Forum Replies Created
Same reason oil, coal, uranium, copper, zinc and other commodities are going up. Lack of exploration 4 or 5 years ago when this stuff was almost worthless, and now demand from China means supply can’t keep up.
A chart of prices. Much more than doubled over 5 years.
http://www.kitcometals.com/charts/nickel_historical_large.html#5years
Not much anyone can do about the grape glut. I feel sorry for the ones who have been in it for years, it’s a great industry.
I don’t feel sorry for the ones who got in in the last few years, anyone could see what was going to happen.
As for the Managed investment Schemes, that is one huge bubble that is about to burst. I urge everyone to be carefull here. It is all about tax evasion, not rural investment, and what is happening to genuine rural towns and industries is a tragedy. Farmers have to make a profit, but these stupid schemes don’t care about profit, it’s all about tax evasion and the wealthy city investors will soon not have a tax problem if they are in these schemes. The farmers now are being blown out of the market by these tax evasion schemes. Oversupply because profit doesn’t matter, just tax. and greed.
Watch what happens next. It will just take a pen stroke and change of legeslation from some polititions to fix things. It’s out of control now, but not for much longer.
Good luck.
DLPP says,.
“So I don’t see how that will help our BOP situation – the banana republic situation you talk about will not go away and just got worse.
Ie the smart nation once again exports raw materials and buys it back as dvd’s and highly processed textiles and value added products. eg we become a price taker rather than price maker.”
You sound a little mixed up there. Of course it will help out BOP situation. Media reports today are saying it could be worth 30 billion over the long term to BHP alone.
As for exporting raw materials, well as I said, we have no choice. We have to find something that we can trade competitively. Currently, all we have left is agriculture, which has been slipping percentage wise for years, and mining, which thankfully has taken over from the manufacturing.
I have seen DVD players on the shelves in boxes for sale for $50! That is increadable! Why would we want to build the things anyway. If someone was silly enough to set up a factory in Australia to make DVD players, I doubt you could make them for less than a thousand dollars. What are the Chinese getting for these $50 DVD players? They still have to be shipped out here! Let them have the business. They must be mad! You would be lucky to make the box here for $50.
There was a great story on Business Sunday about the Aussie guy who started the GMC company. They make electrical tools and other stuff. I always thought it was a Chinese company, but it’s Aussie owned, but the stuff is manufactured over there. At least some profit gets back here.
We export the raw materials for market price. We pay to get it back as consumer goods from China and elsewhere. It is no ones fault that this has happened. It is just how things work now.
I feel sorry for other western nations who just through bad luck have limited resources to trade with Asia. I wonder how they will cope in the years ahead. Will be interesting.
Cheers. Bob.
Yep, but I don’t think we have a choice. We have no manufacturing industry anymore. If it wasn’t for mining, this country would be a banana republic. Thank god for our mineral wealth. Mining is now providing well over 50% of our export income. It will increase even further.
Watch what happens to New Zealand in the next few years. It’s a little mini me Aussie economy but without much mineral wealth. NZ’s current account deficit is already racing away. Not much coal, iron ore, metals etc. It won’t be pretty.
Besides, nuclear energy will reduce green house gases. Good for the enviroment. New technology today like pebble bed reactors means it no big safety threat.
Good luck.
Yep, the cycle is just about complete. Even bush hovels are down to 5% rental yields.
Sydney is the next place to invest for the next cycle. Ideal time is in about 2012. Can’t wait!
Check out this chart.
http://forum.globalhousepricecrash.com/index.php?act=Attach&type=post&id=4
Pretty obvious to me.
Good luck.
Looks over to me.
Booms generally finish when there isn’t a skerick of value left. Where is the value when average people on average wages can’t afford a home, and people can rent for half the cost of buying.
Will be good buying again in about 8 years. Just like the last cycle.
Good luck.
Please, when you move this brick house, can you give me a call!
I want to bring my video camera. I could win some money.
Good luck.
What return are you going to get?
If the yield is good enough after costs it might be worth thinking about. But then if the yield was hugely cashflow positive, then why aren’t the developers making the cash?
Avoid.
Steve’s books were an inspiration. Showed exactly what could be done 5 years ago.
Why do you think Steve is now investing in shares, and property overseas?
The books by all the property gurus are what sent property prices to the ridiculous levels they now are. Plenty of positive cashflow propertys out there, problem is, no one wants to live in those towns.
Good luck.
Very interesting, and scary I must say.
There is some cheap houses in the States isn’t there? No wonder Steve is over there looking about.
Good luck.
And one other thing Michael. You say,…
“ By 1989–90, interest rates and inflation were again too high and led to the famous ‘recession we had to have’ – a heaven-sent excuse for procrastinators to stay out of a property market awash with bargains!”
