Are we on the cusp of an upswing for property?

[RedPanda]

Hi All,

BELIEVE IT OR NOT WE MAY SEE AN UPWARD ON PROPERTY NEXT YEAR!

Why? Well for the following reasons based on crystal ball

You really must have a crystal ball!

1. I think we have hit the peak in terms of interest rates...I am of the view that interest rates will head down during Aug-Oct period later this year (2011). You know what happens to demand for housing once rates drop...particularly NSW which is highly rate sensitive.

I don't know whether rates will go up or down for sure but it doesn't looks like that to me at the moment. Rates will only go down if we face another round of financial crisis of a huge scale.

2. The cost living has increased to the point people are at breaking point and the government and more business savy companies (i.e. Coles) will start addressing this. Other sectors will follow suit driving down prices. I also reckon Oil prices will drop as I suspect the Libya situation will cool off ...maybe not resolved.

If cost of living is increasing (or has increased as per you), even if some measures are taken it will only stop to rise further. Thinking that it will start going down sharply is wishful thinking IMHO.

4. The Housing stats are pointing to a drop in housing starts and people taking loans. This means more renters...thus better rent returns. As I said in a previous thread. I paid 232.5 for a repossessed newish 3 brm T/H in Wyong an expect to get $330-$350pw.

So, if there is drop in housing starts it means a boom as better rents and if there is a rise in housing starts that also means a boom?

Good buy though!

6. The immigration rates will edge up again out of necessity as there is a labout shortage emerging. We should see migrant rates go up to 300k from 180k on the quiet as we are scratching at the bottom of the barrell for local skills.

What situation will change that will see a sudden doubling of migrant rates? Why wouldn't it go down further in the light of population debate and continued fallout of "edugration" (it isn't over yet and the reputation of aus hasn't improved yet)?

I have put my money where my mouth is....I have already bought 2 properties well under market and intent to make another 2-3.

I don't try to time the market, but if you are able to get good deals as you mentioned, it's not a bad idea to keep buying while keeping an eye for thunder.

I know this is going to awaken the BEARS on this forum...I can already hear their growls......don't worry...I am sitting on my porch with a shotgun!

I am no bull!

You have omitted one minor factor Sash. We are experiencing a commodities boom and if there isn't an interest rate rise by the end of the year i'll post a naked pic of myself on this forum. Ok, semi naked, its a family forum.

Sash, do we see a matching offer from you? Of you doing the same if there is an interest rate rise this year?

 

[skater]

Sash, do we see a matching offer from you? Of you doing the same if there is an interest rate rise this year?

OMG!! Don't egg them on! The thought of either one of them in a mankini is really not something I want to see.

 

[bene313]

• Drop in interest rates
• Drop in cost of living
• Drop in housing starts
• Drop in AUD

Sounds like we are in for an economic slow down rather than a housing upswing!

 

[Aaron Sice]

i have a holding interest in about 4 properties - 2 about to settle, 1 in the wings and my PPOR.

looking to accumulate more ASAP.

also bought some silver recently thru the SMSF - not much but put all i could into it.

possibly some JVs later this year if all goes rosy but not counting chickens.

i'm waiting for what is very obviously bubbling away under the surface of WA properties to boil and it'll be one of three ways - rents up/values stag, rents up/values up or rents stag/values up.

the rest of the country i'm not even interested in debating because i really don't give a rats.

 

[sash]

Nah....I'll leave it to the professionals like Evand!

Sash, do we see a matching offer from you? Of you doing the same if there is an interest rate rise this year?

Neither would I....I don't want too many people getting ill on my account!

OMG!! Don't egg them on! The thought of either one of them in a mankini is really not something I want to see.

Well....to me that is the start of another cycle. I seems that most people disagree with me. I feel that rates will drop in Aug-Oct 2011 this year. Though I should say it will be a gradual easing...unlike 2007-2008 where rates dropped 0.5-1%. The full affect of the rate easing will take affect from late 2012. The markets which will feel this is NSW, VIC, and QLD which are the most rate sensitive. I also feel that skilled immigration has to go up due to skills shortages. Time will tell. In either case I am picking up properties up now with 40-50k in equity on purchase and almost 8% yields...this can't continue as people will wake up to buying at some point particularly if rents go up.

