Thnings are slowing a lot quicker than I thought!

[sash]

Looking at the share market and SKY news.....it looks like China is coming off its growth also. India's growth has also been revised to 5% from 7%. China's was revised from 11% to 9%....but believe it will be a lot lower!

I am now more bearish for the prospects for Australia....particulary WA, NT, and Qld....they are now looking at their strong resource economies slowing. This is not good for Australia?

I have held off adjusting my strategy in the property market....but increasingly I am of the opinion to wait and see for the next 3-4 mths. I have gut feeling this is going to get worse. I will however, push along with my share and option trading as I feel there is plenty of potential here....as technically I feel we have reached bottom but will still be volatile for the next 6 months or so.

I am amazed at how fast this thing has taken affect....

Would love to hear what others have to say.

 

[GreatPig]

An interview with Mr D&G himself, Marc Faber. Comments relating to China and Australia near the end.

GP

 

[BV]

Sash

I believe that it's all speculation and that it's too early to tell.

I think that even if demand for raw materials falls it won't stop all together.
We certainly won't be getting top US$ for our dirt and therefore some of the more expensive mining could be put on the back burner but the big miners will certainly be making good money.

I guess the worry is that without the big profits of the big miners the government would need to find a different source of revenue so hopefully the banking industry plus other industries can compensate or the government could be forced to take the latest tax cuts back...

cheers

 

[Novar]

I was just thinking that tonight while watching Lateline.

Thing is there are so many experts and so many opinions all different, goodness knows what will happen next.

I don't think anyone knows they're mostly just getting their face on TV to fill in 5 minutes and the thirst for us all to hear another view.

I'm a bit worried about Rudd handing out the dough, when we are doing so well *cough ...very suspect *cough

Sure is interesting times though, fasten your seatbelt!

And go Obama!! ... nice diversion there

 

[Chatto]

Thought you might like the chart, 20yr band. I expect the bottom to 3400ish before we start heading NE.
My doomsday prediction is 2700! To early to pick the bottom yet I'll wait until it is well under way before jumping back in the water, ruling out any dead cats.
I'd like to think I'm an optomist but my present thinking is that we have arrived at 'the winter of our discontent' and that our bubble denial is not helping, it is early days yet.

 

[evand]

After such a long debt binge, property boom, sharemarket boom etc etc its not going to be short and sweet.

This is going to take a while to play out - barring government intervention - which always makes predictions worthless, as we are seeing now.

We could see a 30% - 40% fall in property, but it sort of happens while no one is watching as it did in the 90s. 4-5-6 years of average 5% falls will get us there, especially if inflation is in the 3%-5% band.

 

[handyandy]

We could see a 30% - 40% fall in property, but it sort of happens while no one is watching as it did in the 90s. 4-5-6 years of average 5% falls will get us there, especially if inflation is in the 3%-5% band.

Absolutely agree. Its erosion by stealth. The hype leaves the market and people worry about their jobs and the increasing prices for food and everyday items.

Cheers

 

[WillG]

After such a long debt binge, property boom, sharemarket boom etc etc its not going to be short and sweet.

This is going to take a while to play out - barring government intervention - which always makes predictions worthless, as we are seeing now.

We could see a 30% - 40% fall in property, but it sort of happens while no one is watching as it did in the 90s. 4-5-6 years of average 5% falls will get us there, especially if inflation is in the 3%-5% band.

I vote for 4 to 5 years of 0% or 1% growth. This will bring the compounding growth back to an average 7% growth since 2000 (I have based this on prices my properties over the past 10 years).

 

[buzzlightyear]

Absolutely agree. Its erosion by stealth. The hype leaves the market and people worry about their jobs and the increasing prices for food and everyday items.

Cheers

Talking to agents at the moment with regards to property vals & sales around Prahran/Windsor/Sth Yarra etc.... and there is no hype that's for sure.

Not many people selling, and not many people buying. Its a very subdued market, really characterised by the fact that most vendors who are looking at selling don't really have to. Many are holding off. Most REA that I have spoken to suspect it will remain this way for the remainder of the year. They are hoping for a more upbeat start to 2009.

Another 1%+ IR reduction IMO will start to warm the cold winds of impending slowdown & recession. But agree, there is no rush to purchase.

 

[essence]

We could see a 30% - 40% fall in property, but it sort of happens while no one is watching as it did in the 90s. 4-5-6 years of average 5% falls will get us there, especially if inflation is in the 3%-5% band.

Forget the myth of "inflation". It is not going to be in 3-5% band - guaranteed. Sharemarket falling, resource bubble dead, oil falling, drought about to break - there is nothing that underpins price growth any longer.

