Ill go in to bat for fat Tony on a couple of points. (Sorry bout the long reply)
Firstly, everyone is entitled to express their opinion (even Bec), regardless of how many or few postings one has done, or how experienced or new one is to investing.
Catchy title- Good idea, if you have a dud title, it often sinks down deep, but if you spice it up, one can have long lasting threads with multiple viewpoints and ideology stated, which is what we want. Personally, I always deliberatly try to add a bit of a spark to the title.
He has stated his opinion (future correction/crash), but has not stated his fundamental reasons. But why should he? I feel his post may be more of an information gathering process on multiple responsers, as opposed to some posters who play lay down maisseire and only really want to hear their own views, opinions and voices reflected back to them via the mirror.
As for his sentiments, lets look at a couple of potential options. Huge CG in the next 3 years, plateu for 3 years, correction for 3 years.
In 3 years time, we will know the answer, until then, it is only speculation.
IMHO, only an idiot would suggest that we will have huge CG for the next 3 years, (part. in nsw), so that leaves only two left, of which a crash is one.
As for positivity, go to an Amway convention, and everything about it will be spoken in such awesome dreams, the ‘you can do it mentality’. A healthy dose of skepticism is good, to keep us away from all of the prop sharks that wish to chomp on our respective legs.
I got on to an os site, and it was similar to this one (in the fact that anyone could post), but everything was delayed, so it could be scrutinised. EVERY single post was masively positive, and most spoke of the authors wonderful ideas, books, and especially seminars (I wonder why?!) and how everything always worked. In filtering out all of the other ideas, only a crap advertising shell remained.
Just a thought- almost all of the US’s consumer spending was due to the refinancing of ppor, in the bulletin the other day it was talking about an asian country (sorry- cant remember what one- might have been singapore or taiwan), and the housing boom finished about six years ago. Prices are now 70 percent BELOW the peak. Imagine owning a million dollar unit 6 years ago, with it now worth only 300 grand. A reputable fact, not an opinion!
In OZ, I dont know anyone who has saved for a new kitchen/bathroom/car, but I know heaps of people who have borrowed, part through their ppor. Our national savings rate is at minus 3%
Lets say rates went up (greenspan has hinted that the 1% us rates may be going up later-prob after the yanks go to the polls in Nov), and a correction happened. The big killer to the economy as a whole would be a drop in consumer spending, due to ppor being valued significantly less.
If the economy is shot, who will be buying houses, when they know that they will be cheaper at next months mortgagee sales?
I am not suggesting that 70% drops will happen, but I feel that fat tony may not be too far off the mark.
I also realise that the majority of forum posters have a significant amount of money invested in property, and may not wish to entertain scary thoughts
Originally posted by wayneL:
. We’ve probably eaten up enough housing inflation to last us another 15 years, all with cheap credit.[biggrin].
Could be a very long cycle coming[wink]
As to whether there will be a crash. Hard to tell, yeah, depending on what the feds do, but I can’t see there being any growth to speak, of, and I’ll bet house prices don’t keep up with inflation for a long while.What really causes a crash?
Mainly I’d say people hurting is the main cause.
So the big worry here is overall credit levels, not just housing sales/prices. People are going mad on credit and using equity for things other than investment and the overall picture is looking balloon like worldwide. Then inflation comes.
If it doesn’t pop, then it’ll just deflate slowly like those left over party balloons and lie on the floor in the corner for a decade. (Recession?/Stagnation? Wheres that crystal ball[wacko])Originally posted by devilcv8:Maybe you are predicting a plane crash or car crash… (best stay indoors then!)
Eventhough you stay indoor if it is not your lucky day then it still happen!
There was a story about an old man who dream that he will hit by a car. So the next day he went to the farm far far away from car and that. Toward the afternoon while he was walking along the footpath there was a car break lose of the tyre hit him and die. The morale of the story is if your time is up no matter where you go still happen.
Let get back to the crash side of thing.
Originally posted by Monopoly:There’s one in every crowd, and it is usually that one, who knows the least, yet manages to speak the loudest!!!
crashing down, and who was that?
Kind regards
Chan Dollars
[Retire Young, Retire Rich] [strum]Fern said:
“What really causes a crash?
Mainly I’d say people hurting is the main cause.”Fern, I agree that is one aspect. The other is, I reckon, fear and panic. The thing about fear and panic is, that it doesn’t necessarily even require hurt, and the same result will occur- decisions made that are not necesarily in the person’s best interests.
I am pretty amazed about how people reacted to the new exit duty in nsw. You could see the whites of people’s eyes, and people freaking out. It’s that kind of response that can harm the market more than any actual policy/legislative change, I reckon. It’s not so much the *event* but the reaction to the event. I don’t quite understand it.
As others have said, it’s probably the more short-term “fashionable” investor (i’ll term it the “market-chaser”) who will do more poorly when conditions change. Longer-term investors (and I don’t mean new investors- I mean those who intend to stay in property) will be fine. Having said that, it’s probably still a good idea for people to check their LVR’s against their serviceability in changing times.
