Forum Replies Created
- Catalyst wrote:My definition of a positively geared property is one where the rent is more than EVERYTHING I paid.
That needs property at less than current prices or rent at more, doesn't it?
Boshy
I think the line between pessimism and realism in some instances isn't far off.
I tend to agree with hbbehrendorff's suggestion that Australia's current property bubble is the biggest of all time. It is just that most Australian's haven't seen it yet (bubbles don't look like bubbles from the inside, they look hollow rather than fulll and ripe for popping).
Japan's property bubble was the next biggest to ours that I am aware of but it didn't pop as far as most think – it just crippled the economy of a country with it's ongoing deflation. America's bubble popped and prices lost 30% seemingly over night. America's seemed bigger because the pop was, not because it was. Who knows what the test and definition of a bubble really is – they change as each new one pops or deflates.
fWord wrote:Thanks for the article. However I'm beginning to feel that there is no need to substantiate the presence of a bubble, nor the need to prove that it doesn't exist.There will always be people on both sides of the argument, and one of them will take the prize. Whatever it is, this argument is getting old.
At the end of the day, the equation is simple: want it? Buy it. Think it's overpriced? Then forget it.
Oh come on… it never get's old:) It's been the best (though most avoided) point of debate in Australia for the last 10 years.
It's not quite as simple as your equation though. Correction – probably less than 10% (perhaps 15%) but the country will pick up the pieces fairly quickly afterward. Bubble – 15% or more drop in value in 12 – 18 months and the country is going to be pretty screwed for a while to come.
Scott No Mates wrote:Bubble , no. In need of a correction, probably yes.Interesting. So what's the difference? When does a correction become a bubble or visa verca?
Did the UK have a correction or did a bubble burst? What about Ireland and the US?
I don't have an answer – just think that defining the diffence between an 'overvalued' market and a 'bubble' market is an interesting thing to do.
emptyvessel wrote:Can someone define the term "over-leveraging" for me? I hear it alot, but nobody ever seems to quantify it. And if it is quantified by a number, does that number change based on other conditions or is it a cosmological constant (or fudge factor0?This is my take only – don't bite off more than you can chew.
Don't invest expecting gains or others to cover the costs. Only invest in things you know you can cover the costs for yourself, so that if it goes pear shaped at least you don't go under holding the asset until it improves.
Oh, I totally agree with Steve's take that the RBA will lower rates – soon and fast. Have thought it for ages but have just been before the times or overzealous in my bearishness:)
Surprisingly, I fully agree with most of the stuff xdrew posts lately? They say the crash arrives when the last bear capitulates – perhaps it's when the bulls and bears agree that they are really here?
Debt has been growing unsustainably for a long time now – possibly as far back as the 80s. It has to correct. Doesn't matter what is done, the underlying problem has to go away for real growth to resume.
Only sustainable solution is a deleveraging the likes of which the world hasn't seen since the great depression.
That's my take anyway.
Doesn't mean there won't be oppurtunity – just means over-leveraging yourself in this environment is a little foolhardy, be it with property, shares, gold or whatever.
That is some good advice xdrew and I agree with your take on inflation.
It may be rising inflation that led to so much housing debt, as you suggest. It's such a chicken and egg thing though. Does credit expansion lead to inflation or is inflation a result of credit expansion? Or, do they just feed off each other in 'good times'?
I think that housing purchase costs aren't included in general inflation/CPI calculations – although I think rental costs are. Correct me if I am wrong. But this would back up your POV that official inflation stats don't show the whole picture.
So you don't see any way of avoiding some kind of hyperinflationary environment now? Like you say, best course of action for individuals is to batton down the hatches and get used to a bit of frugality. If confidence is promoted in spending (as QLD is trying to do at the moment) it could make things worse, wouldn't you agree?
I think, in the simplest terms, the RBA has been caught between a rock and a hard place for a while now.
So much of the economy and state government reveniew has become dependant on an active housing market. But, if the market is too active and grows less affordable, then the effects this has on retail and other industry is more pronounced.
IRs down and more money should flow back into housing but that wont necassarily help retail and other industry. The $AU would continue it's descent in this instance.
