Just as an example;
If I invested $40,000 in the stock market and the market dropped by 50% I'd lose $20,000.
If I invested $40,000 and borrowed $360,000 to invest in a $400,000 property and the real estate market dropped by 50% I'd lose $200,000.
Most people who invest in stocks understand that CFDs are one of the riskiest ways you can trade because the leverage increases your gains and your losses. I think sometimes people forget how leveraging in the property market increases our risk and our exposure to losses. For whatever reason people consider it as a much safer investment. I suppose it's because property has performed so well in Australia in recent history.
I still think understanding the impact of a property crash is very important. I'm confused as to why people here disagree with what I'm saying? I think what I'm saying is very reasonable.
Belle what do they teach you at uni, just because the market drops 50% doesnt mean you loose half your money, you can buy put options. Like a type of insurance. You can hedge and make money in a falling market or rising market. You can still get divends even if the price falls. If the price rose 300% before or after the 50% fall you have lost nothing. Why would you buy a house for $400,000 then sell it for $200,00 houses are usually a long term investment and you would loose more than $200,00 because of the asociated selling cost. You would only loose money if you sold. You would probably still get about the same rent evev if prices did fall. I think falling markets can be good they create buying opportunities, that where you make your money, you buy, you dont crystilize loses by selling.