Where's the crash
- Thread starter pieman
- Start date
i have a mate that believed the house prices were about to fall, as i have seen him pay dead rent for 15 years, so we went for a drive and a talk, to show what i had bought and sold, over time.
and how the values would rise, etc etc.
i remember showing him some { 4 } properties at around 215k mark and the ability he has to be able to value add etc...
after waiting for 8 years for the fall { crash } i am happy for him to know he now has a mortgage, and is now renovating the home for his familly,, 7 years later..................... $330 k
Best time to purchase a home is yesterday, it alway has and it always will!
and how the values would rise, etc etc.
i remember showing him some { 4 } properties at around 215k mark and the ability he has to be able to value add etc...
after waiting for 8 years for the fall { crash } i am happy for him to know he now has a mortgage, and is now renovating the home for his familly,, 7 years later..................... $330 k
Best time to purchase a home is yesterday, it alway has and it always will!
Yup.... get him to ask his parents & grandparents if they thought houses were expensive when they were young... of course they were
.If houses weren't expensive, then we'd all have a few of them - one at the beach, one on the harbour, St Tropez, Vancouver, ....
Odds are, they knuckled down & saved enough to buy one. None of these interent forums back then to link up with others who also think it's all to hard/unfair/someone elses fault.
The year after a boom...which on average is every 7 years...
I have been been amazed at the position Australians, especially the media and Saul from ANZ, have been taking in regards to this. What is almost NEVER taken into consideration if the considerable impact the global recession will have, instead, people are constantly looking to previous domestic market trends or even domestic economic circumstances. Get over it.
The reality is that Australia lags behind the rest of the world in our responses to global variables, always have. Think of us as the last car on a roller coaster ride, we may still be on the up while the rest of the world is half way down the other side. The only difference to the roller coaster is that when we go up we do better than most (see the past 15 years) and when we go down, we go down eve harder.
We are only NOW starting to see the some of the effects trickle into Australia, and we are facing a tsunami which will smash our economy for years. Here is the crunch:
Australia is hugely reliant on our resources sector, this is very inelastic, despite commodity prices, as we negotiate via contract for these (although 80% of our resources are foreign owned we still generate massive income on tariffs and tax) resources. China has become not one of the few but pretty much the ONLY importer as Germany and Japan sink into the abyss. South American miners among others have started offering ore and commodities at spot prices (market prices) meaning our contracted prices are being massively undercut. With the recent negotiations we are seeing huge reductions in our potential income between 40-80% falls. On top of this China has pushed the US to accept inflationary readjustment of their bonds, the US has refused and China has stopped buying. Instead they have been stockpiling commodities at rock bottom prices, beats US treasuries. That means they have even more leverage on negotiations, and as one of the few remaining buyers in a collapsing market the prices for next year looks even worse.
The job losses have only JUST started, and we are looking at the rest of the world starting its recovery in 12 months at the very best projection - we will never see a return to the heady days of free flowing capital of 2007 so there will never be a recovery to those levels, we will stop the decline and make up some ground but no way will we see the same levels of speculative dollars. Further OECD countries have leveraged themselves to the hilt, trillions in the US and UK while Australia is looking at least half a billion.....huge numbers which will burden our economies and hamper growth for a long time (estimates on the UK are 10 -15 years - wow.) All the while Asia will have simply relied on its vast stocks of foreign reserves (savings) to continue command the low prices.
The estimates of %7 unemployment in Australia are simply mad - the US is losing 650,000 jobs a months and that is growing, April looks to be 675,000. A realistic minimum would be 10% and an honest assessment is going to be around 15%. For those who thought we would miss the global credit crunch - we were simply standing last in line.
For those who are also unaware of the level of indebtedness Australians carry both in mortgage and credit card, now is the time to take a look. To compound this is the very worrying fact that 65% of ALL Australian businesses are financed through mortgages on their home.
One of the main avenues for tackling the crunch to save jobs has been to reduce hours, and time share - meaning everyone works less for a lot less pay - meaning finance stress, defaults.
The banking assurance scheme only covers 80% of home loans (big four) leaving 20% highliy vulnerable loans without cover. Even those that are covered will simply be compounding repayments into their debt with interest, and while values decrease we will see a huge rise in 80-100% home loans for unemployed people - we will be creating our OWN sub-prime market. This assurance is only for twelve months and will end right when the peak of problems begin, people will not be getting new or better jobs, they will simply all be defaulting at once.
