Glenn Stephen's comments this week

I am in the market for a property in the inner west of Sydney.

Glenn Stephens comments this week really got me thinking though - I mean if the RBA Governor is telling us we are in a housing bubble (that's what he was driving at) and that rates will continue to rise, should I be concerned of a potential "overheating" in the market and buying at the top.

I know it's NEVER a good idea to try and time the market, but maybe proceeding with caution is best given the RBA Governor's comments. Maybe even holding off.

Or do some of you out there discount his comments and believe the markets will keep going regardless of whether interest rates go to the moon? If now is not a bad time to buy based on the Governor's comments, maybe buying is always good and I should never be concerned about costs of funding etc. Or maybe it's just a matter of weighing up his comments with those of others to come to one's own conclusion, I guess no one really knows where the market is headed.

Any thoughts appreciated.

Happy Easter!

SYDB
 
I am in the market for a property in the inner west of Sydney.

And Glenn Stephens has suggested that it isn't such a good idea if you intend to use leverage.

You have two options:

1/ Believe the man who has the power to make his predictions come true,

or
2/ Believe the rubbish posted here.
 
The main reason that the RBA has been warning against a housing bubble is to make buyers cautious, and reduce the need for intervention (i.e. raising interest rates) that might damage other sectors.

That people (like SYDB) are paying attention to this and questioning purchases show it's working. But if it doesn't have the desired effect then the bank is likely to act.
 
What exactly do you mean by your second point Sunfish?

Exactly? Today I have read people accusing Stephens of virtually everything under the sun. Maybe the worst comments weren't here on SS.

My point is: He still has to the power to make his prophesies "self fulfilling".

Why do you want to bet against the house?
 
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Andrew, Next time I ask for an explanation of the "fully leveraged" philisophy and how it beats interest rates, I expect an "exact" answer. NOT a generalisation about how often property doubles. THAT figure is what you want it to be.
 
The main reason that the RBA has been warning against a housing bubble is to make buyers cautious, and reduce the need for intervention (i.e. raising interest rates) that might damage other sectors.

That people (like SYDB) are paying attention to this and questioning purchases show it's working. But if it doesn't have the desired effect then the bank is likely to act.

I think this is the exact reason that the word 'bubble' has been mentioned.

A slowing down of the housing sector only, without raising interest, is much more preferable, than a slowdown in the business sector and the housing market combined.

If we're not in a bubble now, we may well be if things keep going as they are, and down the track the stars don't align so favourably, especially if due to a downturn in business.
 
And you udnerstand that many here use and suggest the use of leverage into multiple property ownership, utilising acquired equity in order to acheive a profit baed on compounding growth in value, as opposed to their debt, in the future?
 
andrew, I, and others, have voiced opinions, at a little length. It is time you showed you are literate and wrote more'n a few words.

Are you up to it?
 
Excuse my ignorance and stupidity, but how are you supposed to purchase more properties if you don't borrow money? I have 4 investment properties and that's how I bought mine. So unless you have the cash to buy outright then don't invest in property? If this isn't what the RBA is saying then what are they saying?
 
I do think they want you to have some real skin in the game.

So those who are already well heeled can take advantage of the situation while those who want to improve their lot in life can just keep working for peanuts and watch on from the sidelines?

@#$% that!

There's a lot to be said for fixed-term loans.
 
So those who are already well heeled can take advantage of the situation while those who want to improve their lot in life can just keep working for peanuts and watch on from the sidelines?

@#$% that!

There's a lot to be said for fixed-term loans.

You are entitled to rebel. But there are certain basic laws of investment which remain constant. The first is: "Them what has, gets"

I am not yet convinced that borrowing money from "them what have" will make you rich unless you have a unique outlook. To the REAL wealthy you are just sheep.
 
You guys can be pretty funny when you want to be!

IMO this is classic RBA jawboning. They did it in the last boom (remember?) and they'll do it again.

Contrary to what seems like popular belief these days, the trajectory of house prices only forms a relatively small, yet no doubt annoying, part of the RBA's IR policy decision making. Of greater importance are inflation, the pace of economic growth in the real economy or the impact on the AUD, for example.

The RBA is hamstrung in that it doesn't control either the supply of land or the cost of constructing new houses so it has no independent lever to control house prices. So when IRs look like creating undesirable growth in housing prices the only thing they can do is jawbone about the risk of rising IRs in an attempt to exert some influence over this market without actually jacking IRs right up and killing the rest of the economy.

In the absence of govts doing something about the availability and cost of new supply, this is all they can do. Of course the RBA may still keep jacking up IRs anyway because of excessive growth in the wider economy for example if it occurs. In that event, Mr Stephens warnings double up as a conservative "you can't say I didn't warn you" when everyone starts to complain.

So the question is really "why wouldn't the RBA talk up IRs for the housing market". In the context of a relatively healthy and stable economy, they have everything to gain and nothing to lose with such an approach. It's par for the course and to be expected at times such as this.
 
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