Homeowners feeling rate pain

[mbl]

His position has also changed from "it's a myth that property doubles every 7-10 years" to "property has gone up too much and is now a bubble".

Is this supposed to be an intelligent comment.

You guy's can mix and match what I have said, to satisfy your ego's and the myth's you have built up in your minds.........but the fact is we are currently just starting the deflating of the housing bubble (see America), and the gains you have seen these passed 7 years will go away sooner than you think.

Yes it is a myth that property (in real terms) doubles every 7 years. And it is true that we have seen a bubble these passed 7 years where we have seen property triple in some cases. The later doesn't support the former, because I am also saying that these capital gains will go down to where they started from.

regards, mbl.

 

[Monopoly]

Mono


I like that quote. Fits the situation to perfection . Is it a mono original . Sound a little bit old , but then again ....

Cliff

Hey seech,

Far as I know it's just my own (play on words, derived from those I overhead my late father utter of his fellow co-workers). I haven't since heard anything word-for-word, but I'm sure there are many quotes (more eloquently put) that convey the same message. Pity the message has not registered with the fool to whom it is aimed!!!

 

[mbl]

Seech, methinks you flatter the boy WAYYYYYYY too much. Ignorance comes in many forms and in some instances, as in this character's (vain attempt to appear knowledgeable) a heralding of yesterdays paper!!! But more humourous are few than he who foolishly thinks the educated need enlightening!!! Pay him no heed it is clearly...empty vessels...

In fact, I think I'll give that "cool button" a press myself, the boy is borrrrrrrrring me senseless!! There is only sooooo much rubbish one can read.........

Well you may think what you want, but there is a saying in the 'old country', which is a little difficult to translate, but it goes on the lines of

'A smart bird, can be caught from it's beak'.

But as Socrates would have said in this sort of situation 'The only thing I know, is that I know nothing'.

 

[Shadow]

These people will live in houses. However don't expect rents to rise all that much and here is why.......money supply.....there won't be the same amount of money in the market, so even though demand for rental property will rise, the moneysimply won't be there.

If they could (almost) afford to pay the mortgage, then they can pay a decent amount of rent.

If a recession was to happen.....or a deep recession that a lot of people are predicting, unemployment rises.......people have less money. You can't expect people to pay the rent that YOU want them too if they don't have a job.

I don't hear a lot of people predicting a recession in Australia. Just you really

Also if properties are foreclosed upon by the banks.....you will find that a lot of banks will allow the previous owners to rent the place out for a low rent. It happened in 1991, and it will happen again.

According to the reports I have heard, most people in Australia are ahead on their mortgage repayments. Perhaps in lower socioeconomic areas there may be foreclosures, but most people on this forum probably don't invest in those areas.

Also, so that I kill 2 birds with one stone.......I have said numerous times that prices will go down 30-50% depending on the area.
regards, mbl.

I plan to invest in the Sydney Northern Beaches area, where Residex and other property market analysts are forecasting 10%+ per annum growth over the next five years. They predict 7-8% growth for Sydney in general. What research have you done that makes you so sure the experts are wrong. Can you show me any piece of published information from a reputable independent source that predicts a looming house price crash in Australia. I have not seen any such reports. All reports predict good growth on the east coast, with a small correction in WA.

Cheers, Shadow.

 

[mbl]

If they could (almost) afford to pay the mortgage, then they can pay a decent amount of rent.



I don't hear a lot of people predicting a recession in Australia. Just you really



According to the reports I have heard, most people in Australia are ahead on their mortgage repayments. Perhaps in lower socioeconomic areas there may be foreclosures, but most people on this forum probably don't invest in those areas.



I plan to invest in the Sydney Northern Beaches area, where Residex and other property market analysts are forecasting 10%+ per annum growth over the next five years. They predict 7-8% growth for Sydney in general. What research have you done that makes you so sure the experts are wrong. Can you show me any piece of published information from a reputable independent source that predicts a looming house price crash in Australia. I have not seen any such reports. All reports predict good growth on the east coast, with a small correction in WA.

Cheers, Shadow.

There is absolutley NO WAY you are gonna see 7% growth anywhere in Australia in the next 5 years. My sources are numerous, but more so from overseas and some commentators in Oz. And especially one real estate agent we have been with for years who has over 30 years experience.

The only way your property will increase by 7% is if wages increase 15% p.a over the next 5 years....or you discover a diamond mine underneath your block.

