What does the past tell us our market will do ?

[Beef_Hooked]

You are (probably) not smarter than your father. Just more arrogant.

.......could you, personally plot the orbits of the heavenly bodies and predict when they will re-appear? Some of the dumb-shits who preceded you did that thousands of years ago.

Haha ROFL I was wondering if I'd ever post here again given that I don't have the prerequisite pair of Joo Janta sunnies* but that one made me laugh so much I was compelled to show appreciation.

<Back to my seat in the peanut gallery.>

Cheers,
Beef.

* Peril Sensitive Sunglasses

Joo Janta 200 Super-Chromatic Peril Sensitive Sunglasses have been specially designed to help people develop a relaxed attitude to danger. At the first hint of trouble, they turn totally black and thus prevent you from seeing anything that might alarm you.

A double-pair is frequently worn by Zaphod Beeblebrox.

 

[HomePage]

Hi guys

Allot of people who remember them, mention bits and pieces of our previous booms, downturns and cycles .

Maybe what has happened in the past is the best guide in when and what to expect this time round .

If you remember other cycles could you describe them and any correlations to now please , I know I for one would be very interested ..

Someone mentioned that property has slumped 18-24 mths after a stock market crash with others so there's the first guide, maybe . What late 09 onwards ?

Cheers

The problem with such comparisons is that most are based on the last 30/40 years worth of history, where family income increases and investment awareness have hit new high levels. Is this sustainable longer term?

 

[Sunfish]

Haha ROFL I was wondering if I'd ever post here again ........

Join in Beefy. I'd wondered where you've bin!

 

[Aaron Sice]

wow - talk about a complex.

you got a prob with my sig take it to PM - don't pollute threads with your insecurities.

cheers.

 

[nonrecourse]

You are (probably) not smarter than your father. Just more arrogant.

My father survived two world wars and the Great Depression and while I may be more modern/sophisticated than he was (he's dead of course) I make no claim re intelligence.

Without the net to research, could you, personally plot the orbits of the heavenly bodies and predict when they will re-appear? Some of the dumb-shits who preceded you did that thousands of years ago.

Fishy a whole generation of arrogant property investors are about to discover that what goes up can also come crashing down. Those who don't know history are doomed to repeat it. Three blind mice see how they run....

 

[AUSPROP...]

Fishy a whole generation of arrogant property investors are about to discover that what goes up can also come crashing down. Those who don't know history are doomed to repeat it. Three blind mice see how they run....

equally, a whole slice of the population is about to find out that they can't consume (in the form of rent) at a fraction of the true economic cost. Yields will reflect a true a return on risk. Negative gearing will disappear by default.

Developers, unable to make a return, will cease building exuberant 3x2 villas and fancy apartments. The age of reality has dawned. Modest 2x1s that people can actually afford will become the norm.

Housing densities will necessarily increase, construction size and quality will decrease. Think trailer parks - yielding 12%.

 

[Sunfish]

Ten years ago here, if you put down a deposit (which you had to do) you had +ve cash flow, but that wasn't because of high rents it was because of low costs. But people still developed land and built new houses on it. There is plenty of "fat" in house prices now though which can be cut to bring about a fair return in the future.

In a "Brisbane" thread running at the moment they are talking about smallish lots with a basic house on it being worth $400k. That really means that the dirt is worth $300k.

It is possible that in hard times people can't pay higher rent than they are now, so to bring the returns back to where they should be that $300k can drop to $100k, otherwise no investor will want it and without competition rom investors the OO will not have to pay the current price.

The cost of the structure is governed by material and labour cost and cannot fall below a floor price except in an initial clearance period, as is happening in the US now. In a period of rising unemployment the cost of labour will slip a little and first home buyer's expectations will be lowered a little but there is not much "fat" to be shed there. But the floor price for the land is way below the current asking price and there is no guarantee that it can't go down to that level.

So be careful what you wish for. The "fair return" may be achieved by a drop in value rather than a rise in rents. I do agree that the low returns currently received probably won't last.

 

[AUSPROP...]

agree totally Sunfish. Either:

- the value of the land falls
- rents rise
- the expectation of what is currently a standard 4x2 house becomes a 3x1 house

any or all of the above.

