Property bust not here yet … worse to come

Hellow DW,

Yes it is all over the place.

400 properties in the Eastern Suburbs of Sydney are about to hit the market from bank repossessions.

Civil works costs in Sydney have been increased by $30,000.00 per allotment on new sub-divisions.

Bottom is more expensive to develop and the poor people once again are the ones to feel the pain.

Inflation + devaluation of the dollar, electricity up 30%, postage stamps now 60 cents, living expenses up, feeding a family plus school fees, what about child care who can afford that now that ABC stuffed up “Gillard” couldn’t fix that either.

USA and EU can’t print enough cash to fix the problem, gold and silver set to rise sharply.

I’m trying to put the financial jigsaw together hhmmmm how to make the pieces fit?

I focus on cash flow whether the market is up or down I don’t want my passive income to be affected, or my clients.

Regards

Philip Sigglekow
LREA author

Dwolfe, I agree that market is not black and white and money to be made in some pockets by those who in the know. Just trying to stay on the topick of this thread.

BTW, anyone seen W4L around those days? Long time no comments, probably busy with some projects…

Interesting to catch up, I have been sitting out waiting for all the government intervention to wash through..

I am an accountant as some may remember. I don't do many individuals as we are mainly a business practice. However most of the individuals are a similar age to me, I'm 56. Some a little older some a little younger.

The thing I am seeing this year, is that for those (most of them) who bought a property in the last 10 years, they are all bleeding. Now I know that is because they are not clever little cashflow + types, I guess they went to the wrong seminar, – the neg gearing one.

But I sit here watching them either borrow more to keep up the negative payments or draw down on their super to feed these things. Mostly units, returns 1-2 % nett, (one actually is close to a neg gearing loss before the interest !!!!) .

Almost all under $80,000 ann income, some now retired have no taxable income at all, and larger and larger losses carried forward (okay will help with the cap gain – though that does not appear to be a problem for most)

Luckily none of them ever wasted $20 for a phone call and asked my opion first, but I wonder how long they can afford to bleed.

From my wider reading, but dont quote me, i have learnt that ALL governments in the developed world have and use US currency to trade with and store in their govt vaults – physically or digitally or whatever.

When the US dollar weakens further it not only affects the US but every govt that holds US currency.

So if the US currency weakens it means it is not as valuable therefore it cant buy as much.

If other govt's cant buy as much with their own stash of US currency then they will exchange it for another.

If the US currency loses value faster than expected other countries will try and exchange/spend/use their US currency quickly so as not to lose spending power.

If US currency drops its value quickly a whole lot of nations may dump it fast.

If there is a worldwide dumping of the US dollar it could cause some major shockwaves.

In order to stabalise the world certain US banks have been keeping the price of Gold down – apparently. 

This makes it seem as if the US economy is strong and travelling along nicely.

If there is a major stockmkt crash in the US or somethin similar it could unsettle their economy.

If every country dumps US dollars how would it affect real estate and prop invsting in Australia?

What does the  "FHOG stemulus"  has to do with almost $3M apartment having to drop $750k before selling ?  Surely there can't be that many  FHBs who can afford apartments selling at 5x median home price and the ones that do would not be put off by the loss of a lousy $7k  in "FHOG stemulus".   
And as far as the overall 0.2% fall in the median prices go I think the picture said it all and is the reason behind the fall .

Hi friends,

If "collectors" (they are not investors) have invested in a strategy that has not worked for them then that is their business.

I wouldn't ring an auto electrician if my brakes on my car went so I could see why as a business accountant people probably would not think of gmh454 as the first port of call for individual taxation advice.

There wasn't a mention of how many of these individuals there were who had adopted this strategy. 2 or 3 or 20 or 30 or 200 or 300. Even so out of the whole country that would be a very small portion of people buying into property.

I would think that many of the people who haven't made money from property probably either don't own any or are unwilling to sell to realise any capital gain that they may make.