• Drop in interest rates
• Drop in cost of living
• Drop in housing starts
• Drop in AUD

Sounds like we are in for an economic slow down rather than a housing upswing!

 

[The Fence]

Ya just keep soldiering on Sash...good on ya...!

I also believe the next rate move is down before the end of year. Heck...we have a thread where CBA is trying to combat NAB's latest run at the market share....I think they have room to move down...well... they are moving down... on the quiet...but as someone said in another thread..."wait till the media gets a hold of this, it's down down down..."

LOL...

 

[sash]

Will do Thorpey...thanks for encouragement.

Agree with you about rates heading down....the RBA is already indicating they are worried in code. The key is to watch where fixed rates head over the next few months....if they head down then rates are headed down soon. I am also planning to leave my 5.x fixed rates which are coming off variable till the next low point in the rate cycle. Is suspect the lock in will happen around mid to late 2012.

Yes...like the CBA thread ..I even posted my results with CBA and a few others have also had the same success.

Nothing is easy in life....but thinking outside of the square is the key. The other thing is taking a forward view of the market and setting a clear strategy of what you intend to do. My belief property is only the vehicle...the main game is being on the money of where the finance rates and market is heading. Get this wrong and it could sink you!

Meanwhile...I will keep clearing landmines and shooting bears....(just kidding!!).

Ya just keep soldiering on Sash...good on ya...!

I also believe the next rate move is down before the end of year. Heck...we have a thread where CBA is trying to combat NAB's latest run at the market share....I think they have room to move down...well... they are moving down... on the quiet...but as someone said in another thread..."wait till the media gets a hold of this, it's down down down..."

 

[Belle]

Is it possible that we could see inflation in the prices of necessities like fuel/food/energy etc because of increasing oil prices and the emissions trading scheme but at the same time see growth slow and unemployment increase because of the high AUD, high cost of oil and other problems overseas?

What does the RBA do in that type of situation? If we saw basics go up in price but unemployment increase at the same time?

 

[The Fence]

Is it possible that we could see inflation in the prices of necessities like fuel/food/energy etc because of increasing oil prices and the emissions trading scheme but at the same time see growth slow and unemployment increase because of the high AUD, high cost of oil and other problems overseas?

What does the RBA do in that type of situation? If we saw basics go up in price but unemployment increase at the same time?

Exactly Belle.....it makes you think hey.

Basics have gone up already and i'm inclined to agree with sash that they are headed for some flatlining as people "just can't pay"...hmmm...where have I heard that before.

That's another one for the whingers...food is too dear, power and water....it's not fair...!!! It will drop 40% you watch...LOL

 

[Aaron Sice]

last time the RBA tried to control imported inflation they admitted they got it wrong and raising rates did nothing but aggravate the problem.

 

[oracle]

1. I think we have hit the peak in terms of interest rates...I am of the view that interest rates will head down during Aug-Oct period later this year (2011). You know what happens to demand for housing once rates drop...particularly NSW which is highly rate sensitive.

This is what the ANZ Boss Mike Smith had to say about interest rates...

"Are we in an upward rate cycle? Quite clearly we are. The whole world is in an upward cycle."

Read full article on Business Spectator

ECB also raised interest rates yesterday. I think the US Fed would start to raise rates atleast by the end of this year.

Sash...I think higher inflation and higher rates are here to stay. History has shown us that when short term interest rates have been very low[which it has in the rest of the western world] it has had an impact of higher rates long term.

What you will start to see is cost of living will continue to keep going up and ppl start demanding higher wage increases in the coming months/years.

My 2 cents.

Cheers,
Oracle.

 

[bene313]

If cost of living goes down, wages will follow as a flow-on effect. If this happens it will be because our economy is in the crapper.

I can't see it. More likely is that employees demand higher wages to deal with increasing living costs. This is just plain old inflation and it's good for property prices.