Well as far as I know, 89/90 was the top of the previous cycle. Where were the bargains your talking about? Prices were lower, or at best flat for a good few years after 89/90.
Holding negative geared property when prices are flat for many years must be very painfull.
Good luck.
Micheal Says,
“every time this part of the property cycle comes around I hear the same argument”
Couldn’t have put it better myself. And where are we in the cycle compared to the last one? I would say about 1992. Gee, a few more flat years to go yet. Must be better places to put money, surely?
Good luck.
The fact that cash flow positive property can only be found in a mining town or some dump in the sticks with a falling population simply means that property is overvalued. You just have to either wait years for fundamentals to catch up, like in the early nineties, or hope for a crash.
Just sit back and watch the show. Start buying when Sydney CBD starts to take off, in about 5 years.
Good luck.
I’m a bit like foundation. Fortunately I saw an oppitunity in the sharemarket. Still hold all.
High oil prices will be good for the economy. Australia is a net energy exporter. The money being made now from coal and gas and soon uranium is astronomical. We still produce a lot of oil as well though we are net deficient. Grain for ethonol.
It could be bad for some parts of the property markets. Perhaps put a dent in the ‘tree change’ lifestyle property market if the property is out of the way. Also the outer suburbs where traveling is a big cost. Winners may be the areas close to the CBD. Walk to work and shops stuff. The inner city Sydney and Melbourne markets are where the next boom will start anyway, just like always. Not for a while though.
Good luck.
Lupus 1704.
Selling obviously means the properties are now cash flow negative on current values rather that purchase price. Nothing wrong with that. For example, a Sydney property that was purchased in 1960 could be returning a yield of 40% on purchase price. It may only have a rental yield of 3% on current values. It’s overvalued.
Maybe he wants to put the cash into blue chip shares, get 5% fully franked yields, and growth as well.
Good luck.
I think your spot on Ned.
It’s a joke what’s happened in small towns. Most small towns should have a rental yield of 10%. Let’s face facts, land will never be short. Most small towns near me are down to 5% yields. This is one big potential bust. Wont be a bust though, just a decade of no growth. What an investment? A decade of no growth, negative geared. Not for me. No wonder the stock market is booming.
Good luck.
I think it will be a long time yet. How long after the last boom? 1990, to about 1998? That’s about 8 years. Only had 2 flat years now. Values now are still too high. The market simply just got ahead of itself. Average people on average wages could no longer afford an average house. Property will stay flat until it’s good value again.
Also, the sharemarket is on a role, and is still not expensive. As long as the sun still rises in the east, it will get expensive, and it will bust. It’s just a cycle that always happens, and it will bust just as the hype takes over and the first time mums and dad investors start buying up. When the sharemarket bust has happened in the past, property often takes off from then. eg, 1987, and tech crash 2000. Could be wrong. Just speculating like everyone else.
Good luck.
Flats do have land content, though usually not as much as a house. A block of units in a great spot could have a lot more land content than a house at Woop-Woop.
Good Luck.
Ausprop.
After this 10% correction of the last few months, the sharemarket was at 14 year low PE’s. It was about a price to earnings of 14 from memory. A Sydney house with a rental yield of 5%, has a PE of 20. That’s gross too.
It means that company profits have been increasing faster than the share prices. That won’t and can’t continue, but shares are good value historically. That was a few weeks ago anyway. Admittedly, a big reason for such good average values is because of the tremendous profits being made in the resources sector, and which could continue next year as well.
All I know, and it’s a fact, is that shares are historically good value, and property is historically very expensive. This does not mean that shares will do better than property. It’s just a guide as to values. Also, all the big sharemarket crashes have happened when average PE’s were well into the 20’s. Like Oct 1987, and April 2000.
Remember, that if house prices do drop significantly, it would have a big effect on plenty of shares. Like retail and banks.
Good luck.
In 20 years time, anyone who buys now will probably think it was the right time.
However, all I know is that after a property cycle peak, it often takes years for prices to recover, after a healthy correction.
For example, after the 1980 peak, there was a drop, and it took 7 years to get back to the highs. After the 1989 peak, there was a drop, and it took about 10 years to get back to the highs. Thats a long time to wait to get a return. I’m not saying it will happen again, however on valuations, a correction would have to be likely. Property PE’s compared to the sharemarket are crazyly high.
I reckon the property market in Sydney and Melbourne topped out 18 months ago, and it will be years until prices get back to the same levels. All other markets just follow, so there is a time delay. WA and QLD are being held up by the resources boom, and so will stay up while the boom continues, but they weren’t so overvalued in the first place.
Property has had an incredible run, but it can’t keep going up at 15% a year when wages and inflation goes up at 3%. It’s just common sense.
Good luck.
