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Australian Real Estate Overvalued?

Discussion in 'Real Estate' started by Norak Bastiat, 4th Feb, 2008.

  1. Norak Bastiat

    Norak Bastiat Well-Known Member

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    When looking at stocks, we can tell whether they are overvalued or undervalued by looking at the price-earnings ratio.

    What do we look at when looking at residential real estate? Do we look at price to rent or price to wages?

    Whatever measures we use, is real estate in Australia overvalued? I hear unconfirmed rumors that there are cheaper undervalued properties in Canada.
     
  2. shake-the-disease

    shake-the-disease Well-Known Member

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    Canada is cheap. Price is not the only factor in an investment decision though.
     
  3. coopranos

    coopranos Well-Known Member

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    Feed the trolls, tuppence a bag...
     
  4. Glebe

    Glebe Well-Known Member

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    I've thought that Australian property was overvalued for the last 8 years.

    I finally decided last year that the market is right and I was wrong, so I bought Jan 07. Future PPOR.
     
  5. coopranos

    coopranos Well-Known Member

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    I honestly think that your statement holds one of the keys - I would rather be rich than right!
     
  6. crc_error

    crc_error The Rule of 72

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    Its impossible to pick when is the right time to get in, best to just bite the bullet, and get in now! I'm looking at a IP, with the view of making it a PPOR in the future.. so I have a 2 fold view, so if it doesn't go up as expected, I'll still enjoy it down the track as my own castle.

    I was really convinced property wont go anywhere when I sold out in 2005, but has kicked on! Rent has gorn up, so even if capital growth wasnt the best, rent goes up increasing return.. but last 12 months has been great for melbourne... with the vacancy rate been at like 1%, means a very tight rental market..

    Where I'm looking at buying, there are hardly ANY 3 bedroom houses for rent.. and anything which comes onto the market, gets snapped up quickly..
     
  7. Norak Bastiat

    Norak Bastiat Well-Known Member

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    You should invest all in gold then. It's going up right now.

    [​IMG]
     
  8. crc_error

    crc_error The Rule of 72

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    I am invested in Gold.. I write covered calls each month on LGL...
     
  9. Norak Bastiat

    Norak Bastiat Well-Known Member

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    Okay then. You really are chasing performance. The only bull market I think I haven't mentioned is emerging markets, although they have been looking a little shaky recently.
     
  10. coopranos

    coopranos Well-Known Member

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    So Norak, what are you invested in?
     
  11. Norak Bastiat

    Norak Bastiat Well-Known Member

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    Mostly in Australian shares. Yes, I know performance has been lagging lately, and I admit I am guilty of performance chasing myself.

    I think more diversification in my portfolio will set me up for the long term and I am in the process right now of diversification, even into assets that have recently done badly.

    What else is there I can do?


    http://www.invested.com.au/2/crc_error-buying-ip-29092/#post52949

    http://www.invested.com.au/6/australian-real-estate-overvalued-29157/#post52948
     
  12. crc_error

    crc_error The Rule of 72

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    so what are you looking at diversifying into?
     
  13. Norak Bastiat

    Norak Bastiat Well-Known Member

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    Away from Australian shares. Includes international shares, emerging markets, property, and bonds.

    I cannot buy residential property as an investment because I am only 23 and it will involve my taking out money from all other asset classes and putting it entirely in one residential property. There is much variation in residential property. In Malvern, house prices went up by about 40 to 50 per cent in the last year. However, in the outer suburbs where high interest rates and petrol costs hit hard, most have been stagnant and some have seen declines. Perth home prices went down this year.

    If I were a billionaire and could buy many houses at once, the gains of one could compensate for the losses of others.

    There are infinite things you can diversify into, and then there is the issue of how much of each category you hold. Then there is the issue of whether you weight according to market capitalisation or dividends, etc.
     
  14. Tropo

    Tropo Well-Known Member

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  15. Saskatoon

    Saskatoon Well-Known Member

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    Norak,
    are you aware of this residential real estate fund: Fortuna
    It is an option recently available.

    Note: not a personal recommendation, and I have no affiliation.
     
  16. crc_error

    crc_error The Rule of 72

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    Norak, investing into OS shares or OS listed property will do nothing when markets die.. everything goes down with it as they are all linked. Direct commercial property (via unlisted trusts) or residential property will not follow the sharemarket, so to a extent, runs on its own steam. yes Bonds aren't linked, but their return is quite low and you can't leverage into them.
     
  17. Norak Bastiat

    Norak Bastiat Well-Known Member

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    Okay I'll look at that.


    I'm not sure how independent they are. Unlisted property will probably not dive as quickly but people can still sell property in response to poor results in the stock market. We probably saw something similar in Japan when the Nikkei stagnated after the early '90s after the real estate bubble there popped. With property prices down, citizens felt poorer, spent less, and this caused a recession. Similar things are happening in America right now.

    Unlisted property, when it goes down, tends to do so slowly. Contrast this with, say, the immediate drop in the All Ords in the 1987 crash due to electronic trading programs.