This Is the First Time In History that All Central Banks Have Printed Money at the Same Time … And They’re Failing Miserably 01/05/2012
Four of the world’s largest central banks have gone absolutely berserk, running the money printing presses like never before in history:
Is this what the end game looks like? Print till we bust!
The Freckle
Australian House Prices down 10% from Peak
on May 1st, 2012 at 2:04 pm
*yawn*
Hi Freckle,
I really appreciated your research, stat. and opinion?
I am here just wondering where do you live ? what kind of car do you have? how many properties do you have ?
also if OZ property market collapse what will you do ? ( what will you invest in ? or where will park your money ?)
more, in next 3 years which asset class will you invest in ?
How long will this discussion going on ? another year or two or 5 years ?
it's very interesting to see people's view : )
If we can bring this thread back to just Australia for a moment, even though the information Freckle has passed to us all is enlightening and scarey, I think a quick assessment of what the figures here in Australia tell us today and then a basic projection for only 12 months will tell you what position you are in with your IPs.
You can then assess the impact on your portfolio and decide whether you are on a winner or nor, whether to sell off a few, batten down the hatches if that is your decision or sell up now and count your losses if any.
Here are some current valuation figures courtesy of the REIV ( whose credibility is always on the line anyway in my mind) but if these figures can be validated via RP Data or siimilar, then you look at the change of value of your IPs suburb to suburb.
These are for MELBOURNE – Click here
As an example we can take Cheltenham as it seems to sit in the average price range for Melbourne of around $550k. The downtown is recorded at 13.3% for the year. That's a pretty big hit. In 2005 when the sky was falling in, Melbourne values dropped about 4%, in 2008 when the GFC hit, it wasn't that bad, but would have been if Krudd hadn't thrown the gov't surplus at the problem and now after all the hype and banter and billions spent to stablilise the ship, it's bobbing like a cork in the Tasman Sea.
OK so project this same loss for the next 12 months. We have a depreciation of 26.6% in 24 months for Cheltenham and now if 13.3% wasn't enough, ask yourself the question, "Has the boom ended?"
Can you financially handle this scenario? Add to the loss your break even costs per property of another 6% at least and you have a truer loss figure for your investment. For people with a low LVR and multiple +CF properties, their reaction may be poles apart from those of you with high LVRs and neutral or negative IPs, to whom the banks will be sending urgent letters to sooner rather than later.
What is your exit strategy, if required? Do you need to do something now rather than later, if this scenario eventuates.
Your decision.
Time to stop trying to figure out the world's woes here and bring it down to the micro economy in your back pocket.
Common sense tells us that the global situation is not being solved in any of the countries majorly affected by this downturn so far, otherwise we wouldn't be hearing the same problems over and over, except worse. Australia's economy has not been growing for some time, contrary to govt and public opinion. Go back to 2008 -2009 and if you eliminate the resource and banking sectors from the analysis, then we have had no growth in our economy eg: manufacturing, retail etc, for years but nobody wanted to believe it.
Ian
Block Head – http://www.theblockblog.com
Free Property Investment Info, Tools & Resources for Switched On Investorsscha9799 wrote:Hi Freckle,I really appreciated your research, stat. and opinion?
I am here just wondering where do you live ? what kind of car do you have? how many properties do you have ?
also if OZ property market collapse what will you do ? ( what will you invest in ? or where will park your money ?)
more, in next 3 years which asset class will you invest in ?
Described all that about 4 posts back.
I’ve lived in Oz for about 13 years starting out in Sydney in 98. Been in Port Hedland WA for the last 4 yrs.
I’ll be moving to Mandurah in about 2-3 weeks to set up a new business in labour hire and recruiting. A potentially more lucrative position than transport logistics. It’ll service the resource sector initially and diversify once we get that leg going. I tend to think resources will start to unravel in about 18 months as China slows and major resource projects near completion hence the need to diversify fairly quickly.
I don’t think resources will drop dead over night but it will increasingly become overly competitive as resources return to a steady state sector over the next 5 years.
I’ve been out of property a long time but I was always more interested in building and developing when I was involved. The buy hold wait strategy of recent years didn’t motivate my need for quick returns. When I arrived in 98 the Oz market, especially Sydney was cooking. I just saw warning signs everywhere for the investor. You really needed to know what you where doing and having no knowledge of the Oz market I stayed clear. I saw ppl making crazy money and doing crazy things in those days. It was like a frenzy to me. I saw a lot of ppl ripped off during those years.
I’ve been tempted over the years to chase property from time to time but the hackles always go up on the back of my neck. The fundamentals in Oz property never stack up in my book. Over priced, over leveraged, over taxed and manipulated market(s). When I looked in 98/99 I saw crash written all over the property market. Prices couldn’t ramp up at magnitudes greater than wage growth without correcting. The longer it went on the greater the chance and the bigger the falls.
