impact of stockmarket crash on property prices

Hey all, I have asked this question in a previous forum,albeit differently worded.It is not rocket science to figure out there will be a correction or crash on the stockmarket at some time. I believe it will impact on property prices. one would be led to assume there will be downward presuure on prices, but that is not what happened after the stockmarket crash of 1987. Any seasoned investors out there willing to share their experiences of the post 1987 and post 200o era? on the flip side, demand is far outstripping supply at this time, and that should help underpin prices for some time.
I am looking to buy more in Sydney, just cannot figure out where would give the best bang for my buck in the next upturn/boom, when it comes(which it will eventually).
 
I suppose a big crash will happen when the market gets overvalued. Plenty of value about now though, so why would it crash now?

If it did crash now, while shares are reasonable value, [unlike 1987] it would mean that the economy was stuffed. Property would fall too. Remember that in October 1987, shares were yielding 3%, with property rental yields an average 8%. That's a lot of difference between then and now.

Do you really think property, specifically Sydney could boom if the stockmarket crashed. I would like to know how.

See ya's.
 
I think the market will fall. How much I don't know. The value we see (in the form of company profits and relatively low PE ratios) is a bit of an illusion, because it assumes that future profits will be at least at this level. If the subprime stuff gets worse, there is a risk of a general recession in the US. If that happens, profits will fall as consumption falls, so PE ratios will rise.

You have to question whether current PEs only look reasonable because the 'E' is being supported by over-consumption fueled by debt. When people start cutting back on debt..... Since I've been back I've been shocked at the price of drinks and dinner in the city, and groceries, etc. Every bar in the city is booming, and people are really spending money.

The skilled labour crisis is also resulting in faster income rises for even less experienced staff. These people (20s, early 30s) have never experienced a recession and I don't believe they are planning for one.

I also note that everything always looks rosy before a crash.
Alex
 
I am at a loss to understand why:
It is not rocket science to figure out there will be a correction or crash on the stockmarket at some time.
but property always goes up. :(

CNN has a headline this morning:

Glut of homes hits 16-year high
3:12pm: Sales slip but supply of homes on the market jumps to 9.6 months, pushing prices down for 12th straight month.

Do you believe we are immune from the USA effect? We certainly weren't a couple of weeks ago. Read the news this morning? All Aussie companies are reporting strong growth in profits.

And I'll have a bet with you that those who are not already in the market (either) won't have the guts or knowledge to get in anywhere near the bottom after a crash.

But rocket science is a doddle compared to economic predicting. :)
 
Property always goes up....... but with lots of flat periods and sometimes (and in some areas - but never seemingly all at once) dips. The difference (as I am sure most people know) is that unlike shares where you can check prices daily, houses just sit there and earn the same rent as last week, week in, week out.

No margin calls, no excitement.

Two bank loan shuffles ago, our valuations were slightly down, but of no concern to us because we had no intention of selling. Next loan shuffle, valuations up again plus some.

Wylie
 
Sunfish,
We can see the profit figures of Aussie companies but a stock market crash
won't be triggered by local events, it will be triggered by events in the US.
Cheers
 
Meh..property prices go up...I'd say share market becomes less favoured, investors turn to property, pushing prices up....just my guess...
 
Hey all, I have asked this question in a previous forum,albeit differently worded.It is not rocket science to figure out there will be a correction or crash on the stockmarket at some time. I believe it will impact on property prices..
All depends on what you invest in and who you read,corrections happen
every day in every world markets,who would have thought last week
all the racing industries would take a dive like they have over the past
few days,just because the average punters can't place a bet, that's how
quick the investment tide turns,if you think that property will go the same
way and everybody walks away from the Stock Market,good luck to you
everyone knows,blue :) chip inner city properties,and riverside suburbs
in Brisbane are now beyond the average property investor with the low
rental returns,the only problem is the US markets control what happens in this country and always will..willair..
http://www.2000wave.com/printarticle.asp?id=mwo081707
 
hi all
It depends which market
our market it will hit but to no real problem and companies that get hit will be corrected by the other majors.
to the larger boys that bundle there loans they will get a hedge fund here that will cover ther position
the us is a very different question
and I see that there will be a few funds that will appear on the horizon that are setup to buy the mortgage books of the funds that fall bey they way side
if you understand anything about these funds or have read anything you will have a grasp of the situation that these funds are in and boc(bank of china wrote off 3.4 billion off is bottom line last week)
some of these funds that are in trouble are more then australia's gdp will it cause us problems
yes it will
is the end near
no
would I invest in the us
no at the moment as you won't get a lend
would I look at these funds and invest yes
some call them vulture funds but there do very well all the same.
the bigger problem that has not sufaced at this stage
is that alot of these funds invest in large tracks of american real estate and you don't want large track on the narket all at once.
boc announce a sell of its 3.4 billion last week and sold to correct its position.
the other boys have not done as yet.
the big wave for me has not come in as yet and thats the reverse mortgage boys
as they are currently on the low interest section of there loans as they don't start to get money until the 4 or 5th year
and so when they get what in the share market is a margin call and they don't
a have the cash.
and b theyv just got devalued because the the rating system
you have alot of middle american with a very big problem
this is the reason that they are sucking in cash at the rates they are.
put at the end of the day you can only hold the dam for so long.
how long can they hold
your guess is as good as mine, bush, howard or for that matter half of europe.
is it some thing to worry about
no
why
only worry about thing you can fix or you can mitagate against and in this problem there is nothing I can see that anyone can do except look out for these funds as they will make alot of money out of this.
my .002
 
I was doing a bit of work today on a little unit I have located on Balmoral Slopes Mosman in Sydney. The unit is in a small block of twelve built back in the early sixties. I noticed that a lot of the older unit blocks in that area are either being seriously renovated or torn down to make way for bigger better developments. My unit's block is in a prime location on Moruben road. As I sat and ate my lunch while gazing out from my balcony at the 180 degree veiw of the three heads and the entrance to Sydney harbour I had these musings.

