Huge article from Steve Keen on why prices are going to crash

Different time in each city............is there too much hot air in the balloon?



Today the REIA released it's December 2009 Median House Price Data as follows:

Sydney: $598,000 (increase since Sept of +$29,000)
Melbourne: $540,400 (increase since Sept of +$60,400)
Brisbane: $451,000 (increase since Sept of +$21,000)
Perth: $460,000 (increase since Sept of +$20,000)
Adelaide: $385,000 (increase since Sept of +$15,000)
Canberra: $465,000 (increase since Sept of +$26,000)
Hobart: $347,500 (increase since Sept of +$22,000)
Darwin: $540,000 (increase since Sept of +$22,500)
Australia: $515,000 (increase since Sept of +$33,700)



Melbourne's balloon has helium in it :p :)


Hi Player

Someone was nice enough to send me some recent stats on Melb:

Northwest suburbs top the chart in Melb

1999 to 2009

Broadmeadows $105,100 $357,500
increase 240%

Maidstone $155,000 $499,500
increase 222%

South Melb $340,000 $1,067,500
increase 214%

Footscray $195,000 $602,500
increase 209%

Sunshine $140,000 $426,000
increase 204%

Glenroy $153,000 $460,000
increase 201%

Keilor East $182,500 $515,000
increase 182%

Thomastown $142,000 $390,000
increase 175%

Cheers, MTR
 
Hi Player

Someone was nice enough to send me some recent stats on Melb:

Northwest suburbs top the chart in Melb

1999 to 2009

Broadmeadows $105,100 $357,500
increase 240%

Maidstone $155,000 $499,500
increase 222%

South Melb $340,000 $1,067,500
increase 214%

Footscray $195,000 $602,500
increase 209%

Sunshine $140,000 $426,000
increase 204%

Glenroy $153,000 $460,000
increase 201%

Keilor East $182,500 $515,000
increase 182%

Thomastown $142,000 $390,000
increase 175%

Cheers, MTR

So with these 'averages' going up by 200%, and with the assumption that property doubles every 10 years, then using 1999 as the base (just for argument sake), then what is the expected return for 2009-2019?????

Broadmeadows price should be in 2019: $105k x 4= $420, current price $357, return for 2009-2019: (420-357)/357= 18% over 10 years, whats that as an annualised rate????
 
I have no idea not good with figures. All I can say is I am happy and with proposed DAs in place you can add much... more so the figures can possibly be doubled, nice one.
 
So with these 'averages' going up by 200%, and with the assumption that property doubles every 10 years, then using 1999 as the base (just for argument sake), then what is the expected return for 2009-2019?????...............

Who knows? :confused:

The next tranche of suburbs that might return 200 % in 10 years could be different to the list provided by MTR above.

All the suburbs mentioned except perhaps South Melbourne, were seen as undesirable despite being within 10-15 km of the CBD.

Sometimes suburbs are just "too cheap" and they play catch up. Particularly when they involve infill land where they cannot manufacture anymore dirt. Add value like MTR does with DA's (planning permits) and the upside can be even more appealing ;)

If I had to guess where the next decade's shiners are going to be, I would say anywhere with amenity and good roads. So west, N/W and S/W. Not new estates, however devloped suburbs that are gentrifying and where local government is keen for denser living. So buy within 1 km of a train station and shops and > 600 sq to have the potential to subdivide as infill land becomes more valuable.
 
Hi all,

Player,

If I had to guess where the next decade's shiners are going to be, I would say anywhere with amenity and good roads. So west, N/W and S/W. Not new estates, however devloped suburbs that are gentrifying and where local government is keen for denser living. So buy within 1 km of a train station and shops and > 600 sq to have the potential to subdivide as infill land becomes more valuable.

Brilliantly stated... This paragraph is exactly what every newbee to property investment should be pointed to. Every time we hear the talk of off the plan SD savings, or new developments etc, point them to this paragraph, the places where the real property investors lurk.

bye
 
Here's some more......apparently Mr. Keen believes that as we've borrowed too much for housing, we’ve avoided hitting the ground of deleveraging by climbing to a higher cliff:


http://www.businessspectator.com.au...es-high-pd20100324-3U7LY?OpenDocument&src=kgb

Saving the breath would be considered prudent IMO to conserve energy for his hike. ;)

The usual arguments to and fro about affordability versus unaffordability and the entitlement that people should live in houses of their choosing/desire from day one as their first purchase versus delaying instant gratification and trading up as most people have done in the past could go on and on........:rolleyes:

It is not uncommon for people in other countries and major cities of the world to be tenants for life whilst they go about their business and life by allocating those funds to investments and travel, lifestyle, etc.

We may see here a scenario similar to New York, London and other densely populated European cities where the number of renters in the property market hovers around 40 % and sometimes higher, whereas here it is a generic 30 percent across the board in Australia.

There's nothing right or wrong about this.......it could just be a move to follow other global norms and customs. Houses have never been affordable. If one also takes the perspective that in real terms all whitegoods, electronic items such as TV's, motor vehicles, air fares, telco charges, and other consumer goods are actually much cheaper in real terms when compared to 10, 20 and 30 years ago, there is no excuse for people to grumble about not being able to afford to buy a home, or should I say "the home" first up, without some consessions.

