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If house prices slump, we will move to recession as cash dries up so will spending (we have had acredit driven economy) so not sure about rents rising during a recession.
Especially at the bottom end
Wealth, Foundation..I'm back, .. how are you. Have been browsing, but nothing really to contribute.
A couple of points now. -Many members discuss in their posts and lay out there own scenario, and feel that no matter what, for various reasons they will be okay. Back in the last crunch, many people lost houses but to many, many, more the news on TV and a few bargains at a garage sale was as close as they got to the recession, if they had a steady job and a capped home loan they barey felt a thing.
The pain in this will not be evenly shared
A interesting observation I can make however is (I'm a public practice accountant) that I have more clients bleeding and spewing on their investment properties (all bought since 2000) than clients who are not. The thing is we said bail last year, ie: had a tax loss of $37,000 so got little value in the tax break, but he was waiting till May 2007 for it to "bounce back". Not quite the case with him but for many of these people they cannot afford to sell as these properties are the mainstay of their retirement strategy, and they have no other choice but to sit, watch their other savings evaporate and pray.
Talked to another accountant who deals with the big end of town $500,000 salaries and bonuses on top, and mentioned these guys have been paying down debt in a big way this year.Maybe just his clientele but have seen this in the few heavy hitters that I have.
I have noticed in my practice a lots of clients who I have had for 20 years who owe more and more each year. No more assets the home loan is just refianced and bumped. Lines of credit are often to blame. Funny how they never paid off the house in 7 years as promised. Funny thing is the penny only ever drops when they sit down and discuss their retirement. They usually have not factored mortage costs into their budgeted cost of living.
When the reality of new lending caps hit, and people cannot refinance as they have been doing, consumption drops, and the reverse wealth effect kicks in and bingo, we will have arrived.
Foundation… the ABC mid day current affairs just did a piece on the impact of the problems in the US mortage market, and coined the phrase mortgage lead discussion.
Does not sound good, guessing it may be a sign of things to come.
If only they had our optomism and just kept spending….
Foundation your stuff is always interesting often informative but sometimes labored. The above is exceptionally well set out.
Could try adding some humour but it’s nothing really funny is it.
Foundation thanks for that, suspected as much. I am amazed at how the REI press releases are taken as fact.
Always thought our media (ABC excepted) was very, very poor
Wealth have been thinking myself about the Sydney Hole. Had a chat with property investor clients who asked what is actually going on, with the “Rental shortage” as their two bed unit at Pendle Hill is on around $260 per week, and stuck at that price.
Think there is still a lot of vested interest hype.
There is no land shortage in Sydney. Developers are sitting tight for now as too much supply will do bad things to the market.
“there is a rental shortage in the Nth Shore Eastern suburbs etc.” What’s new, I cannot remember the vacancy rate ever being greater than 1/2% there. Campbelltown diff storey but Sydney’s desireable suburbs have always been hard to rent in.
“First home buyers renters etc need a govt boost. ” WRONG as a stock broker was quoted last week on the ABC following the “boo hoo its all the fault of the super changes” line the REI is currently spinning, it was the GOVT assist that screwed the market in the first place. As he said “does the Govt give share investors a hand everytime the market dips”, ….. tampering broke it, let market forces fix it.
Now for my spin.
think Sydney is roughly three markets.
East of Five Dock is doing okay thanks.
Parra to Five Dock varies, some okay (strathfield) others not.
West of Parra still creeping slowly downwards.Now to help understand the latest stats. Sydney slipped last 1/4 1%.
Now that is peanuts BUT if the high end is stable that means the other half dropped a healthy 2-3% depending on where, so as to pull the overall average down.Have so many clients hanging on.
Reasons are, the usual personal ones, not the economic rational ones.
When they were wealthy a few years ago (old values) they were a lot happier. To stay happy they must “hold on till the market recovers to its correct value”. Selling to market will be a troubling emotional ride, that they are putting off (while slowly bleeding)Some others need those pre slump values to support the old retirement plan . If they sold for market they will have to admit there retirement assets are well short and they seem unable to deal with that at the moment.
Think next few months will be interesting in the west.
LA I think we are only a few years behind.
The wealth/gen gap is really hitting here.
As much as I know of the pain in Syds west, I spent a lunch with some fin planners who said that the ave amount people were retiring on was 600K (plus house) drawn from a mix of inferitance and super/savings/property.
Wealth your stats have these people …..they are the x% of the people who are fine.
These guys know that there are problems but the population they see is the haves.
I see some significant social problems here if not addressed
We need some cultural changes soon
Buddy that’s old news been like that for the last three years, agent was right on the money …… Oh sorry you’re talking about Perth NOT Sydney..
Don’t worry Perth is “special”
So you got $1K, and no signed contract.
Not sure you will even get the 1K, think solicitors and agents may want a piece of that pie.
I always consider that until signed I have nothing
Admire your Mums sentiments, so will give some advice. Am an accountant and as such I have spent 30+ years in depth looking at how many people manage money.
Work on your Mum and come up with as whatever you can to buy your dad out. Suggest you buy 12.5% ( $50K from your dad 12.50%and $50K 12.50% from your Mum. )In the settlement she will get his 50% and she will need to raise the rest say 5-20K
Borrow $100K and buy them out from that share
She has $100K loanCan the two of you make things work from that???
