Tsunami' to hit Australian real estate

[topcropper]

(b) his potential 3000 dow forecast, Now with the dow at 11,000 odd lets look at the fundamentals of those companies at 3000. Do you really think it will get there?????

I suppose he's predicting a depression. The start of this thread says he predicts Australian house prices to get back to 1999/2000 levels, so that's about a 50% drop. That would also need a collapse of business and the general economy. Dow at 3000, all ords at 2000, house prices halving, would all go together in a depression.

Dents predicted all sorts of things over the years. I remember him saying the dow would get to 30 thousand or something! a fair few years ago. He's just out to sell books, that's all and if you predict enough outcomes you will eventually get it right.


It's not hard to predict 9 of the last 3 recessions. Or 5 of the last two booms


See ya's.

 

[Deltaberry]

On the Dow, for it to fall back to 3000 would mean average market P / E would fall from today's 9x to say 3x. Unless we saw a corresponding decrease in bottom line, these multiples would stand true. I would've thought that's pretty unlikely

Re rents, yes I think they would by and large stay flat. The major catalyst for rental decrease would be that Australia enters a deeps recession followed by a deflationary period where salaries and company profits fall quite a bit. Falling house prices is alone not enough to drive rents down - but if it is sufficiently severe and there are massive write-downs on securitised debt (as was in the US), it could be contagious.

On investing in the US, typical investment theory tells you deep recessions occur for around 6 years. Seeing the subprime fallout started in 08, the 6 year time frame would be up in around 2014. Besides you'd think buying in after halfway on a low currency and low house prices couldn't get much worst. I actually can't find too many reasons to fault the US strategy.

 

[Deltaberry]

in countries that had a bubble pop rents have fallen.

That's right - it just depends whether the bubble drags the economy down.

Some investors are making a big assumption here - that is, that the economy will continue to power on despite a popping of a bubble. What if it coincided with a commodities bust? I'd venture to guess most here would be less qualified than me to comment on these things too

 

[lizzie]

That's interesting ... the only times I've seen rents go down in the last 15yrs is because of oversupply.

However, hmmm - oversupply may occur from an economic downturn and more people living in a single premises (ie, two couples in a 2bed flat instead of one) - or interest rates/house prices falling so that renters move on to being buyers while potential renters live at home longer.

Okay - I concede economic factors can cause rent to fall. The majority of oversupply I'd seen in the last 15 years was because of overbuilding so mindset was a little skewie.

Even more reason to buy well place, positive/neutral geared properties as they will always be in demand - over stock standard outer suburbs with no shops or public transport.

 

[buzzlightyear]

Steven Keen did and was derided for it.

Steve Keen was on Switzer last night on Sky Business channel.

His comments were not totally unreasonable, even if you disagree with his conclusions. Dent was also on as well.

 

[Mindmaster]

No, you are right.

If you are in the bottom market, then rents are mostly supported by the Gov pension. These tenants have no other option.

Keen & Dent will say to this, consider the extreme issues. They say comments like Families Homeless living in CVan parks were used to justify where tenants will end up.

If this is true then we are all stuffed.

Interesting Dent suggrests we all invest in US Realesate and ride the rise there in value and then take more cash when the Aussie falls against the US $. Risky strategy needing a lot of things to line up if you ask me.

And then the US gov will simply tax non citizens with property sale tax and your strategy is stuffed.

Peter 14.7

Thank you for your reply Peter. That is what I thought.

Never been a big fan of LOE and much prefer to LOR. If you rely on LOE and the market is dropping or even just not growing, you are stuffed. Where as if you are just a boring rent collector LOR, life is still good.

 

[AlrightJack]

There is a lot of talk, specualtion, predictions and so forth on property values falling but what about rents falling???

There's a great article about this on Macrobusiness today. They've calculated house prices have risen far in excess of rents, indicating a bubble.

http://www.macrobusiness.com.au/2011/09/australian-housing-valuation-report

Also, references to international surveys proving Australia is overvalued.

 

[Aaron Sice]

There's a great article about this on Macrobusiness today. They've calculated house prices have risen far in excess of rents, indicating a bubble.

http://www.macrobusiness.com.au/2011/09/australian-housing-valuation-report

Also, references to international surveys proving Australia is overvalued.

compared to what - the USSA system? the UK system? Brazil?

Australian rents have always required a form of negative gearing - 8 posts in and chock full of useless stats already - i smell troll.

 

[myoung]

I quite like Harry Dent's work. That said, although he is often correct about direction he has rarely been correct about magnitude.