 

[BoatBoy]

Housing densities will necessarily increase, construction size and quality will decrease. Think trailer parks - yielding 12%.

LOL, a window to the future for nonrecourse

http://www.trailerparkboys.com/

Dave

 

[josko]

I might frame this one , simplicity at it's best.

Trouble is I need to make some decisions on two I have, that mightn't go as planned , which is gonna hurt me .
And then I have a third property in mind that I want right now if I can get it.
The circumstances on all three hinge in one way or another on just what the hell everything looks like doing unfortunately.

I really wish I was in the position to just sit on the fence and let it all unfold
but no such luck , maybe the next time round .

Cheers

All you can do, Blaster, is make informed, educated decisions. My decisions didn't go as planned last year and I am paying for them now, but I can at least have peace of mind knowing that I thought I was doing the right thing at the time, based on my research and knowledge.

The economy is completely out of your control.

I also wanted that "other" property. It's called greed......don't let it cloud your judgement.

Sometimes others can see more clearly from a distance. Feel free to post if you are comfortable. A bit of humble pie is always good for the soul.

Regards Jo

 

[Ms Jade]

...Sometimes others can see more clearly from a distance. Feel free to post if you are comfortable. A bit of humble pie is always good for the soul.

Great advice from Jo, Blaster. Sometimes a problem shared really is a problem halved.

 

[nonrecourse]

The three f's

LOL, a window to the future for nonrecourse

http://www.trailerparkboys.com/

Dave

Hiya Boat Boy. If you go back 12 months when i first started to predict what was coming you would see I said that rents will continue to climb and unemployment will only reach 7.5%. Two reasons; yes there is continued demand to rent, the property collapse that is coming has more to do with lack of finance as 60- 70% of our housing financed is sourced overseas now. The unemployment level will not reach the highs of the US as most of our manufacturing industry is already overseas. The other reason is although I think the labour party have no idea with regards to managing the economy the one thing they will do is prop up employment even if it is to the detriment of future generations.

BB do you know the three F's of investing ? My bank manager told me this one. If it floats, flies or f@rnicates... rent it.... don't buy it

 

[willair]

The other reason is although I think the labour party have no idea with regards to managing the economy the one thing they will do is prop up employment

Who knows how bad it will all get,but the trend is starting to pick up speed ,went up the local dole office this morning to put my name on the umemployment list ,just think if all the Men over forty with the wife working and the Men at home doing the home dad thing that are not in the unemployment list but the line from the dole office was half way into the carpark, if every person put their on the umemployment lists.i don't want any money just my name on the numbers listname then Kev and Miss Gillard might see the real facts..imho willair..
http://www.abc.net.au/news/stories/2009/03/12/2514425.htm..
http://www.abc.net.au/news/stories/2009/03/13/2515343.htm?section=justin

 

[BoatBoy]

BB do you know the three F's of investing ? My bank manager told me this one. If it floats, flies or f@rnicates... rent it.... don't buy it

What a fool your bankmanager is then.

How much does 10 years plus of rental for a 50 ft cat that will be lived on and used everyday work out at compared to purchase?

Heres a hint http://www.ccy.com.au/perry445p/

And to buy?

http://yachthub.com/index.html?page=list/ed.html?de=44918

Of course if you are like most un deserving boatowners and only use it for 1 day a month at best and the rest of the time park it on a berth while it slowly rots through lack of use, he's correct.

Dave

 

[chilliaa]

Hiya Boat Boy. If you go back 12 months when i first started to predict what was coming you would see I said that rents will continue to climb and unemployment will only reach 7.5%. Two reasons; yes there is continued demand to rent, the property collapse that is coming has more to do with lack of finance as 60- 70% of our housing financed is sourced overseas now. The unemployment level will not reach the highs of the US as most of our manufacturing industry is already overseas. The other reason is although I think the labour party have no idea with regards to managing the economy the one thing they will do is prop up employment even if it is to the detriment of future generations.

