1million in Equity!
- Thread starter TROM
- Start date
Let me save you some minor amount of effort... the bears at GHPC have already looked at yields in Japan.
http://forum.globalhousepricecrash.com/index.php?showtopic=24174&pid=179134&st=0&#entry179134
Even some 18 years off their R/E boom, Japan real estate is no longer attractive to many local investors... yields are fantastic in an environment that had (until recently) insanely low interest rates (< 1 % !).
Why ? because so many people got greedy and burnt with the last R/E boom there...
Even the bears would like to picnic on > 10 % yields
Rastus, it wasn't just greed that led to this situation, it was also 'fear of missing out' as the market careered towards the top of the bubble.
I have friends who bought in Tokyo 18 years ago who now have negative 100% equity in their home, and still 32 years to go on their mortgage. They are not unique. There are large chunks of an entire generation that should be entrenched in the 'asset accumulation' phase of their lives that are facing the prospect of negative equity until the day they die.
This has exacerbated the capital losses on property as the well of potential buyers has massively shrunk over a period where more and more sales became forced. Even from those savvy enough to recognise the opportunities, there are plenty who can't do anything about it since they have accumulated too much debt. And for those that don't truly understand risk, the capital losses on display from the last 15 years are scaring the herd from purchasing.
alexlee;346175 Going back to the topic of the thread said:
Wow
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Or "pitiful" instead;- such that we should be very careful with our own investing ourselves so as to avoid being caught in a similar burst of the "biggest housing boom" of the Decade?/Century? in Australia.
Cheers,
Kenneth KOH
My own reading of the Japanese boom/bust makes me confident that we won't have one of those in Australia. The bubble in Japan was much bigger, and the subsequent government policies in response made the bust worse.
Which is also one reason why I don't think we'll have another '29-type depression. The government won't make the same mistakes.
Alex
Which is also one reason why I don't think we'll have another '29-type depression. The government won't make the same mistakes.
Alex
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Dear Alex,
1. True.
2. However, there are always new scenarios evolving that will newly test the capability of the govt in the world in new un-tested areas regarding their ability to govern their respective countries in the proper manner from time to time.
3. The present credit crunch and housing slump in the US is of a different scale and nature (Lending Crisis? Dollar Crisis?) that Ben Bernanke and his team are being presented with, beside the usual challenges of managing the American Economy away from Recession Vs Inflation perspectives, isn't it not?
Cheers,
Kenneth KOH
Wow
Not necessarily. It just shows it's not a risk-free strategy. Doing what they did would result in healthy long terms returns 'almost all' the time in 'almost all' markets. They just happened to be in the wrong market at the wrong time. And because they were leveraged into debt, their percentage losses were magnified. Unfortunate, but that's the potential price of playing with risky investments.
Interestingly, my friends don't see it as a major issue - it's their PPOR, they plan on being there forever and they have the capacity to pay off the remainder of their mortgage. So the concept of such negative equity doesn't scare them as much as it'd scare me!
1. Why and why not? Care to share your views with us for further discussion, please.
2. What is that magic threshold for housing price levels as well as other market conditions to emerge in Australia which you can see that will indicate a serious housing bubble in Australia, or/and thereby causing it to burst and the enitre Australia property market nationwide to collapse down eventuially as what is presently happening in the USA now.
3. Perhaps, we should adjourn and move our discussion on this topic more appropiately to another thread titled, " Bust and Then What?? - PART 2". What do you say then?
4. Thank you.
Cheers,
Kenneth KOH
The main thing is that the Oz government will LET the economy go into recession. That means if (when?) we have a recession, we'll have bankruptcies, high unemployment, people losing their homes. After the excesses have been shaken out of the system, we'll have another boom. I'm not saying Australia won't go bust. I'm saying I don't expect a prolonged bust like Japan has had. I think we'll have a sharper recession than Japan did, we'll take more pain, and then it'll boom again.
The japanese government was unwilling to let the bust take its course. It kept propping up companies by lending money to the equally bankrupt banks, instead of (like the Resolution Trust Corporation) cleaning them up and selling them. They should have had more Shinseis. The government supported the companies, which didn't fire the workers. But workers know what's going on. If they know their company is basically bankrupt, who would be willing to consume? Add to that massive fiscal government deficits on useless crap instead of productive assets (road that lead no-where instead of, say, education, helping people set up businesses, cutting red tape, etc) and you have a system that in forcing itself not to fall over found itself sinking further and further into the mud.
I have no doubt the Australian market will fall. It might even crash. But it'll boom again: I don't believe it'll do a 20 year bear market like Japan. 5-10 years, however, is quite possible.
