The Right Type of Boom

I was a bit too young to remember the "old" days , but i too see a price explosion, due to the shortfall of housing stock, trades are getting dearer, as there mortgages are now alot larger than the past ,

i was explaining it to my younger off sider, this way, ?
when you were at school how much was a paddel pop ice cream, he said 80c well in my day they were 25c and now they are $2.50 so if you bought them 20 years ago at 25c the gain in the product is yours,

so in ten years from now they might be $5.00 and people would still be buying them , he agreed, so same with property, the loan on a 500k home would be serviced at the 250k price,
he understood this better, and is saving for his first IP at 20yrs old, good on him.
 
Over the next 2-3 years I see a real possibility of a boom in property whilst interest rates rise and the 'recovery' happens in the broader economy. I think the size of the boom will surprise many, like 20%+ pa for a couple of years
Anyway Bill.L . Keep hoping for that 20%+ pa. I'll be getting more properties mid-late next year when the price comes off about 10% after FHOG, and the next wave of the downturncome. Shares in Dec/Jan, after they fall back again Sep/Oct/Nov.

Cheers guys. Enjoy your property "boom". haha.

It's like you guys don't understand basic economics. The economy is only looking good because of all the stimulus (the world is in a bad shape otherwise). What do you possibly expect to drive a property boom when people are working less hours, credit is tightening. The US is stuffed, China is not the driver it's made out to be.

Bye
 
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Hi all,

Investor888,

Are you blinded by all the D&G hype that you don't see a "real possibility of a boom". I don't think you will see that I am 'married' to that possibility either.

I have fairly low leverage on our properties, and a fair size offset balance. I do not need massive growth, it would just be nice ;).

If the stimuluses around the world do not work well enough, then governments will just produce more until it is. However there is already plenty of evidence that the existing packages are getting economies moving again.

As the banks get more confident, and have a greater desire to increase profits, all this new money will have an inflationary effect on something. Because the sharemarket has acted like a shockmarket, and now recovered some of the lost ground, just like late '87 early '88, property will seem like the sure thing to Joe Public.

Given low rates and relatively good yields, then that my friend are the ingredients for a boom.

bye
 
Evidence bill - and final post!

If the stimuluses around the world do not work well enough, then governments will just produce more until it is. However there is already plenty of evidence that the existing packages are getting economies moving again.

OK, Bill. We'll agree to disagree. Good luck with your property boom.

Cheers
 
Anyway Bill.L . Keep hoping for that 20%+ pa. I'll be getting more properties mid-late next year when the price comes off about 10% after FHOG, and the next wave of the downturncome. Shares in Dec/Jan, after they fall back again Sep/Oct/Nov.

In my experience people who try and time a precise entry point in to the property market are always proved wrong. How many of you know people who always say year after year -- "it is not a good time to buy property right now... prices are so expensive..."
 
In my experience people who try and time a precise entry point in to the property market are always proved wrong. How many of you know people who always say year after year -- "it is not a good time to buy property right now... prices are so expensive..."

This time it's different. ;)
 
If the stimuluses around the world do not work well enough, then governments will just produce more until it is. However there is already plenty of evidence that the existing packages are getting economies moving again.
Bill.L, I am inclined to agree with your opinion of further stimuli should world economies not recover, however, I don't share your enthusiasm of the current packages having done a good job. I have seen some MSM stories indicating recovery is around the corner due to such & such, but no real substantial numbers yet to convince me, I am interested to see what you claim is evidence of the packages getting economies moving...

Given low rates and relatively good yields, then that my friend are the ingredients for a boom.
Relative to what? i.e. I am seeing much better yields from many stocks on the ASX...What would you consider a good yield?
 
Hi all,

I am interested to see what you claim is evidence of the packages getting economies moving.

How about this from the WSJ..... here.....

http://online.wsj.com/article/SB125014420293928457.html


Germany and France have escaped from recession surprisingly quickly, outpacing the U.S. in returning to growth thanks in part to government stimulus efforts and consumer spending.

