Property Cycle

[PEI]

Just wanted to open up a general discussion to get peoples thoughts on the next property cycle.

When will it start?
Where?
Why?
By how much?

My thoughts are that it will take some time for the property cycle to turn around again. This is only my opinion and based solely on affordability and over value at present. Some of you have been through a few property cycles and have a lot more experiences in public perceptions and facts. After most booms there seems to be a fear factor attached to that investment option. The media starts to turn to other success stories such as shares, yields dry up, the public becomes fearful of property investment, maybe some stories of people over capitalising in property show up in the media, negative gearing possibly disappears???? the property cycles turns and slows or devalues. The general public stops buying investment properties, the baby boomers move towards retirement and start thinking about investing in shares for retirement income. All just hypothetical but the obvious time to buy would be just before the next upturn. When will that be?

 

[L Bernham]

but the obvious time to buy would be just before the next upturn. When will that be

uh.. we've been debating ad nauseum if and when a downturn is going to occur and not coming to any agreement.

Seems to me a little premature to try and pick the next up turn while we are at the end of the current "upturn".

But I'll play. Lets say 2016.

LB

 

[Brenda Irwin]

My guess for a total Australia wide boom is 2009.

 

[Michael Yardney]

When we look back I think we will find that this cycle has definately ended. This doen't mean no growth or negative growth, it means lower /slower growth.

In previous cycles there were 2 - 4 flat years and then 3 - 5 good years. We have had a very long growth phase this time which has ended during a period of rising interest rates and a generally strong economy.

Previous cycles have also ended during periods of rising interest rates but usually during periods of poor economic growth or recession or credit squeezes (in the 70's and 80' before financial deregulation)

This would suggest that we may have a shorter and flatter downturn and the market may have low or no growth for a year or 2 and then a period of accelerated growth.

In previous cycles, the property market was ussually strong in the latter part of each decade.

 

[Elly7]

Brenda I might be dead by then

 

[Sunstone]

Brenda I might be dead by then

Dear Elly7,

The body starts "dying" from when it is born. None of us know what is going to happen tomorrow. But most importantly is what you do NOW.

The difference you can make to achieving goals for yourself, your partner, family and who-ever else is important to you.

Life is short for everyone. Time is precious. Don't waste it.

Cheers,

Sunstone.

 

[OPM-addict]

Right on Sunstone

Life is short. Invest HARD.

I agree with Brenda the Australian property cycle will start again in 2009. Though some areas will increase more than others over the next few years.

Interesting enough that is the year when the start of the baby boomers (1944) will be forced to have manditory retirement.
Unless the Gov. wants to make them work until 70 y.o.

Respect, Peace, Out.

OPM-addict

 

[geoffw]

Re: Right on Sunstone

Originally posted by OPM-addict
Interesting enough that is the year when the start of the baby boomers (1944) will be forced to have manditory retirement.
Unless the Gov. wants to make them work until 70 y.o.

And I have heard a view that the extra rush of BBs will lead to a much bigger investor-lead boom than the current one, as the BBs start to realise they don't have enough to retire on- with the disticnt possibility that, after that boom, the crash will be far bigger than any which may or may not happen this time around.

 

[Aceyducey]

Yup - once the baby boomers are well into dying off, where will the replacement population to buy & rent property come from?

I'd say we'll see some dramatic changes in our immigration policy.

The problem with a consumer society with a heavy welfare element is that it requires both population growth and sufficient young people to pay for the elderly.....

Cheers,
Aceyducey

 

[BV]

Although the experts look at market movement during previous boom periods and do price comparisons between suburbs to predict future market movement, I think that this time around the property market is not at all the same and there is a risk that they get it all wrong.

The market economics are different. Our Economy is strong and is now linked to international markets. Loan availability and variety is much different to previous boom periods and other investment mediums such as shares, the media and the internet have much to do with how the property market behaves.

In the past few years lots of new investors have entered the market

I think that we will see even more investors move into the property market as some people will realise that they no longer can afford to buy a PPOR, prices are not dropping and they still can't save enough to catch up but can still buy an investment with the help of the tenant and their tax $

IF demand dies off (which it won't if interest rates stay around 7-7.5%) we will prob see a plateu for a year or 2 before prices start to move upwards again. I think that on average the increases will be well over inflation rates in the large cities and that we wil see short jumps to catch up any lost ground in the following years

Affortability issues will kick in sooner or later and people's buying power has to catch up if we are going to see another BIG boom any time soon.

Unless ofcourse the government or the banks come up with a good scheme that will make them money and at the same time keeps the market moving.

