How do you know most of the market has gone up when you only know Melb.? My suburb in Townsville, according to RP Data, has had a cumulative 2% rise in 4 years. Not enough to get out of bed for.
I only said the Melbourne market has gone up.
The great Oz property crash of 2005.
- Thread starter InnerWestie
- Start date
I only said the Melbourne market has gone up.
You're falling into the trap of comparing property to shares. The asset classes are completely different with completely different variables and cycles. You've got to remember property is primarily shelter with investors making up only 30-35% of the market. The rest are OO's and if the market drops, they generally just wait until it goes back up again.
The entry and exit costs making it so illiquid mean people don't trade like they do shares and likewise the psychology of a falling market doesn't have the same domino effect.
If you over leverage and play a risky short term game then sure there are huge potential pitfalls, but this simply isnt the case for most. For starters given the supply issues, even if prices did drop 50%, the rental returns for new investors would be so strong that this fall would only be temporary and those who aren't forced to sell and are playing the long game (i.e. most) would soon see these losses recovered.
No crash with unemployment at 5%. It would need to be 10% + to have the massive impact bears are talking about. With the reserve having over 4% to play with there is also a safety switch that usa uk etc didn't have that can f
be deployed at any time to stimulate a flagging economy.
Agree will happen one day but not with current fundamentals. Good time to buy.
be deployed at any time to stimulate a flagging economy.
Agree will happen one day but not with current fundamentals. Good time to buy.
The property market is very different to the share market, but it can still have a domino type reaction as we have seen in other countries (not that I'm saying it will happen here!) The concept of leverage increasing risk really applies to every asset class.
The Australian government has a bunch of things it can do if we do start to see the property market having problems. They will lower interest rates, give more grants etc, so it would really take quite a shock to have our market come crashing down.
Another issue is that Australians do have very low savings. We rely on foreign savers to provide credit for home buyers. Some might look at the growth in our property market and ask if it is real wealth or is it just a bubble fuelled by extremely high levels of debt?
I'm honestly not smart or experienced enough to look at our property market and make predictions about crashes, but I can see a few issues within the market. I just like to keep my mind open about downturns. I find most people are either all doom and gloom or they're overly optimistic. I like to think I'm somewhere in the middle!
The Australian government has a bunch of things it can do if we do start to see the property market having problems. They will lower interest rates, give more grants etc, so it would really take quite a shock to have our market come crashing down.
Another issue is that Australians do have very low savings. We rely on foreign savers to provide credit for home buyers. Some might look at the growth in our property market and ask if it is real wealth or is it just a bubble fuelled by extremely high levels of debt?
I'm honestly not smart or experienced enough to look at our property market and make predictions about crashes, but I can see a few issues within the market. I just like to keep my mind open about downturns. I find most people are either all doom and gloom or they're overly optimistic. I like to think I'm somewhere in the middle!
Thanks for doing the calcs. As people with leveage or people who have had leverage, I'm sure none of us would've thought of that.
People who use CFDs use it as a leverage yes - but if you traded CFDs - u know you can minimize the losses. At one stage during the GFC - over say 1 month, i was making 1-2K an hour, or sometimes 15 minutes just by trading on ASX200 indices as it was so volatile. You can put trailing stops or stop losses to enable you to restrict you trading exposure or margins. Obviously an understanding of the shares and market conditions are also going to be a factor. However - the losses start to creep in not because - u're stupid or unable to read the market - it happens when you start to get greedy and leverage on things and gamble on it without research and a technical approach to it. And there's where it because gambling as opposed to trading. I did go through that stage personally so i only play CFDs when there are opportunities.
Property could crash i would presume in Australia - however there are far many other places around the world which are more expensive than Australia with the averages wage less than that in Australia.
....and suddenly it all makes sense.
to be picky... you'd lose $40k and enter bankruptcy and the bank would lose $160k. hence their very vested interest in maintaining property prices
What is it with the bottom end of Gen Y? It seems that 12 years of being told "wow, you guys are the first generation to go through your whole education with computers" has made you all arrogant know-alls.
