Avoid the property Investing rip

I watch what they banks offer with fixed interest rates – they don’t get it wrong too often. Right now, that would suggest there is still some breathing space before any great interest rate hikes- though they have to come some time, so there’s no room for compacency!

Cheers,
scotty3

personally i just dont know about this “rip”
part of me says to form an opionion and stick to it, my gut instincs tell me to wait and see.
so wait and see it is. with all the mish mash of information out there at the moment its hard to tell what to believe. i have however figured this much out.
CG will be slow for a while (several years?)
go for cashflow that makes you money from day one, add value and hold (unless you get a good offer).
triple check all your numbers, make sure that they are up to date, not last years numbers. this means more time on the ground getting a clear understanding of whats actually happening compared to what the agents are saying.
make up a business plan, and work out the worst scenario you can think of, that way should it happen you will (should?) be ok.
consolidate your loans, add value to your property where you can, make sure you have a good cash reserve “just in case”
if the rip gets you unexpectantly at least you will be as prepared as possible. remain unaware of it, and it may be too late to do anything.
just my thoughts.
cheers all
shaun

Lead, Follow or get out of the bloody way

The Barefoot Investor [biggrin]

Had a quick ‘flick’ through the book whilst Christmas Shopping…nothing New apart from photo’s of todays Film stars etc(Will SMITH etc) in the book to try and entice the younger crowd.. i’d rate it pretty low..

If rates go up or down at this stage doesn’t worry me as our loans are fixed, rents have again increased and equity is still growing, IP’s are Nuetral.

And i’ve just been consolidating things and sorting out things ready for the next purchase when the timing is right.

My foray into the stockmarket some time back has proved fruitfull and i’m learning from the site at aussiestockforums.

2005 should be a good year [inlove]

REDWING

“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator

the bond market indicates that rates will stay flat or go down next year. They are usually right. This indicates the expectation of a slowdown. The yield curve is very flat at the moment but not inverted so I don’t think anyone is expecting a recession (yet).

The big unknown is where US rates will go as it is hard to see how we can attract capital to pay fo a CAD with lower rates that them. The price of US treasuries seems to have topped out and is possibly going down (ie yield going up). The cash rate is set by the RBA/fed reserve, but they only control the short end. Look at the 10 year notes to figure out what the market expects.

If the chinese revalue the yuan due to inflationary pressures, it is likely interest rates will rise globally. It is more a case of not if but when. They will keep the yuan pegged until it burns out their economy. The mercantilist model is to have low interest rates and accumulate foreign currency/ assets. To this extent the chinese have been successful in lending the US debt, selling consumer goods to them and buying the farm. Unfortunately in every case in the past of this – result has been inflation in the foreign country followed by asset bubble and crash. Same happened with Japan, emerging asian countries. If it happens in China we will see 1) inflation in China 2) USD collapse 3) higher rates in US and globally 4) recession in non asian countries initally then elsewhere : the US is currently only allowed to devalue against every other country except the one it needs to (china). Hence the european and floated asian economies will really bleed until the chinese revalue the yuan. Higher growth in US than elsewhere, eventual collapse in China.

The situation we currently have of a develloping country having a current account mega surplus (china) and a developed country with developing country CAD (US) is unusual. It is also inefficient, capital should be going to china to fund investment rather than to the US to fund housing and consumption (also applies to australia). I think it is an unstable situation. It would not surprise me if this was the turning point of the interest rate cycle.

We either go to inflation from here or deflation. Neither is very positive for asset markets. But then people have been thinking this for ages so who knows how long it will take to pan out.

I think they will go down or nowhere in the next 12 months but when Chinese inflation rockets and they revalue the yuan in the next 2-5 years rates will probably increase significantly.

Consumers are very levered and account for 2/3rds of economic growth. The RBA is aware that the economy is very sensitive to rate hikes and presumably would not shift the short end up any further unless forced to (by an external shock). They may even reduce rates if growth has tanked due to the small hikes we have seen.

This is just my opinion. A stagnant rate environment or small cut would also suck out all the residual buyers in the property market and set the scene for a correction.