What do people think the definition of a “crash” is? Anyone got any figures they’d like to venture? (ie 40% drop in prices across 40% of the region?) If we could measure a crash like we can measure, for example, a drought, that would be good
kay henry
Yawn
Market go up, market come down, people make money, people lose money.
At the end of the day are YOU having fun?
If not, get off the rollercoaster & just enjoy the spectacle.
Cheers,
Aceyducey
I have never liked the term “crash” – because it exacerbates what is simply a market “adjustment”.
Having read the responses to this post there are two points I wanted to touch on.
1. A savvy investor will only buy a property once “potential market adjustments” have been taken into account.
Historic data should be used to determine worst case scenarios in recent years, i.e. 5 to 10 years, then a conservative approach taken to determine future trends.
In addition, an “exit strategy” should always be accounted for prior to investment, i.e. if the market downturn is greater than expected – often due to personal, statutory or severe economic reasons, not typical supply and demand.
2. Market “crash” equals “opportunity”.
For example, and as noted in several responses to this post, many people are currently leveraged beyond their means – especially in Australia, New Zealand and the United States at this time.
It is likely the majority of recent home/property owners are not savvy investors and therefore did not account for short-term market adjustments. They have acquired property on the basis of emotion and/or social trends – or borrowed against equity due to low interest rates.
It is almost inevitable that there will be a downward adjustment in specific regions of New Zealand in the short-term – Australia and the United States are already experiencing this.
As a result, opportunities will soon arise for those who did their homework prior to investing in current real estate holdings – and have positioned themselves to capitalize on such opportunities.
The moral of this story being, the real estate market can be lucrative no matter what direction it is heading. The key to success and indepedent wealth is investing with this in mind.
— Michael
CRASH[cop]CRASH[cop]WHAT CRASH???
definition of Crash:
3. crash, collapse — a sudden large decline of business or the prices of stocks (especially one that causes additional failures)
I’m not sure about the market “crashing soon”, this isn’t like the stock exchange where you wake up one morning and values have fallen 30%. The price declines looks to have well and truly started in many areas, though personally I don’t think there will be particularly large overall falls.
Out of interest on the stockmarket a “crash” is considered a fall of 20% or more and a correction is a fall of 10-20%.
Oh my god – woke up this morning and one bedroom has fallen off all my properties….that’s a 25-50% crash in their actual market value!
Who cares if property values fall – the property remains the same asset, it’s simply the perceived fair price that has shifted. There are a number of ways to add value back onto property & based on current population growth & building there’s not likely to be any systematic and realistic reason for a long-term fall in property prices in this country in the next 50+ years.
Of course an asteroid could strike Sydney, a nuclear war could break out, a virus kill every 3rd person as happened in Europe several times in the middle ages (following their property prices in the period during and between Black Death plagues is quite enlightening) or a device that allows us to each own a home in a different dimension could be invented.
However if there was some fundamental change in the value of property like these, the entire economy is likely to collapse anyway, so frankly owing money will be the least of an investor’s worries
Don’t second guess the market – just look at the realistic range of possibilities and assess your own exposure. If it’s too high, adjust it. If it isn’t don’t.
Don’t waste time worrying about the 90% of people who WILL lose if the economy shifts drastically.
Your worry will not stop them being affected, no matter how compassionate you feel you are!
Cheers,
Aceyducey
Just some comments/contributions
1. From a macro economy viewpoint, let’s not hope for a crash, becasue if people perceive the value of their investments falling, households/businesses will become far more cautious and reduce spending/investing. The effect of rising unemployment is obvious for all in the property sector.
2. Family member is in real estate (Melb) and makes the point, that it is very quiet, both from a buyer and seller point of view. Makes it difficult if you are looking to buy as well!!
3. Tax cuts are likely in the Federal budget, big spending package (which is both parties policy), so there is going to be an injection of government spending into the economy. Not withstanding the slow but emerging trend of a strengthening world economy.
Crash is an overly emotive term. There is empirical evidence of slowing or even price reductions, but those who have a long-term investing time horizon…Water of a ducks back.
Will there be opportunities to purchase? Maybe. But unless there is a dramatic negative shift or impact in the economy, external or domestic, we are not looking at a early 90’s style recession or price stagnation.
James
Originally posted by georgisj:3.” Tax cuts are likely in the Federal budget, big spending package (which is both parties policy), so there is going to be an injection of government spending into the economy.”
Granted but will it be enough to counter households contracting spending, when their paper wealth evaporates.
“Not withstanding the slow but emerging trend of a strengthening world economy.”
Hmmmmm did’nt China last week hint at increasing rates to dampen their economy. Lets see slower China less demand for Minerals how will that effect us ????
“Crash is an overly emotive term. There is empirical evidence of slowing or even price reductions, but those who have a long-term investing time horizon…Water of a ducks back.”
How long do you expect a flat market to last. months years, close to a decade maybe.If inflation occurs and prpty stagnates arn’t investors going backwards.??
