The Coming Property Crash

yee3890

yee3890

I have see the news from Jenman websites states that the property crash will be coming??? see articles below

THE COMING PROPERTY CRASH
The property tip of the year

“The real estate market will crash. It always does. And the bigger the boom, the bigger the bust. Anyone who says real estate always goes up and it's the world's best investment does not know much about real estate.”

So we wrote near the end of 2001 in a series of four articles called Boom & Bust.

Since then the real estate market has continued to boom. Our real estate critics have laughed. “You were wrong. The prices are still going up.” Really? Then go back and read what we said. You’ll realise that it’s more dangerous than ever to be investing in real estate today. In most areas today – especially Sydney and Melbourne – property is overpriced. Its peak will probably turn out to be late 2001 to mid 2002, around the time we issued our first warnings.

Gertrude Stein said, “Everybody gets so much information every day that they lose their common sense.” And that’s what’s been happening in real estate over the past year. In many areas, the real estate boom has been maintained by massive amounts of misinformation, self-interest, cover-ups (yes, that’s right cover-ups), greed, ignorance, naivety and stupidity. The social consequences are frightening.

It might be called ‘The Real Estate Game’ but what’s happening in real estate today is not a game. Not at all. It’s a serious social issue that involves the financial and emotional well-being of hundreds of thousands of good people, many of whom are being (or have been) duped into buying the wrong real estate at the wrong time.

Primarily, there are two types of real estate – the family home and investment real estate. The major consideration when buying either must always be SAFETY.

If you’re buying a family home today, make sure you can handle the payments. If you intend to live in it for many years and you can comfortably make those repayments, go ahead. If not, DON’T BUY.

If you’re investing in real estate today, you are almost certainly taking an enormous risk. It takes little skill to buy property. And sometimes, especially in times of a rapidly rising market, it takes little skill to profit from property. In most areas, these are not those times.

Here’s the best real estate tip at the moment:

If you plan to invest in real estate, go to your newsagent and buy The Economist (May 31 – June 6 issue). It may be the best eight dollars you’ve spent for a long time
 
Originally posted by yee3890
If you’re investing in real estate today, you are almost certainly taking an enormous risk. It takes little skill to buy property. And sometimes, especially in times of a rapidly rising market, it takes little skill to profit from property. In most areas, these are not those times.
Click to expand...


I would call this entire article sensationalism, particularly the extract above.

I do read all the articles on Jenman's site as he has an interesting opinion on what is happening on the market, however I tend not to give them much weight. They are targetted at the lowest common denominator & are highly risk-adverse.

Let's face it - very few people become wealthy without taking risks - calculated ones.

And any risk can be managed provided you do your research, understand your capabilities & have a good support network.

I wonder, is Neil Jenman still buying property?

Cheers,

Aceyducey
 
Hi Aceyducey,

You are right!!However, what if the most people predict the trend of the propert market will down, do you think u need to take this one as consideration when u purchase new propert??:D
 
I agree with Aceyfs comments about taking calculated risks.

From my research true investors (real investors, in which I mean successful investors measured over many years of ongoing success) are more risk adverse than normal people.

As investors we should all be Seeking Opportunities whilst considering and putting into effect plans to minimize all reasonable risks.

Investors are not risk takers but opportunity seekers.

Successful investing is not about taking risks to generate potential rewards, that is called gambling or speculation. Successful investing is about seeking out exceptional opportunities and then taking every reasonable steps towards minimizing the risk in pursuing that exceptional opportunity.

Another wonderful gtheoryh from Always_Learningcjust donft ask me how I am going in real life.

Happy investing!
 
Few doubt there will be a correction at some stage . Matter of debate is when.

In Mr Jenman keeps repeating this , sooner or later he will be correct.

Then he can say I told you so.

If I had paid attention to his advise at the end of 2001, my assett base would be considerably smaller than it is now.

The question for me at the moment is, How will the market go over the next two years. I don't know that and neither does Mr Jenman, BUT I'm not going to sit on the sidelines waiting for the sky to fall in. That is my decision based on my circumstances.

see change
 
I agree with Acey's sentiments.

Property does go in cycles and you need to be aware of where the market is. Each state is usually different - eg Brisbane lagged Melbourne, which lagged Sydney.

Using the Median House Price as published by the Real Estate Institute, for Melbourne, I calculated the following:

From 1982 to 1990 the Median moved from $50,500 to $141,500 -equivalent to a compounding rate of 13.7%. Pretty impressive.
Then, it stalled, burst, collapsed (or what adjective you wish to use). In 1995, the Median had struggled to $144,500, equivalent to a compounding rate of 0.4%. Not so good!

If you bought at the peak, say 1990, you're not a happy camper in 1995.
Hopefully you don't sell, as the Median moved from $144,500 in 1995 to $327,500 in 2002, an equivalent compounding rate of 12.7%.

So, even if you did by at the last peak, 1990 for $141,500, in 2002 the property was "valued" at $327,500 - which is a 7.2% compounding rate. Not too bad a result.

