Economic Armageddon, ten myths

Discussion in 'Property Market Economics' started by ollidrac nosaj, 27th May, 2018.

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  1. Ald

    Ald Well-Known Member

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    Nope bring in the glass Steagall bill being proposed by bob katter and the CEC.
     
  2. Tony66

    Tony66 Well-Known Member

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  3. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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  4. Biz

    Biz Well-Known Member

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    That's what it all boils down to in the end. There are periods you need to be careful and mitigate risk but the trajectory over the long term is up up up.
     
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  5. PresentNow

    PresentNow Member

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    When people "Invest" they should know the risk and reward. It is all about risk management. Since when has a Manage Fund advisor ever state they can guarantee your results, you take the wins and you take the losses.

    When good property investors invest in a market, they will take all market forces into consideration to ensure that the investment is sound. The GFC happened, but how many individuals were bankrupt from that in Australia? The properties have now recovered in the US and properties that lose value has now gone back up.

    The only way you can make a loss in property is if you sell. Banks know this as well. Banks are in the business of making money through interest. So if there is a market problem, they will reduce their risk profile, if they called all the loans back they will create a market crash, home prices go down, which means they will carry more toxic debt.

    Since people are willing to hold their property, they rather work with them and increase the interest rate. The amount of money they collect with interest will be way more than selling a home at a huge loss, which will impact on the equity of the other properties they hold.

    Besides "mining towns' and areas of single industries, where have you seen a property crash? Where have you seen in Australia in its history that you can see properties sold at 50% of its value? Even during the GFC besides the slum areas like Detroit where have you seen property prices crashed by 50%?

    There are property corrections in Australia, not property crashes.

    That's why for Property Investors you MUST have a proper plan in place for your properties for Short-Term, Medium, and Long-Term Goals. If you just buy and hold, then your goal is to pay down your debts as quickly as possible.

    If you only do Negative Gearing then you need to get out of the market or get a better Accountant/Advisor.

    You must treat Property Investing as a business, so before you even start investing, maybe look at understanding business first so you make business decisions not emotional decisions.

    Buying a holiday home right after a holiday is a huge mistake. Buying where everyone else is buying is a huge mistake. Buying a property because it gives high yield without know the reason or market conditions is a big mistake.

    In short, get educated!
     
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  6. radson

    radson Well-Known Member

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    What is a crash - 20% drop?

    Gold Coast - 2000?

    Whitsundays - Not sure what year

    Mandurah - 2008?

    Darwin - now?

    Geraldton - 2012 - now?

    Brisbane inner city apartments ? - now

    Development sites in Belmont Perth ? - 2012 - now

    All ?? Theres a helluva lot of market forces out there.
     
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  7. rjw180

    rjw180 Well-Known Member

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    Anecdotally I know of a couple of people who went through this during the GFC. They lost jobs but banks were willing to put their payments on hold to stop them from defaulting.
     
  8. PresentNow

    PresentNow Member

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    Well, there is an alternative... do nothing and hope for the best.

    My points still stand 20% property drop, you only lose money when you sell?

    In terms of Darwin what infrastructure support is there to show that you should be buying there? What's the population? What's the economy like? What are the job prospects? What are the demographics of the population? What is government spending like? What is immigration like? What is the general feeling of the local community?

    In terms of Brisbane Inner City, same questions and add what is the supply situation? If there are too many planning approvals for the surrounding area why the hell would you buy there when there is going to be an oversupply?

    Yes, there is a hella lot of market forces out there, and like I said it is risk management. If you didn't do enough research it is your own money that you are risking.
     
  9. radson

    radson Well-Known Member

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    What about this statement. Do you stand by this as well?
     
  10. radson

    radson Well-Known Member

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    or invest in:

    Yourself, through further education, upskilling etc
    Your own business
    Other peoples businesses through LICS, Shares, Managed funds, SMAs, ETFS
    Commercial Property individually or through REITS
    Corporate Bonds, Treasuries, Hybrids
    and so on and so on
     
  11. PresentNow

    PresentNow Member

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    Yes I stand by that.

    If you have researched correctly, then the property you would have purchased can withstand increased interest rates, vacancy periods or market corrections.

    So under those circumstances, if I don't sell the property even if it's value has decreased then I have not realised my loss. If I have purchased in an area that has strong infrastructure and economies, then over time the property will increase in value and it will no longer be a loss.

    After what you have written it coincides with my final point "Get Educated..." unless you are educated you will make haste and bad decisions.

    So I'm not sure what point you are trying to make.
     
  12. Sackie

    Sackie Well-Known Member

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    @PresentNow I agree with most of what you are saying. In essence really what you're saying is what I have been saying for years - get educated so you can know how to better manage risk and build your wealth as safely as possible for your situation. I definitely agree with that.
     
  13. PandS

    PandS Well-Known Member

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    Technically it not true that you haven't suffered a loss if you haven't sold up
    Say you buy something for 1m and it dropped to 800K and you still kept it

    but if you were to buy again at that time you only paid 800K so you effectively lose 200K
    at that point in time.

    now I can understand times and various other factors may erase that loss but it still a loss of some sort whether in absolute number or lower rate of return over a period of time.

    Say someone who bought at the top of the stock market in 2007 they would endure the last 11 years and now they back to where they started, sure they haven't lost money in that sense but they have lost 10 years of return so their rate of return is really really crap

    someone with the same amount of money bought any point after 2008 - 2016 still ahead and they get a better rate of return
     
  14. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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    technically speaking, an investor has a loss from the day 1, when they pay the stamp duty, deposit, LMI, and other purchasing costs. And then they may have a monthly loss if the property is negatively geared. So even when the market is growing, an investor lives with that loss till they realise the profit at the sell event or after rent goes up outperforming previous loss.
     
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  15. radson

    radson Well-Known Member

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    My point is that you are making pithy smug statements.

    You seem emboldened from hindsight bias and seemingly unaware of all the risks and pitfalls of residential property investment.

    Quoting "risk management" is not managing risk.

    ...and hey...Im generally pro Australian residential property investment mostly based on long term demographic and economic trends.

    ..but saying amongst other things 'that the only way to make a loss' is to sell makes me suspect you have never bought a house or ever looked at impairment rates.
     
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  16. PandS

    PandS Well-Known Member

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    That the cost of doing business and we all face it as investor so I am not worry about that sort of loss, you paid for buying a business or shares or properties some cost more than other but this is a small price to pay in scheme of thing for long term investment that grow your capital based

    Losing a large chunk of capital or holding large chunk of capital that goes no where is where most investors should guarding from such situation.
     
  17. Sackie

    Sackie Well-Known Member

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    Opportunity cost, imho is very hard to calculate . It's one thing to say in hindsight I would have done x, y and z instead and its a whole different story actually doing it. Very hard to honestly gauge opportunity cost most of the time .
     
  18. PandS

    PandS Well-Known Member

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    All good fun discussion but really at the end of the day each of us has to make his/her own judgement and decision and all of us are bound to make a few duds here and there.

    with good risk management hopefully those duds don't cripple you then you should be ok to carry on and recovered fairly quickly.
     
  19. Sackie

    Sackie Well-Known Member

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    Agree. I heavily focus on risk management with my investing and I can't say I have many regrets .
     
  20. ollidrac nosaj

    ollidrac nosaj Well-Known Member

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