Alex
The japanese government was unwilling to let the bust take its course. It kept propping up companies by lending money to the equally bankrupt banks, instead of (like the Resolution Trust Corporation) cleaning them up and selling them. They should have had more Shinseis. The government supported the companies, which didn't fire the workers. But workers know what's going on. If they know their company is basically bankrupt, who would be willing to consume? Add to that massive fiscal government deficits on useless crap instead of productive assets (road that lead no-where instead of, say, education, helping people set up businesses, cutting red tape, etc) and you have a system that in forcing itself not to fall over found itself sinking further and further into the mud.
I have no doubt the Australian market will fall. It might even crash. But it'll boom again: I don't believe it'll do a 20 year bear market like Japan. 5-10 years, however, is quite possible.
Alex
Alex, I tend to agree. The one caveat I would place on that is if we continue to see the exceptional capital gains of the last five years in the next five years without corresponding growth in income streams. Were we, in five years time, facing yields in the order of 1-1.5% across the board, the debt levels required to support those implied prices without corresponding income support would IMO trigger a collapse of the magnitude seen in Japan.
Paradoxically perhaps, if the market was to 'correct' itself sooner then IMO we may face slowing, flattening or even contracting prices perhaps for a 5-10 year period (maybe shorter), but we probably won't find ourselves in trouble to the extent that Japan did.
That is a very good point Gremlin. Considering the mini boom happening in a lot of cities at the moment. No one is mentioning the increasing disconnect between growth and income of resi investment property.
IMO The only way we can avoid a significant price fall in the not too distant future is if property stops rising in price.
Or maybe if rents take off big time. I cant see that happening due to wage/income restraints.
Possibly a bit of both will happen. Either way, i cant see resi property having any substantial growth for quite a long time.
Could be a repeat of the 1990 - 1998 price stagnation. Which is really prices going backwards between 3% - 8% per year when taking inflation into account.
hmmm...interesting times ahead i'd say.
IMO The only way we can avoid a significant price fall in the not too distant future is if property stops rising in price.
Or maybe if rents take off big time. I cant see that happening due to wage/income restraints.
Possibly a bit of both will happen. Either way, i cant see resi property having any substantial growth for quite a long time.
Could be a repeat of the 1990 - 1998 price stagnation. Which is really prices going backwards between 3% - 8% per year when taking inflation into account.
hmmm...interesting times ahead i'd say.
well said, thats what im starting to think, have grand plans to build a massive portfolio, still do and slightly behind the 8 ball but im doing all i can to accumulate atm - but starting to realise maybe achieving $20 mill net worth etc is not a worthwhile 'goal'. the 'goal' should be too enjoy fin freedom and enjoy life etc - i wont be here forever so i think despite our wealth aspirations, we should always ask 'how much is enough'? because if u dont answer that question, it never will be enough and we'll just accumulate and accumulate and never really smell the roses. Buying Ips and watching the equity position grow IS fun but doing that in a way comes at the expense of truly enjoying the hell out of yourself if u have to keep finding cashflow to service more debt...a comfortable LOE position aside.
Since I already own property, if we have a boom in the next 5 years like the last 5 (really unlikely, in my opinion, given that rates are higher and there are many more risks in the world market) I'll just happily watch the values go up.
In any case, there is no such thing as a uniform market. There are areas that are not seeing much gains at the moment, for example. I can always refinance my (maybe overpriced? Do I care if the property pays for itself and I don't need to sell? No) properties and buy cheaper ones.
Alex
Originally Posted by L.AAussie
On point 2, yeah right.......give it all away. After we have milked millions of punters worldwide and built our lifstyles up to where they currently are, then we'll donate something to charity
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Dear L.AAussie,
Just like Bill Gates and Warren Buffet have donated millions away to do charity works and set a good example for us to emulate when we are as successful as them.
Cheers,
Kenneth KOH
Kenneth,
this quote was by KISSFAN; not myself.
In any case you have me all wrong I suspect. I am a very big fan of wealthy people who do great things with their wealth; people like J.D Rockefeller, Bill Gates, Warren Buffet, Greg Norman, J.P Getty etc, etc.
I want to be one of them and make a difference to the world as only rich people can (Mahatma and Mother T notwithstanding).
The point of KISSFAN's quote was a shot at the spruikers such as Anthony Robbins etc who make a fortune from "wealth creation" and "life coaching" who apparently just help themselves and give nothing back (I don't know about A. Robbins on that score - never had any interest in the bloke).
My shot was at people like Brittany Spears and that stupid wench Paris Hilton, and a multitude of US sportstars and hip-hop knobs, who are disgustingly rich, and never help anyone with their cash, and waste their life on drugs and looking cool at the clubs and sayin' Yo! Yo!