A tip:
Intelligence doesn't peak at 19
Not sure what made you come on here with no experience and tell experienced and successful investors how it all works?
Why all the agression and so defensive? I dont think any of what belle has been saying is wrong or out of context. It does sound like text book stuff, true - but they are relevant, in a broad sense anyway.
Sometimes the best advice comes from the most unlikely source. I am a property and share investor myself. Having survived the GFC - volatile markets, job security etc. I do not reule anything out now. Read the news - Unrest in middle east, Earthquake then tsunami then nuclear meltdown then snow?? and to top it off I think there was a volcano eruption as well. Bad things happen all at once..
I think experienced investors should not overlook that anything can happen. Even a major crash in property in Australia notwithstanding the arguement of supply demand etc.
Sometimes the best advice comes from the most unlikely source. I am a property and share investor myself. Having survived the GFC - volatile markets, job security etc. I do not reule anything out now. Read the news - Unrest in middle east, Earthquake then tsunami then nuclear meltdown then snow?? and to top it off I think there was a volcano eruption as well. Bad things happen all at once..
I think experienced investors should not overlook that anything can happen. Even a major crash in property in Australia notwithstanding the arguement of supply demand etc.
It's out of context. Scott Pape claimed there was going to be an IMMINENT bust in 2005. He was wrong. So what does Mrs NoExperience do? Comes in and goes against the grain with generic information that we all know that really has nothing to do with the OP.
Experienced investors haven't taken kindly to a novice coming in and lecturing them about property investment and quite rightly they have told her so.
Please remember it was Belle who came in and started telling people Scott Pape had a point when in fact he didn't. She has taken his point (minus the ultimately pertinent 2005) bit and constructed a straw argument to take on other investors.
I'm not surprised she has got a bit of stick.
I'm not sure how this is relevant? No one has overlooked anything. But thanks for the straw advice. Perhaps you'd also like to tell us that we need to check for cars before we cross the road?
i value opinions however i also value experience over inexperience. I also have met some really young and intelligent people whose views and intellect surprises me sometimes and i do respect that.
But If richard branson - were to tell me something as opposed to someone who just started working - who would have greater influence?
But If richard branson - were to tell me something as opposed to someone who just started working - who would have greater influence?
Wow! I wasn't lecturing anyone. I was just expressing my opinion. That opinion being that what Scott wrote then is still relevant today. He was obviously completely incorrect that a crash was going to happen in 2005.
I felt like people here were perhaps pointing to this article and laughing. Using it as a way to make themselves feel like the idea of a crash is completely ridiculous. Saying to themselves "well that article was wrong, so all the articles and warnings we're hearing in the papers today must also be wrong".
I've always been very open and honest about being a university student with 0 experience. I'm sad that the fact I'm a student invalidates all of my opinions in the eyes of the majority here.
I feel like many of the posters here hate on newbies when they ask questions because they're too basic and then they hate on you when you try to contribute to a discussion (although some posters have been very welcoming and helpful).
i do value ur opinions - it was not too long ago i was also in uni like urself.
What is it with the bottom end of Gen Y? It seems that 12 years of being told "wow, you guys are the first generation to go through your whole education with computers" has made you all arrogant know-alls.
A tip:
Intelligence doesn't peak at 19
Not sure what made you come on here with no experience and tell experienced and successful investors how it all works?
At the end of the day communism was good in theory, but experience has told us otherwise. That said I think its a little harsh criticising a whole generation just for wanting to contribute to a discussion.
The problem here is not the actual participation in the discussion.
It is the relative (in)experience that is coupled with the argumentative stance.
Yes, you can read a whole load of text about the topic of investing (or any endeavour for that matter), but until you actually have done some of that endeavour, you don't really know it.
That's why it is adviseable to enter into a discussion with someone (who has been doing it) with both ears open, ask lots of questions and (at least at the beginning) adobt a slightly humble approach.
But, quite often this hasn't happened; they come on here with both barrels blazing, and not a Deed Title in sight.
It can sometimes works that way on the up ward trend,and the same way on the down side,and sometimes like now it pays to be right out of the equities markets with cash waiting,trading cfd,s is very high risk even for the experienced in this time..