IRs up and everything suffers but, if the housing market continues to correct, eventually it will help retail. It does, intitially at least, make our banking system seem more stable, so the $AU would go up.
So, the RBAs solution is to leave IRs the same. Don't rock a boat that is on rocky water already.
I think a recession is possible where prices inflate and incomes stagnate. I think the GFC is ultimately a US depression by another name. Economic smoke and mirrors abound.
Yes, decreasing the amount of government would be a good start. I have long held that a single country does not need national and state governing bodies – a national government overseeing councils ran mostly by residents should be enough. Then things like law, order, health, safety and so on could be controlled at a national level whilst more local issues like housing and what to do with education funding could be delt with at a council level. There would be crossovers of course – public transport would be best controlled nationally but organised locally.
While we're on breaking down the government, why not break down the states – do we even need them? What is wrong with everyone just living in Australia?
Obviously, less non productive debt creation. Less money on housing and sport. More on science, the arts and so on…
Solar power. Half of the country is a desert, we need a nationally funded sceme to use it for something.
Water dispersion. Half the country is wet 6 months of the year, we need a nationally funded sceme to do something about redistributing and sharing that resource.
Many things would go ahead more smoothly if we were a single Australia and not a collection of jealous states.
emptyvessel wrote:Ok, I am listening. Can you give me a few examples of how the money an investor in property now can access those investments in the other assets you mentioned? I imagine that there would need to be some sort of financial incentive for the investors to choose those particular investments. Like, say, a return for the risk they take with their capital.Or are you suggesting that the government should be redirecting more tax dollars to those productive assets? The government doesn't have a good track history with any of these things. What are you proposing to change this? More dollars is not the answer, neither is more centralised control of how those dollars are spent.
I am happy to work with you here. But you will need to go beyond a few one liners and some platitudes to convince me. And I am easy to convince. It's the majority out there that chase trends that you really need to get on board.
Sorry, I wrote back to this before and the web page had an error. I will try again now.
I honestly don't know if a low/mid level investors can get involved with investing in emerging tech and social developments. I guess researching companies and shares is a way. It is just my opinion that less money being sunk into housing debt and more being sunk into invention and productivity will be beter for Australia overall.
No, I don't think it should be in any way government controlled. That would become a self serving, beaurocratic nightmare.
I guess the way I see it is that mid level investors (as I gather you are?) primarily save and then the banks use the lvr generated from the savings to invest in business and invention. Kind of a return to how it was pre 90s, when banks had a greater percentage of business loans than housing loans on their books.
Oh, as for the post above this – yes, Australia is different, isn't it? I've always believed that being inside a bubble makes it harder to spot, as it doesn't really look like one from that perspective.
emptyvessel wrote:Interesting theory. Are you able to elaborate in more detail how you came to this conclusion?Simple. If less is spent on housing more can be spent on other things – investment in productive assets, invention, science, arts – whatever.
emptyvessel wrote:Nothing good can come from being negative. Nothing.So housing that is more affordable isn't good?
Sentiment drives buyer confidence in many cases. Negative sentiment will deter buyer confidence, sell less units, lead to price declines and make housing more affordable.
IMO (just to clarify) cheaper houses are better for society as a whole. So negative sentiment around specific things can generate positive outcomes.
My eyes are wet with sadness reading this Angel – my deepest sympathy to you.
As a parent, I think there is nothing as heartwrenching as the loss as you have sufferred. I hope you and your family find the strength in yourselves to support each other through what must be an extremely difficult time.
Again, my deepest sympathy.
Nathan Birch wrote:p.s.The guy with the bull and bear avatar I LOVE IT! Classic!
They're cuddling – proving that bulls and bears can get along:)
You write some insightful stuff.
I also believe the gov, RBA or both will take action before our correction is done – just not sure how and when. And I believe that once things start rolling, it's going to become pretty hard to reverse or contain – like any other property correction that has happened recently around the globe.
Like everything, time will tell. But I recon' sensible investors who haven't been too greedy during what is historically a pricey market (and a bit of a free for all) will be fine.
