Didn't say you were a Troll; just asking the question that plenty of others here would be thinking, given your volume of posts so far.
Continue on then. Give us yer best.
But, my argument is this; rather than say "don't invest" - anyone can do that, and most people do....
How about coming up with a few strategies for investing during the not-so-good-times?
This is what the forum is for; discussing ways to get wealthy from property; not "do nothing".
Actually I think that doing nothing is sometimes the hardest thing to do if there is a lot of pressure to do something. And yes I think buying a house to live in is investing.
As for my volume of posts, I just find the conversation here interesting that's all.
Personally I would say if you are investing in the long long term and really don't care about losses for quite a number of years, Brisbane and Perth will be the best. This is despite the fact they are having the worse price declines now. I actually agree in the long-term resource constraints will be massive. Also I believe, following what is happening in the EU and the US, government spending will be cut. That and they seem to have the least pension liabilities of all the states (see last bit below).
The main reason why I'm not buying property in Brisbane or Perth now is because why buy now, when I can buy cheaper later? The thing is think a lot of the commodity prices right now include too much of a china boom which is not permanent and also more importantly, massive speculation due to QE. If the Fed looks like it is going to be muzzled by the GOP, sell mining stocks. Also, even if Brisbane and Perth survive better, the seize up in the financial system from the other parts of Australia going down will still affect house prices in those areas. Also the risks and instability in the Qld banking system at least (BoQ and Suncorp) still haven't played out. I think Qld and WA will seem to be the worse performers in the short term then good in the medium term then crash seriously and then do the best in the long long term. I'm not desperate to buy and I can afford to wait.
Also there is the possibility I could be really wrong, and I might need to change my investment strategy quickly. Once you've committed it in housing, you've lost a lot of flexibility and it's not like I think the big boom will happen any time soon. For example may be I'm wrong and the big employment and growth will happen in Sydney.
I can only say what I would personally do if I had to buy right now. There are the usual things (buy within your means etc. etc.) However other things is I would buy the least risky house. That is the property with the largest available potential buyer's market - an established average house close to good transport links.
http://www.irishtimes.com/newspaper/property/2010/1028/1224282135011.html
The subject of property values these days is a tricky one, to put it mildly. The truth is that none of us can value property now with any degree of confidence. Estate agents will admit (off the record and after a few drinks) that some properties are actually impossible to value because there just isn’t a market for them at the moment. Regardless of the asking price, they will not sell.
The adage that “everything has a price”, does not necessarily apply to property, as lending institutions are just not lending people money to buy property they consider to be in any way suspect. In other words, if you’re planning on buying pretty much anything other than a well-located three-bed semi, then your chances of getting a mortgage are slim to none.
Few have sufficient cash to buy a property outright, without some sort of loan, however small. Most require loan approval in order to facilitate their purchase and if their bank doesn’t approve of the proposed purchase, then they will not be lent any money to buy it.
If people are not lent money to buy certain properties, then these properties can’t sell. And if they can’t sell, then they have no value.
So, as you sit reading this property supplement at your breakfast table, you might guess that your home is now worth 50 per cent of its boom-time value, but think again.
If you are living in anything other than a well located three-bed semi-detached urban house near good transport links, your property may be considered suspect and be of no value whatsoever. How’s that for a cheery thought to start the day?
If those Irish banks are still giving out mortgages to an average 3-bed established house with good transport in Ireland right now, I imagine that sort of property has a decent chance of surviving the best in any downturn in Australia too. Yes, all that will do is minimise your losses during a downturn, but hey, preserving capital is very important.
I think the other advice would be to consider the neighbourhood the property is in. A lesson learnt from the US is that in a downturn, while you personally may have been prudent and wise your neighbours may not have been. And forced selling in your neighbourhood will drag down *your* property price as well. Are they serious, fiscally conservative people who bought at low leverage (or ages ago) and are unlikely to get into negative equity or lose their jobs? This is not about whether they are "rich" or not (they may just have a lot of credit card debt). It is about how likely they will be forced to sell or go into negative equity.
The actual economic treatment of this, as applied to an entire economy, is in Minsky's financial instability theory in which there are three types of borrowers: ponzi, speculators and the most conservation or hedge borrowers and in which in a debt driven downturn the other more risky borrowers can bring down the more prudent borrowers by causing the financial system to seize up.
Make sure you don't rely on credit too much. In any sort of downturn the banks will likely start shutting off credit. This may force you to sell.
