Agreed. But to the exclusion of property altogether? And if so, do you really see it as less of a risk?A broad solection of Blue chips all the way perhaps via an LIC and love them franking credits. Volitility is the price you gotta pay though, if there is a downturn the sun will comeout again population growth will boost the profits of the blue chips like of CBA and WOW long term regardless.
Call me an optimist
Property risk highest in a long time
- Thread starter hobo-jo
- Start date
My thoughts?
Yes, property is generally expensive these days, more-so than before.
BUT, rates are muuuuuuch lower. And I believe they are here to stay.
Why? Because people have big mortgages in general. And they can't afford to do alot of shopping so spending is down. What does the RBS do? Keep rates low.
K.I.S.S
Yes, property is generally expensive these days, more-so than before.
BUT, rates are muuuuuuch lower. And I believe they are here to stay.
Why? Because people have big mortgages in general. And they can't afford to do alot of shopping so spending is down. What does the RBS do? Keep rates low.
K.I.S.S
If all the liquidity that central banks are pumping into the market eventually comes home to roost in consumer prices and drives inflation through the roof then the RBA may not be able to keep rates low (at least not long term).
There are way too many environmental conditions to predict an exact outcome as inflation is not the only influence. House prices (capital city medians) rose strongly in the 1970s inflation, but fell in real terms (didn't rise as strongly as inflation).
talk of an inflation break out is a bit 2008. There's too much slack for inflation to grip (tho as per usual Australia is different in so far as our dollar is sickening and that will help push up costs) and this is the grim realisation that sees my bullish gold bug mate waking up at 3am in a cold sweat.
strangely (because they have had a long period of time to do the opposite and simply didn't) the RBA may need to jack rates to attract capital, defend the dollar and save households from rising cost of imported goods and the cancerous knock on effects of this. Way too soon to be likely tho and it seems the dollar is finding some support
A lower dollar will attract capital, because it will make australia a more profitlable and less expensive place to do buisness. Capital will also be increased from increased in earnings from exports. You quickly changed you r tune about cheap imported goods,they going to get too expensive now are they. Imported goods getting expensive is good that is why other governments have policies that try to keep their currency low.
Maybe just look at the current challenges first,the aussie dollar drifting below 90 cents,and Gold below 1000us,anyone in this site below 40 would never have experienced any long term downtrends in property,but anyone above 40 would have experienced several..
It is foolish to think low rates are here to stay, when they go up which they will they will go up quickly. They come down slowly and go up quickly. I always work on any thing less than 9% a bonus. A lot of properties dont have mortgages and alot of those that do have low LVRs.
My opionion:
That depends largely on what happens to wages as a result of the inflation. Traditionally wage growth and inflation were closely linked. The inflation of the 70 was partly a result of the strong unionism of the time. Business would put up prices to cover wage costs and unions would put up wages to cover the cost of living as a result of business putting up prices, and round and round it would go.
But the type of inflation we are seeing in the world today is a different animal. It's a result of a deliberate expansion of the money supply, aka quantitative easing. In the UK wages are not tracking inflation, which they acknowledge to be a big problem. Without wage growth there's is no overall benefit of inflation to a nation - unless wages were tracking too high prior to the QE.
Which was the case here in Australia. Wages have been too high. The drop in the dollar has helped alleviate that without any need for QE, but if any resulting inflation were to lift them back to where they were (in real terms) then there'd have been little benefit to the dollar drop.
But without wage growth there will be no added pressure on property prices, either. Sad, but true. Unless inflation gets out of control and continues to spiral up. Even then, though, without the strong unionism of the 70's, there is no guarantee that that there'll be much movement in wages, as is currently the case in the UK.
The moral. Those pesky unions that we all loved to hate may well have been what were driving property prices all those years, at least nominally. It's very possible that we have shot the golden goose.
And, no, this is not pro union propaganda, LOL. I am a small business owner who is happy to see downward pressure on wages. Just like to see upward pressure on property prices too, as overall that is good for the economy. Oh the conundrums!
So, to answer your question. What will happen to house prices? Maybe nothing. Maybe some falls, due to higher interest rates to offset that inflation without the accompanying higher wages.
Power to the unions, I say!
this is simply not correct
when talking of imported goods I was referring to things like dump trucks and generators, not cheap consumer items like cars and sneakers
other govts only do that because they are producing countries. we are not - we are price takers for virtually everything
Property risk
All of us on the SS forum/community who have been in property investment for a time will have heard and seen the good, bad and ugly stories of the bursting bubble, increasing unemployment and soaring interest rates. It just keeps coming and going and coming back again. It is par for the course and what seems the natural cycle of things. But that is the nature of the world and economics. We are successful as investors because we don't take every comment and spin it into a self defeating negative like most other non investors do. If you are smart and prudent with your investment choices you will be fine. If the world comes to an end tomorrow or we become bankrupt as a country, well these are forces no one can work around, so we just have to take them on the chin - so to speak.
