"House prices could fall by more than 40 per cent" - Are you kidding?????

You were one of the biggest naysayers early to mid last year on the markets and counselled everyone not to be buying in that falling-market and I remember you strongly suggested that values had a lot more to crash and that only fools would buy then...

You are saying that buying now (on every single commentator's consensus being a rising market) across the country would be crazy!

So what you seem to be suggesting now that people should only buy with the benefit of hindsight because in a falling market or rising market, no one knows how to time it properly.

Mel and Syd gaining speed, Brisbane and Adelaide starting out recovery and Perth finally out of gutter... the time to buy has never been better - but what would I know with only 130 posts to my name .

I would add that in 12 months from now, looking back, anyone who is selling in this fast-rising market would be considered quite an 'idiot' for giving up hundreds of thousands, if not millions in lost value, because they panicked!! Let's see.

I don't understand why the property has to be such a rigid (buy now or suffer - sell now or crash) kind of proposition, or for that matter any wealth-building investment. Go long, go strong, wear out the minor ups and down, manage cf and build long term wealth.

 

OK...but I do not have a 10 year horizon.

I need mullah now....I am not the 40 year hold gramps mob.

I am too busy exiting.... I have plans for other markets.

I could be wrong...but at the moment...my plans seem to be coming to fruition.

 

Just out of curiosity, are you liquidating your resi portfolio to get into equities? That is my plan to sell down 1/3rd of my new builds (throughout 2021 if the resi markets hold) and go heavy into equities but just mindful of the very exxy aussie equity markets currently.

 

Yes...but a small amount...but also to get into other markets.

Changing my strategy to what Baby Boomers want. I seeing 40% plus gross margins on stuff you can build for 450-480 and sell for 650-700k

 

Vic went around 9% down peak to trough. To give you some perspective, prices have risen by more than 50% in a period 2012-2017. Despite this downturn being the largest in recent history, it is negligible when you consider how much prices have risen.

And considering that wage growth is bleak, all things being equal, you're still better off buying sooner rather than later (provided you do your d&d and walk away from paying over the top just for the sake of buying).

 

Apparently it works great with the sharemarket as well, can go 95% cash or all in.

 

Just read an interesting article, most people always say how housing is unsustainable and that the massive price gains of the past will now dry up in the future.
I believe that we are yet to see the biggest asset inflation ahead of us.

When there's a problem, there's a solution and the wheel keeps on spinning.

Moving Past The Mortgage: How Startups Are Shifting Home Financing From Debt To Equity

 

Seems like fleq is offering something similar to a lease option? Tenant buyer engaged to pay rent+interest to fleq, with option to buy or even sell if conditions are met.

 

interesting.... well now house prices have actually gone up by 20% pa. Like lets talk about generalisations as a mother of all generalisations. Even if you localise to suburbs that performed the worse in sydney...

 

Some very vocal folks on here got it dead, dead, dead wrong about Sydney markets.

As my 2 yr old likes to say...." big ouchie daddy".

 

Being long term bearish is simply riskier than being long term bullish.

But most people dont think of lost buying power as risk. This is why inflation is hard to understand for most people.

 

I think the other big mistake that most pundits are (still) making is that this bull market is nearly over. I wager that we are only 1 year into a bull market that will run 4-6 years.

As Keynes said, markets can remain irrational longer than you can remain solvent. ie, these things can last longer than most people think. Of course in this instance, is is irrational monetary and fiscal policy that will drag on, but the impact on the property market will be the same.

 

That is the key issue....because irrational is not normal. APRA is trying a slowing approach....if that does not work they will do something else. At this point they don't want to raise interest rate which is in the RBAs control. But if they see things are control you may see a 50: basis point jump. You are correct in saying that things will keep going as it is hard to reduce momentum.. but be careful when it comes off as the downward pressure maybe as quick with a couple of successful 50 basis point interest rate movements.. I don't think this will happen till mid 2023....Covid needs to be under control globally.

So the moral of the story is don't be the frog in boiling water .. plan and execute an exit strategy.

