Forum Replies Created
Wot’s a Derivex?[blink]
Nah, just kidding![biggrin] Let’s not, as I for one would miss Robert’s persistant rebuttal of all posts doom and gloom! With the media stirring up negative sentiment for property investment and the economy, I find it refreshing to hear such adamant oprimisim!
Cheers, F.[cowboy2]
Originally posted by AUSPROP:” Given house prices have risen by up to 30% per year recently”
F – where has this happened? I am assuming Sydney…. or are you talking Brisbane?
Nope, Brisbane:
Suburbs on the moveA recent study of Brisbane’s most affordable suburbs in Australian Property Investor Magazine tipped the following as locations to watch due to their strong annual price growth (12 months to December 2004):
* Carole Park (up 52 per cent)
* Riverview (up 60 per cent)
* Churchill (up 43 per cent)
* North Booval (up 34 per cent)
* Basin Pocket (up 53 per cent).I should perhaps have said up to 60 percent!
Cheers, F.[cowboy2]
Originally posted by AUSPROP:Boosting inefficient exporters by devaluing currency is not a step forward improving the economy.
…but the alternative is raising interest rates – significantly. Which option would you prefer?
Cheers, F.[cowboy2]Originally posted by rumbiz:Doom and Gloom in brisbane.( say the papers)….thanks for the tip….I’ll be checking out Brisbane for a bargain then
Given house prices have risen by up to 30% per year recently, does a 4% median fall really bring the situation back to a “buyer’s market”?
Beware, today’s “bargain” is about to become tomorrow’s fair value and next year’s white elephant.
Cheers, F.[cowboy2]gmh & marsden – Preesh.
What do you all think?Yes and no. The RBA doesn’t aim to ‘put the brakes on a strong economy’, it aims to keep inflation within it’s target band of 2 – 3%, and does so by varying the cash rate. Graph
You are correct in suggesting that an increase in interest rates currently has a huge impact on consumer spending and the economy* as a result of record levels of household debt, but this very same debt has brought additional money into the economy, and the inflow of additional cash has caused inflation. Over recent years the majority of this inflation has been evident in house prices, but more recently has shown up in massive state tax & GST widfalls, wage inflation, PPI etc. The other factors worth mentioning are US interest rates and the Australian dollar. The US will continue to increase interest rates. As they do so, if Australian IRs remain flat or fall, the ‘interest rate differential’ narrows, placing downward pressure on the Aussie dollar. A lower AUD means higher import prices and higher oil prices which cause the CPI to rise as these products are included in the index calculations.
I expect a series of small interest rate rises over the next couple of years, regardless of falling house prices and a struggling economy.
Cheers, F.[cowboy2]*Interest rate changes are currently around three times more potent than during 1990 – the final stages of the last housing bubble.
The article is rubbish.
This Graph from the ABS shows that the number of OO loans approved during March was nowhere near record levels. The average price is simply higher than December 2002 (well, d’uh!), so the total new finance commitment is larger. Does anybody have an ABS subscription? I’d love to see the non seasonally adjusted figures.
Also, can we see the origin of the article? Thanks.F.[cowboy2]
<edit> One more thing – does anybody care to do a basic TA on this chart?
<edit2>
Analysts said strong population growth, rising wage growth, sharply rising employment – and now tax cuts at the top end – are likely to keep home finance boomingAnonymous analysts? No journalist worth their salt would make such a claim without supporting it with a quote from an actual ‘analyst’. I’d guess Residex or HIA as the source if in fact there is one.
Originally posted by The Mortgage Adviser:I’m actually inclined towards dmichies opinionsSeems like more and more people are agreeing with me [biggrin]
WOW!!!
One whole person has publicly agreed with you. Lets all be ‘selfish’ then!
Let it be on record that I wholeheartedly agree with every post I recall reading from dmichie.
Now Robert, why is it any more selfish to wish for house prices to fall (in order to make money) than it is to wish for house prices to rise (in order to make money)?
Once again, this seems either illogical or hypocritical or both.I take issue with the absence of impartiality and ongoing posting of negative articles and commentary in an attempt to achieve your desired goals – ie: lower property prices on the northern beaches and a decreasing Australian dollar.Can one person can really do that? [blink] Wow, what power.
