- DWolfe wrote:Best way to create a crash is to keep saying it will happen!
Hey DWolfe
Yep… the economy (the share market is one of the best examples) is predominately driven by emotion.
It is scary how many people (aka general population) base their decisons on things like what the 7pm news report said, their best mate at last weekends BBQ said and what their work colleague said.
That's three sources of information right ?? Thats a well researched descision by anybodies standards ! LOL
Matt_Arnold wrote:Yep… the economy (the share market is one of the best examples) is predominately driven by emotion.Cases in point would be a) how the economy seemingly rebounded overnight last year after all the talk that we were in for the worst ride of our lives, and b) the recent dip in the sharemarket caused by some big shot opening his gap to say that something will be done to cool the market.
In either case nothing had actually changed and yet the economy and share market (over)reacted. This leads me to believe that the run of the mill people are the ones who decide on when the market booms and when it crashes. Yes, run of the mill people like your mates at the bar-b. When everyone thinks the economy is recovering they pour money into the market which occurs as retail sales, increased investment into shares, property etc. When everyone thinks the economy is going to the dogs they panic and pull money out. Supply and demand. When nobody spends, nobody buys, prices fall. That causes the economy to change.
One of the books I read made an interesting comment. One of the ways to ascertain what stage the property market was in would be to see what opinions were on the minds of others.
Things are the pits when nobody is talking about property anymore. And when a good number of them say it's a 'bubble', they only think it is. But it's this thinking and frame of mind, that when taken upon by enough of the population, causes a real 'bubble' to actually occur. Effectively, things that are perceived by the majority of people do become self-fulfilling prophecies. Looking at it this way, it's great to see articles in the newspaper preaching of the boom of the RE market. If everyone keeps this up, the boom will continue.
fWord wrote:Matt_Arnold wrote:Yep… the economy (the share market is one of the best examples) is predominately driven by emotion.Cases in point would be a) how the economy seemingly rebounded overnight last year after all the talk that we were in for the worst ride of our lives, and b) the recent dip in the sharemarket caused by some big shot opening his gap to say that something will be done to cool the market.
In either case nothing had actually changed and yet the economy and share market (over)reacted. This leads me to believe that the run of the mill people are the ones who decide on when the market booms and when it crashes. Yes, run of the mill people like your mates at the bar-b. When everyone thinks the economy is recovering they pour money into the market which occurs as retail sales, increased investment into shares, property etc. When everyone thinks the economy is going to the dogs they panic and pull money out. Supply and demand. When nobody spends, nobody buys, prices fall. That causes the economy to change.
One of the books I read made an interesting comment. One of the ways to ascertain what stage the property market was in would be to see what opinions were on the minds of others.
Things are the pits when nobody is talking about property anymore. And when a good number of them say it's a 'bubble', they only think it is. But it's this thinking and frame of mind, that when taken upon by enough of the population, causes a real 'bubble' to actually occur. Effectively, things that are perceived by the majority of people do become self-fulfilling prophecies. Looking at it this way, it's great to see articles in the newspaper preaching of the boom of the RE market. If everyone keeps this up, the boom will continue.
My thoughts exactly. Economists would do a lot better studying people not markets sometimes. I think there batting average would improve if they did.
It's the old Herd Mentality. Follow the other lemmings off the cliff.
Or keep buying shares they are always going up and you will make a motsa a la 1929.Eventually, the bubble burst – you just have to make sure you are not the one caught with the shares or property at 100% loan to equity ratio at the time…..Nothing wrong with having shares or housing as long as you don't get caught without enough equity to tie you over…
On the other hand it sometimes appear that 'herd mentality' can be wrong, or at least, by going against the 'instincts' of everyone, you actually stand a better chance of getting ahead. So when it's all doom and gloom, that's the best time to buy, not stand there and make water in our pants.
Unfortunately almost everyone follows herd instinct. I did, and missed out on the massive run up of property prices following the march quarter! But of course, who would have guessed the darn thing would reverse overnight without any hint the economy was actually recovering? Again, I refer to above. When enough people start pumping money in, the economy automatically improves because it provides the impetus for things to start moving, a kick start as it were.
Didn't the GFC arise because some time down the track people decided things didn't quite add up and then started selling out?
At least in America I think the complete opposit is what is most often going on, namely the recovery of the market is contrived when in reality it isn't. So people spend more, spend more of what? Their savings or credit? Comes to a point eventually when these people can no longer service their debts and the poo poo hits the fans.
Fact Update:
Bought, 2 bedroom apartment in hawthorn, Mid April 2009, $375 000
Revalued: End May 2010, $485 00013.5 month growth 29.33% – Wasn't it meant to drop 20-40%???
June update.
Interest rates up 0.25% in May
Interest rates steady in June.Reddahaydn,
Congradulations you have made some gain. good on you. Now sell.
