rates at all time lows, page-27

Rezok,

I'm just going off data on the CBA property value guide at http://www.commbank.com.au/propertyvalueguide/

I just had another look and you can see that from Feb 2008 Elwood has seen a pretty good rise but admittedly since August this year it has dropped off.

According to their data, Brighton has seen a 13% fall over the last 12 months.

Now I have to state emphatically that these figures can be skewed if there are not a lot of sales, you really need volumes to draw conclusions. I could be drawing a long bow with all this conjecture.

I am just saying that I saw the aspirational suburbs do very well from 2003 to 2007 and I attribute that to new found wealth in the community.

I think there will be a return to property investment and in my case that means burbs with the best balance of rental return and cap growth prospects.

I could be wrong, with very low interest rates it may be cheap enough to service a Brighton property for a lot of investors but I tend to calculate off interest rates several percent above current rates when deciding what to go with. This time around, I am hoping to lock in at the low rates when they present themselves. It will mean paying above the current variable but it will mean I have a known rate ahead of me to help me with forecasting.

As an investor, I'm drawn to lower end stuff, the most expensive property I have invested in was $600K, the million dollar stuff is out of my league.

Generally speaking, I would look at rental return first using my "what it costs per week" spreadsheet. Given a few properties that will cost me close to the same on a weekly basis then I would assess which of those has the better cap growth prospects.

As far as 1987 goes, yes when the early 90's hit we had some bad times especially in Melbourne thanks to the exodus North (that was a textbook case about how population migrations create opportunity, we can discuss that another time and it is a good story). However, before those bad times hit prices doubled from 1987 to 1989.

I am saying this is coming again. Low rates, high rents, collapsing share market. It will push people into property investment for two or so years, as cap growth is shown it will feed on itself attracting more people.

By 2012, it will be overheating, the RBA will want to stop the overheating and in 2011, 2012 they will start raising rates and they will do it severely like they did in the early 90's.

THEN Miles will get his recession.