Further there is no way that the first home buyers grant will be extended, it has simply been inflationary and everyone knows it with BOTH JP morgan and Stanley stating clearing it has placed the most vulnerable in a worse off position by inflating low prices.
Even if they were to continue it, the rush has bled most of the keenest out of the market and the common sense reality that a 10% drop in the market value on a low end house of $250k is still better than a $21k grant. Simple maths.
Further it has been made abundantly clear that the only real activity in the market has been from this grant, meaning, when it stops the market is going to come to an earth shattering halt. The only other activity in the market is investment property and this has been maintained as people are too shell shocked to realise that the game is over - AND - their entire portfolio is based on the assumption of ever escalating prices - fantasy.
It has also become abundantly clear that everything the government has done to increase housing affordability has failed, with the only option left to ACTUALLY do something about it which will come in the form of releasing new land - Australia has vacant land appreciation values 500 times that of the rest of the world, a totally artificial position as we have the lowest urban foot print (0.04%) of any country on earth. Wow. Hence we are going to see as a result to genuinely realign our market with global norms huge readjustments in the value of land which will gut the market in real estate.
So no more first home buyers, no more investors, unemployment, defaults, all compounding to force the market down - and a 30-40% fall on the market on the whole would simply leave us in line with the rest of planet earth.
On top of all of this as Australia joins the rest of the planet in full scale recession, we will see capital flight from the country. Combined with a genuine market correction in real estate you also begin to see super funds pulling out of Australian real estate, something already happening. This will be calamitous for those relying on the myth of Australian housing prices.
To add insult to injury, as has already started happening you will see second homes, holiday houses, subdivisions, and even granny flats flooding the market as people consolidate their losses and seek to sure themselves up.
As Australia tails the rest of the planet into the abyss, you will also see falls in other commodity sectors such as food - which has already happened. Right when the drought breaks too eh. But what is worse is that as the rest of world heads into recovery, while we still head to the bottom, oil prices, inflation and interest rates will start to rise impacting our ability to climb out of our hole.
The only argument against all of this is pure faith in fantasy - its going to happen.
The reason that the Australian government has been so desperate to artificially prop up the Australian housing market is that it is a false provider of wealth - it is speculative. Further it is where all our boom money went, into simply speculating up the prices of homes without any real increase underlying value we simply speculated the prices up. So any correction is simply going to evaporate our boom years income - this is EXACTLY what has caused the global credit crunch (CDO and CDS). But we are in even more trouble as everyone was taking this speculative bonus and using it to leverage themselves into either more real estate or consumer goods.
Finally for those who believe the 85,000 housing shortage, the Master Builders Association has come out said clearly this is garbage. Further, the Rudd government put the brakes on immigration months ago. The UK was seeing a housing shortfall of 350,000 houses and had the highest immigration rates on earth - their values have already dropped by well over 30%. Japan in the 90's had the tightest housing market on earth - values their dropped between 70-90%. Incredible.
The reality of Australian house prices is that they are totally artificial in almost everyway. Get ready for the biggest bubble burst you have ever seen - and the thing about it is there are PLENTY of experts who have been screaming this from the trees yet, the only thing people want to hear is optimism and whatever anyone with a vested interest tells them. I have never seen such a willingness to turn a deaf ear to sound, intelligent advice.
The reality is that Australia lags behind the rest of the world in our responses to global variables, always have. Think of us as the last car on a roller coaster ride, we may still be on the up while the rest of the world is half way down the other side. The only difference to the roller coaster is that when we go up we do better than most (see the past 15 years) and when we go down, we go down eve harder.
We are only NOW starting to see the some of the effects trickle into Australia, and we are facing a tsunami which will smash our economy for years. Here is the crunch:
Australia is hugely reliant on our resources sector, this is very inelastic, despite commodity prices, as we negotiate via contract for these (although 80% of our resources are foreign owned we still generate massive income on tariffs and tax) resources. China has become not one of the few but pretty much the ONLY importer as Germany and Japan sink into the abyss. South American miners among others have started offering ore and commodities at spot prices (market prices) meaning our contracted prices are being massively undercut. With the recent negotiations we are seeing huge reductions in our potential income between 40-80% falls. On top of this China has pushed the US to accept inflationary readjustment of their bonds, the US has refused and China has stopped buying. Instead they have been stockpiling commodities at rock bottom prices, beats US treasuries. That means they have even more leverage on negotiations, and as one of the few remaining buyers in a collapsing market the prices for next year looks even worse.