 

Most younger people have not seen the impact of inflation. Being prudent is not being pessimistic. I have sold 3 lover last 12 months but have also bought 5. Different markets...different impacts. I know this will not last forever thus being super careful. What is happening is not normal.

 

Hence why I'm still buying 'add value' properties for base expansion AND to take chunks of profits for debt reduction and lifestyle spending. Worst case I can comfortably hold and rent what I'm buying. No pressure on finances.

Properties I bought earlier in the year in Sydney have gone up collectively around 1.2 to 1.6m with no work done yet. The selling agent has contacted me twice to see if I wanna flip it as is lol. Told him to hold his horses. Currently sipping a latte in Leura while a good friend is inspecting a property for me in Sydney. Yes. Life is good. We always feel very blessed. Nothing happens by our hands alone.

 

I think young people have seen the impact of inflation and are told not to believe their lying eyes. If property goes up 20% in one year, that's inflation (strictly, inflation is just defined as artificial currency creation). All it proves is that the CP-lie is a useless measure of inflation.

 

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” Peter Lynch






The risk is the increase in mortgage size. Between 2017 and early 2019 there was virtually no increase in mortgage size in NSW and that correlated with a correction of 10-15%. In 2019 the average mortgage in NSW was sitting around 500k and it's now up to 750k. If interest rates remain low and asset values keep increasing it's probably not an issue. Medium term the increased mortgages will probably constrain economic growth as these 750k mortgages will take decades to repay for the average owner occupier.

I think John's correct and we'll be in a low interest rate environment for a while yet. Even when the RBA starts hiking rates we'll be coming from an extremely low base.

 

Can people with no property afford to be prudent? Less than those with property, probably.

 

Personally living through my first (and many) proper crisis/recession as an INVESTOR, I learned quite a few things and takeouts that could be useful for later recessions/etc.

Here's some general takeouts.

• Holding FIXED views in times of crazy change isn't the best strategy. Facts change very quickly. Views like, 'its always a good time to buy', 'never sell', etc...IMO I've learned that nothing is fixed or constant. Having these views reduces mindset flexibility required to adjust to changing information sets.
• Being flexible is king. This taught me the value of holding cash as an opportunity tool.
• Taking risk at the height of markets pays extreme returns. Nonetheless it's risky and can be stupid if it goes wrong! Hindsight.
  
• Information changes quickly in a pandemic. Strategies should too. E.g. in March 2020 the country predicted unemployment would hit 10-12%, many people were losing jobs, people stopped paying rent, etc. It barely got half way there and that was fairly clear from June.
• Understanding of governments helps a LOT in a crisis like this. The information & policy changes they provide and actions they take really dictate outcomes. 2-3 years ago they've gone from fairly uninvolved, to controlling all major economic outcomes and our movements too.
• Extreme volatility in housing markets is rare, but when it occurs, it is a great opportunity for investors.
• Something I knew, but housing markets in Sydney/Melbourne are all really driven by the cost of credit, and the economy (or rather, jobs/income stability). Everything else really is noise and much less significant.

Anecdotally, we did buy a site in March 2020, but it genuinely felt like madness at the time, like trying to catch a falling knife. We shaved over 10% in negotiations from an agreed price in one week between signing contracts (ie we had offered & agreed early 800s, but dropped bid ~100k to early 7s). At the time, the fear was it could be 20-30 within weeks, if employment projections came true. Vendors who needed to sell got desperate in some cases and were happy taking 10% discounts. IMO, Sydney experienced its biggest ever weekly/monthly fall in March/April 2020. Some did extremely well upgrading their PPORs at this time in primo areas, and may even be near DOUBLE now (70-90?). For expats, even more given the dollar was high 50's/early 60s then.

By June 2020, it was clear it wouldn't be that bad. The economy held up and COVID died down. Policymakers threw a ginormous bazooka into the economy and really we needed a pistol. Fear and uncertainty meant policymakers went BIG, very big, quickly. This information set changed and it made a whole lot of sense taking on risk.

This level of see-sawing property prices is rare. What happened in the stock market also happened to property - the illiquidity of property just meant that there is no daily pricing of assets and prices don't see-saw

 

So as an investor what do you do today/now with this information???