The domino effect is there. People just don't see how exactly it will come into effect because they think that houseprices only go down if people are forced to sell . Here's an outlay of the problem :
– It starts indeed with 1% of the people who HAVE to sell
– Together with a HUGE supply of housing, and a HUGE lack of buyers, house prices for people who have to sell will be 20% lower. These people will stretch themselves to huge extents in order not to sell at 20% 'loss'.
– That means more sellers even. In the meantime, the interest rates are up, so buyers can get LESS money because higher interest. On top of this, credit is not available anymore to banks, meaning even LESS money to be borrowed
– Stressed mortgages will eventually force some people to sell at 20-30% less value.Now, this is where the other people who weren't planning to sell come in :
– Banks will devaluate the houses by 20% since the only houses that sold were sold at 20% less than the 'figures'.
– Banks will then force people who have negative equity to pay up ( there's a clause in your mortgage contract , just look it up ! ) CASH for the deficit on their mortgage. This could be up to 50.000 AUD$ they have to pay CASH.
– Those people will borrow money from credit cards and payday loans. These are huge interest loans, to pay the banks.
– After a while, it becomes unsustainable, the people will have to foreclose.
– Those houses are sold at 30% – 40% loss, which means another devaluation, and more negatively geared and negative equity people. These will have to pay cash too , but there's no money, high oil prices, unemployment rising etc.You see the problem ? It's domino, but not the kind that property investors like to see.
I generally try to stay out of the chicken little discussions …
Marc – you be spot on as usual .. Ormeau, you really need to have a look at western world fertility rates and the balance/approach/future of (past) NATO countries (all old news).
All we hear is the 'credit crunch' and US woes etc etc .. some may be well placed (although we have – in terms of credit, relatively, homogenised and adjusted and so on) been here before. For those really interested in the background – look at the US tax ammendments in 1997 .. examine the white paper proposing them .. look at the rationale (and be glad that Aus didn't do the very same thing – we came so very close in 1999/2000).
You'll also notice that the rhetoric has moved from a wholesale crash in prices .. to a wholesale crash in housing value .. ya dont need to be a Rhodes Scholar to discern why the rhetoric has shifted.
2010/2011 .. yes, potentially a 'watershed' year … though there are now blurring signs – though if it is a watershed fin year .. do you really think there would be anywhere to hide ya assets?! .. if only Jack Lang had a PC in his current place
158,000 native births in Oz last year .. a 27% spike in WA alone .. immigration pops past 120,000 this year – highest since the years following the second world war (welcome Scamp LOL) … the UN reports that, for the first time in human history, the majority of world peoples live in (that we term) Cities (with obvious impacts) … Germany reports that 30% of its current population base was born overseas … in contrast Poland reports that 80% of its native born workforce lives and works outside the country …. the IMF releases information of its intention to examine the US financial system (countries such as – yes, China and the the US are clearly proping up share markets).
Most westernised world working populations will not grow until after 2050.
Oil does its thing, as it will, because YES – it is a finite resource – at the same time we grizzle about OIL (and war prospects) *gasp* along come a bunch of scientists saying that for the first time in human history (yes, that saying again) all ice at the north pole will melt (will greenland making similar mumurs) … of course none of us (aside from the polar bears) perhaps note the timing or the irony.
Curiously, a recent US report said very much the same thing (not a conspiracy theory – merely an observation).
Gold continues to rocket toward $1000US .. as it does in all times of ecomonic uncertainty … though Scamp and co have yet to tell us of the woes and history of the gold standard – all is not what it used to be since international economic deregulation (along with the exchange statements being removed from all currencies some years ago).
A crash? .. 40% 60% … possibly .. who knows? .. and who, aside from those betting 'short' who really cares?