The job losses have only JUST started, and we are looking at the rest of the world starting its recovery in 12 months at the very best projection - we will never see a return to the heady days of free flowing capital of 2007 so there will never be a recovery to those levels, we will stop the decline and make up some ground but no way will we see the same levels of speculative dollars. Further OECD countries have leveraged themselves to the hilt, trillions in the US and UK while Australia is looking at least half a billion.....huge numbers which will burden our economies and hamper growth for a long time (estimates on the UK are 10 -15 years - wow.) All the while Asia will have simply relied on its vast stocks of foreign reserves (savings) to continue command the low prices.
The estimates of %7 unemployment in Australia are simply mad - the US is losing 650,000 jobs a months and that is growing, April looks to be 675,000. A realistic minimum would be 10% and an honest assessment is going to be around 15%. For those who thought we would miss the global credit crunch - we were simply standing last in line.
For those who are also unaware of the level of indebtedness Australians carry both in mortgage and credit card, now is the time to take a look. To compound this is the very worrying fact that 65% of ALL Australian businesses are financed through mortgages on their home.
One of the main avenues for tackling the crunch to save jobs has been to reduce hours, and time share - meaning everyone works less for a lot less pay - meaning finance stress, defaults.
The banking assurance scheme only covers 80% of home loans (big four) leaving 20% highliy vulnerable loans without cover. Even those that are covered will simply be compounding repayments into their debt with interest, and while values decrease we will see a huge rise in 80-100% home loans for unemployed people - we will be creating our OWN sub-prime market. This assurance is only for twelve months and will end right when the peak of problems begin, people will not be getting new or better jobs, they will simply all be defaulting at once.
Further there is no way that the first home buyers grant will be extended, it has simply been inflationary and everyone knows it with BOTH JP morgan and Stanley stating clearing it has placed the most vulnerable in a worse off position by inflating low prices.
Even if they were to continue it, the rush has bled most of the keenest out of the market and the common sense reality that a 10% drop in the market value on a low end house of $250k is still better than a $21k grant. Simple maths.
Further it has been made abundantly clear that the only real activity in the market has been from this grant, meaning, when it stops the market is going to come to an earth shattering halt. The only other activity in the market is investment property and this has been maintained as people are too shell shocked to realise that the game is over - AND - their entire portfolio is based on the assumption of ever escalating prices - fantasy.
It has also become abundantly clear that everything the government has done to increase housing affordability has failed, with the only option left to ACTUALLY do something about it which will come in the form of releasing new land - Australia has vacant land appreciation values 500 times that of the rest of the world, a totally artificial position as we have the lowest urban foot print (0.04%) of any country on earth. Wow. Hence we are going to see as a result to genuinely realign our market with global norms huge readjustments in the value of land which will gut the market in real estate.
So no more first home buyers, no more investors, unemployment, defaults, all compounding to force the market down - and a 30-40% fall on the market on the whole would simply leave us in line with the rest of planet earth.
On top of all of this as Australia joins the rest of the planet in full scale recession, we will see capital flight from the country. Combined with a genuine market correction in real estate you also begin to see super funds pulling out of Australian real estate, something already happening. This will be calamitous for those relying on the myth of Australian housing prices.
To add insult to injury, as has already started happening you will see second homes, holiday houses, subdivisions, and even granny flats flooding the market as people consolidate their losses and seek to sure themselves up.
As Australia tails the rest of the planet into the abyss, you will also see falls in other commodity sectors such as food - which has already happened. Right when the drought breaks too eh. But what is worse is that as the rest of world heads into recovery, while we still head to the bottom, oil prices, inflation and interest rates will start to rise impacting our ability to climb out of our hole.
The only argument against all of this is pure faith in fantasy - its going to happen.
The reason that the Australian government has been so desperate to artificially prop up the Australian housing market is that it is a false provider of wealth - it is speculative. Further it is where all our boom money went, into simply speculating up the prices of homes without any real increase underlying value we simply speculated the prices up. So any correction is simply going to evaporate our boom years income - this is EXACTLY what has caused the global credit crunch (CDO and CDS). But we are in even more trouble as everyone was taking this speculative bonus and using it to leverage themselves into either more real estate or consumer goods.
Finally for those who believe the 85,000 housing shortage, the Master Builders Association has come out said clearly this is garbage. Further, the Rudd government put the brakes on immigration months ago. The UK was seeing a housing shortfall of 350,000 houses and had the highest immigration rates on earth - their values have already dropped by well over 30%. Japan in the 90's had the tightest housing market on earth - values their dropped between 70-90%. Incredible.