Just my opinions. I don't see any blood, I don't even see a black eye out of the property market (maybe Gold coast that has a smacked bottom) Call me when the market is flooded with fire sales. We ARE not America, no matter how much our pollies try to make us behave like them or crawl up their behind.

I'm repeating myself here,

we have no jingle mail,
we have no 50 year mortgages where you will die before it is paid back,
we have underlying demand as no one likes living under a bridge or in a cardboard box,
we have a welfare system that includes weekly cash payments and rent assistance for private rental,

look I could go on, and on, and on about why there are inherent differences between Australia and many other countries but hey…

D

Don't want to be picky simple but how did you work that out ? 

Maybe what you call "normal" was actually "lower then normal" 
Looking at the rest of the world wages to house price ratio Australian cities don't look expensive at all, in fact none of them are into double digit ratios. Looking at wiki  http://en.wikipedia.org/wiki/Australian_property_bubble I found this interesting table http://www.numbeo.com/property-investment/rankings.jsp  which list the income the price ratios in major world cities.   Take Sydney Aus.  with a ratio of  6.7  and compare it with something more extreme like Minsk Belarus with a ratio of 40 and Sydney looks like bargain of the century.  If not for a few US cities where they went silly building cardboard abodes on cow paddocks which caused a massive price crash in certain locations we would have some of the lowest price/income properties on Earth.
 

Minimum wage is something earned by young people just starting in the industry, why kind of loser would still be on minimum wages after 15 years in the industry ? And if  by that you meant it as in comparing the minimum wages a young person just starting out and wanting to buy a property was earning back then compared to someone in a similar position is earning now then your following comment is comparing apples with oranges.

With population numbers increasing by 5 million people between 1995 and 2010 surely you didn't expect prices "on the same street" to grow in line with earnings.  The extra 5 million people competing for a residence near the CBD has pushed prices on "the same street " above the inflation rate and pushed he city outskirts further out.  If your hypothetical young person now is prepared to buy the same size house on the the outskirts of the city  the same as his hypothetical 15 years senior did earlier he should be able to find something in the $290k range with little difficulty. 

You are correct, there is something out of control here and it is the younger people of today who have higher expectations then previous generations . An today most expect instant gratification, buying everything on credit, ,  to be able to afford their first home in the same area their parents live but preferably in a much larger, modern  and better equipped home and they expect to work less hours so they can spend more time with the family and partying with friends.  Nothing wrong with that of course and people starting a family in past decades all had the same aspirations and most of the people buying homes previously have complained about the high price of homes  when compared with the ones paid by their parents. The young people today may think they are special and hard done by life but they are not unique, every generation before them has been singing the same song throughout the history and only those prepared to put in the hard work have succeeded while most of the ones waiting for the opportunity to come to them have failed miserably.

We see same situation totally different obviously based on our education and experience. So we shall keep this thread 'life' and  see how it will develop.  I have no need to prove anyone right or wrong, just checking if my view of finance is still valid by trying to foresee future.

As I side note, we got 50 people  full time working in our manufacturing facility on award wage in Brisbane. I see them struggle much more with there's personal finance now than 15 years ago.  We always paid award.

Harb, I am still laughing!

Yeah 2012 we are all going to bite it, personally I'd rather bite it knowing I achieved my own goals and had fun making money and spreading it around. ;P

Simple I wonder if the people you are speaking of struggle with their finances as money management is not something that is inherent, it is learned. Maybe no one has educated them to take care of their money and personal finance. Maybe the Aussie school system is to blame since no one is taught about money and finance at any year level.

And the big maybe is …………………………………….. maybe there is just more stuff to waste money on. Don't need plasmas, and nice cars and fake tan and beer and ciggies. Don't need takeaway every night and lunch bought every day. Don't need the brand name clothes when the kmart jeans work just the same. But………………….. these are things that people desire and will accrue debt trying to accumulate. I wonder if they struggle because they are trying to have it all and yesterday.

I think is most people knew how to budget life would not be a struggle, it would probably be pretty easy. But it might be a bit tough on them having to go with out the loads of crap they want to buy…..

D