If I’m going to invest I choose business. I have some simple rules. ROI potential must be in the 300%+/yr for low capital investment, Less than $50k. On a weekly basis I don’t want to work more than 30hrs as an average (currently 27). I’m not soley after money. To me wealth is money plus time. I’m not interested in being cash rich time poor. If I have to choose I’ll take time over money any day.
I’m a minimalist. I own a car a truck a microlight and personal affects.. that’s it. I like being mobile and the ability to pack up in hrs and move if I have to. I’m not interested in being rich. I’ve watched many ppl , mostly friends, chase the money. What I learnt was that money has a personal price. The more you earn the more personal the price extracted. Usually in quality time and personal relationships.
The Freckle
Ian you’re a little ray of sunshine.
You’re on the money mostly for my part. As they say; hope for the best plan for the worst.
Where I would disagree is
Time to stop trying to figure out the world’s woes here
this is exactly the right place to discuss issues like this. Forums (and Blogs) are some of the best information and learning tools around. The diversity and depth of opinion is fascinating to me anyway.
One of the big conundrums for PI’s is how would any down turn affect me. For that you need to understand the problem and relate that to your local situation. So for example would a resource sector driven market like Perth be better than a govt driven sector like Canberra.
Does your demographic area offer protection or is it a potential threat.
I would suggest a full S.W.O.T. analysis of a portfolio to understand its potential to withstand global/national shocks.
http://rapidbi.com/swotanalysis/A SWOT analysis may also reveal opportunities within a portfolio and opportunities on the recovery side of downturns.
It’s not all doom and gloom. Downturns and crashes are all part of market cycles even though I think this one will be a doozy. You don’t have to slash and burn but you need to understand the problem and figure out a way of dealing with it.
The Freckle
The Freckle,
Are you a former member by the name of JackFlash? Your posts seem very similar and both from Port Hedland. Excuse me if I'm wrong.
grantos_champos wrote:The Freckle,Are you a former member by the name of JackFlash? Your posts seem very similar and both from Port Hedland. Excuse me if I'm wrong.
Know him well he sends his regards
The freckle
From MB today
Something Just Snapped in the Economy (Link)
In short, this report is suggesting that we are headed into recession. Add in the R.P.Data Index of a resumption of house price falls in April and I’m getting the distinct impression that we’re going through some kind of freeze in aggregate demand.
If I had to pick a cause, I’d say that the bank’s shift to unilateral interest rate moves has dramatically undermined confidence in the RBA insurance policy. Folks are headed into their shells.
We might also speculate that this is why the RBA pushed the panic button, it may have picked this up in its industry liaison or one of its other proprietary data sources.… Houses and Holes
My gut feeling is we’re starting to see downward pressures starting to consolidate. Negative economic pressures are relatively small but are multiplying. This is sooner than I thought. I didn’t expect to see PSI pull back this fast nor to these levels until later in the year.
The hairs are starting to tingle on the back of my neck. I’m hoping I’m wrong because I was hoping to get at least another two years out of this economy before it starts to go pear shaped. I think that’s still possible as most of the pull back was in sales and orders and the most affected sector was finance and insurance (services).
The Freckle
AndyDonnelly wrote:How long will this discussion going on ? another year or two or 5 years ?it's very interesting to see people's view : )
Andy it has taken six years to get nowhere with the bust, so I will take a punt that this thread has another six years to go at least.
sapphire101 wrote:If we can bring this thread back to just Australia for a moment,Ian,
All good points but can I ask you a couple of specific questions about your post.
Do you think actual house by house prices in Cheltenham have cam back as much as the median price has ?
Are you saying that if you have a residential loan agreement with the bank and you are meeting the payments, they can reassess and recall this loan if they consider your LVR to have lessened ?
Freckle wrote:When I looked in 98/99 I saw crash written all over the property market. Prices couldn’t ramp up at magnitudes greater than wage growth without correcting.Steady on their Freckle, any fecker that bought a joint in Sydney 98/99 didn’t see a crash, wont see a crash on what they bought in at and as far as wage growth is concerned have blown their debt out the water in the thirteen years since.
bardon wrote:Steady on their Freckle, any fecker that bought a joint in Sydney 98/99 didn’t see a crash, wont see a crash on what they bought in at and as far as wage growth is concerned have blown their debt out the water in the thirteen years since.No we didn’t see a crash obviously and I was way ahead of the game so to speak. What constantly amazed me was the YoY increases without corresponding leaps in wage growth. A few lost their shirts but more because they were novices and didn’t get their leverage right.