Government and RBA are now worried about deflation. This is why RBA sentiment changed from tightening rates to VERY agressive cuts :

http://www.theaustralian.news.com.au/story/0,25197,24509538-643,00.html

This is why Government sentiment changed form "Save,save save" to "Spend! Spend!!! Spend!!!!" .

Now they want to restart property market, because it is the only hope for the economy. They want people to buy properties.

You seem to be mesmerised to death with S Keen prediction of 30-40% fall in prices.

Ask yourself couple of questions - where all those billions deinvested from share market will go?

Will you invest them in gold knowing that US has no choice but to sell their gold reserves?

Will you invest it in cash knowing that interest rates going down?

Will you invest it in bonds knowing extent of Government liabilities?

Will you dismiss investment in property knowing of severe property shortage and guaranteed returns of 7% up (at least for the next 5 years until construction is revived)?

Ask yourself the other question - will people still pay 6-7% of the value of the property in rent when they will have the option to pay 3-4% of the value in mortgage?

And one more. If 7.25% rate did not cause massive sellof in properties, how rates under 4% (and possibly 0%) will cause it?

And still more. Say there is massive selloff. People who sell - are they going to evaporate somehow? Or will they be living in caves ?

 

[evand]

So, Pro Keens 30% - 40% fall could be on the cards. Its just that it doesn't happen quickly and obviously. it happens slowly and as you say (by stealth).

Its happened in the 90s and could certainly happen again as debt is so much higher.

Do people think first before posting hysterical posts about Steve Keen? Do they know it has happened many times (not just in Australia) and could certainly happen again.

It just indicates the low level of investor experience/knowledge this forum has come to. It is unfortunate as there used to be so many wealthy, experienced and rational investors here that posted from experience, not from theory and spreadsheets.

Absolutely agree. Its erosion by stealth. The hype leaves the market and people worry about their jobs and the increasing prices for food and everyday items.

Cheers

 

[evand]

All the points below didn't stop property sitting stagnant in price for most of the 90s. And they probably wont again.

Forget the myth of "inflation". It is not going to be in 3-5% band - guaranteed. Sharemarket falling, resource bubble dead, oil falling, drought about to break - there is nothing that underpins price growth any longer.

Government and RBA are now worried about deflation. This is why RBA sentiment changed from tightening rates to VERY agressive cuts :

http://www.theaustralian.news.com.au/story/0,25197,24509538-643,00.html

This is why Government sentiment changed form "Save,save save" to "Spend! Spend!!! Spend!!!!" .

Now they want to restart property market, because it is the only hope for the economy. They want people to buy properties.

You seem to be mesmerised to death with S Keen prediction of 30-40% fall in prices.

Ask yourself couple of questions - where all those billions deinvested from share market will go?

Will you invest them in gold knowing that US has no choice but to sell their gold reserves?

Will you invest it in cash knowing that interest rates going down?

Will you invest it in bonds knowing extent of Government liabilities?

Will you dismiss investment in property knowing of severe property shortage and guaranteed returns of 7% up (at least for the next 5 years until construction is revived)?

Ask yourself the other question - will people still pay 6-7% of the value of the property in rent when they will have the option to pay 3-4% of the value in mortgage?

And one more. If 7.25% rate did not cause massive sellof in properties, how rates under 4% (and possibly 0%) will cause it?

And still more. Say there is massive selloff. People who sell - are they going to evaporate somehow? Or will they be living in caves ?

 

[steveadl]

Looking at the share market and SKY news.....it looks like China is coming off its growth also. India's growth has also been revised to 5% from 7%. China's was revised from 11% to 9%....but believe it will be a lot lower!

To be honest I don't see that as bad news. Much better to have growth easing back as opposed to China continuing to power ahead at 11%+ then all of a sudden crash to 2% like the economists seemed to be worried about the last couple years before all this mess came up.

Those growth figures are still very good and hopefully a bit more stable.

 

[essence]

All the points below didn't stop property sitting stagnant in price for most of the 90s. And they probably wont again.

Really?

In 1995 I have got my first mortgage at 9.4% pa. Before that rates were even higher.

During 90s property prices came off merely 5% off boom peaks.

There was no $21K FHOG

There was no stamp duty treshold.

There was oversupply of properties.

Which rock you slept under?

 

[sash]

Agreed.....8-9% would be good and sustainable.

But given what I am hearing....it maybe substantially lower than this figure. If it gets to say 5-6% or lower.....that is going to have quite a bearing on Australia.

I was watching a program where the Latin America thought they would be okay as they are also resources and agricultural based. Now it looks like they are also going to get a hit.

China's growth is now driven by internal consumption...so far this has not tailed off...it it does....then we are in trouble. There are already signs that the domestic housing market in China is slowly.....so some cold winds are starting to blow through.

