386,000 home owners owe the bank more than the value of their home

Unless you are a disciplined financial manager understanding the benefits of cash-flow and tax minimisation, and either a) put extra money into an offset linked to the loan, so that you are still reducing the interest repayments over time just as you would for a P&I loan, but you have ready access to the money whenever required, or b) if it's an investment loan, redirect the money that would otherwise be principal payments toward other investments or reducing your non-deductible (typically PPoR) loan balance instead.

 

Depends if I’m thirsty.

 

No, It depends what you do with the loan or any income from the security. If you had invested in WAAX stocks and had 800% GC in the last 5 years, or had 50%p/a CG. Value of the security is irrelevant who cares if it is worth nothing. Once you have the loan, it is the the value of the security is useless. A loan is a tool. as with any tool it depends on how you use it. A loan can be more valuable if the value of a property falls it can mean being able to continue growing your asset base instead of it reducing, as it would if you paid cash for declining assets, If cashflow is an issue that is a separate issue to equity.

 

This is the challenge for most. How not to become disillusioned with your investing after going through a correction. Its where mindset plays a huge role. The more emotional/psychological capital someone has used up, the more difficult it will be to keep your goals front and centre.

A really wize investor once told me make sure you use up as little of your emotional capital as possible. Because once gone , its f***ing hard to replenish.

 

Depends on whether my salary depends on property transaction volumes

 

Are we really? I feel we are Just coming out of Denial and many have just accepted the new reality... fear won’t be until many more forced sales, maybe at another 5-10% down.

 

But you get such a nice bonus

 

Most things in life are driven by fear and greed. Those who are able to rationalise the fear and seize opportunity while not falling victim to the greed do best.

 

Economists are always gloomy by nature, regardless of the marginal utility of bonuses

 

The article does not take into consideration people who bought earlier and used there home as an ATM e.g. Bought in 2015 and in 2016/2017 decided they wanted to renovate, buy a new car and have a holiday, so they pulled equity to fund all this and the rest is history...

 

Add to that all those that have gone interest only because thats all they could afford, it just adds a lot more risk to the market, the downturns become more severe with bigger falls., people simply cannot hold long term if the market goes no where for 10 years.
Perth is a great example of way to many people trying to sell.
Its almost double that of 2014 when prices last went up.
Probably no shortage of people that borrowed lots of easy money, went I/O and 10 years later have not touched the principal of the loan, and house prices have gone no where in the majority of the suburbs.
For someone just chipping away at a P&I, with a few additional payments along the way should be on easy street by the 10th year, especially when you also consider the really big drops in interest rates since 2012.

 

Then there's the puke stage.

 

We have a forced deleveraged happening now and soon enough you will see selling toys such as jet skies, weekend cruisers etc

 

There is no shortage of posters who are making out that Perth is all doom and gloom. There is no shortage of investors like me who are thrilled with thier investments and have no plans to sell. Pretty much everyone in my close circle is a property investor in Perth and no one is complaining. I couldn't be happier.

 

I was not talking about Sydney but the same pattern applies to every state. Good to hear about your investments going well, after all I read is negative stuff and dont know anything about Perth.

 

Good point. Other signs of bottom are holiday house markets declining, more big developers / builders going under, yachts for half price etc

I remember in 2006 many developers couldn’t afford to pay a RE Agent to sell their units, margins were that tight!

 

Good to hear Perthguy, what property type are you most excited about going forward in Perth?

 

If one listens to all of the negative media and posts on PC, one could start to think that there must/will be a lot of BATAH property owners out there.

BATAH = Buy And Try And Hold

By the way, batah is a Hebrew word meaning "destruction, end" .

 

Property investors are one of the best lagging indicators. When they participate in large numbers, market is generally booming. Conversely when they are out of the market it takes out a lot of steam...

As we know, investors are largely out of market.

If the regular translations (divorce, upsize, downsize etc) were to be significantly affected by the increasing amounts of negative equity and paper losses around then market might get worse quickly.