The Mother of All Booms is Coming??

Discussion in 'Property Market Economics' started by sash, 10th Mar, 2010.

  1. BV

    BV Think outside the square

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    Joe I agree the possibility of a lower share price is high.

    When people today are carrying so much debt it doesn't take much to push them over the edge and our bank's reliance on property is high.

    They can dance now counting their profits but there is no free lunch, one day they will have to pay for their irresponsible lending.

    The other concern would be their exposure due to the value of the AUD.
    If they have borrowed large sums of money overseas when the AUD was strong, how many more AUD's they will need to come up with when those loans mature in 5 or 10 years?

    Anyway, food for thought....
     
  2. MTR

    MTR Bling Bling

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    This thread was originally posted in 2010, The reality is the investors who purchased property in Sydney, Melbourne and Perth have already made money today and sitting pretty.
     
  3. BV

    BV Think outside the square

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    I couldn't agree more :)
    However. my post was regarding CBA shares which is off topic but I had to reply to because some people have unrealistic expectations.
     
  4. charlieandkath

    charlieandkath Member

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    $95 to $150.01 is not a doubling in the share price for starters. I find it weird sometimes how people read into things.
    Will their growing exposure to overvalued property have any impact? Yes - some impact.
    Will the expected crash/correction in overvalued US/multinational shares have any impact do you think? If they were over valued yes that would have impact but I am not seeing what you are talking about. If the Dow Jones was at 30000 or 40000 then I would be expecting a crash.
     
  5. Gockie

    Gockie Life loving Big 4 Banker

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    On another topic, nice to be just about in the worldwide wealthiest 0.2%.
    So blessed to be an Aussie born and raised in Sydney. Thanks also to Sydney's insane property market. :D

    With CBA shares, I can say, it's a very well run company. Strong focus on technology innovation and customer service. And as long as the Australian economy is going well, it will continue to do well for shareholders. If the economy tanks, the bank will have less profits and it will become more challenging to justify the high share price. So whether the share price is $20 or $200, a lot of it will have to do with market conditions. I reckon though, if it ever dropped to $20-30, I'd be buying up shares big time as it will have the yields and capacity to have share price growth once the market rebounds.

    Disclaimer: I currently work for the bank (along with approx 40,000 other Aussies) but do not have shares atm.
     

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  6. hugh72

    hugh72 Member

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    CBA had a capital raising at the height of the GFC for existing shareholders at $26 per share. How times can quickly change
     
  7. willair

    willair xx

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    I could go back too 1991 then 1995 but the above chart would give anyone a simple idea on value and compounding,and CBA has had the reinvestment plan in place for a long time,and that's what happens with value it builds up over time,,some may called what's happened with CBA and several other in that time value range does not reflect the reality that's happening on the ground,but from understanding most large companies in the USA have moved the investment model post GFCm1,and now don't keep their earnings or reinvest them ,they still are downsizing and distribute the cash to shareholders to keep the price where they want it..imho..
     
  8. BV

    BV Think outside the square

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    Your earlier post stated $200 and not $150.01 but that's ok I'm not here to argue, I just cannot see where the growth will come from, that's all.
    Maybe Stevens will start his own QE and then CBA could be $300 in 6 months ;)
     
  9. Intrigued again

    Intrigued again aka intrigued

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    It's not that far fetched, even at last year?s dividend you need to put $248.00 into so called safety of the Australia Government Bond 10Y at 2.31% or term deposit to get the same result.
     
  10. beachgurl

    beachgurl Member

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    We bought a few shares at the time. Think it was 10k well spent.
     
  11. antistar

    antistar Member

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    "The real house price boom hasn?t even begun" - interesting views here:

    This matters because it isn?t so much the absolute level of debt that is important to the property market -- household debt was also at a record in 2000 -- and again in 2004 and 2006. Instead it is the cost of servicing that debt which is the key influence -- and debt servicing costs, already at decade lows are only going lower.

    https://www.businessspectator.com.a...n-news/real-house-price-boom-hasnt-even-begun
     
  12. BV

    BV Think outside the square

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    If the above link asks you to subscribe then try this link
    http://www.theaustralian.com.au/bus...hasnt-even-begun/story-e6frg9if-1227294832562
     
  13. windyzz

    windyzz Member

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    Any other link ? Still asking to subscribe... :( -- nvm i got it
     
    Last edited: 9th Apr, 2015
  14. hobo-jo

    hobo-jo Not a bear just a realist

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    Google the article title & click the first link from Google and it should load without the subscription page:

    "The real house price boom hasn't even begun"
     
  15. see_change

    see_change Apprentice Timing Lord

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    Oh well , another agree to disagree . I'll agree about not buying in Sydney , though I think it still has some time to go .

    Brisbane still has a way to go .

    Cliff
     
  16. Ausprop

    Ausprop Member

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    interesting, sounds like spruiker talk. The cost of servicing debt fluctuates, lenders are quite aware of that.
     
  17. Graemsay

    Graemsay Doom and Gloomer

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    Macrobusiness have a piece up quoting research by LF Economics (Lindsay Davis and Philip Soos) on the cost of paying the principle of a loan exclusive of the interest costs.

    http://www.macrobusiness.com.au/2015/04/oz-housing-affordability-measured/

    The piece isn't that clear, but the point it's making is that it'd take about 25% of the median income over a period of more than thirty years to pay off the principle of an 80% loan on a median property in Sydney.

    That's ignoring interest costs, which would push the costs up.

    The standard view in economics is that it's only the interest that counts, repayments are considered as enforced saving and therefore not a cost. A $100K loan at 10% is deemed as affordable as $1 million at 1%. Given the choice I'd much prefer the former.
     
  18. redwing

    redwing Progress Not Perfection

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    What does the crystal ball say now Sash :D
     
  19. skater

    skater Capitalist

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    Sydney is no longer cheap! :cool:
     
  20. TMNT

    TMNT Member

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    mother of all boom? I doubt it

    a collapse, I doubt it

    a GFC type of plateau and/or dropping of prices by a few %, possible

    but what does worry me is that mining used to be a big chunk of the positiveness of the economy, however I think the economy still isnt in great health,

    Retail and disposable spending has risen noticeably, however I really havent noticed it that much, there still is caution in areas of spending except real estate

    unemployment is still high,

    mining is getting worse,

    to me it seems that the real estate market is on its typical cycle of rises where the herd have gotten on the bandwagon, however the difference being due to rates being at historical lows, the rise has been extended or has hit a bit later. So I think the rising will stop soon, but when! who knows,

    however if I was buying into the hot markets now, whether it be syd or melb, id be quite worried, especially for those who are expecting double digit growth to continue