Property bust not here yet … worse to come

When a place at palm beach, a little weekender, bought for 5.5M with 100% finance no sales at a mortgagee auction, for 2.5m, the top end has tanked.

Marc…..are you reading just a little too much into the posts, ….I don't waste my time here for any other reason than to bring joy to this colorless world….

Rich is defined by anyone who has more money than you…ask Rupert Mucdoch if his is rich, and he will tell you he is well off, "…Bill gates though is rich"""

my favourite quote is from Johnny Carson at the end of his career, when asked about his $1m per show and he replied "the only thing money gives you is the abilty to not worry about having money "

daniellee,
                  I was reading Steve Keens posts, I think he said a 10% drop this year and next, and is taking inflation etc into account, so he is on the conservative side. I would still expect maybe 40%over two years – allowing for inflation and probably only for higher end properties. FHOG is proping up the low end at the moment, but its only temporary not sustainable.

well if it had sold it would have been 54.5%, but as it did not, who knows……it couldn't get any worse ??????   could it ???

No need to be irritated, since this is not a criticism. I don't refer to any of the usual values as "good" or "bad", right or wrong, You are wrong I am right kind of thing. I said I was amused, not offended or irritated. Plus this thread has 28 pages. Yours is just one post of many. Plus I read between the lines or like you say "too much" into it.

My observations are that in general people tend to have conflicting values when it comes to money and riches, and those conflicts surface in the expressions they choose to use and not intentionally.

Yet think for a moment, imagine a writer who believes all famous writers are idiots, or a musician who hates the guts of all from Mozart to the Beatles.
Hard to imagine they will succeed.
Yet when it comes to money it appears that it is OK to think wrong of those who have succeeded, and to lable as greed anything that goes over our own comfort zone.
I once conducted an experiment and asked an audience to write on a paper how much they think is "OK" for a person to earn, and how much is "wrong". Interestingly people wrote down about twice as what they earned themselvs, with answers that considered "obscene" to earn 10 times their own salary.
I find this fascinating since it demonstrates that our own set of preconditioned values determines what we are actualy able or rather allow ourselvs to earn.

Not that there is anything wrong with it!

I was at a property auction this evening in Sydney's lower North Shore. There were 5 properties for sale.

3-4 bidders on the properties which sold for under $700k, not one bid on the other 3 which would have been over $1 million and were passed in.

Seems to reflect what I am hearing, bottom end of the market is booming, top end isn't selling.

Suppose that you took a loan and bought a house then 20 years later you decide to sell it. Is it wrong to sell if for more then you paid for it, eg. cost + interest paid over the 20 years+ rates ? Would you have bought this house if you expected to sell it for less then you paid for it or did you speculate that you could sell it for above what you paid for it ?
Should we think wrong of you if you did any of the above  ?
And if I did the same but added a water tank and built a garden shed in the backyard then sold at a huge profit would it be wrong of you to think wrong of me ?

ummester wrote:

harb wrote:

Suppose that you took a loan and bought a house then 20 years later you decide to sell it. Is it wrong to sell if for more then you paid for it, eg. cost + interest paid over the 20 years+ rates ?

 

No. Zero sum, balance is maintained.

Quote:

Why not, you have not produced anything and speculated that the price would go up and/or that repayments will one day be lower then renting. Otherwise you would have just rented the place.
Besides, if you add the costs, rates and interest over some decades wouldn't that make most of the older properties underpriced ? 

harb wrote:

Would you have bought this house if you expected to sell it for less then you paid for it or did you speculate that you could sell it for above what you paid for it ?
Should we think wrong of you if you did any of the above  ?
And if I did the same but added a water tank and built a garden shed in the backyard then sold at a huge profit would it be wrong of you to think wrong of me ?

Yes. Imbalance is created and correction is required.

So really what you are saying is that as long as you are the one who makes a profit everything is in balance even if you were not productive and speculated that prices will rise but if someone else tries to do that by improving the property and making it more efficient then a correction is required? So what happened to your comment a few post earlier , "  It's OK to think wrong of those that make money in non productive or speculative means. It is wrong to think wrong of those that make money out of useful invention or productivity."  Was that just a load of bull because you are in the market for a property  ?