Am sure we all dont mind hearing the discussion – yes, cash up, sacrifice a chook, whatever is ya thing. If folk don't want to invest in property – that be cool – if those who might might say 'we're waitin for the day ex-property investors are begging outside what used to be their PPOR calling "alms for the poor" before we'd consider buying anything .. well cool – whatever does it for you …. really
Perhaps we should just ask Steve to put a general disclaimer along the lines …
"If ya invest in property right now, or if ya wait till 2011, or 12 or 20 and so … ya might be out of ya scone (or writing the next bestselling book)" .. then can we get on with some discussion that isnt appearing to be the imposition of a view as opposed to the articulation of events and possible outcomes?
There isn't a world shortage of oil. The price will come down again as the markets settle. It may go up a bit more first however. Back in the 70's there was a "oil shortage" and price explosion. Inflation soared. Houses devalued in the late 70's then exploded in the early 80's just prior to the recession we had to have. Nothing new under the sun.
When investing, remember :
1. location location location. Water views rock. Australia has a big coastline. We all want a slice of heaven.
2. Supply and demand. Where there is a high rental need, you can find positive cashflow properties. University towns, mining towns for example.Don't buy houses in dead end country towns with negative population growth because you make $20 a week. Nobody wants to live there. Your rental may be difficult to let. You may struggle to give it away at the end of your torture.
Stick to the coast
Stick to areas of population growth and active economies.The property deal of the decade comes along every week. Look hard
Invest for cashflow rather than appreciation. It is possible the property market may stagnate for a few years. If your rent pays your mortgage then you can look for another one. Property will go up again in the future but probably not for a while. Eventually, you will get some appreciation. Cash is king.
I really f@#^ed up recently by buying a business in a dead end town. It is an absolute lemon and I will have to close it and take a hit. It seemed like good value and the real estate is excellent but the business was a lemon. Depressed rural economies are to be avoided
There isn't a world shortage of oil. The price will come down again as the markets settle. It may go up a bit more first however. Back in the 70's there was a "oil shortage" and price explosion. Inflation soared. Houses devalued in the late 70's then exploded in the early 80's just prior to the recession we had to have. Nothing new under the sun.
When investing, remember :
1. location location location. Water views rock. Australia has a big coastline. We all want a slice of heaven.
2. Supply and demand. Where there is a high rental need, you can find positive cashflow properties. University towns, mining towns for example.Don't buy houses in dead end country towns with negative population growth because you make $20 a week. Nobody wants to live there. Your rental may be difficult to let. You may struggle to give it away at the end of your torture.
Stick to the coast
Stick to areas of population growth and active economies.The property deal of the decade comes along every week. Look hard
Invest for cashflow rather than appreciation. It is possible the property market may stagnate for a few years. If your rent pays your mortgage then you can look for another one. Property will go up again in the future but probably not for a while. Eventually, you will get some appreciation. Cash is king.
I really f@#^ed up recently by buying a business in a dead end town. It is an absolute lemon and I will have to close it and take a hit. It seemed like good value and the real estate is excellent but the business was a lemon. Depressed rural economies are to be avoided
RobL wrote:I generally try to stay out of the chicken little discussions …*Cut the useless info*
Hi RobL, thanks for sharing your invaluable time with chicken littles like us.
Hm.. after cutting out all the useless info, there's nothing left. What was it you wanted to say ?Scamp wrote:You see the problem ? It's domino, but not the kind that property investors like to see.It's only a problem for those on the edge, financially.
There are millions of cashed up investors running around in many parts of the globe collecting cheap properties like in an easter-egg hunt.
Think about it; if you are able to buy houses today at 2005 prices, and with upward pressure on rent returns as well, then there is not much downside for these investors.
Even if there is little or no growth over the next few years (as is usually the case after a boom/slide), there is rent increases to make the income pos (with or without the tax breaks) and the cap gain will begin to move again (as always has, and always will) in a year or two.
devo76 wrote:ormeau wrote:Ah yes, breed breed breed, more humans more money right? You just don't get it do you? Exponential growth. 6.6 billion, then 7 then 8 then………oppsOK OK then can i pitch a tent in your little garden of eden you have planned.
Mate ive got it. You im afraid have lost it.
