So which camp was right the doomsayers or the property faithfull?

[jingo]

I have a feeling some properties did crash 40% plus - you just had to be in the right place at the right time (or wrong place wrong time in our case) - like when I SOLD an IP in late 2008.

A house up the street (similar land size etc, but nicer presentation etc) went for $680k early 2008.

Spring 2008 and we had a shot - struggled - eventually sold for $450k....

I wonder if some people here wished they had bought that when I told them about it!

Cheers,

The Y-man

Was that early 2009 that a similar house to yours sold for $680? I think there were some people on here who were buying up in 2008 - they would have done well.

Not sure if anyone bought your old IP??

Regards Jason.

 

[tcocaro]

Y-man this is anecdotal at best. For every single example you find showing 40% falls (and I doubt you can) I can find one showing the opposite. The main thing is what the market is doing.

The claim of 40% falls is wrong, dead wrong, clearly wrong been established as wrong and only Keen is probably still claiming he was somehow right. Really dont want to discuss this particular point further as this claim falls into the "factually" incorrect bin.

I have a feeling some properties did crash 40% plus - you just had to be in the right place at the right time (or wrong place wrong time in our case) - like when I SOLD an IP in late 2008.

A house up the street (similar land size etc, but nicer presentation etc) went for $680k early 2008.

Spring 2008 and we had a shot - struggled - eventually sold for $450k....

I wonder if some people here wished they had bought that when I told them about it!

Cheers,

The Y-man

 

[tcocaro]

nice post particularly given its 7 years ago and not 2 years ago, because the usual defence is "time" i.e. the falls might not have happen this year but will happen over the next 2 years. That defence is muted after 7 years.

The other fact to take into account is ones own time horizon ie if your scared of what property might do over the next 10 years then dont invest in property full stop. Because when are you actually planning to invest? 20 years from now? Personally I prefer to accumulate wealth and make a few dollars while im still living "at" home and not "a" home.

Hi all,

Just returning to the topic for a moment.

The following is a set of quotes from a previous D&G poster in 2003, that is 7 years ago..

My favourite ones are the third last and last one, waiting, waiting, waiting...

If the anticipated 45-60% property crash happened now, the poster who made these quotes would still be paying more for most properties than if he had just bought in 2003.












It is pretty obvious that over the longer term the faithfull are clearly winning.

bye

 

[The Y-man]

Not sure if anyone bought your old IP??

The buyers didn't look like anyone I'd seen at Somersoft meets


Moral of story: if I am ever selling one of my IP's in the future.....

Cheers,

The Y-man

 

[tcocaro]

No-one in the US lost money on a property they didn't have to sell. So, the key is in the money management and the cashflows.
.

I disagree with this, people lost money and just because its on paper and the loss hasnt been crysalised by selling doesnt realy mean much. Further more your in negative equity which means at best case you wont be borrowing further anytime soon and worst case your lender forces you to top up your equity component or force you to sell.

Either way not a nice position to be in. That doesnt mean people dint do stupid investments and perhaps deserved some of what happened but its easy to get swept up in hyteria thinking you can make a quick dollar so long as you get out in time.

However like I have said many times before there is little benefit in the "it happened over there so it can happen over here argument" because there are just too many factors to take into account. Some people just start taking random facts, demographic figures etc from Japan, Britain, US etc but this isnt really helpfull without a detailed discussion which is beyond our abilities to enter into on a forum.

Hopefully the fact that nothing that happened overseas has remotely occured here is proof that markets are different and some similarities between the two is not enough to warrant the contagion argument.

 

[Reality Cheque]

I disagree with this, people lost money and just because its on paper and the loss hasnt been crysalised by selling doesnt realy mean much. Further more your in negative equity which means at best case you wont be borrowing further anytime soon and worst case your lender forces you to top up your equity component or force you to sell.

That one always gets me.

Somehow a loss on paper doesn't count but a gain on paper does.


RC

 

[Perp]

That one always gets me.

Somehow a loss on paper doesn't count but a gain on paper does.

Oh, don't even start me!

I have a very dear friend who had some shares gap below his stop overnight, about 3 years ago. Trading 101: what do you do when this happens? You sell immediately, before your losses get bigger. He had a stop that equated to an $8K loss; the gap meant he'd make a $10K loss. Psychologically, he just couldn't cope with making a $10K loss.

Three years down the track, he's about $33K down. But, according to him, "by holding on I've managed to avoid making a loss".

In the meantime, he's given up trading completely due to eroded equity and confidence (he was routinely making $50K-ish per year for the previous 3 years).