Good luck with the 7-8% in Sydney in general.......Remember the report of a RE Agent who bought a flat in western sydney for 90k approx (at auction), but the same flat had sold for 200+k 2 years ago ? If you owned a flat right next door, how much is it currently worth ?

You're gonna see a lot of situations like this in the future.


Good luck ...and keep reading REDIX......they seem to know what they are talking about.

 

[Shadow]

My sources are numerous, but more so from overseas and some commentators in Oz. And especially one real estate agent we have been with for years who has over 30 years experience.

Good luck ...and keep reading REDIX......they seem to know what they are talking about.

So... you're saying you would prefer to believe overseas sources and a real estate agent, rather than Residex and other professional Australian real-estate analysts who do this research for a living?

Prices in most areas of Australia have already gone through the correction.

Cheers, Shadow.

 

[mbl]

Australian economy is still signalling an impending recession

Gerard Jackson
BrookesNews.Com
Monday 15 May 2006

The Treasurer Peter Costello believes that the economy is still on course and a recession is far beyond the horizon � or at least beyond the next federal election. It is no secret that Costello gets his economic advice from the Reserve Bank and the Treasury. So the central question here is the quality of this advice. The Reserve�s governor, Ian Macfarlane claimed that the economy�s strong growth was fuelling inflation. According to Mr Macfarlane:

International developments are continuing to provide stimulus to growth in Australia ...The world economy is growing at an above-average pace ... commodity prices have been increasing strongly for some time, and they have risen further in the year to date. This suggests a strengthening in the outlook for Australia's export earnings, with consequent expansionary effects on incomes and spending,

Macfarlane pointed out that wages have risen in the last 12 months and businesses are now reporting labour scarcities. Also worrying to him is the unpalatable fact that the CPI has is up to about 3 per cent in the last few quarters, rising faster than he expected. No doubt this was one of the reasons for hiking the rate to 5.75 per cent. This is the sixth rise since May 2002. Macfarlane�s comments indicate to me that he has no real idea of where the economy is going let alone what it is doing. And in my ever humble opinion the Treasury is no better.

A closer look at the labour market is necessary. One of the failures of orthodox economics is to treat labour markets as an aggregate. If this aggregate is expanding it means unemployment must be falling. Always a good sign, or so say our economic commentariat. But what matters is not the aggregate but its composition. This is a fact that the economic boffins at the Treasury and the RBA are completely unaware of.

This brings to mind the thoughts of Tony Pensabene of the Australian Industry Group when last October he admitted to being dumbfounded by what was happening in the economy. He expressed the view that

� something different is going on in manufacturing. In the 12 months to August, the overall economy added 352,000 jobs. In the same period, manufacturing lost 46,800 jobs.

But unknown to Pensabene he was echoing what Steve Slifer, chief economist at Lehman Brothers, said about the US economy in January 2001:

It�s really an odd-looking slowdown. The manufacturing sector is, in fact, in a recession but not the overall economy. At least not yet.

What is puzzling to Slifer and Pensabene is the fact that an economy can be rapidly increasing the number of jobs at the same time as manufacturing is shedding them. If Pensabene had been properly advised he would have known that what the Australian economy was experiencing � and still is � is precisely what happened to the Clinton economy. (I hasten to add that I do not blame Clinton for the recession, even though it began under his watch). The patterns are identical and closely follow the classical boom-bust cycle.

US Manufacturing was hit first, forcing it to curtail output and shed jobs, even as consumption raced ahead. This process induced schizophrenia in our economic commentariat who, despite their high salaries, could make neither head nor tail of it all.

What most of the commentariat still do not know is that consumption actually accelerated during the US recession. Not once did consumer spending falter. It was, as any classical economist would have pointed out beforehand, the investment-side of the economy that felt the full force of the recession, just as I had predicted in my article Economic clouds are turning black for US economy (The New Australian, 6 December 2000).

As any classical economist would have said: �The demand for commodities [consumption good] is not the demand for labour�. It was considered the mark of a good economist who understood what was meant by this passage. Unfortunately modern-day economists shake their heads in bewilderment when confronted by it. Yet understanding this passage is a key to understanding why focusing on consumption as a solution to recession and unemployment is so dangerous.

Let us take a look at PricewaterhouseCoopers� report for April. We know that manufacturing jobs have been falling, but this report tells us that manufacturing unemployment actually accelerated in April. The report�s employment index for April 6 stood at 45.6 as against 51.0 in April 6 2006. (The rest of the report�s figures are for the same period). Production had fallen from 50.0 to 49.3 while input prices had risen from 68.6 to 73.6.

