House price decline from peak... so far

lol......some are economic giants that we have not fully recognised......

No....do it on the start of tge up cycle and you do not get an out of control boom most likely, but more importantly, you do not crash an economy reliant on housing on a clear downturn....

 

Zero percent inflation over the last quarter is well under the RBA target.... now people think there will be an interest rate cut in May.

 

Not sure what people are expecting to happen after a couple of 25 pt drops in interest rates .
Its certainly not enough to really stimulate an economy.
The GFC happened over 10 years ago , yet the US cannot even get rates back up to normal levels after QE.

 

Cutting rates will do nothing.

Doing the same thing but expecting miraculous results but be double madness

Now it wont even stimulate housing,

As I have said before, if business sees no point in investing, they wont borrow to invest.

 

Why will cutting rates do nothing?

 

Cause it did nothing but inflate housing prices before, and that went out of control, APRA have set the lending at a fixed point, and banks wont pass it all on, so little effect, business does not borrow and invest on cost of funds, it does so for business reasons.

Maybe I can ask you this, due to last rate cuts and lets pretend 2 in very near future, will you employ someone or go an make a significant investment in your business ? What about buy another IP ? No ? Thought so, same for all others.

And then if there is some new global crisis, what happens then ?

 

Look I agree that lower interest rates are just inflation and doesn't create any productive wealth - only paper wealth.

I don't think inflation works nor is healthy, so we agree on that.

But the one thing central banks can do is debase currency and inflate prices.

You are right that APRA's regulations are locked in and will reduce the impact of lower rates. But you are also making a lot of assumptions, eg that banks won't pass the rate cuts on, but that is more of a hunch than anything else.

Lower rates will have some positive impact on housing: it will free up cash flow on more indebted people, and it will stop distressed sales, reducing supply. It also reduces the hurdle rate that rental yields need to become cash flow positive (so poor properties, or recently purchased properties suddenly become cash flow positive).

My guess is that lower interest rates will also be implemented to offset the probable withdrawal of negative gearing by the ALP.

I think we agree that lower interest rates is not the right medicine, but it's all central banks know. And in the past, lower interest rates have inflated prices (that is what they are designed to do), so I don't know why it wouldn't this time.

Maybe the inflation will pop in rent prices first (?), but no matter how you look at it, lower rates are inflationary, and that is generally good for property investors.

 

There comes a point where dropping interest rates from nearly nothing to slightly less just worries people, it can appear to be 'doing something for the sake of it', or a panic move.

It certainly makes me uneasy, batten down the hatches!

 

It really looks like we are in for a few years at least of tough times. We have had our wage decline that we were all crying out for play out over the last 7-8 years, house price growth kept up confidence and it resulted in no drop off in spending.

Now we see people cutting spending this in turn is forcing down prices on many items, a rate cut will likely de value the Aussie dollar and increase the costs of importing, importers may not be able to pass on these costs to consumers in this environment. Can see many more businesses going under in the years to come.

On the flip side I guess lower wages and lower AUD will be a positive for exporters. Hell if things go really bad we may be able to compete with the 3rd world countries.

 

The cash rate is already at a record low of 1.5% - if the RBA lower now due to low inflation, then they will have less freedom to move if things get really bad.

 

The end of the world is closer than I thought .

 

yes chatting to a lot of property owners here it's quite common for people to think that there's not going to be much more of a fall that this is kind of it I think that's wishful thinking. so as you said we haven't even seen the psychological stage of people starting to get worried and try to get out

 

Time for gold bars and a move to the country yet?
502 Back Creek Road, Cooyar, Qld 4402

 

I see no positive, I see overpaid servants of the public just reacting.

Country must produce, must have productive and freedom to create and produce, I see our social systems heading in the exact opposite direction.

It is like the saying of putting lipstick on a pig, it is still a pig. Put as much as you want of any colour or value, still a pig.

 

Devaluing the dollar will create some inflation though, might not be a terrible thing.

 

Looks like my late father-in-law's place that we've been sitting on for two years.
129K?

Tell 'em they're dreamin.

 

Just to clarify by "here" I mean in Sydney. I've moved here recently. Still a lot of denial around.

 

IMF is already thinking about how to make deeply negative interest rate work. Problem solved?
Cashing In: How to Make Negative Interest Rates Work

 

Dabbler, I agree. But this is a property investment forum. And it is still possible to make money out of real estate in an environment of bad policy. Keeping interest rates low for the last decade created a lot of mal investment and it was the wrong thing to do. As investors we are looking to profit from both good and bad policy.