House bubble to burst - 40%? SERIOUSLY
- Thread starter Aulyna
- Start date
Yeah it could happen. The question is whether you can;
a) Ride out the storm.
b) Profit from it by buying low with ridiculously high yields.
Now that we have agreed with you that it "could" happen, is there any more value you can add to enlighten us all? Perhaps creative ways to profit during the downturn? Or how best to prepare ourselves should the worst happen? (Please share, we are listening. However, I do challenge you on this specific point --> Please try to be more imaginative than "Buy Gold/silver, sell all your property now, repent, move to the desert and collect moisture to sell bottles of water to the tribes after the armaggedon.")
FFS stop trying to scare us you crazy black bears!
I don't pretend to know what the future holds. Houses are expensive. They are less affordable than they used to be. That doesn't necessarily mean they will fall in the short term, not while propped up by inept governments.
so are bananas. are they going to crash in price? i mean, they're over $14 a kg here, the grower still gets 60c a kilo, no one is buying them, but still, their prices are sky high.
f you're going to apply that argument to everything, then your economic model had better apply accordingly.
otherwise, i'd love to see the algorithm behind the notion that every market in capitalism reacts differently.
w00t you listen to journalists/tv commentators? Might as well listen to economists... last time the Westpac guy said rates would go down I suspected it'd go up (he gets it wrong nearly every time)
DHere
The issue has been talked about in detail many times before.
40% corrections can happen.
It works like this:
Prices stagnate for a year,
fall 5% the 2nd year,
fall 5 to 10% the 3rd,
then stagnate for a few more years and before you know it the overall correction including inflation is around 30-40%.
In the mean time, rents have gone up by 50%
Then one day Residex come our predicting huge capital gains.
People wake up and say, hang on, rents are higher then a mortgage and property prices are about to double, we should stop paying off Bill's mortgage and get our own place.
They buy their own home, the media want a piece of the action and talk up property again, property becomes the flavour of the month and we all run over each other trying to get on the bandwagon.
Then property prices double and Bill retires....
Didn't we have a discussion at some point about how property only increases for about a third of the cycle? This post is a good example of what often happens in the real world, and what we as investors need to consider and plan for.
This is all part of the due diligence that has to be done when entering into an investment, and has to be considered when risk management planning is conducted.
Sorry, had to correct this.
Growers getting around $5-6kg, wholesale is around $10-11kg.
Whats keeping their prices inflated is the greedy middle men making 100% on it. They should be more around $10atm, less in the coming months (if greed doesnt set in again).
It's interesting to note that the last ten years have been the first time EVER in Australia that property prices DID NOT DOUBLE.
I am neither a doom and gloomer nor an optimist. We live in a time period where the world is chaging faster, and more fundmanentally, than EVER before. Without exception.
Who is to say what will happen? Nobody can accurately predct the future.
However, here are some facts.
Rental demand in Sydney is sickeningly high. People can't find a place to house their families. Rents are ridiculously high and getting higher. And the properties continue to be tenanted instantly. Residential vacancy is literally very close to zero.
Purchase prices/ mortgages are amongst the world's most expensive. In exchange, you get the world's safest, most secure country (Straya!) and ownership of an asset which is at the heart of our national identity.
The thing is, even if property prices fall significantly- you're still getting absolutelely crushed when you rent , and the stock market is no good to anybody, and won't be for a while!
Smart people can make plenty of cash right now!
But yes, it could be a bubble- that's the whole point! Hindsight is 20/20!
Would love to hear everybody's opinions on the subject!
I am neither a doom and gloomer nor an optimist. We live in a time period where the world is chaging faster, and more fundmanentally, than EVER before. Without exception.
Who is to say what will happen? Nobody can accurately predct the future.
However, here are some facts.
Rental demand in Sydney is sickeningly high. People can't find a place to house their families. Rents are ridiculously high and getting higher. And the properties continue to be tenanted instantly. Residential vacancy is literally very close to zero.
Purchase prices/ mortgages are amongst the world's most expensive. In exchange, you get the world's safest, most secure country (Straya!) and ownership of an asset which is at the heart of our national identity.
The thing is, even if property prices fall significantly- you're still getting absolutelely crushed when you rent , and the stock market is no good to anybody, and won't be for a while!
Smart people can make plenty of cash right now!
But yes, it could be a bubble- that's the whole point! Hindsight is 20/20!
Would love to hear everybody's opinions on the subject!
My opinion is that as any discussion progresses, the probability of a participant in the real estate industry advocating property as an investment class approaches 1.
Our houses in Brisbane did. They have been flat for a while now, but the certainly did double over the past ten years.
Australia is more than "one market".
...And Perth tripled
Can you support that opinion with hard evidence? My recollection is that if you check the price action of a specific district [not sure about SYD] there would only be two or three decades in the last ten where prices HAVE doubled.
I concur with the idea that there is always a bull market somewhere but the nature of RE investment does not allow you to be swapping areas of interest easily, even if you actually knew where the next boom would be.
