impact of stockmarket crash on property prices
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Are you sure that's not just affirmation bias?
Reading the stuff over on GHPC.com I reckon a lot of those guys suffer from affirmation bias. They see the world as they wish it to be, not as it truly is. For them its a fact that there is no rental shortage and house prices are going to crash. On both counts I disagree strongly. I only hope I'm not suffering from affirmation bias, but I think I checked my rose coloured glasses at the door...
Cheers,
Michael
I could I just don't want to be losing money on mortgage repayments... I sold up yesterday so I will try and catch a falling knife again maybe late this week if not next week...
Gotta play it safe in these conditions... take in the small profits... gone are the days where you can get 1000% returns...
I believe the truth will lie somewhere in between. Basically, a rental shortage (which will get worse, so higher rents) AND a fall in prices. Not necessarily a precipitious one, just a couple of % a year. But if you compare a 5% a year fall with (general) expecatations of 7-10% gains a year, that's actually a -12 - -15% return. Enough to drive wannabe investors away and increasing rents. A recession will make that worse, of course, and we're overdue for one. Then after a few years property will be derided as a horrible investment, but at that point prices will be low enough and yields high enough for it to be good value again. THAT's when the next boom will begin, most likely together with another economic boom.
dfer, I think you're kidding yourself if you think you can just come into the market with no experience and buy at the bottom. You need two cycles to get rich: one cycle to learn and then the second to apply what you've learned in a big way.
Alex
dfer, I think you're kidding yourself if you think you can just come into the market with no experience and buy at the bottom. You need two cycles to get rich: one cycle to learn and then the second to apply what you've learned in a big way.
Alex
Ya reckon ??
Only for ordinary people like me. The extraordinary may be able to do it in one.
Or to put it another way: I managed to build a decent block of assets in one cycle. It's enough for me to be comfortable. However, to achieve true financial independence, buy the mansion by the water and first class holidays, I need that second cycle.
Alex
I agree with ya on a lot of things Alex... But I'm not classed as the average investor either... I've been in the stock Market for nearly two years and followed it religiously, I've made and continue to make huge profit, and I'm also a Building Designer... I have a lot of knowledge in the industry already... However I haven't invested in any of it yet... I'm just waiting for the next recession because that's a reseting...
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I have viewed that next rate move would be a cut rather than a rise -- which previously it was foolish done by brainless RBA.
gee.. thats a lot a experience you have under your belt !
perhaps alex can learn a thing or two from you with that background or for that matter, I will too
I see. You've made great gains in 2 years during a massive bull market. Well, mortal that I am I'll just have to stick to my gradual buying and dollar cost averaging. Me, I have no property industry experience so I'll just go for my usual median priced properties buy and hold for the long term.
Boring, huh.........
Alex
Are you sure that's not just affirmation bias?
Reading the stuff over on GHPC.com I reckon a lot of those guys suffer from affirmation bias. They see the world as they wish it to be, not as it truly is. For them its a fact that there is no rental shortage and house prices are going to crash. On both counts I disagree strongly. I only hope I'm not suffering from affirmation bias, but I think I checked my rose coloured glasses at the door...
Do you mean confirmation bias?
I think there is an increased rental tightness compared to say, 2-5 years ago, and I don't think you will see anyone denying that on GHPC forums.
We have used census data to try and show that there is no fundamental DWELLING shortage.
One of the problems of defining a shortage is that demand/supply can be affected by either of the 2 moving. I think that dwellings constructed vs long term population trends, number of empty bedrooms etc shows no fundamental undersupply, but there definitely is an undersupply compared to current DEMAND (which is basically as much as credit allows people to buy)
I expect rents to keep rising probably a little bit over wages, but prices to fall as lending standards return and bad debt explodes.
Rents are up but in the last few years repayments of interest (from 6->8.5%) have increased faster than rents.
No it's not boring...
I have to admit the best part of owning a house is having a tangible asset... Something to look at, something to show for... Not boring at all... I'm curious to know how far you've progressed since you started?
It all depends on the psyche of the buyer,why play safe ,I sold up yesterday so I will try and catch a falling knife again maybe late this week if not next week...
Gotta play it safe in these conditions... take in the small profits... gone are the days where you can get 1000% returns...
opportunity in this market is everywhere ,don't know about
1000% returns but i would be interested to know what stocks
have done those numbers over the past few years,from the lists
in front of me those number that fit into the1000% returns are few
and far between,the only problem with trying to catch a falling knife,
is everybody is trying to do the same..
willair..
http://ocw.mit.edu/NR/rdonlyres/Urb...B29-17E5-43FD-850B-5758E17A9BA7/0/ch20new.pdf
here are a few codes of the main stocks I follow
PDN, MTN, AGS, BMN, CAV, DYE, DYL but PDN is the crazy stock from a low of 1.1 cents per share to over 10 Dollars in something like 4 years
They're not all necessarily 10 baggers
I'm not advising any body to invest in shares please... I'm simply explaining my view on the Credit Crunch from a Stock Markets point of view
Excellent point
What is the historical data on such occurences in the past. That info would show a clearer picture of our present economic future.
Simon
No it's not boring...
I'm pretty sure you and I have very different investing styles, so I don't think comparables can be made. I aim for a fair amount of gearing with stable assets investing for the long term. You obviously invest in other things. I also think we have very different views on what property investment actually involves. The physical element means nothing to me. I have bought sight unseen and rarely go to look at my properties.
Me, I can't really afford to sell either shares or property, really. CGT, sell and buy-back costs..... the market would have to tank by 20%+ for me to break even. I guess I can't go in and out of shares like you can. Ah well.
Alex
There will also be periods when rents go up while interest goes down. I think we're going into one of those periods. Falling interest rates don't necessarily stimulate property prices if there is a recession. Inflation is a wild card, and oil and food prices can go crazy without any underlying economic reason.
Alex
But falling interest rates make holding property less painfull especially if rents keep increasing. If that were the case it would not matter that prices stagnate for a year or two, that is unless you have just bought into the market.
Simon
I agree. As investors especially, since rent increases. However, this sort of environment is usually accompanied by a recession. If you don't have a job, it doesn't matter how low property prices are. So while stagnant markets are actually better to buy in than a boom, the fact is many people won't be able to buy because they either don't have a job or are too afraid.
For me, I'm looking forward to stagnating prices and rising rents. Give me a few years to pick up some IPs. In a rising market any idiot can make money. In a weak market the financially prepared will succeed.
Alex
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