Tsunami' to hit Australian real estate

[bluestorm]

Take it as you will. Listen to the property bulls on here who tell you property won't correct, or look at what is happening in the world economically, and with GFC2 on the way understand that Australian property will see a 30% property correction.

I don't think the property bulls here understand just how bad the global situation is.

Tsunami' to hit Australian real estate, forecaster Harry Dent says

AUSTRALIA'S love affair with property is about to turn sour as an "economic tsunami'' looks set to hit world markets, American economic forecaster Harry Dent says.

Mr Dent, who arrived in Australia today, predicts the world will experience a second, deeper downturn, which will arrive between the beginning and the middle of next year.

Starting in Europe, the downturn will spread to the US, China and eventually Australia, he said.

"Australia is probably the best place in the world to survive this, but we do think Australia will not escape as well as it did from the last crisis (in 2008),'' Mr Dent said.

At the centre of the coming debt crisis is real estate, the forecaster says.

Mr Dent said Australia's house prices would return to late 1990s or early 2000 levels.

 

[Empty Pockets]

So you predict 30% he predicts 50%.

 

[bluestorm]

So you predict 30% he predicts 50%.

I predict 30% in value (40% in real terms, when you factor in inflation). Either way, this sort of correction will see many people in negative equity, and many people hurting financially.

 

[Sim]

The key line from that article was "Mr Dent is in Australia to promote his book, The Great Crash Ahead - How to Prosper in the Debt Crisis of 2010-2012". Says it all I think.

 

[Propertunity]

www.maxfunds.com, a financial reporting site awarded Harry Dent the The "Ultimate Charlatan" Award. ........Enough said
http://www.maxfunds.com/?q=node/319

 

[bluestorm]

The key line from that article was "Mr Dent is in Australia to promote his book, The Great Crash Ahead - How to Prosper in the Debt Crisis of 2010-2012". Says it all I think.

When Somersoft ban members having links to commercial property related businesses, then I'll agree with you here. His promotion is no different to the RE's, Buyers advocates, etc promoting their wares on here and giving a more favorable view on property.

 

[devo76]

Self promotion aside he does make you think( and if he had his way rush out to buy his book).

The fact is no matter how confident you are in your own investment choices. This kind of talk does effect you.

But for me the sobering effect is a bit of a knee jerk reaction.
As I sit back take another gulp of my beer as I watch the chills run around the back yard.I realize something.
Nothing has changed.
Sure if what he suggests actually happens then that's not a very good thing. But fact is during my pre purchase thinking.
I allowed for a worse case scenario.
I personally can survive a slump and with the highly likely outcome of reduced rates. I will more than survive.
Add to this a respectable LVR for an accumulation phase.
Very small% of income dedicated to repayments. Buffers and job security.
I will ride this out. I knew this game was a long term play and as I say above.
Nothing has changed.
I talk about my own situation because at the end of the day. That's what matters. Everyone should have their own position at the front of their thoughts. They should have strategies in place to protect or prosper as the market dictates.
So basically when I read stuff like this( I did read it).
I have a think and if caution turns to worry I go over my plans and strategies again.( which I did).
It's at this point I smile again and realize that the game has not changed. My plan remains. And I continue to enjoy my Sunday.

All the best people.

 

[natedog]

Can someone please give me a rational explanation HOW propertry in australia will drop 40%?

Property prices could drop if there are heaps more properties on the market than there are buyers, and sellers reduce what they are willing to take for their property.

why would someone be willing to drop thier selling price though...
- loss of a job
-cost to hold is too great...forced to sell by bank etc
- dont really need to get top $$ to sell, so are happy to get less
- divorce
-moving to a different area
- suits them for whatever reason
etc etc etc

we still have a growing population, we still have low unemployment...5.3%...whoa scary!!!

An ABS report recently showed we have more disposable income or spend more on discretionary items than we do than 7 years ago....we are just saving more of that income than we have in a long time.

what real event or set of events will cause more and more sellers/forced sellers of australian property to make big % falls in value actually happen?

someone....give me something that scares me....i really dont see it...with one of the highest cash rates in th world at present...doesnt this give the RBA scope to help save massive ammounts of pain if its required to do so?

like i said...i am a simple thinker....i think we can over complicate what a home/house/property actually is to people in Oz.

Some here like to compare it to gold, sharemarket, tulips whatever...ultimately it is shelter...a neccessity, like food or clothing...that's why 70% of the population buy it....to LIVE in.

we may have the highest price of homes compared to income in the world....but we also apparently have the largest....

People NEED shelter, whther they buy it or rent it, with a growing population, rising incomes, low unemployment, interest rates that have room to move to help the economy IF it starts to tank, and the psychology of Oz property owners to hold on no matter what...i just cant see massive falls.

rose coloured glasses, glass half full, or just the real world the way it is??

Cheers

 

[TomW]

Last time I checked people in the US and Ireland need shelter as well.