I don't know whether anyone has noticed but the world population is still growing and the developing countries are still developing and we are living on a planet where realestate in well located areas is still and always going to be worth more as the demand increases and supply falls.
I think folks can get pretty hung up on cycles and stats and although they are helpful in telling us what has happened to the herd, hold very little value to the person who recognises opportunity in any market through due dillegence and recognition of good value when they see it.
Simon
 
I think the market will fall. How much I don't know. The value we see (in the form of company profits and relatively low PE ratios) is a bit of an illusion, because it assumes that future profits will be at least at this level. If the subprime stuff gets worse, there is a risk of a general recession in the US. If that happens, profits will fall as consumption falls, so PE ratios will rise.

You have to question whether current PEs only look reasonable because the 'E' is being supported by over-consumption fueled by debt. When people start cutting back on debt..... Since I've been back I've been shocked at the price of drinks and dinner in the city, and groceries, etc. Every bar in the city is booming, and people are really spending money.

Geez Alex, you look like you've been reading too much globalhousepricecrash forums! :p
 
interesting to read fat prophets opinion that we are headed for rate cuts and inflation will be thrown to the wind in order to preserve liquidity. sounds like a good property investing environment
 
interesting to read fat prophets opinion that we are headed for rate cuts and inflation will be thrown to the wind in order to preserve liquidity. sounds like a good property investing environment

Sounds like a dream come true! Inflation to wipe out the real value of debt, low interest rates for increased serviceability!

Whats the catch??
 
I agree Simon, ..... I remember the crash of 87. The only people I remember who suffered from holding property were those that borrowed against it to invest in shares. The problem came when they had to service the margin call .... the properties had to be dumped.

I don't remember property prices being affected that much, ... maybe I'm wrong, but the market has seem quite a few crashes over the years but continues to grow. The "doom and gloomers" can panic and throw all the stats around they like, but like the rest of us ... its anyones guess what will happen, .... me .. I'm still buying.

Martin
 
Hey all, I have asked this question in a previous forum,albeit differently worded.It is not rocket science to figure out there will be a correction or crash on the stockmarket at some time. I believe it will impact on property prices. one would be led to assume there will be downward presuure on prices, but that is not what happened after the stockmarket crash of 1987. Any seasoned investors out there willing to share their experiences of the post 1987 and post 200o era? on the flip side, demand is far outstripping supply at this time, and that should help underpin prices for some time.
I am looking to buy more in Sydney, just cannot figure out where would give the best bang for my buck in the next upturn/boom, when it comes(which it will eventually).

Sorry Momo but the Stock Market Correction (not crash yet) was the result of a real estate crash started by the sub prime mortgage sector... not the other way around... Companies are recording record profits but because central banks and financial institutions all over the world OVER invested in the real estate market to use the properties as easy cash for loans to people who can't afford to pay it back, we have a problem... I don't believe the real estate market will head North for a long time... The "Credit Crunch" we are witnessing is just the beginning IMO... If you have a house you want to buy you better get a good deal because interest rates will rise which means more people aren't buying anymore and more people are selling... IMHO of course
 
Property is a long term thing. You'll never tip the bottom or the top. Just buy within your means (cashflow-wise) and hold for the long term.

Maybe the market won't head north for 5 years, maybe 10. But when it does the market will jump so fast you can't catch it (most booms are like that). Much better to buy into the fall, buy during the fall and as it's starting to come back up. Then you have a nice big portfolio to catch the next cycle.

In any case, all properties are NOT created equal. A standard 3 bed house yielding 5%+ will weather the coming storm better than an inner-city apartment yielding 3%.
Alex
 
on the flip side, demand is far outstripping supply at this time, and that should help underpin prices for some time.

Undersupply doesn't necessarily mean higher prices as people can rent instead (pushing up rents but decreasing buying demand). Further, just because there is demand doesn't mean buyers will offer ever higher prices. Higher rates and tightening lending standards will mean people cannot offer as much for properties. The numeric demand is there, but at what price?
Alex
 
What Constitutes a Crash or more appropriately a recession?

Lets look at 1987 and the great depression of the 1920's

- High Unemployment
- High interest rates
- High Debt (the average borrower today is 300% in debt which is twice as much the previous high which was during the great depression)
- High Inflation

So here are some indicators for you to look at....

Just remember that recessions occur on average every 7 years... our last one was in 1994... uh oh
 
So dfer, how do you plan on profiting from the coming crash and recession? You're definitely not young enough to have experienced the last one (neither am I).
Alex
 
So dfer, how do you plan on profiting from the coming crash and recession? You're definitely not young enough to have experienced the last one (neither am I).
Alex

I invest in stocks at the moment because I can't afford houses (because I'm realistic) and I'm not really interested for the time being... I can make more profit in shares at the moment then I could with property... Yes even during these bad conditions... I'm only 21... I will only know when to buy into property once all the taxi drivers stop talking about investing and heaps of people lose their homes to the banks... That's when I will know we have hit the bottom... I couldn't believe it when a guy who was no older than me and who worked in the gym equipment section of Rebel Sport Highpoint got off the phone and apologised because he just bought a house out in whoop whoop... I'm thinking this guy got a "Cheap Money" and now he has got a series of interest rate rises to come...

The Federal reserve may lower the interest rate a bit but only for a short time... I believe the Bears are back in town
 
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