A question for Steve McKnight – property boom coming?

No crystal ball to tell you… even though the smartest economist.

It is interesting to see when inflation hits > 5% and unemployment rate hits > 5-6%… Property market depends NOT ONLY the fluctation of interest rates.. but others external factors as well.

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mpertile,

Not exactly sure what Steve made the basis of the 7.8 statement but as a general observation over the years 8 seems to produce different outcomes depending on the market at the time.   When rates are low (5-6) and climb then 8 is the figure that makes people start to sell but when rates have been high 10-upwards it brings investors back to the market.

Steve – I have been a guided by your information and advice over the last 5 years and have been quite successful – thankyou – I have just read how to achieve wealth for life through property investing by Tony Melvin and Ed Chan – are you prepared to comment  on their road to wealth?? Just looking for discussion on their different view point .  

Aren't these the same authors who wrote a book about using your super money to buy property?

I believe Steve said himself, that using your own super to borrow money is one of the most riskiest investment decisions you can make.

I partially agree with you that Government does play a role in creating these bubbles,  But the main cause is the privately owned central banks as I have covered in previous posts

As for the dollar,  Yes,  Our dollar like all other made out of nothing fraudulent scam fiat currency's that can be created by the click of a button on a computer,  Its made up wealth deteriorates by 5-10% every year,  You could call it inflation tax.  So obviously the number of digit's that represent the value of property is going to increase.

Everyone keeps going on about how the market will eventually turn around and profits and capital gain will be made again,  I know that,  Obviously property will be more expensive in 20 years then it is now,  But what I am worried about is people who will loose all there life savings in the downturn.

You could have millions of dollars in the bank now,  But it won't help you if Bread was $1000 a loaf, Fuel cost $20,000 a litre and a nice piece of steak cost $250,000

Go to Wikipedia and type in Hyperinflation,  There is examples of over 30 countries that have experienced hyperinflation since the 19th century,  Lets go through a few for the lazy people.

Argentina,  1975 to 1991:  overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983 pesos.

Austria: Between 1921 and 1922 inflation was 134%.

Bolivia: Bolivian note for 1 million pesos was worth 55 cents in US dollars, one-thousandth of its exchange value of $5,000 less than three years previously,  Boliviano was replaced by the boliviano  at a rate of 1,000,000 : 1.

Brazil: 1986 to 1994 1 (current) real is the equivalent of 2,750,000,000,000,000,000 of those old reals

China:  1948-49 The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than 1 year

Georgia: 1994 In the 1995 currency reform, a new currency lari was introduced with 1 lari exchanged for 1,000,000 coupons.

Germany: 1923  1,000,000,000,000 old Marks were exchanged for 1 Rentenmark

Greece: 1944 The Greek inflation rate reached 8.5 billion percent per month (prices double every 28 hours).

Hungry: 1945 The rate of inflation was 4.19 quintillion (4.19 x 10¹⁸) percent

Israel: Inflation accelerated in the 1970s, rising steadily from 13% in 1971 to 111% in 1979. From 133% in 1980, it leaped to 191% in 1983 and then to 445% in 1984

Zimbabwe:  Early in the 21st century Zimbabwe started to experience chronic inflation. Inflation reached 624% in 2004, then fell back to low triple digits before surging to a new high of 1,730% in 2006

United States: During the Revolutionary War, the Continental Congress authorized the printing of paper currency called continental currency. The easily counterfeited notes depreciated rapidly, giving rise to the expression "not worth a continental."

There are only some of the examples,  But like every other time I talk about inflation all the lords of wisdom on this site poke silly remarks and say everything is fine and that everything will be fine and that inflation doesn't even exist,  that it is just a conspiracy theory,  Especially if I mention the word Gold,  everyone will start laughing,  But thats ok,  They can continue to all live in there bank deposit's secured,  Property boom 2009 fantasy world for now.

Steve,

The near term picture may indeed be gloomy, but doesn't the longer term picture look very solid for Australia?

Continued strong population growth (both natural and through immigration), continued decline of household sizes and if anything a shortage in supply would suggest property values are likely to continue along their long term trend. Housing affordability may be an issue but I doubt that will drive pricing, but rather force the demand towards much more medium-high density housing (like e.g. in Europe).

Add to that the Australian economy is one of the best placed in the western world to avoid recession, fiscal structures that are more robust than countries (e.g. UK and US), plenty of room to maneuver for the RBA with relatively high interest rates and a vast amount of commodities which will continue to remain in high demand (indeed, maybe at reduced prices) I see quite a rosy future for Australia beyond what might indeed be a turbulent 1 – 2 years.

With that in mind I think the next 6-12 months, when the market is likely to be at its softest, could be a very good buying opportunity for investors who keep an eye on longer term growth trends…

But, you've made your money in property and I haven't (yet) so would be interest ed to hear what you have to say…