Has anyone been taking notice of the latest headlines about house prices??http://www.news.com.au/money/lenders-say-no-to-loans-as-buyers-knocked-back/story-e6frfmci-1225875970785
http://www.news.com.au/money/property/house-surge-leads-to-mortgage-stress/story-e6frfmd0-1225843130252
http://www.adelaidenow.com.au/property/news/up-front-deposit-for-a-home-loan/story-e6frefgc-1225843479977
http://www.news.com.au/money/property/house-prices-halted-as-confidence-slides/story-e6frfmd0-1225873850606
http://www.news.com.au/money/property/sydney-house-prices-worse-than-london-and-new-york/story-e6frfmd0-1225872983823These are just a few examples…
As I said Oct 09 was the beginning of the downward pressure, prices kept rising for the next few months or so, but watch them drop like a rock, especially when China stops importing our rocks.
WJ,
We just had some of our properties re-valued in order to access equity. They revalued the properties a lot lower than expected and as a result the equity we accessed is lower, hence we can borrow less money.
This does not mean that the property market has gone down. This does not mean lenders are no lending. This means that lenders may be lending less and hedging against any fall that may happen in the property market.
I read an article recently, I wont waste anyone's time by putting it here, which basically said the sky is falling in all the major capital cities therefore the market was falling (conveniently leaving out Melbourne and Sydney, maybe they are not major cities) and a bunch of other rot in which they manipulated the facts to suit the story.
The media likes a beat up. Anything to sell papers and make people watch the tv.
How can you say that Oct 09 was the beginning of downward pressure when Melbourne especially has been in the highest growth period. If you mean that there is downward pressure on some property markets that may be more acurate but to blanket the whole country as being in the slow slide dowhnill is incorrect.
China will not stop importing our rock, they sell half it back to us anyway and have none of their own. KRUDD will get the boot in the next election which is why he is waiting to call it because he is scared out of his wits.
Consumer confidence will change with the govt change and retail will again strengthen with housing in Syd and Melb being slower growth but still growth. Bring on Perth's next boom. These are my crystal ball predictions for the end of this year and the start of next.
Forget about the property market as a whole going down, coz it just doesn't work like that. Unless……………………………..
the population of the country disappears Quiet Earth style (google it), but I don't think so.How do you convince 20 million people that their houses are worth nothing?
It is like petrol prices. People are now used to paying $1.30 p/l. At the start it was a jump up and down, gee the price, oh the terror of the petrol. People still buy petrol. The prices is the price and it is the same with houses. Yeah they are dearer but no one will stop living in one. They will just pay the price that the property is.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeAnother media propaganda from news.com.au. They are meant to be writing up articles (i.e. journalist).
Sydney has 13% of growth during Oct 2009-March 2010.. and still growing despite small rise.4.5% IR is still CHEAP… and it will stay there for long long time… (unless you have incompetence RBA and KRUDD)
GFC part II…. property is still a safer bethaha dont think so mate!
tighter credit hey, i just got a 75k LOC on this property approved (up to 90%) and also a 95% loan pre-approved for another property….and both myself and my partner earn less than the average wage …read some of the comments after than last article….if you excluded sydneys inner suburns like they excluded manhatten the figures would be much different….month on month who cares about auction clearance rates. you guys need to start looking at the bigger picture.
property in australia is still affordable. its just that young people expect to be able to start their life in a equivelant house to their parents, who have been working for 30 years….and the media will write whatever they can to sell papers…who wants to read that property has doubled every ten years for the last 100 years….that wouldnt sell papers now would it…..
god_of_money wrote:4.5% IR is still CHEAP… and it will stay there for long long time… (unless you have incompetence RBA and KRUDD)
GFC part II…. property is still a safer betWell, they better keep the IR there. Retail is the pits at the moment. I went to a friendly local fish shop a few days ago and was having a chat with the owner. He says things have been awfully quiet of late. Raise the IR a few times, spook people, and they'll shut their wallets like clams and refuse to spend on anything but their mortgage.
If Australia wants to trigger widespread failure of their retail segment, then by all means go ahead and raise those IR.
DWolfe,
Nice to hear from you.
regarding China will not stop buying our rocks.
http://www.businessday.com.au/business/markets/asian-stocks-drop-on-china-demand-concerns-20100604-xjjp.html
But that's just a taste of what's to come.
regarding Oct 09 downturn for all Australia. Well you are correct that Melbourne kept booming, but I still think all the country will eventually fall, but of course not all at once.
What.. no more Crudd, he is my hero… well maybe he is a ####. and lets hope he is gone soon.
Petrol demand is very much a sure thing – no real substitute in the short term, but long term will change if petrol prices rises continued.
House prices demand you say is like petrol – people do move back home or share etc so population can rise and demand can fall, its just a matter of peoples perceptions of where and in what they will live. The old Mc Mansion will come in handy for the three families that will live in them as time goes by…You have a strong opinion of house prices rising and rising ( which is fine ) , but I think you may have your dream shattered as the world collapses under its debts… How is you superannuation going lately ???