It�s important to note that nearly all of those sectors reporting growth are consumer based. So we have an accelerating decline in manufacturing while industries close to the consumption stage of production expand output. If it were not for the consumption stages the Group/PricewaterhouseCoopers Australian PMI would be way below 50 rather than the present 50.3.

Despite this data Macfarlane and others are worried that tight labour markets will fuel unemployment. It is loose money supply that fuels inflation not tight labour markets, which are a symptom of inflation.

Sellers need buyers and buyers need money. So where is the money coming from? Although monetary policy appears moderately flat, a look at the RBA�s figures show money supply has been loosened. From February 2005 to February 2006 we find that currency has been basically flat. However, M1 increased by 6.5 per cent and bank deposits by about 8.5 per cent. These figures clearly show that the expansion has been through credit. Moreover, the same period saw the RBA�s assets leap by 38 per cent. The RBA acquires assets by issuing cheques and by doing so it expands the money supply.

This explains the acceleration in credit growth in recent months and the signs that household spending is on the rebound. Part of this rebound can be seen in the record demand for credit cards. (I fear that many people are foolishly borrowing to payoff other debts). Recent data shows that there were nearly one million applications for credit cards in the first quarter of this year. This is 27 per cent more for the same period last year when money supply was tighter.

It is being pointed out in parts of the media that during 2001 the RBA cut rates from 6.25 per cent to 4.25 per cent, a full two per centage point and so prevented unemployment jumping from 6 per cent to 7 per cent. This is all very superficial and far from anything approaching economic analysis. What these commentators didn�t bother to find out is that during this period M1 rose by 22 per cent and credit exploded by 25 per cent. Given the current situation I just don�t see the RBA giving us a repeat performance.

This reminds me of 1990 when commentators assured us of a soft landing created by investment in the resources sector. My response to this irresponsible nonsense was to point out that we were heading for a hell of a fall. And that�s what happened.

Today we are told that China�s demand for resources will keep the economy steady. Don�t count on it. From March 2004 to February 2006 China�s money supply expanded by 34 per cent. March 2004 to February 2006 saw a modest 13 per cent rise. From October last year to last March the money supply expanded by 8 per cent. China�s central bank is driving the commodity boom. So we could end up with commodity exports still surging while the rest of the economy tanks. In any case, China will have to slam on the monetary brakes at some point. It�s just a question of when. In the meant time, Australian commentators are worrying about wage rates.

Note: The Australian economy has, like so many other since WWII, been on a monetary roller-coaster. It is these continual monetary expansions that cause the boom-bust cycle, not some mysterious force inherent in capitalism.

Gerard Jackson is Brookes� economics editor

 

[BoatBoy]

As you said mbl, can't belive REA and newspaper or anyone to do with them.

All liar's with ulterior motive's are'nt they?

BB

 

[mbl]

As you said mbl, can't belive REA and newspaper or anyone to do with them.

All liar's with ulterior motive's are'nt they?

BB

\
Some yes, some no......

However people hear what they want to hear, and believe what makes them sleep well at night.

Doesn't mean it is true though.

 

[AlmostBob]

dont worry, be happy

 

[Bill.L]

Hi all,

mbl,

Yes it is a myth that property (in real terms) doubles every 7 years

Who claimed that you needed this to be successful in property investment?? I'll be very happy with a doubling every 7-10 years (including inflation), just like it has for the last 40+ years.

mbl, do you think inflation is the friend or the enemy of the property investor?

There is absolutley NO WAY you are gonna see 7% growth anywhere in Australia in the next 5 years.

Now I know your kidding, because when you look at history say the last 35 years at least (that I have records for) you see that there is not a single 5 year period where some place in Australia is not appreciating by at least 7% pa. It is just not everywhere all the time.

bye
PS with the $300k you are giving me to spend, I would spend it on several properties with loans and a buffer for expenses.

 

[mbl]

Hi all,

mbl,


Who claimed that you needed this to be successful in property investment?? I'll be very happy with a doubling every 7-10 years (including inflation), just like it has for the last 40+ years.

mbl, do you think inflation is the friend or the enemy of the property investor?



Now I know your kidding, because when you look at history say the last 35 years at least (that I have records for) you see that there is not a single 5 year period where some place in Australia is not appreciating by at least 7% pa. It is just not everywhere all the time.

bye
PS with the $300k you are giving me to spend, I would spend it on several properties with loans and a buffer for expenses.

Inflation for the property investor is neither hot or cold......as I have said in the past property generally increases with the rate of inflation + some.