But it takes all types to make the world go round i guess. I hope for your sake you are right otherwise you have lived your life in fear for nothing.Good luck with the impending armageddon.So were do you think your food comes from genius? A CAN?
I am a farmer, so whats the biggy on that you debt burdened human? Life doesn't begin at Woolworth's MATE
And you can pitch a tent but I doubt if you know how, perhaps you could pitch it on the middle of the M1?
RobL wrote:I generally try to stay out of the chicken little discussions …Ormeau, you really need to have a look at western world fertility rates and the balance/approach/future of (past) NATO countries (all old news).
100 Million baby humans globally P.A. And your right we dont have a problem. All the best then.
ormeau wrote:devo76 wrote:ormeau wrote:Ah yes, breed breed breed, more humans more money right? You just don't get it do you? Exponential growth. 6.6 billion, then 7 then 8 then………oppsOK OK then can i pitch a tent in your little garden of eden you have planned.
Mate ive got it. You im afraid have lost it.
But it takes all types to make the world go round i guess. I hope for your sake you are right otherwise you have lived your life in fear for nothing.Good luck with the impending armageddon.So were do you think your food comes from genius? A CAN?
I am a farmer, so whats the biggy on that you debt burdened human? Life doesn't begin at Woolworth's MATE
And you can pitch a tent but I doubt if you know how, perhaps you could pitch it on the middle of the M1?
Why would i think it comes from a can when i can clearly see it comes from my kitchen.
Mate no more personal attacks i think. You tread your path. Ill tread mine.Scamp wrote:L.A Aussie wrote:Rather than just keep stating the obvious, give the forumites a few strategies that will teach them how to invest successfully in the times ahead.You're right. I think it's obvious now. Hm. Investing successfully in the times ahead :
– Buy alternative energy funds ( solar / wind / geothermal technologies )
– Buy bank shares at the bottom of the crisis
– Buy goldie : stay away from property. The market will stagnate for years and years.
After you stop hearing stories of real estate, and everyone knows someone who lost tens of thousands of dollars on properties, THEN you need to buy. Wait for the negative AND the positive news to stop. When you hear nothing, then you know it's time to buy property again.Banks always recover before the property market does. So if you invest in banks before you invest in property, you should be making enough money to have a head-start on the rest.
Given that this is a PROPERTY INVESTING forum, I'd say that those strategies are pretty worthless for a newbie trying to find ways to make money in property.
SOME markets will stagnate for years and years, but some will still surge ahead; albeit slower than in recent years.
1. Buy alternative energy funds.
I take it this is a managed fund – linked to the stock market? Apart from the total lack of investor control, what are the dividends on something like this? What is the depreciation and tax benefits of these funds? Can you add value through renos and/or subdivisions?2. Buy Bank shares at the bottom of the crisis.
As with all other shares, there is little investor control, there is no guarantee that the Bank you bought shares in today will still be around tomorrow, given the recent credit/finance disaster. What are the dividends, is there depreciation and other tax benefits? Can you add value through renos/subdivs?
I can buy properties at the bottom of the crisis as well, with all the above, and no matter what the state of the market, the house is always there tomorrow, with a tenant, with tax breaks.3. Buy gold.
What is the dividend or rental income from gold? What are the depreciation and tax benefits of gold? Can you add value or subdivide to increase the return? Isn't gold at record highs?If you are predominantly a share investor that's fine, but you can't "bring anything to the table" on this forum, so time for you to bugger off and stop stirring the pot.
Hi all. It has been a couple of years since I visited this forum.
Haven't bought a property since 2006 and not looking to get one right now.
Like an increasing crowd I am somewhat concerned with how the global economy is playing out. Especially given that US is fuelling inflation whilst CB's like RBA is hawkish and don't mind raising rates.The two cents I however wanted to add;
Many people seem to assume that everything will be OK as long as they don't over committ and fix their interest rates.
This is however based on current situation. As it is now, living costs are sky rocketing whilst salaries aren't keeping up, so if you are negatively geared you may have shrinking capability to maintain the negative part of the monthly payments.