On point 2, yeah right.......give it all away. After we have milked millions of punters worldwide and built our lifstyles up to where they currently are, then we'll donate something to charity
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Dear L.AAussie,
Just like Bill Gates and Warren Buffet have donated millions away to do charity works and set a good example for us to emulate when we are as successful as them.
Cheers,
Kenneth KOH
Kenneth,
this quote was by KISSFAN; not myself.
In any case you have me all wrong I suspect. I am a very big fan of wealthy people who do great things with their wealth; people like J.D Rockefeller, Bill Gates, Warren Buffet, Greg Norman, J.P Getty etc, etc.
I want to be one of them and make a difference to the world as only rich people can (Mahatma and Mother T notwithstanding).
The point of KISSFAN's quote was a shot at the spruikers such as Anthony Robbins etc who make a fortune from "wealth creation" and "life coaching" who apparently just help themselves and give nothing back (I don't know about A. Robbins on that score - never had any interest in the bloke).
My shot was at people like Brittany Spears and that stupid wench Paris Hilton, and a multitude of US sportstars and hip-hop knobs, who are disgustingly rich, and never help anyone with their cash, and waste their life on drugs and looking cool at the clubs and sayin' Yo! Yo!
But investors are only a smallish proportion driving this market (especially in the capital cities). From what I hear the majority is people upgrading PPOR or cashing in some of their share market gains (into a larger PPOR). So I think like in the UK in Australia yields would not be a major driver for a correction.
kaf
Sure doesn't. You need a mill clear in shares with your house, car, boat and golf clubs all paid for before work can be considered voluntary.
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Dear Alex,
Please provide the supporting data for your claims that "Australia experiences a sharper recession than Japan", if any.
Thanks.
Cheers,
Kenneth KOH.
TE=Gremlin;346301]
The one caveat I would place on that is if we continue to see the exceptional capital gains of the last five years in the next five years without corresponding growth in income streams. Were we, in five years time, facing yields in the order of 1-1.5% across the board, the debt levels required to support those implied prices without corresponding income support would IMO trigger a collapse of the magnitude seen in Japan.
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Dear Gremlin,
1. "Yields in the order of 1-1.5% across the board?" -- this in itself alone is indicative of a "housing bubble" already in the making.
2. I doubt that speculative housing bubble is able to last that long for a 5 years period with such a low 1%-1.5% yields unless far more extreme greed and fears have existsed in this market as compared to the previous property cycles.
3. Already at 2.5% -2.7% rental yields level, I have observed that many investors have already started to scramble out of the Syndey property market during its last market boom in late 2003 en-masses. This was further repeated during the last property boom in Perth when numerous investors started to leave the market to invest interstate an d ponverseas during the late 2006/early 2007 period.
4. I doubt RBA-Australia will allow this to happen in Australia in the near future as it will probably choose to ***** open the fast emerging "un-controllable" speculative housing bubble first before yields will come down to this level. This is when the attendant dire consequences become politically "untenable" to the prevailing ruling government.
Cheers,
Kenneth KOH
The one caveat I would place on that is if we continue to see the exceptional capital gains of the last five years in the next five years without corresponding growth in income streams. Were we, in five years time, facing yields in the order of 1-1.5% across the board, the debt levels required to support those implied prices without corresponding income support would IMO trigger a collapse of the magnitude seen in Japan.
[/QUOTE]
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Dear Gremlin,
1. "Yields in the order of 1-1.5% across the board?" -- this in itself alone is indicative of a "housing bubble" already in the making.
2. I doubt that speculative housing bubble is able to last that long for a 5 years period with such a low 1%-1.5% yields unless far more extreme greed and fears have existsed in this market as compared to the previous property cycles.
3. Already at 2.5% -2.7% rental yields level, I have observed that many investors have already started to scramble out of the Syndey property market during its last market boom in late 2003 en-masses. This was further repeated during the last property boom in Perth when numerous investors started to leave the market to invest interstate an d ponverseas during the late 2006/early 2007 period.
4. I doubt RBA-Australia will allow this to happen in Australia in the near future as it will probably choose to ***** open the fast emerging "un-controllable" speculative housing bubble first before yields will come down to this level. This is when the attendant dire consequences become politically "untenable" to the prevailing ruling government.
Cheers,
Kenneth KOH
I'm claiming that we will most likely have a sharper recession than Japan. Obviously being something I'm predicting I have no data. It's all anecdotal. My own reading and experience in Japan suggests that for all the talk about a lost decade and so on, unemployment was relatively mild, partly because companies shared their losses, so to speak, by holding salaries down, cutting perks and hiring less as opposed to firing workers.
Alex
