Hi Techowse,
This is a very simplistic outline in response to your Q.
The point has nothing to do with the reported ‘oil crisis’ per se… The point is that right now across the world ALL oil is bought and sold using only the US dollar currency and because of this the USA is able to run up huge debts. (I’m not going into details here)
So if the value of the US dollar is falling all those countries with huge amounts of US dollar holdings are technically losing money (value).
If as reported/rumoured the worlds oil buyers and sellers suddenly decide to start using the much stronger and more stable Euro as the worlds oil trading currency the US Dollar will collapse and along with it the US economy.
Hence my alarm bells ringing with regard to investing in the USA.
Cheers, Nobleone.
[biggrin]“Making mistakes is just another another tool for learning.”
so Nobleone, does that mean that investing now in the US will lead to great losses? what about investing during the collapse?
sorry if my Q’s sound really silly, but i’d rather be a fool for 5 mins than forever.
Techowse,
I don’t have a crystal ball nor am I a professional economist so I cannot accurately answer your question.
However as a personal investor I would certainly be interested in looking at purchasing US property if the US economy collapes.
Once things hit rock bottom there’s only one way for them to go…. UP.
But then you have to start trying to figure out how long will the ‘rock bottom’ period last before growth starts up again.
International investing is a fun game… It’s full of what ifs and maybes.
Cheers, Nobleone. [biggrin]
“Making mistakes is just another another tool for learning.”
Techowse,
It is people such as yourself that I was thinking of when I started this thread.
People who are looking for investments that give a good return and who may be instantly attracted to investing in the US because the numbers stack up great.
I was suggesting that as well as normal investment property due dilligence overseas investors should also be looking at the world economy and how world events may influence their chosen country of investment.
Cheers, Nobleone. [biggrin]
“Making mistakes is just another another tool for learning.”
Once things hit rock bottom there’s only one way for them to go…. UP.
But then you have to start trying to figure out how long will the ‘rock bottom’ period last before growth starts up again.Yes, that’s the tricky bit. Take Japan for example – when will their 14 year trend of declining property values be reversed? Residential real estate is cheaper in real terms today than it was in 1980, but it’d still take a brave investor to leverage into that market!
Cheers, F.[cowboy2]
some interesting comments re The Economist article:
http://www.somersoft.com/forums/showthread.php?t=20441
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Yes AUSPROP house prices never fall do they, except ummm Japan, and the UK, and …
You guys really do remind me of the dot com spin merchants of the late 1990s … “there’s no bubble because this is the ‘new economy’, old rules about fundamentals no longer apply”
I am a little worried about all this investing in the US. Property in the US like here is also overvalued.
I lived in the US (San Francisco) for a year back in 1999. And I was in Canada/US about 8 months ago. I looked at properties in Canada – Montreal and Ottawa. I also looked at some properties in the US on the Canadian border.
The places I saw were like ghost towns. About 20 years ago when my wife was a kid growing up in Canada these US towns and cities were pumping. Now they are a shadow of what they were.
Is this good for investing? I dont know. They may be cash flow positive but I dont reckon its worth the currency swings, tenant problems in winter. Do you realise how cold it gets on the US/Canada border.
I also had discussions with my wifes canadian uncle who is a property millionaire. He was discouraging me saying now is the time to be seling NOT buying. He also made the point when your a long way from your investments you get ripped. I respect his opinion alot as he bought a 64plex back when things were bad – about 15 yrs ago from a group of accountants and solicitors. He told me to just bide my time.
Anyway its my 2 cts worth.
Originally posted by dmichie:Yes AUSPROP house prices never fall do they, except ummm Japan, and the UK, and …
You guys really do remind me of the dot com spin merchants of the late 1990s … “there’s no bubble because this is the ‘new economy’, old rules about fundamentals no longer apply”
interesting spin on things…. yours sounds like a a reverse “it’s different this time argument”, fight fire wih fire approach…”yes property has risen throughout history, but this time it’s different, its a bubble, its oil, its the US conspiracy, its consumer debt, its inflation, technology has eroded the need to live close to the city etc”. But don’t lump me inot the box labelled ‘property always goes up’. There was some craziness in the late 80’s as I vaguely recall and there is always a risk of something crazy happening again. But I don’t avoid the beach for fear of a tsunami if you see my point.
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
AUSPROP, here are a few reasons why I think it is different this time:
– Real property prices are well above their long term trend line
(see http://www.cis.org.au/policy/autumn05/autumn05-1_clip_image002.gif)
– Rental yields are at historically low levels (the P/E ratio for real estate if you like)
– The percentage of investors in the real estate market is at an at all time high
– The CGT changes in 1999 fuelled the property bubble, just as money flooded out of tech stocks and into real estate
– Negative gearing is more popular than ever, because the point at which the 48.5% top marginal rate kicks in has not kept pace with growth in incomes (bracket creep)
– Interest rates worldwide have been held at artificially low levels since 9/11
– Australia has had 14 years of unbroken economic growth, and we are well overdue for a recessionAnd BTW, this property bubble is much bigger than anything that happened in the 80s.
an interesting mix of causes and symptoms you have listed there. I note the generous increases in personal tax rate scales which didn’t really create much of a stir – I was quite surprised to see the current and new scales.
I agree it could be different this time. just as it was in the great depression when guys were jumping out of the windows (they probably weren’t interested in the historical growth rate of stocks at that time!). is a big call to declare we are in a bubble though. the market could collpase, it might boom, it may tick along – I could find stats to argue any of it. on a simplistic analysis you could say that Sydney has had a boom and now it’s time to sell. you need to factor in transaction costs of course. and if you want to hold a position in the market you will need to be able to pick the bottom again – not an easy task. all depends on the strategy you are following.
interesting to read that Len Buckeridge is going to keep his 800 or so properties even after he quits Oz. these old timers sure got it right!
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
AUSPROP, I can guarantee you the Sydney market ain’t gonna boom anytime soon! A slow grinding decline over 4-5 years is more likely.
Did you read the “Crisis of confidence” article in this weekend’s AFR? Property in the $1M-$4M range is taking a tumble in Sydney and Queensland with falls of up to 33% since the 2003 top.
You’ll need an AFR subscription to read it, or see p26 of the printed edition:
Crisis of confidence hits luxury market
http://afr.com/premium/articles/2005/04/21/1114028481153.htmlSome quotes from RE agents in the article:
“But for a high-quality apartment to show a 33 per cent fall compared to what was paid in 2003 … I would not have anticipated it”“It is probably the biggest crack in the market I have seen”
“We are desperately trying to keep prices up but they definitely have dropped”
“The Sydney auction clearance rate was 37 per cent [last] week. That is low.”
“People believe that the value of property doesn’t decrease, it just keeps going up, and that’s not the case at all”
the authors of that article and this article should get together:
http://www.theaustralian.news.com.au/common/story_page/0,5744,15052432%255E25658,00.html
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Yep, sure sounds like the manic buying frenzy typical of a bubble — “I better buy now or I’ll miss out”. No more beachfront blocks eh? Australia has more coastline than any nation on earth with only 20 million people.
Besides, whatever is happening in Queensland and WA is months behind Sydney. Sydney leads the market, and the market is falling here, beachfront blocks included.
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