House price decline from peak... so far

Respectfully - two data points 50 years apart do not make for a reliable trend. The global political and economical conditions over the last hundred years have moved around dramatically. Coupled with exponentially increasing technology I don’t think anyone can say with a shred of confidence what the world will be like in 2030 onwards.

 

Yep and entering the era

• when global credit expansion is coming to an end/ended as IRs are already at all time low,
• households carrying debt at all time high,
• with certainty that technological advancements with increase productivity exponentially without the need for matching salary rise (for masses) aka stagnant real salary.
• along with the need to be closer to work or travelling shrinking fast
  
  next decade will indeed be very interesting from RE investment perspective.

 

Just a quick response as I'm busy today. I'd agree but the cited "two data points" were only examples taken from modern history that many of us can relate to. Here are the last six cycles spanning more than 300 years overlaid with Schumpeter's Joseph Schumpeter - Wikipedia waves of early innovation:

1723.35-1774.95 - Birth of capitalism, political revolution
1774.95-1826.55 - Commerce, textiles, iron, water power, mechanisation
1826.66-1878.15 - Steam power, railroads, steel, cotton
1878.15-1929.75 - Internal combustion engine, electricity, chemicals, assembly line production, aviation
1929.75-1981.35 - Petrochemicals, space travel, electronics
1981.35-2032.95 - Personal computer, internet, AI, etc.

I don't agree with everything Martin Armstrong says or believes but when one marries the concept of cycles and patterns from various sources it sheds a new light on conventional thinking that "we" are in control of anything and merely exist within cycles and patterns that are driven by forces that are more fundamental.

 

So what do you reckon is a better strategy to build wealth now? Put it in a saving account/term deposit - no thanks, barely beat inflation. Put it in shares - is the share market deemed very over valued and risky now and at the end of the day share vs RE is always a endless debate. At least RE is a physical assest and is more suitable to mum&dad investor than shares imo, esp you can be exposed to share market through your super.

I have heard so many arguments about how bad is RE investing now but what is the alternative to build wealth?

 

Sydney SA3 region (Jan 19)
falls from the peak have now gone past 20% and only 8 regions have had falls of less than 10%





Perth SA3 region (jan19):

 

So if you buy property today in falling markets are you OK if your capital is eroded? This is the question you should ask yourself.

Would it be logical to sit back keep saving and wait, we still have not seen the full extent/impact of credit squeeze.

 

I am not saying just jump in and buy a property now without a good DD. But there are still opportunities to make money. I was told in late 2016, 2017, 2018 that investing in RE was risky because the "market" is close to its peak/has peaked/start declining. Fortunately, I did not listen to it. I bought an IP in Mel in 2016, sold in mid 2018 for a healthy 25% profit after all fees and tax (holding cost is zero). Bought another one in Mel early 2017, do not have any plan to sell because it is for a long term hold, valuation done in early 2018 showed 25% increase giving me some equity to fund another purchase, another valuation done in Dec 2018 shows close to another 15% increase, release equity again to put in offset waiting for opportunity. Bought one in Hobart early 2018 (quite late when people said it had peaked) using the equity from Mel IP, within 5km from the CBD, rent covers P&I from day one, bank valuation done today shows 20% increase, refinancing to extract equity now. Have made few more purchases in 2018 but have not sold or re-valued so cannot say much but they are for long term hold and when combined together they are cashflow positive so I do not worry much.

I am by no means a savyy investor and have quite limited knowledge, experience and skills in property investment but still can make not so bad return. At least, it helps me to build wealth way faster than putting money in saving accounts.

Anyways, I get your points and have no plan to buy in Mel or Syd this year. Am looking into other markets atm and as long as the number stack up, I am ready to take action.

 

Hi @TheSackedWiggle can you please post or link to one of these charts for Brisbane Region? Many Thanks

 

You raise a valid point. What you, me, everyone must realise is that financial markets including residential property cycle from boom to bust. There is no other possible outcome except this cycle or pattern. The problem is the busts are getting bigger, the recoveries are slower and for many asset types there is often no recovery in nominal, let alone real (price) terms.

Take a look at the STOXX 50 index. Peaked in nominal terms in 2000 and has never exceeded that high since. Imagine what this chart would look in real terms. I simply never believe anyone who says the (share) market always goes up. That is, you won't lose over the long run.

You're completely correct that the share market is more difficult to succeed in, than say residential property. Unless you can recognise when major tops are near the outcome can be devastating, particularly when you own individual shares. I lost 15% of my superannuation in 2007-2009. Today I understand when market tops and bottoms are approaching.

Going forward it is becoming absolutely essentially that residential property that is an investment is purchased at the right time in the cycle and the right type of property is purchased. Even with a buy and hold strategy you must regularly review your situation. I wish I had understood all of this 20 years ago when we started. Don't get me wrong we're doing okay, I just want to share this.

 

Warren Buffet said it best and most succinctly when he said 'as an individual inventor you dont need to swing at ever ball that comes your way in order to do very well. You just need a couple of home runs'.

There are thousands of markets, opportunities, various strategies etc to be able to do a decent job at building long term wealth regardless what is happening at any point in time . The colossal mistake many make is to look at broad markets/data/stats/herd investors etc then apply their relevance to their own investing as an individual investor . 95% of the time it bears minimal significance if any.

 

STOXX50 and residential property are two different beasts. While I agree that both have cycles, this is where similarities end. STOXX50 is highly dependent on EU performance. We know that Spain and Portugal and Greece done horribly since 2000. We also know that Italy is going into a recession. There is Brexit. Yellow vests movement. There is nothing going about EU that excites me. Unless the highly bauerocratic loose union is reformed, it will come down crashing soon enough.

From perspective of residential property. Australia will remain an attractive proposition even if the economy goes into recession. Assuming migration is not cut people will still wish to come here, settle and live. That equates demand for property.

 

Totally agree.

I have been watching a market for some time. It last peaked in 2012.

I bought in about a year ago. The market continued to fall, by about another 1.5% after I purchased .

Today, that market is up 2% from its rock bottom. This means that I am now slightly ahead on my purchase price. Still got to recover all the purchase costs yet.

Is this a dead cat bounce? Who knows!!!

All the “experts” are saying that property prices are falling and will continue to do so for the next few years. Not true.

All the “experts” are saying that sharemarket peaked end of August/September last year and we are in for a bear market. Not true; after today’s action, we are up 11% since Christmas.

I have no ******* idea what I am doing and I am happy to admit it (but I being positive and taking action) .

It is a pity the “experts” were as honest .

 

Could you please share the melb chart?

 

I hope I can do it soon. Need deeper pocket and more sophicicated strategy however.

 

Thanks. I was referring to investing directly into commercial properties.

 

corelogic has not yet published it for those cities,
I will keep looking if I find it will post it here.

 

Statistic source?