When does a correction become a crash ?

[csc2]

Given that they are many 20 yr olds on this forum, some of whom may well live to be 80+ yrs old, you feel confident that in the next 60 years you won't see a house price double in one 12 month period of that 60 years?

Now there's a bet I'd be willing to put money on - against you!

come and dig me up and cough up the cash prop when you lose!

im confident as hell, but ill be dead to collect...

 

[Shadow]

Hi all.

As most would know there is a lot of talk about where the market is heading. We have bears and bulls fighting it out and we also have fence sitters as well as the crowd that think long term only and are not worried.

Much of this can be put down to what people consider to be a crash.

Is it
5 plus years of no growth
10% drop
20% drop
30% drop
40% drop

Or any combination of the above.

So when does everyone think you change from a correction/slump into a full blown crash?

I know this thread may go pear shaped a bit quick but i think it could show some interesting thinking.

Oh and i think 30% and 5 years of no growth.

Cheers

Well, a 20% fall would barely even reverse the last 18 months gains, so it would have to be a fair bit more than that to be considered a proper crash, so yes 30% seems reasonable. It's not going to happen though, not for at least another 4-5 years.

 

[MrCrumbpacker]

Well, a 20% fall would barely even reverse the last 18 months gains, so it would have to be a fair bit more than that to be considered a proper crash, so yes 30% seems reasonable. It's not going to happen though, not for at least another 4-5 years.

What happens then?, presumably we all sell before it crashes?

 

[Aaron Sice]

sell? no, we buy more.

 

[MrCrumbpacker]

sell? no, we buy more.

Kinda depends on the size of the crash Shadow is predicting, might be worth getting out and back in, like some did in UK 1990.

 

[Sunfish]

sell? no, we buy more.

Remember Storm Financial? That was precisely their response to any query re any possible price drop. They used charts going back to the Great Depression to demonstrate how robust their theory was.

Maybe they should have used charts going back further, LOL

 

[devo76]

But are these not the times that test your investing metal. If growth was a continual % per year then sure why worry. But most investors know good/great years are often counterbalanced with bad. Does this mean we head for the hills or do we stick to the long term goal and keep an eye on the prize at the end. These are the times that sort the sheep out .

Hope that makes sense. I'm working in Darwin for a month and i've had a few I love this place. I will say that the 1.3 mill apartment I'm in does seem a little pricey .

 

[devo76]

Well its been half a year or so since i wrote this thread. What are peoples thoughts now ?
Is this just an expected bump in a normal cycle.
Are people continuing on the path while some are heading for the hills.

Personally im sticking with it and getting my project done. What i do with the created equity at the end im not so sure. Im actually counting on softer prices creating some more buying opertunities.
With a long term view nothing has changed.Nothing at all.

Crash or correction. Im guessing some have had their own personal crash while others cant even see it on the horizon.

Cheers

 

[VYBerlinaV8]

I'm sticking it out for two reasons:
1) We've been hearing bad news for several years now, and yet property where I invest (Canberra / Queanbeyan) is not crashing. It's not growing much, but there's plenty of demand to prop up prices.
2) My portfolio is cashflow positive now, so I'm happy to put it on the backburner and let is run for a while.

I always expected us to enter a long period of stagnation, and I think that is what is happening locally for me. It's the big upswing I'm expecting 8-10 years from now that I'm trying to get ready for.

 

[Shadow]

House prices rose 20-30% in many places since the GFC. A fall of 20-30% would just take them back to where they were pre-GFC. I'm expecting national prices to be relatively flat over the course of this year, with moderate falls in Perth and Brisbane being offset by moderate gains in Sydney.

 

[Graemsay]

Shadow, you haven't got the maths right there. A 30% rise followed by a 30% fall equates to a net fall of nearly 10%.

Going back to Devo76's point, my opinion is that Australian property prices are high (and I know that Shadow will disagree with this ), but that doesn't necessarily mean a collapse will happen. Here in the UK prices are down a bit, despite a savage recession, lack of mortgages, and impending cuts to government spending.

However, falling house prices are often a leading indicator of economic trouble, and given today's figures (yes, I know that they were expected to be worse), caution might not be a bad thing.

 

[Shadow]

Shadow, you haven't got the maths right there. A 30% rise followed by a 30% fall equates to a net fall of nearly 10%.

Yes fair enough, I should have been more accurate - but you get my drift. A 20% fall is just going to take us back to where were we a few years ago, give or take a few percent.

 

[albertwt]

It is when the RBA decalres that if the country is currently in a recession state so that'll be the wake up call but it is too late.