Hi all
I’m very new to this forum and infact this is my first post.
I would love to start buying properties as a longterm investment and with this excellent WWW to get information, is certainly a much wiser way to start researching.
For myself I have always had a long term big picture view of things and have been right in many things. Which comes to something that has been on my mind for some time.
With money so cheap for the last while and many people jumping into the real estate boom everywhere – (internationally also), It seems that many people are way over extended. If interest rates climb – as they will, there are going to be many people stung so to speak and many bargains a result I suspect.
This being the case and possibly a litle bit more down the time track, I can see a major worldwide depression occuring similar to last century’s. Does anybody else have this view[?]
PS. not a cynic just realistic
Kindest
Chris.
Hi chrissos
anythink is possible. the US have recently been talking about the possibility of deflation, who know what the effect of that would be. But the world of finance is different today to the 1920’s, then even the banks were putting depositors money into the stockmarket and those poor people who thought they had money in the bank and not in the stockmarket were devestated also as their money disappeared. there are always going to be people who get badly burned after a bull run of any type, so it’s important to make sure you aren’t one of them, the idea of cash positive properties reduces the risk incredibly in comparisson to negative geared properties. i suspect it will be those who have bought inner city appartments at over inflated prices who will be burned the most. No matter what you do in life there is risk the best thing to do is become an astute investor and learn as much as you can to reduce the risks. What are the option for you, do nothing put the money in the bank? then what if you are wrong and prices continue as the have for the past 30 yrs and end up doubling in the next 10 yrs.
While it’s been great riding this boom i would rather see prices go flat for a few years before the price increases.
regards westanI occasionally visit this site when I want to get a bear market view of the world..
Of course, all their predictions so far have been off the mark
EZ-Rent. The free tax and cashflow simulator for Australian property investors.
http://www.ez-rent.comChris – yes there will always be booms and busts and anyone who says otherwise is underestimating human emotions of fear and greed.
But I look at it this way. The human population is not falling. Housing is a basic necessity (about number 2 or 3). Thus people will sacrifice almost everything to get a roof over their head. So provided that it meets a basic necessity (which the more expensive houses certainly don’t!) and it’s in an area in which people want to live, I think you will do OK.
Buying overpriced properties? Well if you buy something that attracts 8-10% yield, even if the price were to fall that’s not a bad (though not fantastic) return on your original investment. If house prices were to fall yields would go up. In a period of uncertainty, I’d imagine that people would be rushing to get 10% or more on their money, especially if the sharemarket is weak and the international situation was uncertain. This might limit any fall in prices.
What about a general recession? Unemployment would reduce people’s capacity to pay. Even so, housing would be one of the last things they’d cut out. If they’re in an expensive house, they might want to move to something cheaper. Average rents might fall, especially at the middle-top end. There might be a short period of high interest rates and high unemployment (eg 1982) but you’d expect that one of the other would fall eventually.
If you’re worried about prices falling, why not buy one cheap place now, and save up so you’d be able to afford another in about 2 years time? Then you’re not buying both places at the peak of the market if your judgement is correct.
Peter
Quote:Chris – yes there will always be booms and busts and anyone who says otherwise is underestimating human emotions of fear and greed………………………………………………………………….Thanks Peter
Yes, I think you are right in what you said – We are a blessed nation theres no doubt – having milllions of people out on the street seems way off the planet.
Kindest
Chris
Hiya Crissos,
The universe rearranges itself to accommodate your picture of reality.[
]Take those paradigms that surround you & stretch the bageezez out of them. [:0)]
Ow and as Westan wrote :
anything is possibleMichael
just beif you *are* worried about the global economy – I can’t see it changing much until oil runs out, at which time the US will crash – then don’t buy anything which only has a paper value. Buy stuff which has an intrinsic value. Like houses ! and gold (maybe?)
I think gold always goes up in times of economic uncertainty.Banks have this low fractional reserve thing which means that only a small percent of their ‘money’ is gold backed, like between 1.5 percent – 2.5 percent for the NZ banks. Banks obviously don’t publicise this fact, but you can find it out. Actually, ask a teller ‘what’s your fractional reserve rate?’ They won’t know. Neither will the branch manager. You have to go right to the top. it’s really a bit of a conspiracy actually because it’s so embarassingly low. In NZ it used to be regulated at 10 percent, but they changes the laws so that now banks set their own rates, and it’s dropped right down -they don’t want you to know!
Swiss banks have the highest fractional reserve rate which is why they are supposed to be the safest/best for cash deposits.
Oh yeah. I just remembered Dolf de Roos saying that property has averaged 7 percent growth in the western world every year including the depression!. I don’t know how he massaged the figures (added up every yearly average and averaged them?) but that’s what he said, anyway.
As you can gather, I don’t really trust the banks – especially if they have my money. if i have theirs, though, that’s OK – because I’m good for it!!
Although that was rather a dark post (for me) it meant to reassure that I think that residential real estate is (and is considered to be) one of the most safest investments there is.
I think that there are a lot of things that could change the world’s ecomonic future. But will it be a negative thing (the US going broke-!) or a positive thing? (millions of millionaires creating their own abundance, and giving back a share of profits to the community?)
I have long thought that if everyone in the world lived in service to others instead of themselves, then we would have no more problems, ever…
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