Secondly, if we indeed see a global recession or even depression, this will lead to increase in unemployment.
This could lead to forced sale of not only the investment property but also the home if this has been used as colatteral.So what I am urging is that when you do your risk assessment you take into consideration the worst case scenario as a possibility and look at minimising impact.
Not 100% sure about Australian mortgages, but I know some other countries have as standard that banks can request extra downpayments with short notice if the loan to value ration goes the wrong way.
Once you have protected yourself, I believe holding on to at least your home and another property for the long term is valuable.
If nothing else becasue of increasing replacement costs as cost of materials and energy is running wild. (Not to mention potential impact if we have passed peak oil production.)Right now more than since the 70's I however believe diversification into precious metals will be beneficial.
The market risks are not just inflationary/stagflationary/deflationary, but increasingly so counter party risk, when ripples from the credit debacle can have unexpected consequences in derivaties (Currently 1.2Quadrillion dollars in OTC's) and in banking/corporate defaults.
Especially physical gold/silver bars and legal tender coins. These can also be sold tax free and/or passed on to children/grand children tax free.Peaknik : I agree 100% with your post. Great advice.
Property markets, like the sharemarket, can often be driven by fear / greed as much as economic fundamentals.
Never underestimate the power of panic.
Although there is the argument that a drop in values makes property more appealing to investors who move in to stabilize prices, panic selling accelerates a decline making investors and first home owners alike adopt a wait and see approach.
This in effect lowers the safety net in the price mechansim.
It is likely a steady stream of negative economic news will see plenty sitting on the fence for a while yet.The Yanks are going to take a big hit, anyone who thinks this is the bottom for them is in for bad news. We all get affected by that in some way. We will be far from the worst hit in terms of the general economy, but the property market will be particularly interesting to watch as the numbers have seemed unsustainable for a while.
Each of us will put our money where our mouth is. Buy, sell, wait – its up to you
But remember that with many of us sitting back and waiting – demand goes down, and prices with it
Scamp wrote:Peaknik : I agree 100% with your post. Great advice.Amazing how Peaknik can come in a first-time poster, and agree 100% with your point of view, on exactly the topic you wish to push, Scamp. Very fortunate for you.
Most first-time posters come in with some pertinent questions about how to move forward with their PROPERTY INVESTING.
My guess is either you are Peaknik, or you've roped in one of your GHPC mates to come in and give you a hand.
Pretty obvious that it's one or the other.
L.A Aussie wrote:Scamp wrote:Peaknik : I agree 100% with your post. Great advice.My guess is either you are Peaknik, or you've roped in one of your GHPC mates to come in and give you a hand.
Pretty obvious that it's one or the other.
Or they are cyber lovers.
L.A Aussie wrote:My guess is either you are Peaknik, or you've roped in one of your GHPC mates to come in and give you a hand.
Was it the comment about gold that gave him away ?
http://www.news.com.au/business/money/story/0,25479,23961580-5013951,00.html
Read the comments. 114 comments. 2 comments say "yes, they're right, house prices will go up"
112 comments say "what a load of bullshit, houses will go down, everyone knows that"That's about how the market is divided now. 99% of the people know the market is crashing.
only 1% thinks house prices will 'boom'. What do you think happens when 99% of the people offload their properties, or lower their prices in order to sell and get out of the property business ? It means more rentals ( lower rent incomes ) and more houses up for sale on the market.It's not rocket science, it doesn't take a genius to see what is about to happen.
I’m not for one minute disputing the fact that the Property market is flat at present and in fact I’m sure that in some places the value has fallen. I would suggest that perhaps the degree of fall would be greater the further out from CBD’s or Regional Centres. Buyers fall into several categories;-First time Buyers with good jobs and income (there are many out there)Those who are upsizingThose who are downsizingThose who have been transferred or have movedDivorcedChange of lifestyleAnd then there are Investors. From my observations, the good deals at present are being bought by any of the above except the last. Most investors will need to see the proof of a good deal and that will only happen when they see prices rise.