I dont have exact figures on me but around 2001-2004 we achieved the doubling of values just like many other areas achieved. The thing is we have seen little if any significant growth since and we are fast approaching the magic 10 year mark.
now look before the 2001 boom and we get a very similar picture to what has played out now. That is little to no growth through the 1990's with the eventual catch up to happen later starting in 2001. I can almost cherry pick a 20 year period where we doubled. Not 7 or 10 years. TWENTY YEARS !!!
Now does this make property investment wrong or a poor choice. Im not sure.
Still very new to this and i see tough years ahead. I also see a likely recovery at some point.
Not sure what im trying to say but Australia has many markets and many variable driving them at any one time. Times look tough now but that may be because we are cherry picking a period that reflects the tough times.
I sure wouldnt feel confident to stand on my soap box and claim to know what will happen as many do. I just trust( Hope) that with time things will play out in my favor and protect myself as best i can while trying to achieve my goal. What more can anyone do really.
Haha Touche!
Not going to argue with you there!
lol!
However, I will say- my money is where my mouth is! Apart from a hobby of share trading (more for my own entertainment than anything) I invest in nothing but real estate. The same is true for all members of my immediate family.
My father, who is LJH Merrylands Office Licensee has been mentioning that 2012 will be a very rough market, and "everybody's profit margins are going down." My dad raised me in the investment game. He is not actively buying, but that is only because he is restructuring his assets towards retirement.
Every week I see dozens of tenants, and dozens of landlords- there's no debate who is better off!
Shares are a laugh, but they can't make you genuinely rich (unless you start the company, buy offmarket, blah blah blah)
The rental squeeze will soon be a crush!Just don't borrow TOO much money!
Our head property manager just bought another place in Guildford. Yes we are agents. Yes we love selling. But we do walk the talk!
I myself am currently looking for a flat in Potts Point/ Elizabeth Bay. To me that's Sydney's next boom area (actually, I think it's the last undervalued gem left!)
I believe the Australian economy is about to implode. We have one of the world's highest paid, laziest workforces, with a huge sense of entitlement and very little geniune ability. Jobs will continue to bleed offshore (example ANZ Bank.) Australia's time in the sun is almost over. And when the **** hits the fan, real estate will be all we have left! Our middle class is about to be turned on it's head- and collecting their rent is a very sensible idea, cause they won't have any money for anything else! Sorry if I sound callous. I feel the Australian public has had a free ride for way too long, and our working culture is lazy, sloppy, inefficient and unprofessional.
Companies are even outsourcing accountants, lawyers and actuaries in India.
The whole game's about to change, and I do think this country will see tougher times than it ever has before. But people always need a place to live!
Jason
Of course you are entitled to disagree with me, and while I am using my business name as my username, this is just my personal opinion! I enjoy interacting with other investors and property addicts- for the love of the game!
There are plenty of intelligent, successful and helpful people on these forums. But you must still ALWAYS seek your own advice! On everything!
The only evidence I use to substantiate this claim is my family's real estate holdings and the properties we sell in Merrylands. Nothing else!
I do not use graphs or statistics in any capacity when it comes to real estate. I have never found a use for them.
I've never seen anybody make quick money in real estate (and hold onto it in the long run!)
All the wealthiest investors I know, buy (ocassionally build/develop) and hold, rarely selling. This process takes decades. It is very difficult to get wrong, if you stay disciplined.
In my experience, real estate millionaires don't even care what the market is doing to the properties they own. Their time frames are longer than market variations. They tend to have the cashflow to never NEED to sell.
As an sidepoint, bona fide real estate millionaires tend to look underdressed and out of work most of the time as well! Ha ha any theories why that is?
One of our landlords comes into the office sweating, stinking and with mud on his boots and clothes. We manage more than 10 million worth of assets for him, and I know he has other property managers too!
If the economy implodes then you'll see one or more of the following:
Then again, Sydney might copy the London market, where there's enough incoming foreign capital ($6 billion per annum at current exchange rates) to push up the top end of the market, which in supports the rest. So you have unaffordable prices, mortgage restrictions, and rapidly rising rents, but a generation that looks priced out of home ownership.
- A reduction in the demand for rental properties.
- Buyers will be earning less and generally be more cautious about extending themselves.
- Banks will be concerned about lending against an asset whose price might fall, and cut back on what they offer for mortgages.
- Large numbers of distressed sellers or foreclosures that drive property prices down.
Then again, Sydney might copy the London market, where there's enough incoming foreign capital ($6 billion per annum at current exchange rates) to push up the top end of the market, which in supports the rest. So you have unaffordable prices, mortgage restrictions, and rapidly rising rents, but a generation that looks priced out of home ownership.
Funny post LJH. All the talk about property being solid long term, then this about how we get paid too much, imploding economy, etc.
Unemployment and wage deflation will certainly not be a positive driver for rents and property prices.
I thought you said you are not a 'doom and gloom' kinda guy?
I'd hate to be sitting next to you at a dinner party!
Just let us know when you've finished building that ARK.
F
Some have
2001 $100k+... last sales in this complex in Dec 2011 = $287-300k+
2001 $135k... now = $400k