Moved this young guy into a major high rise upgrade on Lavender St Milsons Pt. This is back around 02. He was young and single and just bought a one bedder looking north for some insane amount. I think at the time it was costing him slightly more than he was earning in interest only repayments. He was desperately looking for a girlfriend to shack up with and share expenses. Not sure he’s blown the debt out the door just yet. $420k takes a few years to erode away. These figures where quite common for investors chasing the Sydney North Shore market. $400 – 600k was pretty standard.
Those who will feel a crash the most are those who run into debt servicing issues and are forced to liquidate assets at a bottomed out market. That might occur if we run into high inflation and central banks try to suppress it with higher interest rates. In the late 80’s early 90’s we saw interest rates get to 16% on average and 22% for high risk borrowers. That was on inflation in the 8 -10% range. Given the way the muts overseas are carrying on anything’s possible.
The Freckle
Yes we all know about the high interest rates of that era and the recession we had to have. It was only a few years later when I learned how to read that I realised that I had gone through a recession, even if it was a dawdle.
Sure the trade up young guy may have run into difficulty or whatever. But anyone buying into the Sydney market at market price are not shitting themselves right now about negative equity, debt serving or how much their joint is worth, that ‘s for sure.
bardon wrote:But anyone buying into the Sydney market at market price are not shitting themselves right now about negative equity, debt serving or how much their joint is worth, that ‘s for sure.Not sure I’d agree with that. Our high net worth clients where time and cash poor. There’s a keep up with the Jones’ mentality in the upper markets of Sydney. People seem to live maxed out on credit. $200k cars in the drive but couldn’t pay us in cash. I doubt that the top of the market is doing all that well but Syd’s a large and diverse market. Something for everyone.
The underwater places tend to be out west. I recall the mad dash for McMansions by the FHOG’s. Thought they were getting a better deal but didn’t really factor in the cost to commute back into the city where they worked in. The mortgage saving just got eaten up in commute costs. A few years later we were moving some of them back after they either sold or rented their PPOR’s
The Freckle
Bardon, ran across these comments at MB. Even though they’re anecdotal they add weight to the real world events happening out there as opposed to the data and statistics.
SMc….In my opinion its already started.. I live in Sydney and have the fortune or perhaps financial misfortune to live in Mosman.. take one look at military road and count the for lease signs… even the rich mosmanites are not buying in their little boutique stores.. probably need the cash for the Mercedes finance repayments.
BotRot….SMc, I live in Cremorne. Oh boy what a scene it is here indeed. Military Road is full of empty/for lease/for sale/for auction commercial premises. Even my favourite Barber, Mr. Milano has been tossed and the premises is up for auction. This happened within a month.
The Solicitor’s office above him is booming in business, in orbit. Not from divorce, litigation, nor from compensation cases, no, but from people selling their houses not being able to afford their mortgages any longer. I understand the details, they can get some protection from some law that stops them from being immediately tossed or something like that.
Also from about November 2010, I noticed and kept mental notes of the amount of times I saw people having more than 2 cards rejected at either, Neutral Bay Wollies, Mosman Harris Farm, and the BP Servo in Mosman near the Vet.
One that sticks in mind is at Neutral Bay Wollies, a woman had 6 credit cards and one EFTPOS card rejected, all for $43 buck worth of shopping, she calls her father (this woman looked late 40s) to come pay the bill, they both walk out, she then steps into her brand new dark gray Audi. Amazing!
Tarriic…I’ve seen similar things many times. Do they really need to pay for Milk and Bread, all of $4 on their credit cards. Living on the Northern Beaches I very rarely see anyone pay for anything with cash its always a card. I always hear from people around here that they are struggling financially. You tell them to stop dining out 3-4 nights a week and buying a new car every 2-3 years and they act like you have committed a heinous act of blasphemy against their beliefs.
The Freckle
@ Freckle, not very different here in Brisbane. Properties around us, especially those on the water overlooking marina births (Manly) use to be hard to get. If one comes on the market, it used to get snapped by the buyer within days.
Now, we have number, all well over 1Mil mark sitting on the markets for well over 6 months. More and more coming up for sale, and longer it takes to sell.
Strange the way it looks, shurelly people driving new Merc S500 and Porsche 4×4 can afford the repayments for a house that is only 5 times more expencive that car they drive. I would expect those who lived in the house over 5 years to own it outright anyway, considering suburb's high profile buyers.I am in manufacturing industry, we deal with over 500 companies in Australia. We get notified of buncrapsies now weekly, use to be unheard event.
Times are tough, as economy tightens futher we are going to have disproportiannaly more people going bust and liqudating the assests at firesale.
It's shocking the amount of headlines in the last month reporting big job loses.
Unfortunately though, this collapse has been on the cards for quite some time, the worlds banking systems have basically been operating large scale legal ponzi schemes, which eventually have to collapse.
We are all going to live through tougher times ! !
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