Two Auctions on the week end and two record sales based on past sales in block. One up by 40% in 3 years. Two OO’s and one Investor bidding and the Investor dropped out $57K under final price.
It's not all doom and gloom – believe it or not there are people out ther with real money and vision. The rich will get richer and the rest will watch and pray for a collapse. Isn't that the Australian way?
Jon
Scamp wrote:http://www.news.com.au/business/money/story/0,25479,23961580-5013951,00.htmlRead the comments. 114 comments. 2 comments say "yes, they're right, house prices will go up"
112 comments say "what a load of bullshit, houses will go down, everyone knows that"That's about how the market is divided now. 99% of the people know the market is crashing.
only 1% thinks house prices will 'boom'. What do you think happens when 99% of the people offload their properties, or lower their prices in order to sell and get out of the property business ? It means more rentals ( lower rent incomes ) and more houses up for sale on the market.It's not rocket science, it doesn't take a genius to see what is about to happen.
If you believe that stat as a sign of the times, then you really are an idiot, Scamp.
It is very easy to have one person, with 3 or 5 different names on the one forum, continually sprout the same message in different posts.
As you have been doing, and like a few others have been doing over at Somersoft.
In any case, I never listen to anybody else's fears.
That is a herd mentality mindset, and is a lack of Due Diligence by an investor to listen to it without researching their own facts.
I only listen to facts, and the facts are the numbers of the investment, the population movements in the area, the rental yields, the size of the block of land, the zonings, the location and so on.
If I had listened to every person I know who has put forward a reason not to invest in property over the last 8 years I've been doing it, I would not be in the great position I am today.
I've been buying property since 1985 (PPoR's until 2001, then IP's since), and have seen 2 cycles of boom and busts, and those PPoR's I've owned are all worth a lot more now than when I owned them.
Not that I'm Bill Gates by any stretch, but I'll be retiring way before the accepted age with a cashflow for life, that'll keep on increasing unless they make renting a crime.
And now that I've got some experience, I have every confidence that I can keep investing with utmost safety and the ability to hedge against loss in any market.
In fact, if the market does drop as you say, then I will be in position to make the biggest killing of my life, because the market will eventually go up again, and I will have acquired more cheap property before the next boom.
So, I'm here to help others do the same through the benefit of my mistakes and wins.
What are you doing – buying more gold with un-leveraged funds and no rental income or tax benefits no doubt?
The mindset of a saver, which is fine, but it's very slow.
Or maybe you've got an investment loan for it, but it's all after tax dollars which will service that loan – you are hoping the cap growth will occur.
Meanwhile, I've created a cashflow investment that costs nothing to hold, and has every chance of going up (has gone up) in value at least as much as gold.
I'm not saying this to brag; just trying to point out to you that your fears are grounded in ignorance of what is possible in property, irrespective of the state of the market (which I firmly believe will not be as bad as you predict).
Rather than continuing to keep sprouting the D&G crap, start asking how you can make money out of property in any market and make yourself useful.
I’m not for one minute disputing the fact that the Property market is flat at present and in fact I’m sure that in some places the value has fallen. I would suggest that perhaps the degree of fall would be greater the further out from CBD’s or Regional Centres.
Buyers fall into several categories;-
First time Buyers with good jobs and income (there are many out there)
Those who are upsizing
Those who are downsizing
Those who have been transferred or have moved
Divorced
Change of lifestyle
And then there are Investors.
From my observations, the good deals at present are being bought by any of the above except the last. Most investors will need to see the proof of a good deal and that will only happen when they see prices rise.Two Auctions on the week end and two record sales based on past sales in block. One up by 40% in 3 years. Two OO’s and one Investor bidding and the Investor dropped out $57K under final price.
It's not all doom and gloom – believe it or not there are people out ther with real money and vision. The rich will get richer and the rest will watch and pray for a collapse. Isn't that the Australian way?
Jon
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