The great Oz property crash of 2005.

[InnerWestie]

I got a bit of a kick out of this article from December 2005-

http://www.barefootinvestor.com/property-market-crash-looms/

The argument sounds strangely familiar to the D&G crowd in 2011 however I particularly enjoyed the part of the article where the author made a point of the slowing Melbourne market and joked about the RE spruiker in Victoria arguing that 'now (i.e. 2005) was a great time to buy property'.

Well with the benefit of hindsight, and knowledge of Melbourne's growth over the last few years, this guy really got it wrong. I just wonder whether any young impressionable potential homebuyers took notice of these warnings and subsequently held back from purchasing, only to find themselves priced out of the market despite their high-interest savings accounts.

Oh yeah, we also had a little bit of a GFC somewhere in there too and strangely things worked out ok.

I will preface this with the comment that the Barefoot Investor is actually a really likeable and intelligent guy, I just think he missed the mark with this one.

 

[profit]

I'm thinking this could have gone in one of the countless other related threads?

 

[Felixter]

Scott Pape is a massive flog and I have no idea how he gets a gig on TV as an investment guru. Every time I see him he just shows that he knows nothing about property.

You'd think to compensate for his lack of property investing nous that he would go and seek a property investment guru for advice?

Nope. He get's his information from people who run managed funds which include property trusts. Such people really don't understand property investing properly.

The arrogance of financial advisors who treat the property asset class with the same rules of thumb as stocks never ceases to amaze me. They not only misunderstand it but they truely believe they are an authority.

I laugh at this try hard every time I see him on TV. I hope you read this you talentless know nothing hack.

 

[InnerWestie]

I'm thinking this could have gone in one of the countless other related threads?

Thanks for your contribution.

 

[Felixter]

I will preface this with the comment that the Barefoot Investor is actually a really likeable and intelligent guy, I just think he missed the mark with this one.

I've never heard him say anything that gives me the impression he knows anything about property investment.

I wouldn't mind if he sourced information from people who are in the know but unfortunately he sources information from people who aren't really qualified.

If he can't provide informed and balanced advice about property then he shouldn't be on TV. These TV networks need to get someone who is more knowledgeable across the different asset classes, or bring on someone else to talk about property because his knowledge is a disgrace.

 

[InnerWestie]

I've never heard him say anything that gives me the impression he knows anything about property investment.

I wouldn't mind if he sourced information from people who are in the know but unfortunately he sources information from people who aren't really qualified.

If he can't provide informed and balanced advice about property then he shouldn't be on TV. These TV networks need to get someone who is more knowledgeable across the different asset classes, or bring on someone else to talk about property because his knowledge is a disgrace.

I wasn't talking specifically in relation to property, I think he does a pretty good job of de-mystifying personal finance for young people...

 

[Felixter]

I wasn't talking specifically in relation to property, I think he does a pretty good job of de-mystifying personal finance for young people...

Investment generally means stocks and property, and then some smaller concepts such debt reduction, saving, etc

Australians are avid investors with property and stocks being very popular. Any person appearing regularly on TV needs to be an expert at both of these, or at the very least an expert in 1 but with the ability to access the leading authorities on the other.

He can't do this. He's a hack.

 

[Bigtone]

Scott Pape is a massive flog and I have no idea how he gets a gig on TV as an investment guru. Every time I see him he just shows that he knows nothing about property.

You'd think to compensate for his lack of property investing nous that he would go and seek a property investment guru for advice?

Nope. He get's his information from people who run managed funds which include property trusts. Such people really don't understand property investing properly.

The arrogance of financial advisors who treat the property asset class with the same rules of thumb as stocks never ceases to amaze me. They not only misunderstand it but they truely believe they are an authority.

Sorry James GG as I know u r a fan but Felixter is on the money.

This guy is just dangerous and I have met several people who stayed out of the market in Sydney in 2007 because of his "advice" and basically got wiped out in the stockmarket during GFC.

It is one thing to have some knowledge and make some informed comments but some of his statements simply prove he has no idea whatsoever on property and should not talk about it.

His completely misguided and misinformed comments on interest only loans last year further re-inforced his ignorance and this article is a clinker, will be keeping that on file for sure.



Good work Innerwestie

 

[JamesGG]

Sorry James GG as I know u r a fan

Haha, well, yes and no.

Pape's general line of thinking about reducing debt, reducing lifestyle costs and increasing savings (in shares, cash or managed funds) make good sense for urban teenagers and twenty-somethings with no idea where their paycheque goes every week. I do like the way that he helps these people get their proverbial together and start making progress.

For those in a position to do more - either because of his advice, or purely of their own doing - then I would agree, that his ideas on property investing don't always make a lot of sense.

Part of the problem may be that Pape tries to be too much, for too many people? And then, his disciples don't realise that while he's gotten them out of debt and into some good money habits, he's not necessarily the right advisor for those who want to create some serious wealth; particularly through property.

That, and he's taken to referencing real estate agent (cough) NJ as his property expert. Must admit that I did lose a little respect for him at that point .

 

[Piston Broke]

He was spot on!
Some homes decreased by millions since.

 

[twobobsworth]

I've got a feeling these people felt like they had a crash

32 Strathfillan Way, KELLYVILLE NSW 2155
07/07/2006 Government Notified Sale (Normal Sale) Residence $1,260,000
09/08/2003 Government Notified Sale (Normal Sale) Residence $2,000,000

& the house still isn't worth $2m.

 

[pickle pickle]

Wait until unemployment rise. It will happen one day.

Once the economy goes pear shape, property will crash. However that may take awhile and property will probably have a couple of booms before that.

But when we have a recession, it'll be interesting how young people handle it as we haven't had any real hard times for nearly 20 years.