Something to consider is the price of Petrol. last petrol crunch was 1974. It changed the world, and lead to a inflation spiral that ran for almost two decades.Remember the interest rates that fixed inflation.
Maybe inlation will be encouraged, to fix the mess that the last two asset bubbles have left???“Will there be opportunities to purchase? “
When ????
” But unless there is a dramatic negative shift or impact in the economy, external or domestic, we are not looking at a early 90’s style recession or price stagnation.”
No we are looking at 2003 and we are all (myself included) guessing.So many self proclaimed property gurus have come out of the last 3yr period and cannot face the thought of a “crash” or major adjustment. Even if the property stays positive geared the thought that the underlaying value decreasing up to 20% seems unrealistic to a lot of people.
The adjustment is taking place now with prices off around 10-15 %…how much more is to come.
The next news will be what the US fed does (rumour is June/July interest rate rise over there). That will be reason interest rates rise here as we follow them. This will then really “adjust” the market some more.
A crash is always based on panic. So the property market may experience a SLOW crash as it comes off way slower then compared to the share market.
Lets see how many panic next rate rise
Originally posted by Fat Tony:Crash > Crash > Crash > Crash > Crash > Crash.
Looks like it will crash soon.
Any comments.
I’m surprised how this boring post got so many responses.. [sleepy2] .. and the poster hasn’t even responded to any of the comments within it!
My opinion: For every loss there is a win. The only ones that will suffer are the ones that didn’t calculate their finances properly and prepare themselves.. others can just wait for the market to improve. Property investing works out most of the time in the long term! [thumbsupanim]
My opinion: For every loss there is a win
Very true, and with all the winning thats been going on over the last three years, there is going to be one hell of a correction.[biggrin]
Article on the US property market FYI (it is related).
Best not to be part-smart[wink].http://www.gold-eagle.com/editorials_04/maund050804.html
The Looming Property Crash
by Clive Maundsnip
<<In watching the US property bubble expand to its final unsustainable extreme over the past year or so, I have felt rather like that old guy in the rocking chair in those Jack Daniels whisky ads, who whiles away the time while the whisky matures reading the newspaper. After about 15 years he slowly rises from his chair and shouts “Jed – get the wagon!” The moment has arrived.>>Snip
<<Appropriate action for you would probably be to pay down debt to ensure that if, in the coming recession/depression, you get kicked out of your job, you won’t also end up being booted out of your home. On the other hand, if you have additional discretionary property, such as a second and maybe a third house, I believe you would be very wise to take of advantage of the fabulous, insane prices currently on offer and cash in, in the knowledge that you can buy back a similar property for perhaps half the price, maybe less, in a few years. Property speculators in particular would be very wise to cash in their chips now, in my opinion. Homeowners who are undecided about a potential move, perhaps due to having neighbours like the Osbournes, would probably do well to rent for a while and then move in to buy a really nice place after prices have plunged.>>The rot has already set in a good many states, where State budgets are under severe pressure, unemployment is rising and property prices are falling, or about to fall as prices stick, buyers evaporate and a forest of “for sale” boards appears.
The crash in US markets and in particular the US property market will, of course, have global repercussions. Two countries that will be particularly badly affected will be Australia and the UK. Speculation in property in Australia has been rampant driving prices to giddy heights, but at least you get something for your money there. The same is not true of Britain, which seems to specialize in what I call “rabbit hutch” housing – unimaginative, poorly constructed, overpriced boxes. Don’t get me wrong – there are nice houses in Britain, just be prepared to pay a huge sum if you want one.>>
The last crash we had in this country was 1930 and since then we have had some challenging periods of adjustment.
I don’t know how many people on this forum actually own property and have had many real life experiences, own business, married, retrenched …, or how old were you in 1990 (14 years ago) why 1990 well I remember paying 19.33% interest and the property market was dead for over 5 years as for pos cash flow country properties shit i9t was the last thing on peoples minds.
Will we have a crash, in my opinion NO, adjustment Yes, the crashes will come from stupid mistakes and no research. Like buying a property from a marketing company, being sucked in at a seminar or thryng to start too high up the ladder when you begin.
A true investor is prepared for these times eg; if you lost your job and the interest rates rose to 10% next month could you afford it.
Originally posted by residentialwealth:Will we have a crash, in my opinion NO, adjustment Yes, the crashes will come from stupid mistakes and no research. Like buying a property from a marketing company, being sucked in at a seminar or thryng to start too high up the ladder when you begin.
couldn’t agree more.
FWIW we’re trying to sell one of our places at the moment, and the market’s bloody quiet (Mornington Peninsula)… mind you, while we won’t be getting the price we first thought, we’ll still be cashing in an enormous amount of tax-free capital gain that’s happened in less than 3 yrs, so I won’t be complaining too much. [biggrin]
It was bought in my wife’s name before we were married… we’ll be paying down debt, getting rid of PPOR mortgage, credit card debt and keeping an eye open for deals…
Cheers
rPlan for the worst and hope for the best.
And for goodness sake, DO SOMETHING ![angry2]
What should we do, WallFlower?? [eh]
kay henry
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