BB do you know the three F's of investing ? My bank manager told me this one. If it floats, flies or f@rnicates... rent it.... don't buy it

I think you have this point incorrect. Banks have to maintain capital based on risk weighted assets. Residential property has a very low risk weighting, so its 'easy' for banks to lend against residential property. This is why you are not seeing the problems in the commercial sector translate into residential lending. Australian banks have already secured 60-70% of borrowing requirements for 2009.

 

[Chatto]

I was hoping the quality would start to come back into the building industry with more tradies looking for work.

 

[sparky23]

I was hoping the quality would start to come back into the building industry with more tradies looking for work.

Looks as though it is to me! LOL

 

[nonrecourse]

I think you have this point incorrect. Banks have to maintain capital based on risk weighted assets. Residential property has a very low risk weighting, so its 'easy' for banks to lend against residential property. This is why you are not seeing the problems in the commercial sector translate into residential lending. Australian banks have already secured 60-70% of borrowing requirements for 2009.

What was viewed as not risky in 2005/06 with regard to property in the USA with a AAA credit rating today doesn't qualify as toilet paper. Before you jump on me I am not comparing that pile of trash (U.S. subprime borrowings) that they lumbered on unsuspecting and naieve investors with Australian residential property. My point is risk weighting is not a science but a collaberative view of valuers and actuaries.

Don't be too sure that the commercial madness will not spill into the residential market. We both agree that Mr market is not rational, BHP at $30 is madness. Residential property's turn of being trashed by a market that is not rational will play out over the next 18 months

 

[blaster]

All you can do, Blaster, is make informed, educated decisions. My decisions didn't go as planned last year and I am paying for them now, but I can at least have peace of mind knowing that I thought I was doing the right thing at the time, based on my research and knowledge.

The economy is completely out of your control.

I also wanted that "other" property. It's called greed......don't let it cloud your judgement.

Sometimes others can see more clearly from a distance. Feel free to post if you are comfortable. A bit of humble pie is always good for the soul.

Regards Jo

Hi Jo .

No nothing to do with greed , it's not in my nature and I have no such luxury I'm afraid but way too complicated. Although I see how it sounded that way .

The 3rd is a very much needed roof over our heads and after a damn lot of sacrificing and a very rough time but , what happens if in 6 or 12 mths time you have paid too much and it 's only worth 1/2 but you can't cover the difference .

Will banks expect 2/3 of the country to just rip that kind of money out of a hat to cover , or do we all end up American 08 ?

Cheers

 

[chilliaa]

Hi guys

Allot of people who remember them, mention bits and pieces of our previous booms, downturns and cycles .

Maybe what has happened in the past is the best guide in when and what to expect this time round .

If you remember other cycles could you describe them and any correlations to now please , I know I for one would be very interested ..

Someone mentioned that property has slumped 18-24 mths after a stock market crash with others so there's the first guide, maybe . What late 09 onwards ?

Cheers

The past can provide insperation into the future. But whilst cycles have similarities to the past they do not have a 100% correlation, otherwise arbitrage opportunities would exist by imposing previous cycles onto current cycles.

What i can nearly guarantee you is:
1) Market fear levels are at levels not seen for decades, therefore certain asset classes are being priced on excessive risk, where as previously they were priced on bluesky risk.
2) Many asset classes purchased at todays prices will produce very satisfactory investment returns over a 10 year period (because of the over pricing of risk)
3) Most people will be too scared to invest in the current climate. Instead they will wait until financial situations return to normalicy. They will then pay a much higher price for certain asset classes, but will consule themselves by saying they are buying in a less risky environment (even though this is only perceived risk and not actual risk), they will also receive positive re-enforcement by seeing the masses follow their investment decisions.
4) The next bull market in a certain asset class will begin. At first it wont be noticable, but as it grows it will draw more attention. As it grows, human greed instinct will come into play, the more believable the story, the more people will buy into the story regardless of the fundamentals, the masses will believe this time its different and its their chance of getting their share of the riches. The fact that this position becomes a crowded position will escape most peoples notice. The more moderate crowd will be warning of the position, but the fact that asset prices keep rising will 'prove' them wrong, and the cycle will grow until it goes bust.