From: See Change
Having watched the previous property boom from the sidelines I'm interested in the number about the commentators who use the label " Bubble " in relation to the current increase in property prices. From my relatively uninformed position the current changes just represent a normal past of the economic / property cycle.
Prices are said to double every 7-10 years. As I pointed out in a previous post the current cycle has occurred over closer to a 14 year cycle , so if we take that to one possible conclusion , maybe we will see prices quadruple over the current cycle. Personally I don't think that will happen, but who knows.
For me a "Bubble" is a one off event within a particular market. Historically the "Dutch Tulip mania" and the "South Sea Bubble" are the classic examples quoted. But these are historically rare events. Given the use of the term in 2000 in " Tech Bubble ", to start calling the current property boom a "bubble" sounds more like an attempt by the media to increase the sales in their various publications. Even the " Tech Bubble " reminded me of the "Share Boom" that occurred with posiden and seems to be a regular occurrence within the economic cycle rather than a rare , one off event.
So if we’re not in a Property Bubble and I’m claiming the Tech bubble was not a bubble why start raving on about Bubbles. ? There has been one common factor driving the dreams of people aiming to get rich quick and that is Debt.
The article Ross posted raised this and it has been the subject of many previous articles, but these are always opinion pieces that rarely get read by the masses. The use of Debt to make money is an integral part of any wealth plan but many people seem blinded to the thought that the assets they have bought through the uses of Debt may actually go down.
So are we in a Debt Bubble? Probably not . I still think that it’s part of the normal cycle . The market will go up some more and then plateaux . In some areas the market will come down significantly while others will hold their own . Some areas will go up more than others ,and others are already softening. People who have over extended them selves will go bankrupt when they loose their jobs or rates go to 10 % ( let alone 18 %!!) and can’t afford their negatively geared properties. The banks will sell them at mortgagee auctions and because no one is buying, houses that are currently going for 200 k in lethbridge park will be picked up for 150k or less. Houses selling on the north Shore for > 2 mill will be selling in the mid 1 mill range. ( as examples a house selling in pymble for > 1 mill at the peak of the last boom sold for high 600’s in the 93-94 , and houses selling in Lethbridge Park for around 90 –100 at the last peak were selling for 60K four years ago ). This all happened after the last property cycle and will happen again
If you don’t have to sell , it won’t matter but if you do , you’ll be stuffed.
Life goes on. The people who will win are the people who put to use what they’ve learnt in this cycle in the next cycle.
See change
it's better to be guided by your dreams than your fears
Having watched the previous property boom from the sidelines I'm interested in the number about the commentators who use the label " Bubble " in relation to the current increase in property prices. From my relatively uninformed position the current changes just represent a normal past of the economic / property cycle.
Prices are said to double every 7-10 years. As I pointed out in a previous post the current cycle has occurred over closer to a 14 year cycle , so if we take that to one possible conclusion , maybe we will see prices quadruple over the current cycle. Personally I don't think that will happen, but who knows.
For me a "Bubble" is a one off event within a particular market. Historically the "Dutch Tulip mania" and the "South Sea Bubble" are the classic examples quoted. But these are historically rare events. Given the use of the term in 2000 in " Tech Bubble ", to start calling the current property boom a "bubble" sounds more like an attempt by the media to increase the sales in their various publications. Even the " Tech Bubble " reminded me of the "Share Boom" that occurred with posiden and seems to be a regular occurrence within the economic cycle rather than a rare , one off event.
So if we’re not in a Property Bubble and I’m claiming the Tech bubble was not a bubble why start raving on about Bubbles. ? There has been one common factor driving the dreams of people aiming to get rich quick and that is Debt.
The article Ross posted raised this and it has been the subject of many previous articles, but these are always opinion pieces that rarely get read by the masses. The use of Debt to make money is an integral part of any wealth plan but many people seem blinded to the thought that the assets they have bought through the uses of Debt may actually go down.
So are we in a Debt Bubble? Probably not . I still think that it’s part of the normal cycle . The market will go up some more and then plateaux . In some areas the market will come down significantly while others will hold their own . Some areas will go up more than others ,and others are already softening. People who have over extended them selves will go bankrupt when they loose their jobs or rates go to 10 % ( let alone 18 %!!) and can’t afford their negatively geared properties. The banks will sell them at mortgagee auctions and because no one is buying, houses that are currently going for 200 k in lethbridge park will be picked up for 150k or less. Houses selling on the north Shore for > 2 mill will be selling in the mid 1 mill range. ( as examples a house selling in pymble for > 1 mill at the peak of the last boom sold for high 600’s in the 93-94 , and houses selling in Lethbridge Park for around 90 –100 at the last peak were selling for 60K four years ago ). This all happened after the last property cycle and will happen again
If you don’t have to sell , it won’t matter but if you do , you’ll be stuffed.
Life goes on. The people who will win are the people who put to use what they’ve learnt in this cycle in the next cycle.
See change
it's better to be guided by your dreams than your fears
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