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Today's poll about 2009 property prices

Here's the poll on 07/11/2008:

"What will happen to property prices in 2009?
1-10% fall
1-10% rise
>10% fall
>10% rise
no change
"

My answer is "a combination of the above", because I see property prices beginning to shift in different directions based on location.

The price of oil is unstable, and will continue to be unstable as more of the world's people want access to this relatively diminishing resource. The properties nearest shops and employers will gain value because you can get to and from them without worrying how much petrol costs. The more it costs to drive to and from a property, the more its value will decline. The shift will not be drastic in 2009, but a trend will begin to emerge.

Tags: lifestyle, oil, petrol, property, urban

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Replies to This Discussion

Permalink Reply by Bandwidth on November 19, 2008 at 11:49am

I have not lost the 50% it is still in the equity.

Permalink Reply by Bandwidth on November 19, 2008 at 11:56am

Any equity still in the asset can not be considered a loss.

The equity can be used to secure other borrowings for different investments such as shares.

Where did you find the calculation that writes off the investors contributed equity in the 1st 12 months?

Permalink Reply by Mrs. C. Jarvie on November 19, 2008 at 12:14pm

Hmmm, I was not thinking of equity. I did not find the equation I am using, I made it up myself. I had the feeling that reinventing the wheel would cause a problem somewhere.

So, I shall remove the erroneous loss and recalculate....

profit by individual years
1 $911
2 $1,941
3 $2,969
4 $3,994
5 $5,017
6 $6,720
7 $7,759
8 $8,703
9 $9,737
10 $10,770
11 $11,685

The mortgage is paid of in month 6 of year 11. Total profit at the end of year 11 is $70,206.

Would this be a "good" investment property?

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Permalink Reply by Bandwidth on November 19, 2008 at 12:26pm

Hello Christine

You seem to be purely looking at income and that is just the tip of the iceberg

There are other things to look at

The depreceation costs can be written off
Paying interest only reduces the outlay
Capital appreciation overy time allows more properties to be purchased while still maintaining the required LVR
The equity can be used to finance other investments
A large Equity loan can be establishe, allowing for cash flow lumps and bumps to be handled.
Low capital gain periods normally mean faster rising rent. A property normally returns 14% pa in combined capital gain and rent..

When doing calculations I suggest you think of these entities
Expenses
Income
Cash Flow
Capital (total equity value)
Working Capital (equity being used to revice other investments)

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Permalink Reply by Mrs. C. Jarvie on November 19, 2008 at 12:57pm

Thank you for this insight. I understand the expenses and income and must learn more about calculating the cash flow, capital and working capital. I also need to learn about how investment properties look on paper during tax time.

The internet has many answers....

This is fun :D

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Permalink Reply by Bandwidth on November 19, 2008 at 2:23pm

The internet has many comments, some of which are answers :-)

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Permalink Reply by JeffK on November 21, 2008 at 7:36pm

Well put Bandwidth. It was hard before the Internet to know what to believe. Now it's near impossible.

Actually they're all answers. Just not necessarily correct. In fact, the internet is a fantastic place to spread a good rumour or untruth...

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Permalink Reply by mangrove jim on November 24, 2008 at 4:56pm

Hi Bandwidth,

Me? I,m a small time residential property developer. My patch extends from Ballina north to the Qld border. Enquiries and sales have dropped marginally but the market is still positive enough for me to confidently purchase land stock and to instigate 2 to 3 building starts a month.

Proximity to beaches and/or a more relaxed lifestyle rather than proximity to public transport seems to be the major consideration; in this area anyway!!

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Permalink Reply by Bandwidth on November 25, 2008 at 6:34am

Hello mangrove jim

Good to hear your business is going well, I agree that having a unique feature is something to look for.

There is still money in the marketplace and if there is a unique and scarce opportunity there will be buyers. There is a lot of talk about the "market" but nobody buys the "market", they buy individual opportunities.

I would like to talk to you about you business as I am involvef with a product that reduces building quite dramatically, while still maintaining the properties of block work.