If there is any downturn, it is likely there will be a dead cat bounce at some point. Even if you miss selling at the top you can sell at the dead cat bounce (if the market is slow cut by 10% below similar houses and make them think they are getting a bargain). And make sure to sell to someone who doesn't need to sell their own house first - a big problem in Brisbane.
A thing to remember about apartment blocks in a downturn is that if lots of other people start bailing out you may have to cover more of the common fees, eventually causing you enormous pain. This is a problem in the US with condos. Actually I think this is a variation of it doesn't necessarily matter how prudent you are, your neighbours can still bring you down.
The next bits may be a bit long shots as it will only happen in Australia reaches the same depths as Ireland but if you have an interest only loan, make sure that the bank can't force you to pony up extra cash if prices drop. Or (with X days written notification) force you to pay the principal as well. Also as people are learning in the US, with the debts of local and state governments and their reliant on property related taxes and/or sales taxes during the boom, what will happen in a serious downturn is services will be cut, local and state taxes raised and this can't have good effects on employment and property prices. Also in a downturn pension liabilites to public servants become more of a burden because investments go sour. Also don't forget the rapidly aging population. The questions are: how reliant on they are on property related taxes? How big are their pension/superannuation liabilities to the public servants? Have they invested the money wisely (e.g. not in commercial property). If things go sour how much extra money do they have to put in. Do they have reputation for corruption? How overpaid are the public servants?
For example here:
http://www.theaustralian.com.au/nat...liability-crisis/story-fn59niix-1225958841611
The state government share of the net liability is $82.6bn -- nearly double the $45bn it was in 2005.
Without any savings plan, the liabilities of the states are skyrocketing as many of them increase public servant numbers, pay and benefits.
Queensland is the only state that has no liability, whereas generous benefit schemes have been retained in other states and their liability is increasing. Most alarming is NSW, which has the biggest liability of $34.4bn -- almost three times the level five years ago.
The government had sold assets such as the state lottery to fund the liability, but it had still increased by 10 per cent on last year.
He said a Future Fund model, with dedicated budget allocations, was needed to arrest the alarming increase.
The policy paralysis of NSW is despite the state having benefited from rising mineral royalties, because most of this windfall has been blown on populist spending.
Yesterday, a spokesman for Treasurer Eric Roozendaal said an independent review, released earlier this year, confirmed the government was on track to fully fund its liabilities by 2020.
The spokesman said $510 million from the sale of NSW Lotteries was poured into its superannuation liabilities.
Victoria has the second-highest liability of $22.5bn, but its increase has been at a slower, although still disturbing rate of about 50 per cent since 2005.
Western Australia's former Liberal government reformed its public service scheme about a decade ago and its increase is less dramatic, up $2bn to $7.4bn over the past five years.
West Australian Premier Colin Barnett said last night superannuation entitlements of the vast majority of state government employees have been fully funded since 1998-99 through a decision of the Court Liberal government.
Well, I guess that rules out Sydney as a good safe investment decision. NSW fits the over categories too actually, e.g. corruption. Yes, definitely not Sydney.
The total NSW government revenue for 2008-9 was about $48 billion. Let's say the third of their revenue that comes from direct taxation goes down.
For example of how this can affect the government take this from 2008:
http://www.theaustralian.com.au/bus...-deficit-blowout/story-e6frg90f-1111118304707
The blowout in the super deficits at a state and corporate level is the direct result of plunging equity markets. Latest figures - calculated for The Weekend Australian by financial services research group Rainmaker - reveal the total value of Australia's superannuation pool fell $72billion between June 30 and November 30 to $1.1trillion.
There are warnings that the situation could be far worse, with a further $160billion-plus worth of unlisted investments held by funds expected to be devalued at the end of the month to reflect the economic crunch.
The collective deficit in state super funds will put pressure on state governments to consider new taxes to plug the holes in the retirement savings, according to Alex Dunnin at Rainmaker.
"Share markets diving 40 per cent in a year for the unfunded liability is like pouring petrol on a bushfire. It only makes their lack of a plan more problematic," Mr Dunnin said.
He said what caused the unfunded state government super unfunded liabilities was a naive hope that they would somehow go away.
"In Latvia it is illegal to mention the global financial crisis. In state treasuries, the same stupid rule almost seems to apply to unfunded super. The ballooning NSW unfunded liability just reflects what's wrong with NSW across the board," he said.
Of course the recovery have enabled them to paper things over again but if there is a big housing or other downturn, this problem will emerge again in a bigger way.
If things are still rosy in the future NSW may be OK. However if there is a serious downturn, NSW is at serious risk of having the downturn caused by housing further compounding the downturn.