I won't go on in detail about going into cash at the right time… lets just say I haven't lost anything…bye.
im not saying there wont be a slow down or possibly (but unlikely) a small reversal as people become spooked, all i'm saying is that in 10-20 years, a 20k drop after you bought a property isnt going to make a big difference in the scheme of things.
its like holding off on buying a speculative stock at 5c to try and get it for 4.8c, your still making plenty if you sell for 20c.
WJ,
Always a pleasure to hear from you.
About the three families that want to live in the McMansions, this may be true, but the fact is that they will want to live in the house. It will not be empty. Those three families will probably pay rent if there is three of them sharing. That will mean that house prices will be a lot higher than they are now. Meaning heaps of capital growth for those investors who bought now. If even if they buy, it means that house prices are a lot higher because there are three families not one living there.
My super has never, ever, ever been anything but squat. I worked for 10 years in retail (pay is lousy, perks are great) so I have about $16k. No I am not ashamed to admit it. I never thought I would ever be able to afford to retire on super.
You may not have lost anything, but how much have you gained?
Bye
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeI read that article and it was so selective in which suburbs of the cities it included. it also did not compare apples with apples. the sydney family bought a five bedroom two bathroom house, the price of this was compared with a two bedroom apartment in some of the other major cities. What a load of bollocks!!!
DWolfe,
Hi again,
Superannuation, is a good thing. The main advantage being no tax after 60 or no tax in the drawdown time for SMSF etc.
Whilst I do have lots of houses that pay lots of rent, I do regret not having the knowledge ( this was a long time ago before SMSF etc ) to put all my houses into SMSF it would be so good not to pay thousand and thousands in tax up front every 3 months.Don't worry about my SUPER fund I invested back into growth at the low side of 2008 and put it back into cash after the 40% gain at the end of 2009. Currently in cash still.
Your assumptions of house price growth with 3 families in the Mc Mansion has some merit, but it does assume current rules apply, if the economy drops drastically, then all current rules go out the window ( think back to the great recession – back then landlords let people stay in rental property for free or very low rents to stop them being trashed,,,actually that's exactly what is happening in the US at the moment ).
Whilst I talk doom and gloom, I hope it doesn't happen, since I have investment properties, money in super ( cash ), but if all goes wrong it won't matter where your money is, it will be worth zip, unless you have gold coins in your safe at home…
bye
Such talk about 'if the economy goes south, house prices will fall', 'if China's property bubble bursts, we're in trouble'…
Yeah, if the end of the world comes then everything will be worthless. Come to think about it, I thought that was going to be in 2012. Why don't people just dump properties on the market for $2 a piece so that the needy, or the greedy, can mop it up?
Of course, property (and any investment under the sun) would suffer under the 'right' circumstances.
Let's not waste time talking about the 'ifs'. We've heard it all before. People want to hear knowledgeable answers about 'when' it's going to happen, and honest, truthful answers from those who well and truly can read the market and practice what they preach.
I have a question that i havent recieved an answer for yet. Not worth its own thread but well within the context of this one.
Australian property is often compared to other countries in regards to it being very expensive.
But most of these countries are in dire financial trouble.My question is what do we believe will happen to the property values in these countries after they recover.
America for example. When/if they turn the corner. Do we expect there values to stay low. Return to normal growth or would you expect a rapid recovery of values.
I ask this because of what i believe may happen.
In a nutshell
Australia will have flat to moderate growth over the next 7 to 10 years while other countries in debt problems will see stronger recoveries possibly overtaking Australia at some point. But this would only be if they recover from there debt problems well.No graphs,no data,no insider info. Just a gut feeling and a bit of a realist approach.
What do others think.
I'll run with that. I don't think growth will be too slow over here though. Maybe just slower than other countries.
USA would have huge growth with a recovery. If you have a house that is worth 300k then it is worth 30k then it is worth 150k, that is huge growth, but not the price it used to be……
I think unless USA does something drastic they will really become a third world nation. No health care, no money, lack of public confidence……downward spiral. There will be the super rich and they will live in the next suburb over from the living in a box suburb.
I do not think that Australia is in for little to no growth. The wave of people lining up to live in the land of milk and honey is getting longer. Our kids are going to look back and go wow, did you see it coming? The prices will just keep going up. Yeah there will be a few down moments because you need corrections etc to keep growing.
Personally I think everyone should compare Australia to Australia. We are not like any other country on the planet. Sydney is 19th in the top 50 most expensive cities (for living expenses, housing etc acc to SMH) Wow! 19th. Not 1st not 5th but 19th!
Brisbane almost didn't make it at 99th place. That says that all the carping everyone does about prices means nothing. Yes the price of hot chips in the 50's was 1 cent, now it is 3 bucks and you get the tiniest amount, blah, blah, blah. It is inflation!
Sorry Devo, got a bit sidetracked!
I think it does relate to this topic and is good to think about.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Me
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