Recession ??



From: Peter TRAN

Hi all,
Lately the news have mentioned a lot about a possible recession soon. Does any one know how the recession (if it happens) will effect the property market. I am thinking of getting another property soon, but now in a dilemma of waiting or not waiting to take advantage of the recession. What are your thoughts on this.

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Reply: 1
From: Yee Chan

Who knows exactly what's going to happen? There's lots of speculation but, personally I think one shouldn't worry too much if one is not a trader, i.e should be a buy-&-hold strategy as suggested by J Somers. Otherwise one will become one of the "Gonna-do's"
I've just bought a second IP & looking forward to reaping the rewards.
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Reply: 2
From: Peter Davidson

I agree with Jan Somers. Hold onto investment and buy when you can afford, but I can't stop thinking\believing that house prices will fall substantially over the next few months with recession looming. Not being a pessimist, but all the signs are there. High fuel prices, GST, rising unemployment, federal election, world economy slowdown, weakest Australian dollar on record, consumer confidence levels down, winter(property prices drop) etc. You'd be a fool to believe Howard and his advisors to say where not heading for one. Anyway, I'd like some views on this. What do people think will happen over the next few months? I was fairly confident late last year in buying an IP, but now have my reservations and will wait for at least 4-6 months to see what happens. I believe the chance of houses substantially going down is a lot higher than them going up. Some people on this forum will go on and on about staying positive and "only the tough get rich", take your chances, etc, but one must also be "real" and understand things won't always be rosy. I think my job is secure, but who knows what will happen with many businesses going bust! We are in a fragile time. I know I'm being a bit negative, but please don't have a go at me(I'm only human). I guess I'm a realist. Thoughts please.
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Reply: 3
From: Kevin Forster

Probably the two main things is that if the papers are reporting that we're in a recession then we're already in one.

One thing with property is that if property prices flatten out then a lot of property owners will just sit tight and wait it out. If the property is rented and is creating an income then most will just sit tight. If the property isn't rented and they need to sell quick because the mortgage payments are eating them - one wonders if you would have any more success in renting it out; unless of course they vendors are mismanaging the property.

Interest rates probably won't increase as it's hard to have inflation in a recession so there is less chance of skyrocketing interest rates causing property owners to sell.

Just my $0.02

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Reply: 1.1
From: Rolf Latham


Good point - seems to be a lot of chicken little's around. Is the ssky really falling ?

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Reply: 2.1
From: Rolf Latham

Hi Peter

Very good post given the current media.

I am not an IP guru, nor a huge IP investor, so I rarely comment on issues of the prop side.

If you truly believe the buy and hold scenario, then regardless of when you buy you will benefit medium to long term.

If that were correct, the only "logic" for holding off is the basic human need to get a better deal when "prices drop" for a short period.

The value of property issue is for most people much easier to "risk manage" than the source of their PAYE income. Any loss is only a paper loss in the interim and the bank will rarely come knocking on your door for a margin call.

All other aspects are pretty much in your own control unless we have a full on depression.

If you are worried about servicing the debt due to job loss - yep then look real hard,because that is your biggest asset.


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Reply: 3.1
From: Synth Boy

Well, I think the Prime Minister is correct insaying we are talking ourselves into a recession.

When we had the Keating "the recession" we had to have, conditions were totally different. We had extreme high levels of un-employment, 17.5% in interest rates......reality was no where to be seen !
Then things went crash !!!!!!!!

Now we are falling into the trap that the likes of Peter Spann and Henry Kaye warn us about. Its called "market sentiment". Markets panic, people panic, population panics. Smart people now walk in and make money. Its all started from the media. They hype it up and then in the end belief what they are saying. As Peter Spann says " your taking advice from people who have caught the train to work and writing in a newspaper for a job".

What do others think?


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Reply: 3.1.1
From: John (Brisbane)

Hi SynthBoy,

You said: 'In a recession ..... Smart people now walk in and make money.'

Bring it on, recession or no recession property prices in Brisbane are on the way up. My job is secure so the picture is just getting better! Good times are coming for those who can see the opportunity created by change. Slaughter those sheep, squish those lemings, etc. (I'm a vegiterian BTW) As long as those lemings need a roof over their heads property investors will be OK.

If the press wants to talk the herd into a recession, let them. Guys & Girls Let's Just Do It !! We have the know how, its contained in the forum archive.

BTW I do not believe you can link individual house prices to the inflation index. Property operates on supply & demand created by demograpihics, property trends, local economics and macro economics and many other factors. If you use long term fixed interest then the prevailing interest rate isnt a big concern either.

Oh yer, I buy & hold, if you are trading property it may be a different story. Can any of the property traders here give us a few words on thier outlook?
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From: Michael Croft

YES !!!!!!!!! Keep those interest rates falling. Keep talking recession please, please, please. Every 0.25% drop means $12k p.a. to my bottom line, and opportunities abound.

Regards, Michael
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From: Gee Cee Cee

Know the feeling!!

Just as well the % rts are not going up at present Ah

Gee Cee
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From: Gavin J

Forgive me for being new to all this IP stuff, but isn't a recession what everyone should be looking forward to?

With interest rates astronomically low (as well as house prices taking a bit of a dive?) Isn't this the bottom of the cycle? With low interest rates, as well as the new home-buyers grant in effect - that should drive the property market into a bit of a frenzy, yes? Higher demand = increasing prices! The time to buy is before the end of the year, as there may only be 0.25% of a cut to the interest rates left - if anything at all!

In this scenario, all the "Chicken Littles" are doing us a service! They'll all be selling because times are "bad". Strike while the iron is hot people ...

Gavin J
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