 

[AJK]

If you find the right property it's always worth buying no matter what point the economic cycle is supposed to be at. There's always a suburb that's growing in value. Even in the worst recession there's always some area producing good rent... you just have to find it. What I mean is that I don't believe the economic cycle is a true enough indicator of when you should or should not invest.

Most people don't realise that the vast majority of the world's fortunes are not made in good times, but when times are bad. Anyone can make money in good times; people who make fortunes do it in the bad. They achieve this through research, by knowing what's growing. On the other hand, most other investors do their investing ad hoc.

The truly wealthy people do all the research that is required. Truly wealthy people might seem lazy on one level - enjoying their wealth and doing what pleases them - but they're never lazy with their money. For example, if you were to ask Jamie Packer where he buys real estate, he wouldn't come back with some hazy answer. He'll say: "This is where I buy because it's growing". He'll tell you the current price level in that area. Truly wealthy people always know this type of detail off the top of their heads.

I do think the property cycle is over-emphasised. Prices may be falling but they won't be falling everywhere at the same time... and in some areas they'll probably be rising.

 

[Puppeteer]

Originally posted by Aceyducey
Yup - once the baby boomers are well into dying off, where will the replacement population to buy & rent property come from?

I'd say we'll see some dramatic changes in our immigration policy.

The problem with a consumer society with a heavy welfare element is that it requires both population growth and sufficient young people to pay for the elderly.....

Cheers,
Aceyducey

Acey,

I remember seeing an article and a graph of the population spread of Australia, and was surprised by the large post baby boomer proportion of the population.

From memory the generation after baby boomers is about the same size as the baby boomers, and then there is a slight dropoff in the generation afterwards (which the article went on to describe was attributable to people defering parent-hood, and an increasing proportion of DINKS couples, and children staying at home longer.

I can't remember exactly where I read this, but it was probably a bulletin magazine floating around the office a month or so back.

 

[Aceyducey]

Originally posted by Puppeteer
Acey,

I remember seeing an article and a graph of the population spread of Australia, and was surprised by the large post baby boomer proportion of the population.

From memory the generation after baby boomers is about the same size as the baby boomers, and then there is a slight dropoff in the generation afterwards (which the article went on to describe was attributable to people defering parent-hood, and an increasing proportion of DINKS couples, and children staying at home longer.

Puppeteer, refer the ABS site for a graph of the Australian population.

There is a large baby boomer bubble - and they are living longer

If we followed the Logan's Run scenario (killed everyone over a certain age) there would be less drag on our social security system....as it is each worker in the future will be supporting more than one retiree (despite super, which is insufficient in most cases for peopl over 40).

Cheers,

Aceyducey

 

[Puppeteer]

I had a look at ABS site and according to this page:

http://www.ausstats.abs.gov.au/auss...6bb8002315a5/7b31121743c8d5f6ca256bb90004a0b7!OpenDocument

(then follow the link to Australia wide stats).

0 - 14 years 20.8%
15 - 24 years 13.6%
25 - 44 years 30.0%
45 - 64 years 23.1%
65 and over 12.5%

The baby boomer generation is closest to the 45-64 group and clearly the younger groups (looking in 20 year groupings) represent progressively larger portions of the population.

Do you have another link population stat's that I might have missed, or a different representation?

I do conceed though, that I hadn't considered the impact of a population that lives longer. That will certainly have an impact, but the population does appear to be steadily growing after large change brought about by the baby boomer gereration (ie More people are being born/immigrating, than are dying/emmigrating), and immigration seems to have a smaller effect than births (due to the largest population being in the youngest 20 years).

Living longer though, probably accounts for the increase in the median age from 32 in 1991 to 34 in 1996 and 35 in 2001, though this increase does appear to be slowing.

 

[see_change]

People will work longer , and that's already happening.

My Father has just retired at the age of 77. He liked his job.

See Change

 

[Aceyducey]

Originally posted by Puppeteer
0 - 14 years 20.8%
15 - 24 years 13.6%
25 - 44 years 30.0%
45 - 64 years 23.1%
65 and over 12.5%

Puppeteer, the figures you regard as normal are actually VERY skewed.

50 years ago there was a huge bubble beginning in the 0-14 age group & it has been passing through the system.

Globally 50% of people are under the age of 20 - so in Australia to have that figure under 20% is placing a huge future burden on our systems.

Break the figures into decades and you'll see that the 35-45 group is significantly larger than the 25-34 group.....and it gets worse from there.

Cheers,

Aceyducey