The article sounded more to me like he was talking up the US dollar.

We all know we are in for tougher times. The questions we need to ask, I think, are:
1) How bad?
2) How long?

Making sensible estimates for these answers helps with forward planning. Me, I'm not planning to buy or sell for a while, unless I see a stone cold bargain.

Sums it up for me perfectly. He is good on direction, but terrible on how far things rise and fall.

That being said, it doesn't take a genius to work out that we are in for a bumpy ride for a few years, then a period of flatness followed by the next growth phase. Cycles are cycles

 

[pieman]

compared to what - the USSA system? the UK system? Brazil?

Australian rents have always required a form of negative gearing - 8 posts in and chock full of useless stats already - i smell troll.

Yes he's come to a property investor forum to tell us all how property is overvalued and we should run for the hills. Perhaps a run down on his/her investment strategy would be nice

 

[Deltaberry]

Steve Keen was on Switzer last night on Sky Business channel.

His comments were not totally unreasonable, even if you disagree with his conclusions. Dent was also on as well.

I think there's merit to what they say - whether it's as hyped as they make it out to be I don't know and certainly hope not. Doesn't do any one any good, even if you're cashed up, though it helps.

 

[Sunfish]

I think there's merit to what they say - whether it's as hyped as they make it out to be I don't know and certainly hope not. Doesn't do any one any good, even if you're cashed up, though it helps.

I'm cashed up and even conservative old BHP looks risky today. Might just spend it on a holiday. Any restrictions on taking gold out of the country?

 

[josko]

I think there's merit to what they say - whether it's as hyped as they make it out to be I don't know and certainly hope not. Doesn't do any one any good, even if you're cashed up, though it helps.

I've been lurking on this thread and following with interest,

For what it's worth, with sentiment aside...it just doesn't look good. Every now and then....if you are unlucky enough...twice in a life time....there comes a financial tsunami that will ultimately hit property...If there is no money to pay rent, people will move in together - as I have my in-laws doing on October 14th...If there is noone to buy houses...prices will go down as people try to escape hefty mortgages.

It's a pain in the butt really, as I can't move to another mortgage product to lower interest rates, without having my house revalued. I've estimated at least a 25% drop since first GFC.

Regards JO

 

[Ausprop]

I think there's merit to what they say - whether it's as hyped as they make it out to be I don't know and certainly hope not. Doesn't do any one any good, even if you're cashed up, though it helps.

then the next geust came on, brushed it all aside and switzer commented about the healthy gdp growth in the US and said he was waiting for an uptick in stocks later this year. Pick the bones out of that lot.

 

[devo76]

Ok I weakened and googled " dent in Australia"
I found an interview where he says he expects Australian property to drop 50 to 60% within 6 months with massive layoffs and high unemployment. Crap that does not sound good.

Apart from the fact that this 6 month prediction into our hellish future was Actually made back in 2009 !!!

No sign of the future mind you but still funny I thought.

 

[Deltaberry]

I'm cashed up and even conservative old BHP looks risky today. Might just spend it on a holiday. Any restrictions on taking gold out of the country?

Yep anything over $10k needs to be declared before you board the plane. They might make you pay 99% taxes to fund the needy ALP voters.

 

[Perth Investor]

Yeah his doom saying has been going on for a while; even made it into "cut and paste" in The Australian, which normally reserve this section for labor MP's

Ok I weakened and googled " dent in Australia"
I found an interview where he says he expects Australian property to drop 50 to 60% within 6 months with massive layoffs and high unemployment. Crap that does not sound good.

Apart from the fact that this 6 month prediction into our hellish future was Actually made back in 2009 !!!

No sign of the future mind you but still funny I thought.

 

[redwing]

I'm cashed up and even cuonservative old BHP looks risky today. Might just spend it on a holiday. Any restrictions on taking gold out of the country?

Take it out in gold fillings ..rings, earrings, basically an older, whiter version of Mr T

 

[random]

I look at it this way , it could happen and could be on it's way, our numbers and chances over this last decade do make it highly probable/feasible no matter what anyone says and then ad the rest of the world . So I just think it's in my own best interests to treat it as a possibility and that's how I've tried to set my stuff up.
Not that I'm saying it is on it's way, how would I know , no one else does but it could be , this is the point that interests me and the way I look at it. Personally I think it'll end up somewhere middle road between the bulls and the bears and pan out into more of a long stagnation type scenario than a crash but we're crazy not to cover our butt on a just encase scenario to be safe don't you think.