However you have to take note that property these passed few years has doubled......it has escaped the rate of inflation. So it is only natural that it will correct and find it's mean again.

As for your advice.....maybe you're right and maybe your wrong.....but I would rather sit on that amount of money and wait a couple of years....maybe if I am correct I will be able to buy 2 properties virtually outright.....maybe owe 20% on what I will pay......that sounds much better.

 

[mbl]

Safe as houses

GRAHAM DAVIS: Moving day in the suburbs and yet another family takes possession of its most precious asset, courtesy of the banks. It's the Australian dream, isn't it, what you've got here?

MEHTAP KILNIC: Definitely.

GRAHAM DAVIS: Swimming pool, big block. Is it a 5-bedroom house?

MEHTAP KILNIC: Five bedrooms and a study.

GRAHAM DAVIS: Like many Australians, the Kilnics have borrowed heavily to pursue the national dream of home ownership. But you have to pay for it, don't you?

MEHTAP KILNIC: You sure do, nothing is for free, unfortunately, unless we win the lottery.

GRAHAM DAVIS: There's a house to live in, like this one in the Hills District of Sydney, and an inner-city flat as an investment for the future. All to cushion retirement in a country with an aging population and shrinking tax base. What sort of equity do you have in the investment property?

MEHTAP KILNIC: Ah, none.

GRAHAM DAVIS: None?

The rest of the above here .....

 

[geoffw]

mbl

For Copyright reasons, please quote a source. Quoting a summary of a few paragraphs is OK- with a link to the full article.

A date may add credibility.

I don't want to get the forum in trouble for copyright violation.

You have quoted articles like this in full before, as have others. However, this article names several people and organisations who have raised the possibility of action in the past.So I want to be especially careful here please.

 

[DavidMc]

I've always been an advocate of doing the best of both. So I rent and own IPs.
Alex

This is what I do as well. I even take it one step further.

You own IP's or are you paying off IP's ?

I haven't paid a cent off one. I am 'holding' property assets for growth. I have a very high LVR on a reasonably sized portfolio have years of cash flow buffer (as cash in offset) for job loss, interest rate hikes and 'deflation'.

Hi Geoff,

I think I have stated my opinion a number of times on this forum. But anyway as I have said before, I am pretty sure that we are going to see a drop in housing prices over the next few years. And it won't only happen in housing prices, but assets across the board. In other words deflation.

I think debt levels of households are dangerously high, and that the averaxge household is living way beyond their means. I also believe that this will happen whether interest rates continue to rise or not.

Basically I feel that the fundamentals in real estate investing have left the market (namely 8+% yield) and this reason alone will cause a lot of more 'traditional' investors to leave the market.

I also believe that the past interest rate rises are yet to 'hit the market', and they will withing a year or 2 when a lot of these 'fixed for 3 years' loans adjust.

Basically I think there will be a run for the exits very soon (the smart money has already left), and I expect a haircut of at least 30% off current prices, and in some instances up to 50%.

Also a major factor that boosted prices these past few years has been 'investors', or dare I say it 'speculators'. These are going to be the people who are gonna be holding the bag.

History repeats.

That is basically my view.

regards, mbl.

Inflation for the property investor is neither hot or cold......as I have said in the past property generally increases with the rate of inflation + some.

However you have to take note that property these passed few years has doubled......it has escaped the rate of inflation. So it is only natural that it will correct and find it's mean again.

As for your advice.....maybe you're right and maybe your wrong.....but I would rather sit on that amount of money and wait a couple of years....maybe if I am correct I will be able to buy 2 properties virtually outright.....maybe owe 20% on what I will pay......that sounds much better.

mbl,

The above posts are the first two I've seen from you that IMO don't have snide or patronising overtones. Now I'll actually read them, listen to what you have to say and think about them rather than just skip over them.

I'm sure I'm speaking for many people when I say this forum welcomes different (and even opposite) views however for them to be effective they must be presented in a respectful manner. We are thinkers - we enjoy challenge and healthy debate. You're bringing out some very interesting discussion from people.

It's great to see the forum improving.

David.

 

[topcropper]

mbl

We don't all wear rose coloured glasses, no matter what it seems like.

I was looking for something else, and came across this thread. In 2001, a gentleman argued very forcefully that there was no money in investment property.

.

Great post Geoff.

Poor old Eric would have posted that at the peak of shares in 01, then suffered 2 years of declines. While property investors, we know what happened then the next two years.

See ya's.

