1. Of course a crash is good - for those not in it, but wanting to get in it. Or for those already in it, those who don't mind losing a little to gain a lot, a crash is probably even better... Of course all GHPC posters are different, but it seems to me that the majority of them (us?) have no issue with long term property investors - but rather those who overleveraged speculators, who ignored record low yields, on the expectation of endless capital gain, on endlessly cheap capital.
I'm in this supposed crash, and not selling anything. In fact, I'm looking to buy more. But, the cashflow has to be good, and fortunately I've got the low LVR to be able to buy.
The over-leveraged always exist, and at both ends of the wealth spectrum. They get burned one way or another; it's part of life unfortunately. What I deplore is the D&G'ers who plonk everyone in this basket, assume we are all massively over-leveraged neg geared specufestor Ponzi Nazis, and tell us we will ALL go down, yet they own no properties. HUH?
For the more malicious GHPCers, it's something akin to getting late to a buffet, with no food left, only to see the health inspectors declare that whoever scraped the bottom of the dishes, probably got a good dose of salmonella. For some, there is a sense of schaedenfraude (sp? German is not that good) with a sense of revenge for those who missed out.
It's obvious from the tone of many of their posts that they are bitter, or angry, or jealous etc on missing out on the last boom, or the one before etc. Too bad. I wish I'd bought Microsoft in 1985 instead of my first PPoR, but I'm not saying HA HA at the share investors in the current crash.
I bear nobody any ill will. However, I have no sympathy for anyone who borrowed at 7% at the edge of their finances, and didn't budget for a substantial interest rate rise. I have been pestered by parentss and other well wisers since 2005 to buy a Sydney house... I didn't think rates would stay this low forever - although the slowness at which the rates rose, and the market fell, surprised me. In some of the suburbs I'm looking at, I'm already ahead 25%, without even considering what my money was earning me in the bank. In others, property values have held nominal values, or even gained a few percent but are down in real terms...
So, if they are down in real terms, are you going shopping soon?
So tell me, did my skepticism and "doom and gloomness" cost me much?
Probably not, but how would you have felt if the market had doubled again in the last 3 years when you didn't buy? The thing about listening to D&Gers is there are always going to be some around, and it will be in every area of your life. Most of the more important accomplishments in life were by people who wouldn't be told NO. You cannot listen to negative sentiment, because for ever person not investing in a down market, there is another who is, and who will do well if they have the knowledge.
2. Of course you can do well when the market is down - but is it down? Half of Somersoft is claiming the market is still growing, half are claiming it's already crashed, and therefore a great time to get back in. GHPCers are relatively unified on the fact that the pain has only begun - that it's not one single market, but a cascading falling market, which moves from the outer suburbs to the inner.
It's all about your point of view. The experienced investors are saying a slowdown, and are looking forward to it, the D&Gers are saying run for the hills, and are hoping they can pick up a house for 50% of what it costs now, because that's what they believe (hope) the properties are really worth.
I agree that there is a slow-down coming; higher rates, neg sentiment, no easy finance anymore - it's gotta lead to a period of no or little growth, or even dropping values (in some areas). The important thing is; what are you going to do about it? The D&Gers say "park you cash in the Bank, buy gold, property is crashing".
Me; I'm thinking "wow; cheaper properties, better yields, less competition; let's go shopping". This is a totally different mindset; I'm thinking forward to the next cycle and how to capitalise on the upcoming slowdown.
I hate the phrase "I'm in this for the long term". Bull. (and not the market condition either). Any investor that doesn't at least look at opportunity cost is nothing more than an uneducated speculator riding on the back of a good wave. If it takes 3 years for you to regain a 5% loss, (1 year loss, 1 year flat, 1 year gain), then that's 3 years where you were paying interest, and not earning money in another asset class.
True, but if you are looking at property as a longer term asset (say; 10 years or more), then to buy in a slump and wait a few years for the next growth cycle is part of the strategy. It doesn't work for short-term flipping or trading in this climate, but flipping and trading is not investing.
Also, don't forget that you can create your own growth through buying low, doing renos, increasing the rents, adding value, depreciation etc. These factors maximise the return, and allow the investor to outperform the market and go against the trend/sentiment. Sorta like buying the worst house in the best street and stuff like that.
Sure, the entry and exit costs might not justify an exit. No point paying 10% in entry and exit costs if your loss was only going to be 5%, but then why would you buy "just before the crash" and say "I'm in this for the long term"? Heck, if you bought just before black tuesday, you would have been waiting 9 years to get your money back in nominal terms, let alone real terms. In it for the long term indeed.
But how far did the stock market crash on that Tuesday?
People who buy at the wrong time have to say they're in it for the long term to make themselves feel better, and keep the hope going. It's like the share investor who says "It's only a paper loss; I'll only lose if I sell". Unfortunately, sometimes the shares remain worthless forever. At least with property, it does come back, and I'm yet to see any property go down so much in value that it won't get back to the normal growth rates after 10 years. The seller in any given time frame can make a big loss, but they sell at the wrong time and in unfavourable circumstances. It's not the house's fault. It's still there in 20 years time. It's operator error.
Both sides of the equations have their herd followers, their dreamers, and their idiots... You only have to look at some SS posts asking ridiculous questions that demonstrate an absolute ignorance of accounting, business and law, but thankfully, they're not the majority.
Being pessimistic in this environment is a survival trait, not idiocy.
I don't agree. Being pessimistic with no real-life knowledge will cost you a chance to make money in a down market. Then what happens is these types are late to the party when the next one starts, and often have to sell out because they got caught up in the euphoria, but couldn't hold the investment. They then sell at a loss, and blame the world. Real-life experience allows you to see the opportunities in a down market, and capitalise.
I have no problem with ignorance. My whole working life has been dealing with people who can't play golf and want to know how to do it. I'm happy to teach them if they are willing to learn, and not try to tell me how it should be done from a position of less skill and less knowledge. The problem with many of these D&Gers, is this is what they do here. They don't have any real life experience, and don't want accept the words of the ones who do. They quote models and stats, and keep arguing the point and keep answering with "yes, but, I read this paper, and I saw this graph, and the SMH said..." without the real life experience to make informed comments.
