Crash looming

At this stage of the Cycle No.

 

Far better to Cash at at the Top and look for other Investments in other asset classes.

 

I'm sure some of the Posters and Readers who frequent this forum would like to hear alternate views?

Would you disagree?

 

The people who retain jobs and buy things.

 

I think people often forget that aspect, that demand is generated when prices come down. Right now, demand is dropping because property is expensive. People are sitting on the sidelines, can't get a loan to borrow enough to buy, won't invest in high numbers. The solution is cheaper property, which on its own will cause demand.

Markets when they drop always have a natural floor. Even in the worst case scenario crash we live in a diverse, advanced economy, and the basic rules of economics aren't going to be suspended. If you're an average joe looking at buying a house, and it's just dropped in price, you can now afford to buy it, or spend in other areas. This gets more money moving up through the economy. This is why every property crash is followed by a relatively rapid recovery especially in developed economies.

Investment capital is always going to find a home. Instead of capital growth, people will make money from rents (in Dublin I had friends who actually coped with the downturn because rents spiked. People didn't want to live in ghost estates so the "excess supply" didn't translate to places anyone actually wanted to live in. I mean few families are going to want to live in our glut of one bedders no matter how cheap they get, so rents for family homes will be a great income source even in a recession).

I think the best way to position yourself for a downturn is to get out of oversupplied fringe assets and apartments, and into quality family homes. People will want to rent these regardless of a downturn. And the economy will be perfectly fine (if the worst case scenario outcome did happen, and of course it may not). People predicting the end of the world though are just being hysterical.

 

Appreciate the detail you always put in @highlighter.

 

“But if we truly learn to be open-minded, we’ll understand and live with the fact that we can disagree and yet still make our own choices. And that those choices don’t put us on separate, competing teams. They just put us on different paths, and when those paths intersect with someone different than us, we can have meaningful conversations with one another.

Life really doesn’t have to be as complicated as we make it, and we really don’t have to be as divided as we are.”

Dan Andros, Faithwire

 

Thanks for your informative posts @highlighter. Downturns aren't fun but they are not the end of the world either.

I think the important thing to remember is that after a boom there is always a correction. Perth had a massive boom that ended around 2007/2008 and the overall market has not recovered. That said, there is a thread about a joint venture between forum members that made profit in the falling Perth market. It can be done but it is a lot harder to make a profit on a falling market than in a boom.

Personally, I am not too concerned about a downturn. Downturns happen. Relatively short term pain for long term gain. The Australian economy has been limping along for too long and needs something to happen.

 

One thing we all need to remember is that in Australia we have way more owner occupier than investors. That being said owner occupiers will always want to buy a property out of NEED. That is very different from an investor which they look for VALUE.

Owner occupiers will just shift to cheaper suburbs to buy and those expensive suburbs will stagnate for the time being.

I never like and agree with the idea of boom and bust along with certain time lines. When property market boom because there was a genuine demand for it fueled by cheap credit and easy home loan approvals, but not because we happen to went into a boom cycle because we have experienced certain years of pricing decline.

When the credit market is being tighten it will sure affect the property market. But it mainly only drive away investors, owner occupiers will still be actively looking which will help support the market.

Hence why all these newly created estates are still going fairly strong while the established suburbs are seeing a decline in activities. Because owner occupiers are emotional and will buy what they like but seldom will consoder those run down properties and dream about buying under value and capital gain.