 

[InnerWestie]

I've got a feeling these people felt like they had a crash

32 Strathfillan Way, KELLYVILLE NSW 2155
07/07/2006 Government Notified Sale (Normal Sale) Residence $1,260,000
09/08/2003 Government Notified Sale (Normal Sale) Residence $2,000,000

& the house still isn't worth $2m.

$2m in Kellyville? A stupid purchase does not a crash maketh...

 

[mrmonopoly]

I've got a feeling these people felt like they had a crash

32 Strathfillan Way, KELLYVILLE NSW 2155
07/07/2006 Government Notified Sale (Normal Sale) Residence $1,260,000
09/08/2003 Government Notified Sale (Normal Sale) Residence $2,000,000

& the house still isn't worth $2m.

As already stated one property certainly doesn't make a crash. Further to this the numbers above don't really show the full story.

The house was built in 2002 on land which cost just $345K in 2000. If anything this shows a great example of a VERY successful developer combined with a very stupid buyer.

At $2M this property was bought at considerably higher than fair market value, so the $740K price drop was more a return to fair market value than a price crash.

 

[Vic Bitter]

when australia's mining boom ends - the economy, jobs, and property prices will go down... when and how this happens is anybody's guess... china and india's consumption of our natural resources will slow at some point. i think scott pape is right - the property market will eventually crash.

over the long term, australia's property prices should still double every decade with demand driven by population growth. i don't think pape discourages property investment. if anything, i think he encourages it. i believe all he is saying is buy when you are really to buy rather than when others tell you buy, and even better if you can buy when property is at the bottom of its cycle.

 

[Deltaberry]

Haha, well, yes and no.

Pape's general line of thinking about reducing debt, reducing lifestyle costs and increasing savings (in shares, cash or managed funds) make good sense for urban teenagers and twenty-somethings with no idea where their paycheque goes every week. I do like the way that he helps these people get their proverbial together and start making progress.

For those in a position to do more - either because of his advice, or purely of their own doing - then I would agree, that his ideas on property investing don't always make a lot of sense.

Part of the problem may be that Pape tries to be too much, for too many people? And then, his disciples don't realise that while he's gotten them out of debt and into some good money habits, he's not necessarily the right advisor for those who want to create some serious wealth; particularly through property.

That, and he's taken to referencing real estate agent (cough) NJ as his property expert. Must admit that I did lose a little respect for him at that point .

His attitude to life isn't bad.

However if we call him an investment expert... well you would wonder why he's still working for a salary.

 

[twobobsworth]

As already stated one property certainly doesn't make a crash.

You're right.

42 Seymour Way, KELLYVILLE NSW 2155
02/03/2007 $490,000
21/09/2005 $950,000

 

[InnerWestie]

You're right.

42 Seymour Way, KELLYVILLE NSW 2155
02/03/2007 $490,000
21/09/2005 $950,000

Seriously dude? You're trolling right?

You are honestly saying that property has crashed in Australia since 2005 based on a few isolated events in the Mecca that is Kellyville?

Please go ahead and pluck some further anomalies from other areas around Australia to further prove your moot point.

If property crashes, it crashes (not that I think it will) but trying to re-write history is a strange and pointless game.

 

[Belle]

I don't see anything wrong with that article (except for that quote "get out of the market now"). He doesn't say specifically when a crash will happen. I think much of what he wrote is still relevant now.

There are plenty of people out there who are investing in property wisely and making a lot of money.

But at the same time there are a huge proportion of people in Australia who think their houses are assets when they're really a consumption item. I think many people over-invest in their homes because of this. Many young Australians, including me, have never seen a property crash in this country. We have never experienced a rainy day so it's hard to imagine that it could happen, but we all know that the property market is cyclical and a crash is going to happen at some point in the future. History tells us that much! Will it happen next year or in 50 years time, who knows?

All I know for sure is that currently we have people who aren't sophisticated investors who are investing in an incredibly risky way;
1: Leveraging up to 95% LVR
2: Putting all their eggs in one basket (not diversifying)
3: Speculating on capital growth by negative gearing (capital growth alone is a much riskier strategy than income + capital gains)
4: No deposit with the help of the FHOG
5: The mindset that a crash is impossible and that if you fall on hard times the worst case scenario is that you sell at a profit
6: Many home buyers are under mortgage stress or would be under mortgage stress if interest rates went up
7: Buying off the plan to get the FHOG
8: Buying at a time when interest rates are very low

I'm not sure if a crash is going to happen soon, but I am certain that if it did happen many people would be well and truly screwed because they haven't planned for the possibility of it.

I'm not saying don't invest in property, I'm just saying save a deposit, have a cash buffer, don't rush in, do your research, get income protection/life insurance, understand the difference between consumption and investment and don't just assume property prices are going to go up forever! If a crash does happen it’s going to hit a few areas very hard (the mortgage belt areas & off the plan apartments).

There are a bunch of things that I foresee are going to be huge challenges for Australia in the future. I think we will see a currency crisis overseas and the possibility of a depression in international markets, the strength of the Aussie dollar will slow demand for exports hurting Australian businesses and reducing the number of international students coming to Australia (education being the biggest exports for Melb and Syd!) and then there is the end of the resources boom. I think it’s really important to be aware of these things instead of just laughing at articles which talk about a property crash.

Any good investor should have a market crash plan. How would you deal with it? How would you manage a 20%-50% drop in prices? Most importantly how would you profit from a crash? Good investors make a lot of money in a downturn!

 

[ziggy2214]

This guy is just dangerous and I have met several people who stayed out of the market in Sydney in 2007 because of his "advice" and basically got wiped out in the stockmarket during GFC.

I didn't listen to him. I bought in 2007 when not many people were buying and have done well
I wish I had bought more.