Calling Property Bears (Bulls excuse)

if must buy in Sydney then 2010 is indeed a better time, but no one is limiting you to buy in Sydney only as an investment. If you made purchases in 2013 Brisbane or Perth you would have a killing. After you made your fortune in those markets, you can easily buy in Sydney in 2010 by selling up or use equity. In short, you should buy when you can afforded but look beyond a single city. I felt that now history is about to repeat.

 

Markets can always be be led by delusion. Spending money the bank tells you that you have, FOMO and decades of indoctrination into a low complexity Australian economy can't hold the this delusion forever.

You really don't need to look hard for reasoning it is overvalued.

Wage to median price, and how much debt you need to put yourself into to enter the market are two key indicators. Breaking the down to suburb by suburb levels you see that clearer.

More debt means less spending, less spending means less jobs, less jobs means etc. It's a mathematical inevitability.

 

So what’s the limit/tipping point then? If it’s overvalued now. What’s the ideal number? Cause the number is different at 10% interest rate, 6% rate, now 3-4% and now going even lower.

Each time rates drop, that tipping point changes. Debt to wage obviously has less & less affect with each interest rate cut. If you think things are overvalued now, wait till we hit 0, QE, and eventually a ton of fiscal spending.

Property prices are heading north if you like it or not.

 

I am neither bull nor bear. I own property, but I am also hesitant. However we are in a global market. A few questions;

1) What makes property expensive? Is it simply the dollar value of the contract? Or is rental yield a better indicator of expensive? How does Australia compare on that front (particularly Sydney/Melbourne) on the global market. Have a look at price of property in London. Yikes!
2) Security of investment. How does the political/banking/financial setup in oz compare to the rest of the world? I am definitely not qualified to answer that question.
3) How pressed are people to sell? Not a simple question to answer. Ultimately, this will be driven by employment rate. I bought a house in outer suburbs of Melbourne in 2015. After a renovation, and with current interest rates, this property is now well and truly cash flow property. I recently purchased a property in Victoria, rental vacancy rate < 1%, gross rental yield 5%. With recent interest rate drops, the property is not far from cash flow neutral. I for one am not pressed to sell because both properties are cash flow positive.


Some areas of Australia may be overvalued, some may be undervalued. Depends on your metric of value.

 

With all those desperate measures already in play, you'd hope a crisis doesn't happen. Lucky there isn't a hint of macro uncertainty and we aren't due for a recession....

 

We most likely will have a recession, There’s a ton of uncertainty around, and I’m sure there’s another crisis just around the corner that the media can pump. I still plan to buy again as soon as I can in certain markets where value and opportunities present. I’d personally sooner risk the banks money trying, than sit on the sidelines and be wrong.

 

And thats the attitude that's ingrained in Australians which is why/proof the property bubble exists.

Borrowing more and more money out of FOMO because the consequences of missing out is so large that you might be priced out of the market forever. Doesn't sound like a healthy/sustainable economic system to me.

The can can't be kicked down the road forever. I can't remember which report it was, but I remember seeing that a 4 percent drop in interest rates was needed to recover from a recession. Unless the suggestion is that QE is the new norm every time houses prices aren't rising at double digits, in which case goodbye global economy as we know it. If the numbers don't fall in on themselves, polticial shift will.

Even Christopher Joye says he can see 30% falls if a crisis occurs. And after avoiding multiple recessions, I can't imagine this one being gentle.

 

30% falls in a crisis could potentially happen. It would take widespread job loss I would say. The economic landscape has changed yes, I don’t think what worked previously will now. So people just need to adapt and invest accordingly

Mortgage arrears aren’t high, mortgage stress isn’t high, unemployment isn’t bad, so until the picture paints itself a lot worse than it is I’m not worried at all.

 

The unemployment data is essentially useless. They define employment as being employed for atleast 1 hour this week. I don't know how confidently this information can be cited.

Not sure what data you are looking at, but mortgage stress is according to Westpac (might have been NAB) and DFA.

Mortgage arrears won't be high till they are. Interest only loans coming due will play its part.

 

Fair enough. What are you going to do? Your very confident the can cannot continue to be kicked, delusion drives markets, the economy isn't healthy, and house price falls of 30% are a very real possibility, I'm wondering what your personal next move is financially?

 

*Dellusion CAN drive markets. FOMO isn't fundementals.

Do you believe we can keep kicking the can down the road? Mathematically we know it's not possible. At some point it must limit in the sense of debt, wage growth, global macro economics (of which Australia is very exposed to).

What's the strategy? Damn good question. Not many options are attractive at the moment. That's the downside to 30 years of recessionless boom. Staying in cash and buying people's mistakes is a starting point.

 

How long has this property bubble been going for?

wonder if owning fully offset property is considered staying in cash.

mathematics is funny. Malthus said population increases exponentially but farmland increases geometrically, so were doomed. But productivity increased.

what if transport lines gets extended, and fhbs accept a one bed unit as a first home?

 

Why is it mathematically not possible?

In a free market, debt needs to be supplied by savers. But we don't have that. We have central banks and fiat money instead. We can do debt ad infinitum. I would be betting on higher prices from here. There is such thing as an inflationary recession.

 

Got to congratulate you for your persistence and paraphrasing the same stuff in 179 identical posts.

Don't you get tired repeating yourself over and over and over....

You are worse than jehovah's witness mob bashing doors...



https://www.smh.com.au/business/ban...-corner-cba-s-matt-comyn-20191016-p5313n.html

 

*mathatically not possible (practically speaking). I don't consider generational debt practical (or moral).

 

Headline: Banker says everything ok come and borrow from banks.

Refer to REA head economist statements in regards to recent price rises.

 

Don’t let your morals & practicality get in the way of making a buck @Timb89

Then again your strategy is hoping to take advantage of “peoples mistakes” so I wouldn’t start preaching morals.

 

I’m not sure what you mean by kicking the can down the road exactly, but I am betting on inflationary pressures causing asset prices up and would strongly suggest cash would be a terrible strategy shortly

 

Those people are going to be property investors, and their mistakes mean people will be able to afford to buy to live in the urban fringes atleast.