Unemployment hits 5.2%

[Chatto]

I know we are not in Japan but property prices plunged and rates went down with them, not inconceivable. The thing is it is really hard to borrow now because the rates are next to nothing, what incentive is there for the bank to lend unless they will make a quid?
If people are now conditioned into accepting that their house is worth x and wont budge on price what affect does unemployment have? If your world suddenly changes for the worst and you HAVE to sell, where will that take price?

 

[BayView]

Probably why now is a good time to concentrate on Neutral or pos geared property. If you loose your job you can still hold on.

This is a critical point.

If you have IP's which can pretty much support themselves, it doesn't impact on your financial position and won't be so much of a factor during bad economic times.

And of course; in good times you'll be laughing like a fat spider.

It all depends on your frame of mind.

 

[pully]

people who find themselves in a must sell are in a difficult position.
i think some call them motivated sellers?

of course there are options such as refinance etc if they can.
even if the price is reduced down markedly it is possible in a serious down turn that others are finding themselves in that position too.

if buyers bargain hunters also find it difficult to get finance there is a real problem. it is happening in many places in the world.

but i agree to protect oneself from being forced to sell type scenarios is to be realistic about level of gearing. certainly have a good buffer and avoid at all costs negative equity because of all that that may mean.

i know it is not strictly the role of the financiers/mortgage brokers etc but i wonder if they counsel their customers/clients re the consequences of overgearing in this economic environment? regards

 

[nonrecourse]

people who find themselves in a must sell are in a difficult position.
i think some call them motivated sellers?

of course there are options such as refinance etc if they can.
even if the price is reduced down markedly it is possible in a serious down turn that others are finding themselves in that position too.

if buyers bargain hunters also find it difficult to get finance there is a real problem. it is happening in many places in the world.

but i agree to protect oneself from being forced to sell type scenarios is to be realistic about level of gearing. certainly have a good buffer and avoid at all costs negative equity because of all that that may mean.

i know it is not strictly the role of the financiers/mortgage brokers etc but i wonder if they counsel their customers/clients re the consequences of overgearing in this economic environment? regards

Look out pully with views like that you will be branded as a D&Ger. Realistic gearing what a novel thought

Regards NR

 

[Chatto]

You've been copping a bit of flack over your views NR as being too D&G but I find it refreshing to hear views other than the usual 'it will be alright' view. Holding on to bubble mindsets will do none anygood now I feel.
It is quite healthy to tighten the belt and stop living to excess even if we ride this through without too much hardship.

 

[pully]

i think it is just a matter of being in a place where you have some control over your destiny.
it means looking after yourself self interest if you like.

if the aim of investing is to progress through life and be comfortable and reach your own optimal level of whatever it means to you to be happy, so be it.

if you are sensible you look at risk. by all means be optimistic about the future but be prepared/have a plan if things become more complex.

its really about being self reliant. sometimes i would question who benefits most by excessive gearing? but thats another story.
the mantra is often about equity and that is good. avoid negative equity.
achieving total equity is the most comfortable place. it cannot be taken.
just my thoughts. regards

 

[devo76]

I feel nothing has changed. In the short term yes there are dangers. But if you are investing for the short term you are taking a great risk. If you plan long term,have buffers and watch your cashflow then absolutely nothing has changed. How quickly people forget the long term when faced with a negative looking short term.

Its funny how when you chuck a battery in front of people.
Some see a negative but no positive
Some see a positive but no negative.

Then the balanced thinking people see that both create a battery and wonder why the other d@#k heads cant see it.

PS. this was not directed at anyone. Just an observation.

 

[chilliaa]

Look out pully with views like that you will be branded as a D&Ger. Realistic gearing what a novel thought

Regards NR

Yes all through this D&G period i have been presenting an alternative theory. Subject to cash flow, those people who are choosing this period (when they really should have been doing it several years ago when asset prices were priced for less risk) to offload property, reduce LVR's, buy gold as insurance etc etc may find themselves in a major quandry once the GFC finishes.

They could well find themselves in a future position of trying to buy assets again when there is no more GFC and asset prices are priced accordingly.


It reminds me so much of those investors who bought into regional towns/mining towns/coastal regions 10 odd years ago and achieved ylds of 10-20% on purchase price. Of course it was perceived (and perceived risk is not the same as actual risk) more risky because there was no nice upwards trend in asset prices to provide comfort. But what do we see next, the schmucks get on board in recent times after seeing these more marginal properties show outstanding capital growth. They look at the past 10 years of capital growth and assume to be able to extrapolate that into the next 10years. The early investors sell out to the schmucks and look for the next opportunity.

 

[sash]

Well said Chilla....though I am of the belief that any property in a capital city held for 10 years or more will do well.

But you are right in the sense people always think that areas will alway stay the same or go up. Property like any business has ups and downs and you need to manage this.

Diversifying into things like shares is also a smart move.

It reminds me so much of those investors who bought into regional towns/mining towns/coastal regions 10 odd years ago and achieved ylds of 10-20% on purchase price. Of course it was perceived (and perceived risk is not the same as actual risk) more risky because there was no nice upwards trend in asset prices to provide comfort. But what do we see next, the schmucks get on board in recent times after seeing these more marginal properties show outstanding capital growth. They look at the past 10 years of capital growth and assume to be able to extrapolate that into the next 10years. The early investors sell out to the schmucks and look for the next opportunity.

 

[Trogdor]

Marc - there was an article in yesterday (Fri 13th) AFR on property prices / rents in aus by BIS Shrapnel.

Reckoned "average" (whatever that meant) prices would fall but rents would increase by 25% over the next 3 years. The concept at least supports what you are saying!

 

[yorke]

Marc - there was an article in yesterday (Fri 13th) AFR on property prices / rents in aus by BIS Shrapnel.

Reckoned "average" (whatever that meant) prices would fall but rents would increase by 25% over the next 3 years. The concept at least supports what you are saying!

Makes sense, since thanks to the FHOG its only the low end of the market that's running hot the numbers are skewed and the average will come down this year.

 

[Aaron Sice]

*sigh* - again with the "3 months behind" sh it.

rents have been rising all throughout the "downturn" - BIS "forecast" can be seen by anyone with a mortgage just by reviewing the past 3 months....

again....