Germany, Europe's biggest economy, grew at an annualized pace of 1.3% in the second quarter, while France, the region's second-biggest economy, expanded at an annualized rate of 1.4%. Both countries recorded contractions for the previous four quarters, and bounced back earlier than other advanced economies including the U.S. and the U.K.

~5% yields when you are paying ~5% interest seems pretty good to me, but those 5% yield are disappearing quickly.

bye
 
I believe that figure for Germany was a seasonally adjusted rate. Another article discussing Germany's figures:
http://www.reuters.com/article/bondsNews/idUSLD35734020090813?pageNumber=2&virtualBrandChannel=0
Year-on-year, the German economy shrank 7.1 percent in the second quarter, the data showed, following a 6.4 percent drop in the January-March period. The Office is due to publish a detailed breakdown of the second quarter GDP data on Aug. 25.
It will be interesting to see the breakdown in a couple of weeks.

~5% yields when you are paying ~5% interest seems pretty good to me, but those 5% yield are disappearing quickly.
I guess if you have very low LVRs it might be ok or if you can find a newer property with a 5% yield and lots of depreciation to squeeze a few more $, but for the average investor who I assume would be borrowing most of the capital, 5% return when paying 5% interest rates doesn't make much sense to me.
 
Hi hobo-jo,

If 5% yield with 5% interest rates sound bad to you, then how do 8% yields sound with 13% interest rates??

Because that was the scenario in the early '80's with property booming over the next 8-9 years.

bye
 
If it was during a period of high capital growth you wouldn't be so concerned with such a low return I guess, but I don't see house prices going anywhere too quickly in the near future.
 
Most people didn't see house prices going anywhere in the future in the early '80's either, especially because of high interest rates and low yields.

bye
 
Most people didn't see house prices going anywhere in the future in the early '80's either......
I think this is an important point.... it's v. hard to predict the future. As was said in the first post... the conditions are right for a boom & after failing to see falling prices after the last 2 years events there appears to be little downside from here. Many SSers would be seeing the current conditions as close to perfect and with the bonus of a possibility of an impending (& unforecastable) boom.
 
Just how big was the early 70's and entire 80's property and share booms though? I think there was not much of a boom at all in real terms.

We had probably an average 10% inflation/CPI increase for the 15 years. A high of 16% in 1975. If property and shares wasn't doubling every 7 years it was going backwards.

The current boom has been big though. We have had great capital gains in a low inflation environment since the late 90's.

See ya's.
 
According to this graph:

http://www.wealthfoundations.com.au/blog/are-home-loan-interest-rates-really-low/


Inflation in 1985 was around 9.7% when interest rates were at approx. 17%.

I don't know that interest rates have any real impact on housing inflation though. I think there are too many other market factors that have to come into play, just as Keith mentioned.

We should all be worried about what the inflation rate is in comparison to interest rates...rather than just the interest rate. (After cashflow of course!;))

If you analise the REAL Interest Rate in comparison to Inflation now....then interest rates aren't really that cheap/low.:eek:

So what we all really want is high inflation with our low interest rates. I can't see that will happen in a "boom" sort of way. The road to me seems bumpy but gradually inclining.

Interest rates WILL rise and there is no doubt here about that. What I wonder is how will those that have "positively geared" property now.....fare when interest rates are 2% higher. The good thing about bank serviceability calculators is that serviceability is assessed at a higher interest rate.

Realistically, FHOB'rs should be able to afford at least another 1% interest rate rise. But what of inflation?

Genereally speaking, I personally think rents have gone as far as they will go. Anyone relying on rental increases along with increasing interest rates is in for a shock.

Steady as she goes for me.;)

Regards JO
 
Depends on lender, some 4 weeks, some 12 months.

Cba has best shelf life, as standard run of mill loan..


But what happens if IR rise on a 12 month pre-approval with CBA.

Today - For example
At a 5.5% SV IR - Preapproval for $270 K


But then I dont find the property I want to buy until 7 months later and now IR's have gone up a lot, the SV is now 7%. Does that mean now CBA will write me up another pre-approval based on the new 7% IR

eg
At a 7% SV IR - Preapproval for $240 K


Hope im not babbling too much

thanks :)
 
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