It ain't what one earns that's important, it's what one (decides to) save after spending that counts. There are folk that have built impressive property portfolios who were on a well below average wage and are now financially independant. They were prudent savers and investors....perhaps those who come from the perspective of home unaffordability could mimic those prudent investors and just buy one such asset.....who knows they too could duplicate into IP's and become investors themselves......or not. :cool:
 
I dont know, but what i do know is the churn that happened in this forum, during the GFC.
Its interesting to look at this forum pre GFC and post GFC.
Many some people said 'yiip buy for the long term and hold' but when the sh**t hit the fan, there were a number that panicked and tried to sell, others just disappeared into the sunset.
(of course there were also some serial D&G'ers who also road away, namely non-recourse, hey buddy where are you, i'm still here:D).

The point i'm trying to make is its easy to be a bull when the sun is shining.
Its the long term players with rstrong risk management plans that move through the various cycles.
 
Many some people said 'yiip buy for the long term and hold' but when the sh**t hit the fan, there were a number that panicked and tried to sell, others just disappeared into the sunset.

I sold IV, not out of panic, but risk management.....like a stop loss.
What many don't appreciate is that even if an asset's price hasn't moved, the risk in holding it may have, and this effects risk adjusted reward.

Every disciplined serious investor measures in RAR, not blind net profit.

The risks during GFC were extreme....and we are still not out of the mud.

Re NR, the last time I spoke to him he was expanding his very CF+ chain of health sector centres. Obviously a good sector to be in when managing downside risk.

How's your investing/trading going since October IV?
 
How's your investing/trading going since October IV?


From October i'm still doing very nicely. From December 31st to now, i'm down 2%.
Part of this is my own fault:(
I made some stupid investment decisions (with hindsight). Sometimes when the market is bullish for long enough, you should just reduce debt or increase cash instead of moving into positions in lower quality companies.
Mistakes i made that are costing me money (and i am not even sure of underlying intrinsic value, more fool me:mad:), include:
buying and exiting
UXC
CND (although i could have been too early on this one, not sure yet)

buying and selling a partial position on PBP (again the lack of quality in the half year result makes me doubt my position, i'm still holding 50% of original position with the other 50% position costing me 20% realised capital loss).

Interesting point though, i looking through the non-resources market, it seems alot of companies are now trading back at their Augest/September levels. Not all, but alot.
 
What many don't appreciate is that even if an asset's price hasn't moved, the risk in holding it may have, and this effects risk adjusted reward.

Every disciplined serious investor measures in RAR, not blind net profit.

The risks during GFC were extreme....and we are still not out of the mud.

I quite agree about the underlying risk, regardless of asset price movement. Sometimes general conditions have to be taken into account.

What is RAR???

Yes agree the risks during the GFC were extreme for some areas, not for others.
As mentioned in my strategic outlook 2008, i never believed australia was at risk to the level hyped by some people and invested accordingly.
 
Another lession i have learned (dont you just love the market, its a fantasic teacher, the trouble is you just never know the cost of your tuition bill:D)

When the market is in a bear market, its safer to buy good quality companies on a price decline because of pyschological fear. The greater the bear market, the safer it is to buy good quality companies on the price decline.

In a normal market due consideration must be given to a price decline near the release of publicly sensitive information. The market is no longer gripped by fear, therefore one must consider what does the market know that i dont.
 
NR is a total crack up, what happened to his sharemarket crash in 2009? :D

I guess we are still waiting :D

I am sure he will be back one day :D

I sold IV, not out of panic, but risk management.....like a stop loss.
What many don't appreciate is that even if an asset's price hasn't moved, the risk in holding it may have, and this effects risk adjusted reward.

Every disciplined serious investor measures in RAR, not blind net profit.

The risks during GFC were extreme....and we are still not out of the mud.

Re NR, the last time I spoke to him he was expanding his very CF+ chain of health sector centres. Obviously a good sector to be in when managing downside risk.

How's your investing/trading going since October IV?
 
NR is a total crack up, what happened to his sharemarket crash in 2009? :D

I guess we are still waiting :D

I am sure he will be back one day :D

Yep, ASX at 2200, and AUD at 0.32 USD, and house prices to fall 50% across the board.

This was all supposed to happen by October 2009. According to NR.
 
When the market is in a bear market, its safer to buy good quality companies on a price decline because of pyschological fear. The greater the bear market, the safer it is to buy good quality companies on the price decline.

well, it is all fear and greed. just imagine how much less volatility there'd be if the stock markets only traded once a quarter.

RAR is risk adjusted return, and more precisely, risk adjusted return on capital at risk where,

expected return = P(win)*size of win - P(loss)*size of loss)

It is unsophisticated to compare returns without adjusting for risk.
Consider three investments:

1. 100% return/loss on the toss of a coin.
ER = .5*1-.5*1 = 0

2. 6% return on bank interest bearing term deposit.
ER = 1*.06-0*1= .06
[P(loss) on bank interest is treated as the risk free rate]

3. bet on one number on a roulette wheel with 38 numbers and a 35x payout
ER = 1/38*35-37/38*1 = -0.0526

although the bank's face value return is small, it's risk is virtually nil, and therefore it has the highest RAR.......so rightfully, a wise investor would choose it over the other two every time.

this same analysis is applied by all large business, banks, insurance companies etc in their allocation of capital.........and it should be emulated by individual investors......and governments.

the trouble is it is difficult to measure downside risk without a thorough understanding of the forces that influence that risk......hence the arguments that break out on somersoft re where house prices are going.

Even the RBA can't make its mind up about the risk associated with current house prices. One week they put up rates partially on the basis of a housing bubble forming; the next week they come out with the Financial Stability Review to justify why there isn't a bubble. As expected, Chris Joye is joyous.
 
Back
Top