The reality of Australian house prices is that they are totally artificial in almost everyway. Get ready for the biggest bubble burst you have ever seen - and the thing about it is there are PLENTY of experts who have been screaming this from the trees yet, the only thing people want to hear is optimism and whatever anyone with a vested interest tells them. I have never seen such a willingness to turn a deaf ear to sound, intelligent advice.
Gee wiz audas, why don't you stop beating around the bush and just come out and say what you really mean?
That's some first post you got there fella - what happend? Were you a bit too positive for the guys over at that other forum?
That's some first post you got there fella - what happend? Were you a bit too positive for the guys over at that other forum?
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I think much of what audas says is true, the argument is about degrees! I dont think it will be as catastrophic as overseas, as they are beginning their recovery mode now, albeit protracted. If that can gain some momentum, then at least things will be more positive than they are at the moment. And that will help us recover quicker.
Umm...
Skys been falling for a long time now, still hasnt hit the ground.
I fail to see how this will affect me.
Disaster 1: Get fired.
Disaster 2: Interest rates soar.
Both of which are solved by accept a crappy job labouring & working hard for a while. Ive got enough savings to cover 12m worth of repayments or about 8months living+repayement, even though im in the "risky" %97 LVR group.
Thats why I follow Rixters advice, forget the media just do your own thing.
Good Thread.
I like the point that Jobs and Rising Rates are the only issue. Property is a great advantage to wealth creation and the sooner you get in the better. Prices go up and down but mostly up. My first prop cost $72.5k and that cost a lot then in 1989. Last one was $320k and it was not a blip on the radar to hold.
So dont fear,
The lesson I learn't from the last recession (1990) was dont trust the jobs to someone else. I was retrenched twice, one due to slow down and second due to Company failure... that when I started my first business. This time I have been in my own business 7 years. Must have been predicting the recession LOL.
Rates. Fix , fix and fix.... Presently paid to unfix early in this cycle so reaping big time but will fix again the moment we see a clear rise in rates coming. My advice is fix long. 5 years minimum and even 7. Yes you lose $$ sometimes but you never lose your IPs.
Now it great time to get in. One of the best!
Peter
I like the point that Jobs and Rising Rates are the only issue. Property is a great advantage to wealth creation and the sooner you get in the better. Prices go up and down but mostly up. My first prop cost $72.5k and that cost a lot then in 1989. Last one was $320k and it was not a blip on the radar to hold.
So dont fear,
The lesson I learn't from the last recession (1990) was dont trust the jobs to someone else. I was retrenched twice, one due to slow down and second due to Company failure... that when I started my first business. This time I have been in my own business 7 years. Must have been predicting the recession LOL.
Rates. Fix , fix and fix.... Presently paid to unfix early in this cycle so reaping big time but will fix again the moment we see a clear rise in rates coming. My advice is fix long. 5 years minimum and even 7. Yes you lose $$ sometimes but you never lose your IPs.
Now it great time to get in. One of the best!
Peter
I don't see this as a bad thing.
Unless, the person who has bought the business using their PPoR equity is out of control financially both in normal life and in their business dealings.
You'll find that most people will fight like hell to make a go of it if they have gone down this path, and good luck to them for having a go.
Rather see this than see them sitting around crying because they can't get ahead in life.
There will always be a few who will go under, and that's sad.
But it is also life.
The reality now is that Banks won't lend against businesses as a security. I'm experiencing this right now. This really p.i.s.s.e.s me off. If they did lend on the business, I'd be able to borrow twice as much as I currently am for this purpose.
So, if the wheels of commerce and investment are to keep turning - and they always will for those who are motivated to do so - then this is what you have to do right now.
No matter; you can only play the game by the rules of the day, and them's the rules of today.
I'm suprised it was only 65%. That may probably relate to the 70% that own a PPOR. My business has no debt but if it did I would use the PPOR or IP as security as the rates are the lowest.
Peter 14.7
Peter 14.7
I agree, Push.
Our country has had the benefit of being able to watch the USA etc implosion before it affected our shores, and allow us time to put in procedures to minimise the carnage.
Being able to watch and learn should provide a better level of damage control and should give us a much softer landing here in the land of Aus - the best Country in the Universe.
Absolutely not the case - the only figures which have come out as positive are reductions in the rate of negative figures - when you have the percentage of unemployment increasing month on month finally returning a lower number this is not a recovery - the only figures we have seen any where are a slowing in the GROWTH of negative news - nowhere has there been any news on a turn around.