I feel a bit sorry for the FHBs who brought on the back of Rudd's stimulus though – especially towards the end of 2009, most things were selling for an easy 50k above what they were worth the year before.
emptyvessel,
we were obviously thinking of different hats:)
With your hats I'd be blood coloured – dark red, or black red:)
fWord wrote:– Are you a bear, bull or a 50-50?Depends – on housing, 90% bear & 10% bull. On investment in general 50/50. Productive investment is good for everyone.
fWord wrote:– How many properties do you control?None
fWord wrote:– Last question: do you NOT control any property now and wish you did?No to both.
fWord wrote:Not an exhaustive list of questions, but a good start. If we ever started something like this, it would be very revealing. The opinions of people on threads such as this are usually very much divided. That's because these opinions stem from a thought process based on their current situation. I suspect that, in the end, the property market will do whatever it wants, despite what any individual might say. 'Getting it right' is nothing to brag about, whichever way things turn out to be. That's because if a person 'gets it right', he/ she does so by chance.I don't mind being revealed. I have paid for 1 home loan in my life, back in the 90s but it wasn't in my name. It was an insignifigant part of my wage at the time. I've never paid a home loan since because since I have been interested in buying a house for myself, the loans no longer seem an insignifigant part of anyone's wage.
fWord wrote:People who are reliably able to pick a trend shouldn't be wasting their time here, or on television talk shows. They'd be out there spending all their time making billions of dollars.Why? Why is making billions of dollars the be all and end all. There are greater things to invest in than money.
And, before you ask, if I'm not interested in making money why post on a bullish housing forum – the answer is that the temperament of housing bulls gives me an insight into housing investment in this country, which I am interested in more for sociological reasons than financial.
If I could add questions to your survey they would be along the lines of:
How old are you?
What is your family situation?
What is your work situation?
When are you looking to retire?
What do you value most in life?The social functioning of this country has me far more involved than the financial and housing is as big a part of the social as financial.
emptyvessel wrote:I find it interesting that "bears" have this almost fanatical need to be right. It is in almost every post by a person that identifies themselves as a bear. They also tend to be "black-hat" or "critical" thinkers that are fantastic at finding statistics, graphs and interpreting the numbers. Obviously to support their negative sentiment. Many seem to take offense with so called "bulls" that have made good money, for whatever reason, be it dumb luck or smart investing. No matter how positive the market sentiment, the bears seem to always be posting about how and why they predict a collapse. Any mild decrease in any portion of any market is always considered to be the "beginning of the end". The bears also tend to congregate in "packs" to support their negative views. It is almost like a negative gravity well that sucks more into it.As for the "bull" posters, they on the whole just seem to be "glass half-full" positive-types. They don't seem to need to be told they are right. It is almost like they don't care about being right, they just keep being positive and investing. They quote some statistics and graphs to support their way of thinking, but it often tends to lack any real independent substance and is often picked to pieces quite well by the "black-hat" bears. The "bulls" also don't seem to take any notice of the "bears" with their well-reasoned and logical arguments. They do seem to take delight in poking fun at the bears and getting them up on their "high horse" soapboxes to pontificate. They also seem to be getting independently richer. But this could just be the positive language rubbing off on the rest of us.
Then there are the vast majority that swing on a personal pendulum between being bullish and bearish. They don't really know which way things truly are going at a macro level, but they are trying to do the best for their own personal wealth creation. They do tend to read the bear posts and wonder if they are right, but hope they are wrong. They read the bull posts and hope that they are right and can emulate their success, positivity and and creativity. I am on the "bull-faction" of this group I reckon. The bull part comes from being incredibly positive about my individual success no matter what the macro or global market is doing.
Thanks for bothering to read this if you get this far. I just felt like sharing my observations.
You know the only difference between a black hat and a white hat is which side you are looking at them from, right?
Scenario – MS hacks Sony. Blackhat to Sony, White hat to MS.