 

[Ocean Architect]

Judging by the mass freakouts being had by real estate agents that I chat to, and seeing some serious drops in sale prices all over the place, I wouldn't put money on an upswing. I see a short correction, and then flattening out for a while

 

[lawsjs]

What happens when it becomes extremely difficult to borrow money to buy things? Cars, houses, clothes on laybuy/hire purchase etc?

In case anyone reading this has been living in a cave, what you get is a market like the US right now where cash is King with a capital K.

The worlds bank right now is China. There is NO discussion to be entered into on that point.

Can anyone conceive a time when China's banks and investors decide to lessen their loans to the rest of the world and loan 'locally'?

Loans made to the rest of the world are now almost un-repayable.

I do not think it is impossible or inconceivable that the US may be forced to 'readjust' its sovereign debt. If that happens then China might seriously start to question where its money goes. In the last 15 years I have watched China move from (predominately) bikes, to basic VW golf type cars to now having Lamborghini's as popular now as Limo's were 10 years ago. They have a healthy domestic finance market.

Consider this: The ability to finance everything has led to inflation. Lee Iacocca started the first finance packages for cars - to help people buy cars they couldn't otherwise afford. Now that strategy is so common it exists on washing machines. Houses, cars, clothes, whitegoods are now ALL financaed - it is taken for granted now that no-one pays cash. If you take finance away from any market what happens to the prices? Look no further than sub-prime. They collapse. There is NO shortage of debt in the western world, and it is all being financed by.... China.

When will they lose their desire to 'lose' money on ever more shaky looking deals financing consumer products to the West, and/or when will they decide it is easier and safer to put their hard cash into their own growing economy. Because when that happens, the Western addiction to debt is going to be over. And it won't be pretty.

 

[MTR]

Nah....I'll leave it to the professionals like Evand!



Neither would I....I don't want too many people getting ill on my account!


Well....to me that is the start of another cycle. I seems that most people disagree with me. I feel that rates will drop in Aug-Oct 2011 this year. Though I should say it will be a gradual easing...unlike 2007-2008 where rates dropped 0.5-1%. The full affect of the rate easing will take affect from late 2012. The markets which will feel this is NSW, VIC, and QLD which are the most rate sensitive. I also feel that skilled immigration has to go up due to skills shortages. Time will tell. In either case I am picking up properties up now with 40-50k in equity on purchase and almost 8% yields...this can't continue as people will wake up to buying at some point particularly if rents go up.

HI Sash
reading you posts for so long now, I don't know about silver, but everything you touch makes money. You were pretty much spot on with your last predictions.

Cheers, MTR

 

[Ocean Architect]

What happens when it becomes extremely difficult to borrow money to buy things? Cars, houses, clothes on laybuy/hire purchase etc?

In case anyone reading this has been living in a cave, what you get is a market like the US right now where cash is King with a capital K.

The worlds bank right now is China. There is NO discussion to be entered into on that point.

Can anyone conceive a time when China's banks and investors decide to lessen their loans to the rest of the world and loan 'locally'?

Loans made to the rest of the world are now almost un-repayable.

I do not think it is impossible or inconceivable that the US may be forced to 'readjust' its sovereign debt. If that happens then China might seriously start to question where its money goes. In the last 15 years I have watched China move from (predominately) bikes, to basic VW golf type cars to now having Lamborghini's as popular now as Limo's were 10 years ago. They have a healthy domestic finance market.

Consider this: The ability to finance everything has led to inflation. Lee Iacocca started the first finance packages for cars - to help people buy cars they couldn't otherwise afford. Now that strategy is so common it exists on washing machines. Houses, cars, clothes, whitegoods are now ALL financaed - it is taken for granted now that no-one pays cash. If you take finance away from any market what happens to the prices? Look no further than sub-prime. They collapse. There is NO shortage of debt in the western world, and it is all being financed by.... China.