Time will tell.....I am battening down the hatch in terms of the property market acquisitions but am a bit more positive about the financial stocks in the Share market. Currently, I am putting my money where my mouth is.

On more postive side.....I have also a worst case back-up plan...which will insulate me from a severe recession. If worse the economy gets the more positive cash-flow income I have. It is now starting to look more like the median wage. I also feel because the properties I own are in the lower end, I should not have as much difficulty getting tenants. particularly if first home buyers cool their heels due the current uncertainty in the market. I still plan to increase rents, albeit at a slower rate than the last 12 months.

Cheers
Sash

To be honest I don't see that as bad news. Much better to have growth easing back as opposed to China continuing to power ahead at 11%+ then all of a sudden crash to 2% like the economists seemed to be worried about the last couple years before all this mess came up.

Those growth figures are still very good and hopefully a bit more stable.

 

[Aaron Sice]

Sash

I believe that it's all speculation and that it's too early to tell.

I think that even if demand for raw materials falls it won't stop all together.
We certainly won't be getting top US$ for our dirt and therefore some of the more expensive mining could be put on the back burner but the big miners will certainly be making good money.

i don't believe it's just specualtion - RIO just pulled a $14b deal from WA, other miners are holding off as you mentioned. whether they come back onside in force is yet to be seen or the implications of such fully understood. i just see more skills shortages if it does - already hampering operations.

big miners ARE still making massive $$$, and even 2nd tier companies like Woodside are still posting record earnings (see 3Q!).

I guess the worry is that without the big profits of the big miners the government would need to find a different source of revenue so hopefully the banking industry plus other industries can compensate or the government could be forced to take the latest tax cuts back...

my job was looking bleak for next year until all these FHB incentives came out. all of a sudden there's a rush on like never before...if everyone takes advantage of the scheme then i see increased taxes for anyone over $100k, hike in luxury car tax, higher fringe benefits tax etc etc. you know, the usual labour "you rich, you bad" taxation system...!

cheers

purely opinion.

 

[DCI]

From my understanding resource companies usually have fixed term contracts for price, quantity and duration of supply. I am assuming if a slow down were evident in the near future it may still take a while to filter through, untill contracts expire.
Perhaps China has decided to recycle a few olympic stadiums
I do believe things appear to have unfolded way to quickly, so either specufesters has taken front row seats, or we have all been left in the dark for quite some time about the real shape of our ecconomy.
I may be neive, but my guess is media scaremungering taking place on a global scale. Yes the global ecconomy is suffering but really many companies with oustanding fundamentals are taking a complete unworthy battering on the markets. When fear infiltrates the world markets, it manifest it's own demise.

 

[evand]

Mate, i'm talking about the eroding effects inflation has on a property value over time.

If it goes nowhere in price for - lets say - 6 years. Its actually losing 4% of its value compounding over that time.

And if it loses any value in real terms (as you suggested) even @ 5% pa then the real loss of value added to inflation can add up BIG time. This is exactly what happened in the 90s.


Of all the risks in finance and investment, the one least mentioned and very real is called 'inflationary risk.'

http://www.investopedia.com/terms/i/inflationrisk.asp

It can erode your aealth without you noticing. Now, wheres my rock?

Which rock you slept under?

 

[BV]

And still more. Say there is massive selloff. People who sell - are they going to evaporate somehow? Or will they be living in caves ?

Essence,

I agree, there won't be any selloff.

There is a big property shortage now and lowering interest rates will also put a stop to loan defaults so there will be a natural floor on property prices.

I am monitoring the numbers of listed properties in my suburbs of interest and the listings on a weekly basis are currently going down.

Anyone who believes that property prices will fall is dreaming.

IMHO

Cheers

 

[urchin]

Forget the myth of "inflation". It is not going to be Now they want to restart property market, because it is the only hope for the economy. They want people to buy properties.

How will restarting the property market save the economy? I really don't get this. Sure, it is important for the construction industry, it is important for real estate agents, it is important retailers such as Harvey Norman, etc. (you have to furnish your house and when you have just spent hundreds of thousands on a house a $3000 lounge looks positively cheap). And of coruse local governments need high rates and stamp duties in order to balance their budgets.

But otherwise is it not simply a matter of money moving from one set of hands to another? Nothing is produced as a result of the exchange. No service or product emerges out of the transaction.

Ask yourself the other question - will people still pay 6-7% of the value of the property in rent when they will have the option to pay 3-4% of the value in mortgage?

I agree with you here. But it has a long, long, long time to go before that sort of ratio is achieved. Rents will have to go up significantly, interest rates AND property values will have to decline significantly.