Somersoft leading indicator , neutral or negative
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To my knowledge there are 3 indicators that have recently turned positive...
However, all the other macro indicators are pointing strongly in the wrong direction.
Some here are feeling that we're in the early stages of a boom or at least upturn. I'd need a lot more than just those three indicators to be convinced, and I'd be happy to miss the initial stage of any upturn to be more certain that it really is an upturn and not an aberration brought about by artificial stimulus.
- SMH tells us houses are the most affordable for 5 yrs.... when they're the most affordable for 15 yrs it'll be a bit more interesting.
- Auction clearance rates are 70%+ in Sydney for a couple of months.... if they where a more reliable indicator & they were relatively high for more than a couple of months then it'd be a bit more interesting.
- Westpac MI consumer confidence survey reports that more people think that now is a good time to buy a house than at any time since Dec 2001.
However, all the other macro indicators are pointing strongly in the wrong direction.
Some here are feeling that we're in the early stages of a boom or at least upturn. I'd need a lot more than just those three indicators to be convinced, and I'd be happy to miss the initial stage of any upturn to be more certain that it really is an upturn and not an aberration brought about by artificial stimulus.
Keith....the indicators you are looking at are the leading indicators....the real test is unemployment. Frankly....I have been surprised by how resilient - i.e. how employment is holding in Australia. If this continues....then you lagging indicators will move the property scenario to a new "boom".
Crystal balling....I think the fear is now "hyper inflation"...with all the stimulus around the world...the real risk is prices going into a asset bubble. The real risk is when this bubble explodes in say 3-5 years! Well, lets hope this is not the case..
Crystal balling....I think the fear is now "hyper inflation"...with all the stimulus around the world...the real risk is prices going into a asset bubble. The real risk is when this bubble explodes in say 3-5 years! Well, lets hope this is not the case..
Yes, there's not much point watching the trailing indicators so early in the cycle. They're useful a little later for confirmation. Employment is a trailing indicator, however, job ads is about 6-9 months ahead of employment, and is a leading indicator. Wanna see the ANZ Job Ads trend for Jan '09 and it's correlation with actual jobs 6 months later ? ......
The other leading indicator is (though not necessarily as reliable) is unemployment expectations.....
... as you can see, we're off the scale
.I just find it hard to believe we're heading for a broad based upturn when the big picture points to the worst conditions (sentiment) for a generation.
Hyper inflation may be the fear in 2+ yrs time, and obviously..... oh no, it's fading,.... sorry crystal balls stuffed again.......Crystal balling....I think the fear is now "hyper inflation"...with all the stimulus around the world...the real risk is prices going into a asset bubble. The real risk is when this bubble explodes in say 3-5 years! Well, lets hope this is not the case..
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As much as I don't like talking about general markets as what does that actually mean to a person buying one property - there seems to be a lot of picking that start of the next boom. Why?
Could also be that the economy levels out again ie. it's not the doomsday scenario, and it's not a boom - but property prices will steady and experience a flat period for a while or low levels of growth for a few years like in the '90s.
Now I'm not saying this is what I think is going to happen, like I said entire markets are not my area - but so many people seem to think that if property holds out in the current environment, then the next step is a big boom again straight away. Not necessarily.
Could also be that the economy levels out again ie. it's not the doomsday scenario, and it's not a boom - but property prices will steady and experience a flat period for a while or low levels of growth for a few years like in the '90s.
Now I'm not saying this is what I think is going to happen, like I said entire markets are not my area - but so many people seem to think that if property holds out in the current environment, then the next step is a big boom again straight away. Not necessarily.
... as you can see, we're off the scale
I just find it hard to believe we're heading for a broad based upturn when the big picture points to the worst conditions (sentiment) for a generation...
The scary thing for me with that graph is that Jan job ads, though it might be partly seasonal, don't reflect how bad the employment situation will get, IMO. Lots of businesses took pre-emptive action late'08-early '09 to prepare for what they thought was coming. Since then we have seen evidence of banks pulling funding from miners, builders and goodness knows who else. I can't see this getting better. Nylex is in receivership and Australia's largest trading partner is falling headlong into the abyss. It's reported in The Age today that 1 out of 5 export containers goes to Japan. That will have a massive flow-on effect for business & I can only see it getting worse for the next 6 mths as forward orders dry up. The question in my mind is how bad unemployment can get & what effect that will have on confidence. Housing affordability makes no difference if you don't have a job. How affordable were homes in the southern US after the Savings & Loan crisis?
(Edit: Bloody hell, i must have woken up on the wrong side of the bed today; unusually negative; sorry)
All the little anecdotes I'm picking up from business owners is that we are heading into a significant slow down, how significant would just be a guess I think.
As it is I don't see any risk in waiting for some confirming macro signs that the economy is on the upturn before jumping into some things. I'm raising some cash and looking to be very nimble at the moment, can't see anything I consider great value with residential property in Brisbane yet, that view is always different if you have siginificant value adding skill and a good exit strategy however.