Anyhoo, F.[cowboy2]
Yes, the pressure to keep IRs low (in support of domestic consumption) has all but evaporated. Possibly a couple of rate hikes to come this year? Now as for opportunities, if we can predict where the multi-billion dollar future fund is headed and get in early there should be some easy money to be made.
It will be interesting to see how the sharemarket reacts tomorrow. Retail should do well I guess.
Cheers, F.[cowboy2]Interesting stuff, thanks guys. I will pass the info on to my friend, and see what he thinks. He may be prepared to make the broker’s life very difficult… after all, he very clearly stepped over the ‘financial advice’ line on a number of occasions. That is what raised our suspicions that he might be benefiting from the IO situation.
Cheers, F.[cowboy2]I especially love it when the US stock market is in a downward trend. It is easy money!!![blink]
Sniff…. Sniff…
Is that hypocrisy I smell?F.[cowboy2]
Yup, it sure does, especially if you are paying off some principal / offset. I asked because I recently helped a friend work out the difference between his then strategy of IO payments only and actual repayment with similar numbers to yours. The difference over 15 years was quite astonishing over a whole range of projected HPI and CPI scenarios.
He is now making PI repayments.
Curiously, his mortgage broker seemed fairly peeved that his ‘advice’ was being ignored, which raised my suspicionometer. Do mortgage brokers recieve an ongoing payment based on the debt level or is their fee once off at the beginning of the loan?
Ie is it in a mortgage broker’s financial interest to push IO mortgages?
Robert?
Cheers, F.[cowboy2]Have you noticed a trend in LPTs recently? Not perhaps the place for the majority of a pension portfolio perhaps? [blink]
F.[cowboy2]Just out of curiosity, do you have some kind of strategy for repaying seven hundred and thirty odd thousand dollars of debt?
I’m interested in the ‘big picture’.
Cheers, F.[cowboy2]Originally posted by The Mortgage Adviser:The ‘jealous’ comment refers to property investors who actually make good money in all economic climates. Instead of preaching doom and gloom and sitting there with money in the bank earning nothing, they get on with it and have an educated go.Instead of regurgitating other people’s negative economic commentary, why don’t you tell us what you consider to be a good investment and show some positivity and originality for a change?
It can be difficult to do so without appearing to ‘blow one’s own trumpet’. I also object to the view that the ‘reversion to mean’ ascribers are all doom mongers. By having a little foresight, one can capitalise on any market correction. Here are a few from my personal file:
2003 – Sold 2 (of 3) properties to pay off my PPOR, bought a small vacant block of land in a tiny coastal town on which I have almost completed building a small holiday home also fully paid for from previous capital gains. At this point many of my friends and workmates were trying to maximise their exposure to property and thought my ‘doom and gloom’ outlook was laughable.
2003 – Made my first foray into the sharemarket (and a couple of other asset classes) through managed funds. Those same colleagues were openly of the view that shares were a way to lose money. “It’s just like gambling” I was told. Over the next 18 months I gained confidence and understanding which enabled me to confidently leverage into some direct share investments mostly in resources & oil.
2005 – Expecting a broad correction in the sharemarket, I switched my superannuation investment option to 80% cash, 20% shares. Reduced my direct share investments, payed out my loans and exited my then managed funds. As a hedge I bought into an internally geared fund which would give great returns should the market continue its bull run. It was generally accepted at this stage (Feb/March) that the shares would be the best performing asset this year.
Now I’m not saying that every investment decision I’ve made has been perfect, and I’ll admit that I’ve lost money on more than one occasion, but overall, I’m quids ahead of the majority of investors I know who seem always to be making the opposite choices.
So my point is this – I don’t look around and see doom and gloom. I see booms and busts, bull markets and bear markets. It’s not important to me that I pick the absolute peaks and troughs, but it is important to me that I’m only holding appreciating assets. In falling markets I support dmichie’s idea that preservation of capital is better than holding assets in the hope of long-term growth.So where are the current opportunities? I still think oil’s a sure bet, gold should do well as inflation rises, high interest cash accounts…* however, the best investment for overstretched property investors at this point in the game is reduction of debt IMHO.
