Perth to become most expensive city!

[alexlee]

I wouldn't say Perth property won't plunge? i think all property would plunge. interest rates then fall and it all starts again. as alexlee pointed out, clear streams and mountains don't equal high property prices. there is nothing particularly aesthetic about Kalgoorlie for example.

the scenario starting with a US housing bust is kicking around all over the place at the moment. I find John Mauldin's updates particularly interesting. i can't see anything healthy about an economy propped up from US consumer spending resulting from inflating property values. real growth in GDP creates wealth, not equity withdrawals against valuations that have run ahead of long term vals.

And at the same time, just because a place has water, mountains, etc doesn't necessarily mean it will be popular. You still need utilities, services, etc and if city property prices fall, the boomers aren't going to be confident enough to just 'cash out' and move. With a critical mass of retirees shops and services will just appear, but that's assuming the retirees are confident enough to spend. Most of these people are just 'we own our own home' types who don't really know how to manage money. A economic downturn will hit their confidence hard.

Cashing out and moving is an expression of confidence in their retirement, I believe, and if the economic outlook is uncertain, they won't. They will cling to what's familiar, and that means staying put in the old house.

What's interesting is that now experts are saying flat and falling property prices in the US won't plunge the US into a recession. This despite the last 5 years of consumer spending being propped up by refinancings, and inflation kept low by shifting production to China.

For me, the more interesting question is 'in an economic downturn, which market will plunge the most'? Looking at rental yields, I say Perth. Of course, if you bought before, say, 2005 it doesn't matter much if prices fall 20%. I won't be buying in Perth anytime soon, though. I'm not selling, either, but for new purchases I'll pick markets with a bit more cushion in the form of rental yields.
Alex

 

[alexlee]

Ausprop, a Global recesion hits, shares plunge. OK sure. What the hell do you think will happen to Perth property? Your dreaming if you think it won't plunge too. Perth prices aren't as high as they are because of the views and the sand and the wind and the scrub you know.

I believe a recession will come but it will also pass. So, lock the values into the Perth properties with LOCs, and buy when the market crashes! If it doesn't, watch your properties go up even more. THAT's why it's easier after the first couple of properties. As long as you manage your cashflow you win whether the market falls or rises.
Alex

 

[cabo wabo]

and buy when the market crashes! If it doesn't, watch your properties go up even more. As long as you manage your cashflow you win whether the market falls or rises.
Alex

Spot on Mate! Ur onto it....

 

[alexlee]

BUT, where the Perth market is currently so hot, I see no need to buy in WA. We have plenty of other choices, after all. I don't time sells to maximise my returns, but I try to time my buys a bit.

The cashflow from a Perth property in general sucks right now (3%). You can't tell me that long term a normal Perth property will grow twice as fast as a normal SE Qld house yielding 6%. (This comparison is based on the fact that for the same amount of cashflow you can own twice as much house in SEQ as you can in Perth). For buy and holders, Perth is pricey right now.
Alex

 

[Celeste]

So where are the jobs in Mandurah and Hervey Bay???

Hi all

Beef- Hook

I was responding to the above quote.

Beef-Hook - Yes, but you will need someone to clean your house/pool, serve you at the shops and restaurants, nurse you in the hospital, someone to provide you with those leisure pursuits etc etc.... I'd guess these people won't all be travelling down from Kwinana to work.

Exactly!!!! That's what I am talking about!!!

Celeste