As it is I don't see any risk in waiting for some confirming macro signs that the economy is on the upturn before jumping into some things. I'm raising some cash and looking to be very nimble at the moment, can't see anything I consider great value with residential property in Brisbane yet, that view is always different if you have siginificant value adding skill and a good exit strategy however.
Sure.... I'm a top down/macro investor who tries to time entry into markets... so is the starter of this thread - seech. However, most here are Somers-type investors - buy when you can afford it & optionally attempt to buy bargains. I haven't bought IP since 2002, I've preferred other asset classes. Somers followers don't have that luxury - they only ever buy IP.
The downside (for me) of the strategy of seeking out bargains regardless of the time in the cycle is that they may get an instant 20% equity, but they then get flat for N years until the cycle turns. But Somers followers don't care, they are long term buy & never sell, so it makes sense to buy when they can afford to - it often means buy when affordability is high (like now). Some of the more closed mind posters here fail to recognise it's a valid strategy
.That's the scenario I'd say is most likely. The bottom supported by high affordability & FHOG and the rest of the market will be more or less supported by that. So flat for a while, IRs down a little more, higher unemp, a few more forced sales & bargains appearing. And after the doomsday scenario continues to fail to appear, people will eventually start spending again, the FHOG will be withdrawn, IRs will rise a little, and people will be confident enough to upgrade their PPOR, and the cycle will continue.
Agreed. The RBA will be watching closely - if people start spending & inflation threatens,they may be able to preempt any boom. I'd say flat for a while, although medians will fall a little because of lots of activity at the bottom end, and lower prices at the top.
This is a interesting read..willair..
http://www.rba.gov.au/Speeches/2009/sp_so_160209.html
http://www.rba.gov.au/MonetaryPolicy/RBABoardMinutes/2009/rba_board_min_03022009.html
http://www.rba.gov.au/Speeches/2009/sp_so_160209.html
http://www.rba.gov.au/MonetaryPolicy/RBABoardMinutes/2009/rba_board_min_03022009.html
Sure.... I'm a top down/macro investor who tries to time entry into markets... so is the starter of this thread - seech. However, most here are Somers-type investors - buy when you can afford it & optionally attempt to buy bargains. I haven't bought IP since 2002, I've preferred other asset classes. Somers followers don't have that luxury - they only ever buy IP.
The downside (for me) of the strategy of seeking out bargains regardless of the time in the cycle is that they may get an instant 20% equity, but they then get flat for N years until the cycle turns. But Somers followers don't care, they are long term buy & never sell, so it makes sense to buy when they can afford to - it often means buy when affordability is high (like now). Some of the more closed mind posters here fail to recognise it's a valid strategy
Good point Keith (as usual
), I get blinkered a bit by my micro focus at times - to an extent I don't worry too much about the broader market as long as my little world is ticking along nicely. Just trying to point out to some of the more enthusiastic posters of late that we're not necessarily in for a boom just because property is holding out at the moment. Many here are predicting booms straight away again - it may happen, but it's not the only alternative to declining prices.Sorry Dave, i fixed up the link,i'm new to all this
,plus i think Glenn Stevens is a very smart man.. willair
An investor's mindset in these times is directly influenced by their strategy.
A trader will be more bearish right now than a buy-and-holder like me, because there is little sign of rapid growth for the foreseeable future.
I have been otimistic about property for whole of this D&G period, and even recently through all the GFC stuff. For me, it's all good.
I only think long term about property - 5 year blocks and more, so in most scenarios, property will do ok over 5 years, even if you buy at the peaks.
Now is defintiely a time to be optimistic for longer term investors because the climate is good for another 5 year block;
1. Negative sentiment - less buyers and sellers, less competition and lower prices from stressed sellers.
2. Lower interest rates - reduced holding costs
3. Good rental yields - better cashflow, and more demand for renters which keeps rents solid.
4. Bottom of the Market - very important; it means that prices are going to be moving up in the next 5 years. They may still go down further from here, but in my opinion it will not be much, and then back up again.
A trader will be more bearish right now than a buy-and-holder like me, because there is little sign of rapid growth for the foreseeable future.
I have been otimistic about property for whole of this D&G period, and even recently through all the GFC stuff. For me, it's all good.
I only think long term about property - 5 year blocks and more, so in most scenarios, property will do ok over 5 years, even if you buy at the peaks.
Now is defintiely a time to be optimistic for longer term investors because the climate is good for another 5 year block;
1. Negative sentiment - less buyers and sellers, less competition and lower prices from stressed sellers.
2. Lower interest rates - reduced holding costs
3. Good rental yields - better cashflow, and more demand for renters which keeps rents solid.
4. Bottom of the Market - very important; it means that prices are going to be moving up in the next 5 years. They may still go down further from here, but in my opinion it will not be much, and then back up again.