My point is that not everyone works on a mine or comes to our country to work in mining. People won't leave their home countries on a whim and move here, just to move back again. Well some might, but most realise that they came here at great expense and emotional upheaval for a better life. We might have a recession coming or be in one, but it is going to be a lot better here than living somewhere like Spain with something like 25% unemployment.
There will always be the risk of economic gloom just the other side of a boom, that's life. You can either think like a naysayer and hope your superannuation and the pension see you through your twilight years, or grasp the opportunity to invest without sticking your neck out. Real estate will always be a long term investment strategy.
All of us on the SS forum/community who have been in property investment for a time will have heard and seen the good, bad and ugly stories of the bursting bubble, increasing unemployment and soaring interest rates. It just keeps coming and going and coming back again. It is par for the course and what seems the natural cycle of things. But that is the nature of the world and economics. We are successful as investors because we don't take every comment and spin it into a self defeating negative like most other non investors do. If you are smart and prudent with your investment choices you will be fine. If the world comes to an end tomorrow or we become bankrupt as a country, well these are forces no one can work around, so we just have to take them on the chin - so to speak.
My point is that not everyone works on a mine or comes to our country to work in mining. People won't leave their home countries on a whim and move here, just to move back again. Well some might, but most realise that they came here at great expense and emotional upheaval for a better life. We might have a recession coming or be in one, but it is going to be a lot better here than living somewhere like Spain with something like 25% unemployment.
There will always be the risk of economic gloom just the other side of a boom, that's life. You can either think like a naysayer and hope your superannuation and the pension see you through your twilight years, or grasp the opportunity to invest without sticking your neck out. Real estate will always be a long term investment strategy.
As I said, there's merit to some of what everyone is saying.
All that matters is, how much money you made in the past 12 months from all these predictions and convictions you all have?
All that matters is, how much money you made in the past 12 months from all these predictions and convictions you all have?
That could be another thread topic.
The past brings regret, the future anxiety. Hindsight is great.
Yet we live in the present. The now is where the action is.
aka as DB stated, put your money where your mouth is.
the reality is, buying a house and waiting 30 years for 'growth' does work.
but price growth is really a devalued currency against the initial asset. the price didn't go up because it was more valuable, the price went up because your purchasing power went down because of inflation - ie it cost you more of your money for the same item.
the price you paid in 1980 pales in significance compared to now, but at the time was equally as expensive as someone on current wages buying now.
we will have 18 year cycles of inflation, stagnation and deflation - but overall the trend is up.
I think we've seen the peak of the inflationary cycle, coming out of the deflationary cycle and I look forward to some stagnation and slow growth.
it's that 2020/2025 boom that worries me.
but price growth is really a devalued currency against the initial asset. the price didn't go up because it was more valuable, the price went up because your purchasing power went down because of inflation - ie it cost you more of your money for the same item.
the price you paid in 1980 pales in significance compared to now, but at the time was equally as expensive as someone on current wages buying now.
we will have 18 year cycles of inflation, stagnation and deflation - but overall the trend is up.
I think we've seen the peak of the inflationary cycle, coming out of the deflationary cycle and I look forward to some stagnation and slow growth.
it's that 2020/2025 boom that worries me.
seems the pain has started already - was just doing some ordering for an online business and I can hold prices for a little longer but my stock levels aren't very high and very soon prices will need to go up 10% across the board at least. Aussies have had it so good for so long that I really feel they have no idea what is coming down the line. Anyone looking to purchase anything should be acting now. Year end sales of stock bought with a strong AUD may be the last good buying opportunity in a long time.
re inflation, is it possible the talk of stimulus reduction is a fear that the cash may finally be unleashed? i.e. do 'they' know something we don't know?
re inflation, is it possible the talk of stimulus reduction is a fear that the cash may finally be unleashed? i.e. do 'they' know something we don't know?
Its been a hell of a month, I'd say. I've seen my purchasing power whilst overseas drop by 20% in these 5 short weeks.
If we take the example of Brazil (who began the public airing of Currency War talk a few years back), they've been well and truly stuffed by the Fed. They protested about low interest rates making their exports more expensive comparitively and then couldn't hold on and joined the ranks of the cutters. Since then their currency has plunged and they've just imported the inflation that should be hitting the US money printing cabal. Hence a small trigger unleashing a massive protest ie, bus fares.
Now that the Aussie is falling and our rates are primed to drop further, we can expect the same to happen to us over the coming 18 months. In fact, Currency Wars author james Rickards tweeted that we'll be heading down that path next.
Its a common thing these days.
Arab spring had a lot to do with the increasing price of basic foodstuffs.
israel had massive strikes over the price of cottage cheese
brazil about bus fares.
a lot of it is exported US inflation.
Double whammy as I said recently.
With the fall in AUD, all my cash reserves is up around 15-20% in value.
Then the properties are probably up another notch on equity value (up to 200% on some) with the recent uptick in inner city.
With the fall in AUD, all my cash reserves is up around 15-20% in value.
Then the properties are probably up another notch on equity value (up to 200% on some) with the recent uptick in inner city.
Similar threads