 

[Les]

G'day all,

For Copyright reasons, please quote a source. Quoting a summary of a few paragraphs is OK- with a link to the full article.

A date may add credibility.

Good point Geoff - and, from the hysteria, the quotes re RBA intervention (and thinking back to when John Symonds was saying this) I reckon this was from around mid-2005. If I'm right with the date (there wasn't one on the link that I could see) then I'd say John S has been proved right by the passage of time.

But, that was then - this is now !! We are now two years down the track, and the market has changed somewhat.

Someone else mentioned "yesterday's paper" - whomever that was, well said.

Regards,

 

[BoatBoy]

John Symond seem's to think investing in property is a good thing on this blog.

http://blogs.news.com.au/dailyteleg...ilytelegraph/comments/john_symonds_live_blog/

Posted by Chris of Auburn on Thu 21 Jun 07 at 11:46am
Gees judging by the questions here this almost seems off topic, but here goes. What are the state budget implications for first home buyers? Im in the market and considering a managed fund since the return is so much better.


It is becoming nearly impossible for first home buyers to get into home ownership. The State budget does not provide any huge windfall for first home buyers but does provide a little bit of help in wiping out mortgage duty which can save you $1,000 - $2,000 depending on the amount borrowed. It’s a hard choice in deciding between investing in equities versus property but I guess I am biased and have always believed in investing in property. Good luck, John

John Symonds
Thu 21 Jun 07 (12:44pm)

Posted by howlowcanugo of gosford on Thu 21 Jun 07 at 10:08am
John,
with current (and forecasted) interest rates, would it be better to have a fixed rate mortgage or variable. and if fixed would you do it for 1, 3 or 5 years.


I am confident that interest rates should remain pretty stable. Most people have borrowed to the max and fixing a portion of your loan does give you certaintly with repayments. I would suggest fixing maybe half of the loan and keeping the remainder variable which enables you to make extra payments, redraw etc. Fixed rates have recently increased a little so I would wait a few months as I expect them to drop back a little. Hope this helps. John

John Symonds
Thu 21 Jun 07 (12:17pm)

BB

 

[BoatBoy]

This article by John Symond would support what Les say's about him doing the piece in 2005.

http://www.propertiesonline.com.au/...default.asp?f_AgentID=470&f_NewsletterID=2161

Sales Newsletter November 2005

16-November-2005

Australians with investment properties have no reason to panic because talk of house prices falling further is simply scaremongering, experts say.

The managing director of lending giant Aussie Home Loans, John Symond, said Australians should get out of property investment markets on the eastern seaboard, particularly in Sydney.

"Blind Freddy can see that the housing market is coming off and will continue to come off," Mr Symond told Nine Network's Sunday program.

His comments come just months after the head of the Reserve Bank of Australia, Ian Macfarlane, said Sydney was the nation's most expensive city and advised young people to move to more affordable places.

Mr Symond advised families to sell investment properties. "Because I reckon the price you're going to get today will be higher than what it will be tomorrow," he said. "Generally speaking, for the average mums and dads out there, I think the price of real estate today will decline, and continue to decline, over the next couple of years." However, a rival lender, a leading economist and the president of the Real Estate Institute of Australia disagree.

Wizard Home Loans boss Mark Bouris labelled Mr Symond's comments as "scaremongering" and irresponsible.
"Thousands of Australians will be worried sick and panicking," Mr Bouris said.


BB

 

[Les]

G'day BoatBoy,

Hmm - might've been later in 2005 than I thought. But I do find this whole "John Symonds" thing interesting...

Mr Symond advised families to sell investment properties.

I wonder if he thought things were going to be THAT BAD as to exceed:-
1. The cost of selling (Solicitors, RE agents, etc.)
plus 2. The Capital Gains Tax cost of selling
plus 3. The cost of "buying back in".

If this is what he thought, then I take back my earlier comment

I'd say John S has been proved right by the passage of time

. To be fair, it was a bold statement on his part, and might have had value for PPOR owners - given that Sydney DID experience a drop in values.

But, to cover the cost of CGT as well (i.e. selling an investment property) would have required a MUCH heavier downturn than what transpired to have been worthwhile.

Back then (as I recall) there was also the "Bob Carr Tax" on investors (what was it called again?) - and this might have been "due to take effect" when John S made these comments. I don't recall the actual dates involved, so I could be right out of the zone.... Certainly, there were MANY investors who bailed prior to that onerous Tax hitting NSW investors. I still think it would've been ~ 2 years ago...

Anyway, interesting stuff - especially in hindsight,

Regards,