Meanwhile in Europe:

German Finance Minister Prepares For Possible Greek Bankruptcy – Spiegel

Read more: http://macromon.wordpress.com/2011/...sible-greek-bankruptcy-spiegel/#ixzz1Xe6zRJgT

 

[devo76]

If the #### was to hit the fan to that extent there may be pockets that drop to that level. Just as there would be areas that only see a 5 or 10 % correction. But guess which area will get the airtime on the news. In my situation a 40% correction would put all my properties below replacement value of the building alone.
If you had 5 to 10 years of working life left or you needed a boom in that time to survive. Well I guess I would a bit jittery. But this is not the situation for most. While I won't say it can't happen as the market can overshoots in both directions. I am confident that things will recover.
Like I said. Look at you're own situation and have your own plans in place.

Can someone please give me a rational explanation HOW propertry in australia will drop 40%?

 

[pickle pickle]

Property in Australia will crash 40% if we have a deep recession. I just don't see Australia having a deep recession. I can't see the prices for our commodities dropping with the demand from China. Even if China demand drops off I can see India replacing Chinese demand. India has a growing population and I can see India overtaking China in economic size due to China's one child policy.

Can someone please give me a rational explanation HOW propertry in australia will drop 40%?

 

[Ausprop]

will this 40% be additional to the up to 50% falls that some property has seen? or is this directed to the markets that have been going up during the gfc?

 

[Rolf Latham]

Spiegel

]

Highly reliable journalistic material

ta

rolf

 

[VYBerlinaV8]

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.

 

[TomW]

Highly reliable journalistic material

ta

rolf

You mean De Spiegel? Germany's equivalent to the NY Times? Yeah can't imagine why anyone would believe anything they had to say about German economic policy.

 

[Ausprop]

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

yes, tearing up debts he reckons will see less supply of USD? if that's the gist of it, would you really want USD? Sounds like "invest some dollars with this guy because he is about to go bankrupt so will soon be debt free"

 

[HomePage]

Can someone please give me a rational explanation HOW propertry in australia will drop 40%?

It doesn't have to relate to fundamentals as you've outlined above. A good dose of greed helped get us to where we are today so why couldn't fear do the opposite?

 

[Deltaberry]

Self promotion aside he does make you think( and if he had his way rush out to buy his book).

The fact is no matter how confident you are in your own investment choices. This kind of talk does effect you.

But for me the sobering effect is a bit of a knee jerk reaction.
As I sit back take another gulp of my beer as I watch the chills run around the back yard.I realize something.
Nothing has changed.
Sure if what he suggests actually happens then that's not a very good thing. But fact is during my pre purchase thinking.
I allowed for a worse case scenario.
I personally can survive a slump and with the highly likely outcome of reduced rates. I will more than survive.
Add to this a respectable LVR for an accumulation phase.
Very small% of income dedicated to repayments. Buffers and job security.
I will ride this out. I knew this game was a long term play and as I say above.
Nothing has changed.
I talk about my own situation because at the end of the day. That's what matters. Everyone should have their own position at the front of their thoughts. They should have strategies in place to protect or prosper as the market dictates.
So basically when I read stuff like this( I did read it).
I have a think and if caution turns to worry I go over my plans and strategies again.( which I did).
It's at this point I smile again and realize that the game has not changed. My plan remains. And I continue to enjoy my Sunday.

All the best people.

Actually that's probably a little naive.

If a downturn as severe as the one Harry Dent predicts materialises, the banks will force your hand and if you can't meet such a commitment it will take charge of your home and sell it at a loss, wiping out your equity and your entire life savings.

Also in such a severe down turn your "job security" will quickly turn to a "job loss" as a meltdown in investment confidence, crashing commodity prices etc puts most of Australia out of a job.

Having a buffer certainly helps, but if your buffer is a salary that helps meet your negatively-geared cashflow repayments, I can assure you that in such a downturn you'd face a significant prospect of being wiped out. The only buffer that would help is if you were so cashed up that the bulk of your cash would or would nearly pay off all your debt.

 

[Deltaberry]

Can someone please give me a rational explanation HOW propertry in australia will drop 40%?

It's just a question of how contagious a Europe meltdown will be for the world. I have no idea because I don't appreciate how serious it is over there - but you probably appreciate it less than me judging by the rhetoric you spill out in your post.

In a sufficiently severe meltdown followed by a liquidity freeze, your reference to "discretionary income" will soon be changed to "man without a job living under the bridge".

 

[Deltaberry]

Property in Australia will crash 40% if we have a deep recession. I just don't see Australia having a deep recession. I can't see the prices for our commodities dropping with the demand from China. Even if China demand drops off I can see India replacing Chinese demand. India has a growing population and I can see India overtaking China in economic size due to China's one child policy.

Make no mistake. India is a long way off China. China's iron ore demand currently accounts for half the world's consumption. We are the world's 2nd or 3rd biggest iron ore producer (top three are Brazil, Australia and China and I forgot the order - yes China actually has A LOT of iron ore)). And a Chinese slowdown will be driven by a Europe meltdown, which would also impact India.

Coal is primarily driven by India - less so by China - and Korea and Japan. A Europe meltdown would bring those 3 down - especially Japan which is already on its knees. As usual, knowledge helps, but even I have no predictive ability and can't tell which way the world will go.