Property bust not here yet … worse to come

Man… been reading the last couple of post and I have to say, it reminds me of conversations that I have had with my best friend back in Singapore. Since coming over to Australia in Feb '04, I have been intrigued by property investing and recently, started learning about Sharemarket investments.

Over the years, I would email my friend about the need to building one's wealth, maybe set up a business and provide jobs to others. We had a number of arguments over the years via email due to misinterpretation, differring views, etc. When I was back in Singapore last year, we took up this discussion again, and he said to me this.

"The financially rich got to where they are because they stood on the shoulders of others, depended on the elbow grease of many below. I have not come across one rich fellow who is also a nice generous person. If you want to be rich, make sure you do not exploit others, even if others are willing to let you stand on their shoulders."

I then brought up the whole idea of businesses providing jobs to those in 3rd world countries, as I had just returned from a holiday in Cambodia. He responded.

"Sure, those Corporations are providing jobs in the developing countries, but they are still exploiting them. Companies are making even bigger profits by offshoring such operations. Where they used to pay a worker in their developed home country $2K a month, now they only pay $200 a month. You want to talk about being fair, then pay that 3rd world country worker $400 a month instead. You, as a business owner, still make $1600 per worker in lower cost."

It made me realise this; that I should go about to create my wealth in an ethical and moral way that harms no one. After all, if I was meant to be rich, I will be. There is more than one way to be financially rich, and still lead a respectable life.

Regards
Daniel Lee

Harb,

I'm only going to make a couple of points. We have been over much of htis ground before:)

Tumbarumba is still a very cool name for a town.

If the bottom keeps rising and the top, the middle stagnates and the top falls – what do think is going to be the end result? Every house, no matter how well made and how big the plot it's on, costing the same?

Boomer retirements and future deaths far outwiegh population increase in developed and semi developed nations. We are not having children fast enough to support the hole they are going to leave and it is not possible to make up the lost ground before they die.

Yes but its always fun to go back over it from time to time and see what's changed.

Picking a dump under $50K and flogging it now for double that would also have been cool.

 I agree with you that you can't have every house and plot costing the same, location and quality of the building is what differentiate properties. If a new H&L package 50KM from the CBD has a minimum replacement cost of $250K then something 5KM from the CBD surely has to cost a lot more then that. $000K more, since you would save about $200 a week and about 10hrs (another $250) travel a week  to work over the working life. So at $20K a year over 30 years you'd be looking at an extra $600K on top, not to mention the extra family time you get which is priceles. So a $850K 5Km from CBD would be a real bargain and not overpriced at all.
Since the bottom of the market is rising at a certain point the buyers will decide that its worth spending the extra money to get a better quality home in a better location. Once that happens the mid range market starts going up and the mid range buyers will start looking at the then undervalued top end market.  The most important thing is that the bottom market which is the entry point for the first home buyers is  going up, its only a matter of time before the rest of the market follows.

Which is where migration comes in, or do you honestly believe that in 20 years time we will have a smaller population then we do now ?
If the ~10M increase in population we had in the past 40 years caused property prices to go up so much what do you think the 20M increase expected in the next 40 years will do ? 

http://www.abs.gov.au/Ausstats/[email protected]/mf/3222.0

Wow!
How did we get to rich is bad?  Why, unmester, if you don't want to ever own any real estate other than your own PPOR are you such an active participant on a property investors forum? All very interesting ideas.  It is necessary to recognise that resources are scarce, and that if you are to increase your own wealth, it will be at the expense of others.  Is this unfair?  Not necessarily.  If you provide housing, funding, labour, skills, products that other people are willing to pay you for, then what is wrong with that?  If you are particularly skilfull at leveraging your own set of resources to provide a high profit, then what is wrong with that?  There is everything wrong with lying, cheating, taking part in dishonest dealings.  Some people make alot of money that way, some go to jail, some end up dead. 

I'm reminded of a comment my mother in law made once when my husband and I were relating a story about a succesful couple who are freinds of ours.  This couple had built up a successful business, and done very well providing a service within the mining industry.  They were in the process of defending a workers comp related lawsuit.  Good old story of employee has a minor but permanent injury and is going to make sure it means not having to work for the rest of their life (I think the bloke lost a finger).  My mother in laws comment was pretty much along the lines of our freinds were getting what was coming to them.  The idea was that they could have only achieved such success unethically and that they were now in for the related fall.  My mother in law and her husband are lovely, but not at all well off.

My original problem was with the "rich people are selling" comment that was made by W4L quite a few posts ago.  My problem was that the comment was very non specific, and wasn't referenced.  Who were these rich people, what were they selling, why should that indicate something to us, and if so then what, where did this information come from?  My intention was not to demonstrate any feeling that "rich people are evil", just to challenge the point that the statement "rich people are selling" meant anything very specific about the economy.  