Believing that there's a difference between a "paper" loss and a "real" loss is not just philosophical; it can be very expensive.

The same people who think these two are different, also tend to think that "opportunity cost" isn't a real cost. Well, if he'd taken the $10K loss and learned from it, and adjusted his psychology, I think it's likely that he could have continued to make his $50K per year profit. So I reckon this erroneous belief has cost him nearly $200K over the last 3 years, when you take into account opportunity cost.

 

[MichaelW]

So who is/was right?

The answer should be clear, neither! Instead the large number of faceless and more importantly campless business minded people who were quietly adjusting their investment strategy based on the prevailing information were right. They understood simple economic principals such as cycles start and end and therefore taking advantage of the downside by picking up undervalued assets and now re-adujsting again for the prevailing up cycle.

So what I am saying is be smarter than the masses, see property for what it really is, an asset class, that goes up and down and that money can be made whatever stage in the cycle we are in so long as your decisions are business ones and not ideoligical ones.

OK, without going all hubris on you, can I just say that by staying true to my convictions and my loudly espoused views on the Austrlian property market, I have profited a lot from this recent period. A lot of people argued black and blue with me that this was the end of the world and that we should all liquidate our property assets to protect against the downside. NR, SK, others? The truth was somewhat removed from this viewpoint.

I held my development site in Mona Vale despite that suburb suffering a bit more than most due to its top end market position. But here I am about 12 months on ready to commence construction and all I can say is that my gross valuation today is far higher than I hoped it would be. Had I liquidated as the gloomers suggested then the nice big pay day at the end of this project would no longer be there for me to realise.

The numbers are so big now I'm a bit too embarrassed to disclose them. But I'm happy, my wife is happy and our future is looking sound. To me that tastes like victory from the decisions I made during the crisis.

Endure, adjust and overcome. During the crisis and the test of my conviction I constantly remembered that youtube speach by the American guy who had terminal cancer someone linked here previously. I remember him saying something to the effect of "challenges exist to test just how much we want something". I wanted to be financially independent and to afford to spend more time with my family. I wanted it a lot. No Western Sydney economics fantasy-land philosopher was going to shake my well grounded convictions. To the victor the spoils.

Cheers,
Michael

 

[Perp]

During the crisis and the test of my conviction I constantly remembered that youtube speach by the American guy who had terminal cancer someone linked here previously. I remember him saying something to the effect of "challenges exist to test just how much we want something".

Thanks for reminding me to re-listen to Randy Pausch's Last Lecture. (This is the abbreviated, 10 minute version given on Oprah. The full original 1hr+ version given at Carnegie Mellon University can be found here.

Edit: LMAO at his Mum's lesson in perspective. Randy was complaining about how hard his postgraduate exams were, and his Mum patted him on the arm and said "There there, dear, we know just how you feel. When Dad was your age he was fighting the Germans."

 

[Intrinsic_Value]

The buyers didn't look like anyone I'd seen at Somersoft meets


Moral of story: if I am ever selling one of my IP's in the future.....

Cheers,

The Y-man

Not really Y-man.
Reading between the lines you assessed your situation in 2008 with having a high level of risk because of gearing. You took what you believed was evasive action at the time. Sometimes hard decisions have to be made in order to fight the battle another time and on grounds of your choosing.

Anway Kudos for your posts. It takes guts to come out and talk about (in hindsight) incorrect decisions. Most of the time all we hear about are the correct decisions people make. When people make incorrect decisions of a severe enough nature they just 'disapear' from the forum.

 

[The Y-man]

Not really Y-man.
Reading between the lines you assessed your situation in 2008 with having a high level of risk because of gearing. You took what you believed was evasive action at the time. Sometimes hard decisions have to be made in order to fight the battle another time and on grounds of your choosing.
.

Thanks IntrinsicV. Actually, the sales were necessary because I needed to pay off some loans on some share based investments that went a bit pear shaped, and I had no means of paying the interest on them.

As tcocaro notes - what I write is anecdotal at best (awlays is ) - but I wonder how many others were in this situation (ok, on the other hand maybe I was the only idiot that tried to leverage shares to a gazillion%...)

On top of that, I am guilty of a bit of dramatisation/selective story telling (as usual), as the "bad sale" was only one of 5 IP's we offloaded in 2008 to meet the emergency. The other 4 sold at prices we were quite happy with - to the point where CGT became the "next" financial issue we had to face...

Cheers,

The Y-man

 

[MichaelW]

As tcocaro notes - what I write is anecdotal at best (awlays is ) - but I wonder how many others were in this situation (ok, on the other hand maybe I was the only idiot that tried to leverage shares to a gazillion%...)