Interesting post.

The point I am interested in is not the moral or ethics of real estate investing. We have enough religious wars as it is to add yet another one. The only point I am interested in is to show that we, or rather our set of values determines what we allow ourselves to achieve.

If someone considers selling a property at a large profit "speculative" and the meaning of such word in his mind is morally corrupt or unethical and in anyway wrong, will the person be able to make big profits in real estate?
Answer no.
Furthermore the person will equate in his mind and probably not even consciously, success in RE as synonym of unethical or morally corrupt. And that is precisely my point. The masses primed by teachers, parents, religious leaders, media and assorted friends have in the vast majority set in their mind this concept that rich is evil and poor is virtuous.

Now one can do two things: First, debate how this is wrong and bring up scores of examples of very good rich people and very bad poor people, or vice versa.
And this would archive nothing.

The other thing to do is much more interesting. Consider what is the effect of believing the above premise.
The result of adopting the above anti-value reflects in every single action the person takes. Every time a person needs to make a choice it will make the choice that takes him away from becoming corrupt and morally objectable like those evil rich people. THis is inevitable and is at the root of the functions of our brain.
So our acquired values determine what we achieve or lack to.

The practical person would immediately realise that if we can change our set of values we would change the results in our life just like changing a program in our computer.
This is of course easier said then done.  To do that it is necessary to understand how did we acquire those values and for what reason. Exploring those remote origin will usually bring us to the conclusion that many of the values we keep dearest and that we believe to be essential to who we consider ourselves to be, are in fact not serving is to achieve the purposes we seek.

That is why I said it was interesting to see people who seek success in RE burdened by values or rather anti-values that would be their worst enemies to achieve such success….and lets it be clear that in no way I express value judgement like it is wrong to do this and wrong to do that. Only exploring why things happen.

This days you can buy foreclosure properties in the US for a fraction of their value. $10,000, $5000 and $1000 are not uncommon.
Would you buy this properties?
If not why not.
If yes why?

Marc, I have had the privilege as a public accountant to get to know in enormous depth the lives and business practices of maybe over 1,000 clients, in 35 plus years.

In my practice alone I would say there is not one sucessful client who has not broken the law. That breach may be as small as lying about there financial affairs when applying for a licence, to as high as buying a surgeon a 220k Merc, because he pedals a product that my client sells. I cannot say the surgeon performed needless operations, I don't have that info, but will say he sold 90% of all the product we sold nationally, and after his death, the national sales of the product slumped. Apparently not all specialists had his moral values. Though one other specialist did comment after a operation " very good procedure doctor….but where was the cancer "

My first eye opener was a public company director who was no 4 in T@T  What struck me was his sucess as a share trader. Starting with a very small inestment he built up a small nest egg of $200k (early 80s) , he was exceptional, he always bought his shares weeks or even days before before a bonus or rights issue. I am sure the directors on the boards of companies he shared also bought T@T just before such evernts as well. All great investors.

Now the kicker with the pub director was that in the early 80s he bought two Gold Coast properties off the plan for $160k each. By time of settlement he could not unload them for $80k. Basically blew all that he made by investing in something he did not know, or maybe he actually beleived he was a great investor.

Now withn the doctor, the thing that makes me wonder about a god, (unmester please take note) is that this doctor died from the very "illness" that he was a specialist in. Dead 6 mths after diagnosis. Too busy making bucks to read his own symptoms till it was too late, and the night before he died he tallied up the last sales and sent off an "invoice" closing out his secret commisions at around 10pm, and was dead before morning.

and I wish I was making up that last one but it is true, and as the Jute importer said to the piano teacher (Peter Cooke and Dudley Moore)  "no-one has talked to me like that in 20 years, you have integrity…..and that is something I am willing to pay for.."
put a big enough bag of money on the table and even I will even put down the names,  4 corners could work off my stuff for years..

Marc you may probably see me taking some form of joy from the downfall of these hardworking individuals, ..holding them out to ridicule, but me, I see it as Karma, and it renews may belief that there may be a god……I think his name though may be Loki…