Investment is about logic, about making consistent and sustainable gains, without exposing oneself to too much risk. Investment is not about pride or hubris or being able to boast "told you so" when you are right and others wrong. Logical investors keep open minds and look at all the evidence before making decisions. To ignore evidence or economic history ("this time it is different") is reckless -and that's putting it politely.
perth isn't as cheap as it was a decade ago.......right....so, what's your point? that NOW it's a bubble, but it wasn't back then? that because prices have risen a lot that it's unsustainable?
Mostly yes. Bluecard, you make some good posts on this forum and have often generously directed people to cheapies that are for sale in WA. If I recall correctly, the properties you've shared with us have usually had large land content and have been cheap relative to other stuff on the market. I'm fairly sure that what you've shared with us will not underperform, let alone decline. Now that we've got that out of the way, yes, I do think many Perth people will be hurt by what is shaping to be a growing bubble. Most of these investors are not as cautious or informed as you and do not chase value as you do. They pile in, usually late in the cycle, and invariably pay too much for assets that have already grown in price.
To those who only see blue sky and yet refuse to crunch the historical macroeconomic data for themselves, I'm NOT saying that ALL of Perth is set to crash and burn. What I am saying is that there is excessive optimism out there in the market and many houses in the outerlying suburbs are overpriced,
relative to local peoples incomes and mortgage committments. Getting in this late is dangerous. Not all Perth residents earn stratospheric wages and it is a relatively small number of lucky people who work in the mines or in related industries. Booms do not last forever, even when most people say "this time it is different."
Are you saying that median prices should continue to be 3 or 4x median wages ? If so, then I'll take a dozen in both Melb & Perth please
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It is relevant to look at relevant historical antecedents. Let's not compare Perth to the bubble of Tokyo, where rents (not to mention property prices) have fallen for almost 20 years, even as the population of the city has risen.
Let's consider the resource rich states of the USA, developed English speaking places like like Texas and Louisiana. During the boom days of the 70s and early 80s, when nobody thought commodity prices would fall, these states saw massive real estate gains of the sort that we see today in Perth. But commodity prices are fickle and almost never rise exponentially, as they have recently.
When commodity prices unexpectedly turned sour, the resource rich US states were hit very badly. Entire towns and suburbs closed down as previously rich roughnecks suddenly found themselves on the dole. As the rest of the USA boomed, these resource rich states stagnated for many years and thousands of once optimistic property owners were bankrupted. Those who got in early or paid for their property with cash fared better than those who, in better times, borrowed to buy property.
Investment is about logic, not pride. I don't wish anyone harm and encourage everyone to consider the possibility that black-swan events do occur regularly in our lifetimes. If you've borrowed to buy $750 000 houses in Pt Hedland or Karratha, it may be best to pay off some of your debts as these houses could someday fall vacant. Not that I would wish it on anyone.
The same with outer-lying Perth suburbs. Nice places really, with beautiful homes. But are they really worth $600 000 today when they sold for $80 000 back in the 90s? Will new investors who buy in at $600 000 see similar capital gains in the next 15 years. Personally, I don't think so. If you disagree, feel free to get in and buy as many as you can afford.