Y-man,

You're not alone. I lost a "gazillion" through margin loans in the ASX in 2008 too. I think I've posted about that here in the past. It takes a strong personality to admit to your own mistakes and learn and move forward. I burnt some $200K odd over that horrendous 12 day losing streak and sold out at the bottom of that streak just to watch it bounce back about 10%.

But I've licked my wounds, tended my bruised ego and reminded myself that I'm not a failure. I tenaciously hung onto my development site and am now ready to commence my build and look to pocket about 5 times that loss in margin at completion.

Investors make losses. That's life. Successful investors learn from their mistakes and move forward. There's no room in this game for victims. Good on you for acknowledging your stuff up and getting on with it.

Cheers,
Michael

 

[Aaron Sice]

The claim of 40% falls is wrong, dead wrong, clearly wrong been established as wrong and only Keen is probably still claiming he was somehow right. Really dont want to discuss this particular point further as this claim falls into the "factually" incorrect bin.

keen stil is right, if you take into account the highest possible median before and the lowest possible median after, then take your deposit leverage into account.

geez...all this Keen bashing. Anyone would think he was wrong.....

 

[GreatPig]

Anyone would think he was wrong.....

And we all know what that means:

http://blogs.technet.com/gray_knowlton/archive/2008/03/14/someone-is-wrong-on-the-internet.aspx

 

[craigb]

where do all the dollars go? i mean if ten folks place 10k each into a bank acct , and they all buy 10k each worth of shares , and the shares shift to Zero , Nill , nadda, gone , where do all the foldies go!

Usually they change hands from one to another , but what happens to them in this case?

 

[The Y-man]

where do all the dollars go? i mean if ten folks place 10k each into a bank acct , and they all buy 10k each worth of shares , and the shares shift to Zero , Nill , nadda, gone , where do all the foldies go!

Usually they change hands from one to another , but what happens to them in this case?

You are assuming foldies are "tabgible"

Cheers,

The Y-man

 

[Bill.L]

Hi Craigb,

and they all buy 10k each worth of shares

That is where the foldies went, to the sellers of the shares.

bye

 

[tcocaro]

all Keen highlights is the poor state our educational facilities are in, out west...

keen stil is right, if you take into account the highest possible median before and the lowest possible median after, then take your deposit leverage into account.

geez...all this Keen bashing. Anyone would think he was wrong.....

 

[Ausprop]

where do all the dollars go? i mean if ten folks place 10k each into a bank acct , and they all buy 10k each worth of shares , and the shares shift to Zero , Nill , nadda, gone , where do all the foldies go!

Usually they change hands from one to another , but what happens to them in this case?

i thought there was a change of hands... they bought the shares from someone. the person who sold the shares has the cash. wealth creation and destruction is all around us, but the CASH can't be created or destroyed by mere mortals

 

[yorke]

Not only that but the government was encouraging it with increases in the FHOG. 2009 absolutely reeked of the final stages of a mania/bubble. Hence towards the end of 2009 I became quite bearish and sold the only property I owned (there were other contributing factors), which was purchased as a first home with the intention to subdivide down the track. I now believe we will see at least 15-20% of nominal prices over all capital cities over the next few years and probably another 5+ years stagnation/low growth. It could end up being worse.

Sorry to hear the bears got to you dude. You waited until the market has started to pick up to jump ship ?
Next thing you'll say that now its the time to move into gold.
Now you sold the house you'll have to pay increasingly higher rents. Inflation and increasing energy costs is pushing the cost of materials up and after a couple of years of no wage growth we'll start to see them going up again. All this will be affecting the replacement cost of low end housing and with that the existing property market so forget about any price falls. The only unknown is how much will they go up.
All the best with your future investments, whatever they may be, and be careful in because there are not many investments that are as safe as houses and its easy to do your dough. I hope you won't end up like others I know who sold their own home because of expected flat growth or a fall in prices then 2-3 years later when none of that eventuated and prices were twice as high they finally realized that they have been locked out of the property market.

My prediction is the tipping point is Qtr 1 2010 (that may just mean relatively flat growth to begin with).

I think you are about 2 years too late with your predictions of flat growth for SA and we'll see 10-15% growth this year and almost similar growth next year. I guess we'll see if the tipping point predicted by bears for years will finally happen in Q1 2010 but with the world coming out of recession in 2010 I very much doubt it. If I had to chose and bet between a 50% boom and a 15% crash I'd put my money on the boom , not because I expect prices to boom that much, not because I'm a property bull but simply because it would be the safer bet.