Living at home you should be able to cover interest on $100K
DO NOT BUY HER OUT AT A DISCOUNT, that’s if you want to have happy Christmas’s with the rest of your brothers and sisters.
Try to keep the house, because if you do it will stay the family “home” , look after your brothers and sisters as family can be more valuable in life than any investment.
And support your Mum.
Tracey I try to mix humour with sarcasm but that aside, glad you are okay, sorry to hear about your neighbours.
Personally in the old days that sort of incident would drop the price. these days their are so many specualators who will guess this and may rush in you may get a real bounce in price.
Seriously though at times like this money and wealth creation don’t seem so important.
Agree with Can Am, the clean up is painful. Had a fire on the floor, ten years ago, and fine sort came in through the air conditioning, it was everywhere. in desks photocopiers computers etc etc.
Wealth agree, I am hearing the term in the US of “negative wealth effect”, sure we will hear it here next year.
Simple agree, but also think there is a lot of pent up demand for sellers who are bleeding and waiting for the spring sale period. that should be very interesting, as many can’t hold on much longer.
As for Perth Wealth, don’t worry as Cartman said when trying to get into the “special” olympics…..”but Mummmm you always said I was special”.
B & S Shrapnel those fools who predicted a topping of the RE market also predict that by the end of 2007 the resourse boom will be over and some commodities will come off by 60%.
This follows stats last week about the US consumer market slowing, (neg wealth effect) investment being hauled back in China, a slowing world market and a decline in demand for our commodities will follow.
Perth will make great watching
Originally posted by L.A Aussie:Originally posted by elkam:“To be on the conservative side, I always underestimate expenses, over-estimate returns/income. It is a successful rule that I live by, and I wouldn’t quote blown up figures to ill-advise ‘simple’. “
Hello L. A . Aussie
I’m a bit puzzled. This is the second post that I have seen you say the above. The first time I just thought that you had mixed it up but now I am not sure.
Don’t you mean
I always over-estimate expenses, underestimate returns/income.
Sorry, I’m not trying to nit pick. Maybe I am missing something?
Thanks
ElkaSorry everybody – this is a typo.
You are correct elkam.What I want to do is make sure I expect more expenses than I receive; I over-estimate expenses.
I also want to make sure I get more in come than I expect; I under-estimate income.
This is part of my number crunching when I am researching a property, and it ensures that I don’t encounter an unexpected short-fall of cashflow after the purchase.
Cheers,
Marc.
[email protected]Marc sounds like Sydney early 2005.
In 2004 the market had topped out but many beleived it was the pause that refreshes. Sorrrrrrrrrry.
Can Am sounds nice and as always the educated buyer does much better than the masses.
Good luck with it hope it all goes well
Can Am that is how Sydney started.
I know I hear the top end is holding up but saw that Flemings mansion on the Georges river sold recently at a loss(7 figues) from its 2003/4 last sale price.
Also I keep hearing the same comments from clients. I put it on the market and did not get a nibble. Market is pretty dead, will try again next year / after Christmas. it is amazing how quickly people become locked into a boom price level and think somehow the market must “bounce ” back to it.
Both of these people are bleeding, so can’t hold out for ever have a feeling a lot of near new units town houses apartments will have to be cleared some time next year. Neither of these in Sydneys west both Sydney coastal
With strong retail (thats what I am hearing) and another rise next year, yep getting close.
Had a client in that years ago his rate of return was 122%.
had a leg breaker collector, licenced to carry a 45 magnum, and owned the premises on a brothel.
was a hell of a ride.
got to see the inside of the NSW special police unit. (luckily not the inside of HMSP)
hop on ……..enjoy the ride.
Great ,my son has been waiting to use the new bulldozer I bought him for his Birthday
I’m with the kid here and agree with Foundation.
Kid (sorry do not mean that in a condescending way just trying to separate my advice from my peers) you have the power in your hands.
My son is 25 qualified last year is now on $45,000 and has almost paid off his HECS. He is with us and saving and feeding his super.
He never expects or wants to “Own his own home” he is happy to be flexible in his housing will probably move a lot more (not get screwed by stamp duty and agents comm every few years) and will remain with a balanced investment portfolio, of shares and foreign investments.
ALL his friends are doing the same.
As they are in fewer numbers than we are who will buy our houses to fund our retirements ?????
He looks as MaxMansion land and thinks its hideous.
Who will be out there blindly investing / speculating with a copy of the best seller in one hand and dream of early retirement in the other.
As Dazz said if it is not your dream don’t buy it, make your own.
Sincerley wish you good luck.
Originally posted by simple:According to what I see, we are on the beginning of the next “Major†interest rise cycle. Any comments anyone?
Agreed for many reasons.
Problem for western sydney is Property market has been tanking
BEFORE the rates started to move upward.Remember one of the boomers here on the Boards who talked down a correction as not happening before interest rates had moved a long way back upwards. Would love to here his take on western Sydney now, as rates are still below what he would have called a neutral setting.
Interested to see how credit growth and retail go this Christmas
It is mainly the west. I mentioned to a fin planner from Hunters Hill about the issue and he was puzzled as in his circle everyone is doing very well.
It is a big issue but localised to half of Sydney, the west
Am looking but still waiting think it may get worse before it gets better
