for sale.

I hope I have satisfactory answered the questions, and their time was well spent.

Thank you for reading.

Victoria’s property market tipped to slow in wake of new government restrictions

Commenting on “Victoria’s property market tipped to slow in wake of new government restrictions”
https://www.domain.com.au/news/coronavirus-victorias-property-market-tipped-to-slow-in-wake-of-new-government-restrictions-948204/

Post to Facebook on 11/4/2020 8:20 PM
I saw banning of auction and open-for-inspection as early as January 2020, but somehow the state government was just pussyfooting.

When I was teaching problem solving, I always taught to consider and evaluate the worst case scenario. If one can get out of the worst case with minimum damage, then one is ready to deal with any situation.

Looking for loophole is not the way to tackle a problem. For example, arranging private inspection. The fact is social distancing laws clearly say that social visitation is not allowed, and inspecting a property is not an essential purchase like buying food.

This is the most testing time in human history, and everyone including the real estate agents are not different from others in the community.

The government keeps saying Victoria is in Stage-3 restrictions, and possibly Stage-4 is forthcoming. A better educated person like me don’t even know what these jargons mean. It is better to clear cut that makes no exceptions than the rules - just call it a lockdown!

The sooner everyone gets into the act of staying home, non-food and emergency “trade” businesses stay shut, the sooner the spread can be stopped, and Victoria will be back on the road of recovery.

I went through slack time before, but not a disaster like this pandemic. I spent my time designing my own real estate software, working on new design brochures, reading books and articles of successful professionals, and working on my garden - an essential component of real estate.

It is easier said than done, many will remark. How about consider this slack period as non-pay leave and hang in there until government assistance kick in?

Thank you for reading.

Up to one third of mortgage holders don't have a buffer

Post to Facebook on 10/4/2020 9:54 AM
Commenting on “Up to one third of mortgage holders don't have a buffer”
https://www.theage.com.au/politics/federal/up-to-a-third-of-mortgage-holders-don-t-have-a-buffer-for-virus-downturn-20200409-p54io2.html

I suggested repeatedly that you must have enough buffer money reserved for at least two months of mortgage repayment for rainy days. The rainy days are here to stay for quite some time.

A member commented that six months is recommended by advisers. While this may seem like a better safeguard, this is unlikely possible for those work with tight budget. The unfortunate thing is that many will use the “spare” cash to pay for the deposit, just to reduce the loan amount.

I have stressed many times that young people who rely on Mum-and-Dad bank are likely to suffer in tough time, just like this now. If they do not have the ability to save for the deposit, it is doubtful they can afford the cope with repayment and other related household expenses.

What if the mortgage holders continue to fall behind their repayment? The banks are not charity organisations, and they will have to default, and more properties will end up in the market.

Someone’s loss is others opportunity. Unfortunately, this is just a sad story penned by the coronavirus pandemic.

Stay Home, Stay Safe.

Thank you for reading.

Property prices to plunge as auction clearance rates fall off a cliff

Post to Facebook on 8/4/2020 10:57 AM
Commenting on “'Property prices to plunge as auction clearance rates fall off a cliff”
https://www.theage.com.au/money/investing/property-prices-to-plunge-as-auction-clearance-rates-fall-off-a-cliff-20200403-p54gt1.html

You have to keep up-to-date with my blogs. What I advised yesterday may be out-of-date today.

When I advise readers to hold, I do mean hold. Some people ask me whether a property is worth a certain amount, my answer is always vague and non-committal. The reason is simple; I am not the one that buys the property.

Beauty is in the eyes of the beholder. I do not know how much they like that property, and for what reason. The worth of that property in my eyes is different from theirs.

By now, you probably have read many of my blogs, and some of you have taken my advice and hold back that purchase. If during this period you are still accumulating your money more than you expense, you will have a much larger deposit when the time comes.

Even some people I know well or related to me thought that I was pessimistic and talked crap, until they got themselves burnt, and burnt badly. Even recently, one just bought a property which I believe is at least $150k too much.

Some people have bought and sold a few properties, and they become very confident or even over confident. No one can be an expert unless his ears are on the ground and eyes on the market trend. Each property has its own objective value, and the same property value fluctuates with economic situation.

My first boss at Barry Plant once said, “if you think you are an expert in real estate, it is time to get out of the game”.

There is some truth in it. Some real estate representatives and agents do get arrogant and with a click his fingers quote a price of a property without looking at it. Just a word of warning; these are not the agents you want to sell your property or sell you one, because they take things for granted and very likely they are a smart Alec.

A few days ago a member messaged me and asked “SFC what’s your outlook both economy and hounding market for 3, 6, 9 months?”

As I have said on 26 January, “the coronavirus will have a negative impact on the real estate market”, and I have said the fall at best will be no less than 20%, that translates to a property sold at $1,500,000 can go down to $1,200,000 or lower.

For some reason I think the economy will see some daylight in August or September. However, this Coronavirus pandemic will have left a trail of disaster.

Please remember NOT to bank on negative gearing. This pandemic will serve as a bad lesson that gives them financial nightmare.

Thank you for reading.

Australia's suicide rate to rise 40% if emerging risks such as debt not tackled

Post to Facebook on 7/4/2020 9:42 AM
Commenting on “'Australia's suicide rate to rise 40% if emerging risks such as debt not tackled”
https://www.theguardian.com/australia-news/2019/sep/10/australias-suicide-rate-to-rise-40-if-emerging-risks-such-as-debt-not-tackled

Do not become a statistics directly due to coronavirus infection, or indirectly due to depression caused by loss of income.

Seek help if you can’t find ways out. Remember, taking your life leaves the trouble to your loved ones to deal with, not only the financial burden, but also the grief and the lack of a shoulder to lean on.

I keep warning readers NOT to overstretch their financial commitments, and all need to save up for rainy days such as foreseen disaster like now. If you can’t afford that extra luxury, sacrifice it until you have accumulated that extra wealth.

The adage that “Short term pain, long term gain” should always be kept your mind if you need a happy ending.

Please be wise, and do not do such silly things.

Thank you for reading.

Housing market 'not immune' to coronavirus crisis as cracks show in Sydney and Melbourne

Post to Facebook on 2/4/2020 1:26 AM
Commenting on “Housing market 'not immune' to coronavirus crisis as cracks show in Sydney and Melbourne”
https://www.theage.com.au/politics/federal/housing-market-not-immune-to-coronavirus-crisis-as-cracks-show-in-sydney-and-melbourne-markets-20200401-p54fut.html

One of the members from this group called me via Messenger about 2 weeks ago asking for my opinion / advice on a property he was to bid the following Saturday. I checked the advertisement posted by the agency, and did some calculations based on the information provided in the Section 32, I reckoned it was worth no more than $625K.

We exchanged messages and when he asked me whether the property prices would fall, I replied that "The virus situation can only get worse. ... Too much uncertainty about employment and there will be a shortage of buyers, and therefore the price will come down."

After my quick analysis of the property, I had a long conversation with him, and emphasised that he must keep to the budget and not to get too hyped up. I reminded him that the coronavirus outbreak would result in banning on-site auctions, and falling house prices.

I did not attend the auction, but he provided me the feedback. There were not many interested parties, and it came down to a 2-horse race. He continued to push the price up, beyond what he budgeted for. The final killer bid was $686k, $1,000 more than his.

He was really keen to buy the apartment, but I believe even $625k was generous.

I was pleased that he did not win the final bid.

Thank you for reading.