Leverage x Depreciating Assets x Rising Interest Rates = Oh Sh!t [blink]
Cheers, F.[cowboy2]
*<edit> I just thought I’d add that one of the most important money making vehicles over the next few years will be having a (excuse the dirty word) J – O – B. You know, the type where you work 40 odd hours per week providing a service or product that somebody else is prepared to pay for. I know, it’s contrary to the many posts here from those wishing to leave the 9 to 5 world, but it really is a good way to make money!
At a quick glance:
Roughly neutral gearing, roughly 55k gross profit, 50% CGT concession… Vendor tax thing…. I’d say you’d clear about 35k?Whichever way I look at it, any guaranteed positive return on zero down is good, regardless of inflation!
If only life were so easy.
Cheers, F.[cowboy2]
Originally posted by wilandel:There are going to be lots of Aussies left holding the baby! [cigar]
But surely capital appreciation will soon make up the difference even if investors pay 10% over the odds, no? Or has the NZ market hit a ceiling? If the latter, why on earth would anybody want to be left holding the baby, even if they negotiate 10% below market value?
F.[cowboy2]
Thanks for the link to the PMI report Robert, a good read, and supportive of the view that house prices will stagnate (fall in real terms) in most areas then fall moderately (sharply in real terms) throughout the country. Good stuff.
Regarding Mortgage broker bias, surely a booming property market is in their interest? Does not the dramatic fall in loan approvals mean the industry will need to contract?Cheers, F.[cowboy2]
If statistics and graphs can prove any given argument, can someone please send me a link to anything at all showing house prices anywhere in Australia likely to rise over the next 5 years?
What about some workings applying the ‘doubling every seven to ten years’ rule from the current historically unprecedented high prices?Seriously, if stats are so easy to malnipulate, surely there should be plenty of supporting evidence (bear in mind that the soft landing scenario so often floated involves falling real prices and does not therefore represent a positive return on investment)?
I absolutely support the idea that we need a ‘market discussion’ or economics section in this forum.
Cheers, F.[cowboy2]
Originally posted by The Mortgage Adviser:dmichie, that article does not support your claims. Why do you persist in posting it over and over and over again?
Perhaps if I point you to the relevant paragraphs:
In any case, even in our world of fat tailed distributions, we have only found 28 good examples of previous bubbles including: stock markets around the world, currencies, and commodities.
<snip>
…all the other 27 identified bubbles did indeed move all the way back to (or below) the trend that existed prior to those bubbles forming.Today, though, in the U.K., the price/income ratio would have to fall by 37% to merely get to trend, and today’s lower inflation and lower income growth will cushion far less of the decline, perhaps only half. Once again any overrun would inflict additional pain. And any unexpected help from accelerating inflation in reducing the ratio would in the U.K. come with an equally unexpected sting in the tail: their floating mortgage rates would of course rise with inflation, leaving most people worse off, all things considered, than if inflation stayed low. Adamned if you do, damned if you don’t situation if ever there was one.Australia and New Zealand would both be in the same boat as the U.K.Cheers, F.[cowboy2]
*It is worth noting that I dispute the graph of Sydney house prices to income. Done properly it looks frighteningly more similar to the UK one over the last 20 years, except with a shallower trough in the 90s.
I have clearly state 30-45% in real terms Robert. That is what it will take to return property values to trend. You can make the graphs yourself for your area using historic house price stats from your nearest Real Estate Institute and adjusting them for inflation (City & regional stats available from the ABS). Whack a trend line through it (make it as sophisticated as you like). There is not a single area in Australia where residential real estate is not overvalued – this includes apartments in Sydney and Melbourne.
There is absolutely no reason why house prices will not continue to fall to that trend or below.Just regarding your comment about the March increase having ‘such a big impact’, can you please explain where this is evident?How about today’s retail trade figures? The surveyed collapse in consumer confidence immediately post rate rise?
Also, don’t forget that it normally takes 18-24 months for the full effect of IR changes to fully work their way through the economy.
Cheers, F.[cowboy2]