Then Sony hacks MS – the colour of the hats don't matter, it's understanding the whole game that does.
xdrew wrote:I assume someone pays you for this garbage opinion?Why?
xdrew wrote:The core reasons for the dollar boost is because at this stage the collapsing factors that the rest of the world has arent present here. America is STUFFED now. The call came for it to do something in March .. and it … extended to resetting its debt line which it did this may. The dollar in America is going to inflate .. and inflate badly. I'd be expecting anything from 30%-50% inflation for a period of up to two years. Anyone investing in America is going to feel their dollar value just collapse under them.?I agree.
xdrew wrote:As far as the Australian market goes .. we have more money being generated in key exports to China and Vietnam than any value in our dealings with the US. Since the great Keating (barf) we havent been tied to the US or UK in any major way. Our major dealing are with East Asia and the Middle East.With the boost to our economy with an unnecessary stimulus, we've gone and plumbed ourself for inflation whether we like it or not. We inflate normally with regular increases … we shelve a downturn of major proportions. We dont inflate … we risk devaluation of our dollar because of its buying power loss. For anyone who earns in AUS dollars .. that would be bad new indeed..
So we are still on the same page – I don't get what you are debating here?
xdrew wrote:The rental scenario? Across the board in my area (dont know where you are) rents are tight .. approaching less than 1% all over again. This places significant pressure and eventually will boost rents again to even out that pressure. Leading …. to greater housing prices. I'm dealing with whats being presented to me .. not stats sheets .. not presentations of doom.I'm in ACT. My rent hasn't gone up in over 3 years. There are a lot of vacant rentals around me, asking a lot more than what I am paying and they are remaining vacant. Crazy, when we are talking $100 PW difference. It's $2500 they are chasing on $10k they have lost over the last 6 months. Their choice but I am sure the places would rent for $100 less PW, they just can't find tenants for $450 or so PW.
xdrew wrote:The average punter will panic when the ideal low interest climate we are now in .. lets face it .. anything under 9 is still historically low, becomes a higher interest level. Leading to the NEED .. (read that word NEED) for the property to be sold. THAT IS PRESSURE. Until then .. as long as rents are being placed under pressure … property will .. again .. go up. Sad for the doomsayers .. huh?Anything under 9 is kind of low but I don't see it working like you describe – glad you do. Like I've noted, I see rents under pressure to be lowered. Rents are and have always been based on what wages can support week by week. Wages are too stretched (generally) to afford any more – unless banks start giving rental loans, they can't go up much more without wages increasing and food/petrol etc stagnating.
Before this is said and done, IRs will be slashed (atleast by the RBA) but once its starts happening even that wont convince people to buy houses.
xdrew wrote:And as far as fiat .. dont abuse the word. Currency has been fiat either since 1929 when we left the gold standard or .. 1966 when we abandoned silver in our currency. Its a word thats been floated around alot .. but basically means that people lose trust in the currency. I dont think anyone is running for the banks in this country … and people arent tossing their dollars into the street. So stop using the word fiat for what everyone KNOWS is a fiat currency. It induces unnecessary panic and its just crap anyway.yea, I know the history. I wasn't trying to induce panic, just find a descriptor quickly. It's simple, really simple.
Houses costs as much as what debt our wages and their growth will allow. Rents are as much as wages will allow. There is no shortage of houses. The rest of the world is starting to distrust our banks finances and are charging more for credit. Bank IRs will go up, no matter what the RBA does. But, when house prices slide too much, the RBA will lower the cash rate, devaluing our dollar and causing internal hyperinflation. The speed at which this occurs is dependant on China's residential property bubble popping. We are little America and we are just late to the party.
harb wrote:What would you say will likely cause the average punter/investor to panic , rising rental returns ?
I believe that your average punter/investor would be unlikely to have purchase a property post GFC for a quick CG so as long as rents continue to go up they would have little reason to panic. Anyway, that is assuming wages and inflation remains under control which up to now was helped by a rising AUD. What do you suppose would happen to inflation if the AUD starts falling back towards $0.75 over the next 2-3 years ?
Rents aren't going up – they are stagnant and going down in some places.
The dollar likely will drop back to 0.75 over the next few years. I missed my chance to short it (only hit 1.10 for a single night of trading).
Likely outcome will be fiat inflation, verging on hyperinflation, like America.