The 21 year compounding equivalent from 1981 to 2002 is 10%. But don't forget about inflation - not sure of average, but now around 3%.


Is now the equivalent to 1990?

I think it's shaping up that way.

Geekay
 
Originally posted by yee3890
Hi Aceyducey,

You are right!!However, what if the most people predict the trend of the propert market will down, do you think u need to take this one as consideration when u purchase new property?
Click to expand...

Yee,

Firstly - who are 'most people'? And do they buy property regularly?

In any case, I don't believe that the majority sentiment is that property prices will fall.

I do believe that media & expert opinion is that property prices will stop going up at the rate they have been in major cities over the last 24 months. Whether prices stabilise, fall or rise slowly is still a matter of considerable debate & there are likely to be significant variations in every suburb & town across the country.

I don't weigh opinions highly when I purchase property. I take into account the facts & figures & then get a feel for population & fashion movements. To outperform the market you must outthink the market.

Anyone who invests in line with market sentiment & opinions is not an investor, they're a gambler :)

As a famous politician didn't say: 'property investing is the art of the real'.

Cheers,

Aceyducey
 
Acey wrote:


"I don't weigh opinions highly when I purchase property. I take into account the facts & figures & then get a feel for population & fashion movements. To outperform the market you must outthink the market."


Im not sure if youre correct. What about the saying "the trend is your friend" dont go against the trend or you will lose, which means you cant out think or second guess the market.



"Anyone who invests in line with market sentiment & opinions is not an investor, they're a gambler "

Have you got this one backwards?
 
"All doomsday cults are correct, the world will end, its only the timing they get wrong"

When property does not increase in value (1990s), these people tell us 'its no use theres no money in property any more, technology stocks thats the way to go, they go on and tell us how wrong we have managed our finances, and seem to enjoy rubbing our noses in the fact that property is such a poor performer.

Then when property finally catches up in price after remaining stagnent for 6 or 7 years, all of a sudden we are all fools for investing in property.

All I can say is that I have been a property investor for 8 years, and this is my first boom, Ive done very well out of it. Regardless of wether I buy tomorrow or another 2 years time, all I know is that as long as I keep buying, use common sense, coupled with the experience I have gained, when the next boom comes in 10 or 15 years time, I will never have to work again, which is a choice most people do not have, and I won't even be 40 when that happens.

Of course I could take the other path, and be scared of my own shadow, never take a calculated risk. Some of the points mentioned are quite valid, I think that the house prices will not increase much more, and could well fall short term (not as much as my superannuation of course -25%). I personally think city units are overpriced and oversupplied, but then most property investors can see that.

I am looking forward to a time when rents will catch up to the price of houses, I have not bought any property for the last 3 years (in hindsight a mistake), simply because I don't think the rental yeild is high enough.

regards Adam
 
Hmmm..

But Brains, what about those who invest against market trends (contrarian investors), and end up in front?


At any rate, sensationalist "the sky is falling", "pending doom", "market crashes" are all much more exiting than "slowing down of market","market flattens out" that is much more likely. And it sells more papers / magazines....

Of course, economists always get these things right too......;)

Mind you, if enough people chant this, it will become a self fulfilling prohesy - people will become scared, then spend like they're scared, panic and sell of IP's cheaply dropping the market etc etc.

Me - If the numbers work (with some safety margin - lower rent, higher rates), go for it.

Cheerio

Simon.
 
sbe wrote:

"But Brains, what about those who invest against market trends (contrarian investors), and end up in front??

I know some contrarian investors do well, and its a valid investing philosophy but isnt that a different thing to saying that people who invest in line with market trends are gambling, no?
 
Originally posted by brains
Acey wrote:

"Anyone who invests in line with market sentiment & opinions is not an investor, they're a gambler "

Have you got this one backwards?
Click to expand...

Brains,

Notice I mentioned market sentiment & opinions, not trends.

Trends to me are figures-based, not opinion-based.

As I said in my last post, I look at the figures first & that's how I determine where the market is & is probably heading - ie: the trend :)

I'll phrase it differently (if less elegantly):

Anyone who forms their IP purchase & sales decisions based on what they hear in the media and from friends without placing due weight on the figures is a gambler.

Also, bear in mind that the trend is generally drawn along the average line. The average is around the middle result you would expect. In property this is equivalent to people who simply buy & live in property.

Anyone who can't do better than the market averages, is probably in the wrong game & should find one where they can outperform the market.


Cheers,

Aceyducey
 
Hi

Like others, I read "Henny Penny Jenman's" website and interpret most of what he says and writes as sensationalism. I think most investors agree that the market is overheated, but that is not a boom nor will it be necessarily be followed by a bust.

It is simply an overheated market and it will flatten, or already has done so, and will wait for the rental market to catch up, supply and demand to sort itself out, a few other economic factors to have their effect and then move ahead again.

Some parts of the market may ease back a little, some just simply flatten and wait for time to pass and everything catch up, but, when Henny Penny flaps his wings and makes a lot of noise, the sky is really not falling, just take it for what it is, a sensationalist trying hard to keep his name and face before the public.