The only market indicators of a positive sign have come out of the banking sector in the US - with Goldman Sachs reporting a profit, but refusing to disclose where this came from - remember the two in charge of the US bailout were also in charge of Goldman and AIG -
There has not been a single figure released anywhere which points to a recovery. In fact the Chinese slow down was expected to be around %6.8 - instead it has hit %6.1 - the magic 6.8 figure is what is known as revolutionary marker - the people will take to the streets.
The global economy is contracting, and that's WITH Chinas growth rate of 6.1.
The biggest threat to workd economy is now from corporate defaults - these haven't really picked up pace yet as we are still feeling the pinch of credit default swaps and sub prime write offs.
Yes its negative but it is the reality check we all need. Just consider for your own position what it will mean for you with a 40% write down on value.
I am not a commodities expert but I read on the weekend that the bounce in commodites prices has surprised the bears. the stock of materials in china has now dwindled, orders picking up and the long heralded crash at the ore negotiation table is now likely to be modest rather than shocking
I liked Whittakers simple cycle flow that went something like
leading indicator (shares drops)
margin calls
boats and beach houses sold
unemployment rises
leading indicator (shares) rise
and the merry go round goes round
I liked Whittakers simple cycle flow that went something like
leading indicator (shares drops)
margin calls
boats and beach houses sold
unemployment rises
leading indicator (shares) rise
and the merry go round goes round
One more thing - all this means is that come July / August next year for those of you have heeded the reality of Australias tail-gaiting world markets there will be some genuine opportunities.
Don't forget that the huge falls in the UK, and the US still have not seen anyone capitalising on their falls - they still haven't bottomed. Australia hasn't even started to really drop.
For those with cash in twelve months - you will REALLY and TRULY be able to make what is called a profit on housing.
Don't forget that the huge falls in the UK, and the US still have not seen anyone capitalising on their falls - they still haven't bottomed. Australia hasn't even started to really drop.
For those with cash in twelve months - you will REALLY and TRULY be able to make what is called a profit on housing.
Hi all,
Good grief, what a saga for a first post...
Audas,
Where do I start?? Oh yes how about here.....
This is a property investors forum.
What has been your experience with property??
How have other investments performed for you??
Are you young and just starting???
Are you approaching retirement without a nest egg???
What are your interests, other than telling property investors that they have no idea what they are doing??
bye
Good grief, what a saga for a first post...
Audas,
Where do I start?? Oh yes how about here.....
This is a property investors forum.
What has been your experience with property??
How have other investments performed for you??
Are you young and just starting???
Are you approaching retirement without a nest egg???
What are your interests, other than telling property investors that they have no idea what they are doing??
bye
This is always worth watching,as there are too many people on this planet that worry about things that they have no influence over..imho.willair.
http://www.abc.net.au/4corners/content/2009/s2544841.htm
http://www.abc.net.au/4corners/content/2009/s2544841.htm
Audus, the problem with your post is its based soley on FEAR.
Its funny, we just had one extreme D&G'er ride off into the Sunset, and now another one arives at the Sunrise.
You say that Japan and Germany not longer import resources from us? really are you sure?
What about the devaluation in the AU$ vs the drop in commodity prices? And just out of curiosity, what were commodity prices 5 years ago to now?
Did Australia only start to exist in the latest commodity boom? were we living in the dark ages before this?
So if lending markets eventually come to some form of normalicy, then why would that inspire a property crash then, if we are in a tight credit market NOW.
If interest rates rise, that will be because economic conditions are improving, if economic conditions are improving then job stability will increase which means no forced selling due to unemployment.
Anway welcome back non-recourse, this forum hasnt been the same without you.
Its funny, we just had one extreme D&G'er ride off into the Sunset, and now another one arives at the Sunrise.
You say that Japan and Germany not longer import resources from us? really are you sure?
What about the devaluation in the AU$ vs the drop in commodity prices? And just out of curiosity, what were commodity prices 5 years ago to now?
Did Australia only start to exist in the latest commodity boom? were we living in the dark ages before this?
So if lending markets eventually come to some form of normalicy, then why would that inspire a property crash then, if we are in a tight credit market NOW.
If interest rates rise, that will be because economic conditions are improving, if economic conditions are improving then job stability will increase which means no forced selling due to unemployment.
Anway welcome back non-recourse, this forum hasnt been the same without you.
Ahhh how are you this fine evening Professor Keen?