When will they lose their desire to 'lose' money on ever more shaky looking deals financing consumer products to the West, and/or when will they decide it is easier and safer to put their hard cash into their own growing economy. Because when that happens, the Western addiction to debt is going to be over. And it won't be pretty.

I agree with you on most points and personally expected the chinese to start shunting as much money into gold etc as possible in anticipation of a US default, but didn't take into account the degree of social unrest/social inequality they have over there. If the chinese decided to stop funding everyone elses debt, then their western customers wouldn't be able to buy from them, and all of those chinese factories operating 24/7 would close down, with tens of millions becoming unemployed.

In theory I agree with you, but as Jim Rogers is so fond of saying, China has a billion people and a million problems - and so my view is that the Chinese will continue to ramp up their local infrastructure/hoard commodities/buy up foreign assets as fast as possible whilst keeping the current game going as it is. Kicking teh can down the road, so to speak.

I also think that the world is in for some mass upheaval shortly because of the imbalance between the productive capacities of debtor and creditor nations - the west is in debt up to its eyeballs and doesn't really produce anything (notable exception: the Germans) and so if I was king of the world, I would be getting western nations reindustrialised as fast as humanly possible so that they can actually pay the Chinese with something mroe valuable than pieces of paper with the word "Treasury Bond" written on them

 

[lawsjs]

Agreed, with one caveat. They now consume a LOT of their own product.

One question (whichever way you look at it) remains.

How long is the road - when will THEY tire of kicking cans?

And I 100% agree with you about 'ze Germans'. We have this god awful useless government doing nothing and there in front of our noses is the one economy we could successfully emulate.

 

[intrigued]

Currency wars

You two may find this interesting.

 

[sash]

Yep....which also means that they will start moving up the manufacturing hierarchy. The will leave things like shoes, clothes, and other low priced items to the Indonesians, Vietnamese, Indians, Pakistanis, Bangledeshis, and Africans as their wages will make it costlier.

However, to replace this they will move into machinery such as Airplanes, Cars, Ships, Heavy Machinery...you might poo poo brands like Chery, Geely, etc....but in 5 years they will like what Hyundai was in the 1990s.

This is good for Australia..as goods from the countries above is cheaper. Also, remember....we pay a lot for our food because we produce most of our food with higher wages. If we imported it would be a lot cheaper.

With the gorcery price wars going on....I think this is good thing...because woolies has dominated for a long time with a 8% retail margin...whereas the UK/USA average is about 3%.

I also feel that government will wake one as the skills crisis bite and ease the foreign labour restrictions. This shoud put a cap on the ridiculous wages paid in Australia. This will also help ease inflation.

Agreed, with one caveat. They now consume a LOT of their own product.

One question (whichever way you look at it) remains.

How long is the road - when will THEY tire of kicking cans?

And I 100% agree with you about 'ze Germans'. We have this god awful useless government doing nothing and there in front of our noses is the one economy we could successfully emulate.

 

[bluestorm]

This is good for Australia..as goods from the countries above is cheaper. Also, remember....we pay a lot for our food because we produce most of our food with higher wages. If we imported it would be a lot cheaper.

With the gorcery price wars going on....I think this is good thing...because woolies has dominated for a long time with a 8% retail margin...whereas the UK/USA average is about 3%.

I also feel that government will wake one as the skills crisis bite and ease the foreign labour restrictions. This shoud put a cap on the ridiculous wages paid in Australia. This will also help ease inflation.

You sound quite clueless on the economy sash. Why don't we just outsource everything overseas. Will be a lot cheaper than. To bad no one will be employed, and have the income to actually buy the stuff back.
Like the banks are slowing finding out after outsourcing a lot of IT to Indian, once you hand over control of essential and strategic assets (ie food production), you are at the mercy others. What is cheap now, may cripple you later down the line once the balance of power changes.

Also comparing Australia to the US is ridiculous. There are economies of scale to factor in.

As long as your the first to cap your "ridiculous wages", preferable to 3rd world levels.
The is no "skills" shortage. Your being fooled by the business lobby to get cheaper labor in on 457, where they don't need to pay some of the stuff the Australian labor does.