I will also study the facts and figures, listen but not be heavily swayed by the talk of "most people" who don't back the talk with facts and reality.

We all know that the market will rise, plateau and perhaps fall from time to time but in the long term (5 or 10 years or more), there will be a steady and progressive increase in our net portfolio wealth.

Regards

Ross
 
Does everyone remember how property prices were going to drop 25% as soon as the olympics were over? What about how the world was going to go into chaos when the y2k bug hit?

In my limited experience as an amateur phsychologist, there will always be people who enjoy telling you how many problems you are going to have, what a mistake you have made and how bad things are going to get (usually not for them though, because they saw it coming). Sometimes, just sometimes, you start to fall for their hype, and as soon as they see you getting drawn in or starting to become unsure, they are satisfied. That's what these people are all about - getting a high from unsettling others because it makes them feel powerful. Or sometimes its simply because they haven't gone ahead and done things for themselves and they need to convince themselves that everybody else is making a mistake. Often these people don't even know that they are doing it, its just part of human nature.

Sure, maybe the prices will stop rising, maybe they will even fall a bit, but we knew that when we went into it didn't we. If you were given a gold plated guarantee that everything would go to plan then everybody would be a property investor. This does not mean that you throw caution to the wind, just that you look at the trends, know the upside and downside and be prepeared for all (or most) of the possible scenarios, and for heavens sake, don't buy into the hype of the naysayers. As I once heard the great philosopher Rene Rivkin say, some people will tell you the worst case scenario is going to happen, some people will tell you that the best case scenario is, but what usually happens is something in between.

Sanchez
 
Ross,

Responding to the first part of your post

Im sure there are plenty of companys willing to take your money for an inner city apartment in Sydney and/or Melbourne.

With your view on the current state of the market im sure you would be up for a few.:D

The way Jenman thinks in his conservative way is safe and correct and will protect and save a lot more people (read ameuter property investors and those sucked in by scams) than those that are talking up the market (encouraging people to keep buying) with an ulterior motive ever will.

No one knows what will happen at the end of this property bull market. All the signs are there for a fair size correction, so what is your opinion based on?

Originally posted by Ross Sneddon
Hi

Like others, I read "Henny Penny Jenman's" website and interpret most of what he says and writes as sensationalism. I think most investors agree that the market is overheated, but that is not a boom nor will it be necessarily be followed by a bust.

It is simply an overheated market and it will flatten, or already has done so, and will wait for the rental market to catch up, supply and demand to sort itself out, a few other economic factors to have their effect and then move ahead again.

Some parts of the market may ease back a little, some just simply flatten and wait for time to pass and everything catch up, but, when Henny Penny flaps his wings and makes a lot of noise, the sky is really not falling, just take it for what it is, a sensationalist trying hard to keep his name and face before the public.

I will also study the facts and figures, listen but not be heavily swayed by the talk of "most people" who don't back the talk with facts and reality.

We all know that the market will rise, plateau and perhaps fall from time to time but in the long term (5 or 10 years or more), there will be a steady and progressive increase in our net portfolio wealth.

Regards

Ross
Click to expand...
 
Originally posted by Aceyducey
Yee,

This link doesn't work...

Can you pub the article if it's premium content.

Cheers,

Aceyducey
Click to expand...

Judging by the number at the end of the URL, I'd say Yee was trying to post a link to the Economist article everyone is talking about in another thread

http://www.economist.com/surveys/displayStory.cfm?story_id=1794873

Yee, a tip for future posts: use the preview button, and check links before posting. You can also edit posts afterwards if you see a mistake needing correction.

:) MM
 
Hi Brains

Your thinking has galloped away with you again. I made no reference to inner city, CBD apartments in Melbourne or Sydney, none at all. Nor have I suggested that apartments were a good investment. Indeed I have stated many times in the last few years that I don’t recommend CBD apartments but I acknowledge others may have a different viewpoint. Where you get the idea I have suggested something else is only in your mind.

My comment is that the property market has overheated. In most areas it has reached a plateau and in some areas it may fall a little or rise a little further but essentially it has reached a point where it will now commence to stabilise and rents will catch up over time. Natural inflation will also have an effect.

I don’t see a crash occurring but a steady stabilising of the market back to a state of normalcy, whatever interpretation you wish to use to apply to the term normalcy.

I have reread my comments and don’t intend to suggest any changes to what I have already stated.

Regards

Ross
 
The link doesn't work and neither does your logic. Dooms sayers are always correct - eventually.
Supply and demand rule, thats as hard as it gets. Make the numbers and dollars work for you and commit to knowledge and due dilligince. It doesn't matter if its shares or property or anything, same rules apply to rising and falling markets. I just think thats its easier to specialise in one area and become an expert in that field. For me that has been and will always be property.
When I first started buying IP's they said I was mad, when I developed they said I was mad, when I spent money and time on education they said I was mad - well I like being mad, beats the hell out of working for a living.
 
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