Personally, I happen to believe that there is ample scope for sufficiently skilled, informed, motivated and well timed individuals to make alot of money without compromising their ethics.
S 

harb wrote:

Upgrade like to a higher priced property in the mid range? In that case the increase in the grant is causing a ripple effect throughout the property pond and soon it will reach the high end properties.

That is a reasonable point and no doubt exactly what Australia's REI is hoping for when they push to have the grant increased. It does require people wanting to upgrade and feeling secure enough in their employment to upgrade. But don't you ever wonder why the real estate industry needs grants and boosts to keep it going and other industry in Australia doesn't?

Why is there no first car buyers grant, first business openers grant and that kind of thing? Is it just possible that housing is overpriced and without the grant there will be no turnaround at the bottom end? Is it possible that the housing industry in this country actually needs the grant to function now? And if so, doesn't that bother you in the least?

I received a call last week from a person that with very grave voice, like a funeral director, told me he wanted an appointment to help me in my situation.
When I asked who he was and if he was buying or selling he kept on going with his line of "my situation". I don't have much time for bull artists so I told him if he could explain what situation that may be. To what he replied as if he was reading my clinical history from the chart at the bottom of my hospital bed. You have a rental property and the problems created to the world financial market by speculators has brought you to your situation.
Now lets draw a merciful curtain over the un professionalism, mediocrity and poor ethics of this call and lets concentrate on why was this hungry soul using this line to obtain a meeting to sell me some overpriced and useless "advise".
Clearly he had done his homework and found that most people respond to blame placing on others. If you blame the powerful and call them speculators you are on a winner. Let's go to the pub and have a beer over it!  If he then pulls a whole set of world problems as if he knew what he was  talking about and rattles along blaming everything from the price of butter to the last dodo barbaque onto those who have more than you, two cars (imagine the waste you can only drive one right?) more than one property, you can only live in one cave, what do you want two for? Etc…. I am sure you have heard all this before.

The point however and the only I am interested in, is that all the scores of people who blame their inaction on others, particularly speculators and greedy rich, (since we all know that every single person with money has broken the law and buys Mercedes and performs fake surgery) has his poor success rate to blame on his own set of values. Precisely those values that he thinks make him meritory to a medal to honesty. The fact that his values are false, and that proving it is a matter of a few hours of research is irrelevant. Our (his) values are so tightly nit to our character that without help it is very difficult to extricate oneself from the maze that is holding one behind.

So if the market is down the proactive person finds opportunity, the talkative person finds who to blame for the losses. 
If the market is up, the proactive investor sells, the bla bla person find someone to blame for the "un affordability" and "unsustainable" and the "baby boomers that retire and bring it all down" and those who are left behind and will never be able to afford a home" and also "world peace", and why not the fact that the world rotates anticlockwise if you look from the north pole down…etc

Yet…nota bene…for the person with the value ingrained in his soul, "rich is bad, poor is good" this all makes a lot of sense and I am some sort of monster defending the indefensible, supporting the immoral and the corrupt.

So as you can see it all comes down to our choice of values.
Your values either serve you or they do not. If you aspire to being on a crusade against all evil landlords or against private property in general, this are the value to have.
If you on the other hand are or believe to be on a path to success by enterprise in RE or any other for that matter yet still cling onto those values, they will be clearly in your way.

Just my thought.

What if you want to crusade against evil landlords from the comfort of a fairly priced home?

The real bidding stopped @ 5K more than expected but then the REAs somehow managed to negotiate the winning bidders up another 20k with what looked like a false bidder (didn't enter a bid until an REA whispered something into his ear) and the last 10k because the owners wouldn't sell. Not really an auction when one bidder bids against themselves for the last 30k.

Still, it was interesting to attend, if only to know I'll never buy at one.

Nobody forced the bidder to go that high, if he did so then he must have believed the house was worth it or really liked it. Besides its like you said in another post, in 10 years time it will make little difference that he paid a few extra $K. At least now he has secured a solid asset that can protect him from inflation if things turn nasty and gives him a much higher return then he'd get at the bank. 

harb wrote:

 Trying to re-educate ummester and turn him into a property investor is very challenging but I haven't gave up on him yet. 

Lol You damn property bulls almost have my wallet out. Every forum I'm on seems to be a propbull spouting the virtues of property. Low interest rates, deductions, FHOG and govt money falling from the sky. It does seem like a great time to buy. God only knows why I have such an aversion to property. But I think I will wait to the end of the year just the same.