House prices fall at fastest rate in 35 years

Yes.... if you're structured for CF & carry little or no debt.... not all of us rely on CG or tout net worth like it's the holy grail.

As the masses are generally CG structured speculators (i can hear the whining already) then most would probably care I guess.
I'm glad that I'm not in this group.

 

I had a good old chuckle at this.

Not wanting to start another CG vs CF war on PC, I would like to make the following observation:

As an old and well-known CG prostitute, I have reached the top of the NW/FI/retirement mountain (over 8 years ago) and I continually wave to and encourage all the the old CF prostitutes as they struggle day-in and day-out to reach my spot .

Keep climbing .

 

CG structures are great for rising markets & you were fortunate to experience one of best in modern times.

Now that we're in a falling market, low debt & good CF is hardly "a struggle" nor is your spot everyone's aspiration. It's great that you've been successful & your strategy has worked for you.

FWIW, being semiretired in your early 40s is not the "struggle" you might think it is..... good luck buying more life units with all that cash..... I am very grateful to be in a position to never need to work again yet so far from retirement age.

No climbing required

 

Recently sold a unit in Sydney for $1,170,000 renovated. At the peak of the market it possibly would have gotten 1.2m so I can't complain too much. Selling another unit in a few months so it will be interesting to see if I get a decent price. Its in a boutique building and close to the beach so I don't anticipate the price will be affected too much. Its other stock types in the area I am seeing some bloody great buys and I am waiting 6-12 months before purchasing some of those, then will add value to them and hold. When the next boom comes (and it will), it will add a few more 000s to my bank balance. Personally I am loving the bargains coming on the market because I planned for this, and went for Brissy to do my devs over the next few years while Sydney stabilizes. Inner to middle ring Brissy for the right stock is doing well and has done pretty well over the last 3-4 years if you were able to buy right and in good OO locations.

 

I have been in the property game for forty years and I have used the CG approach for all of that time, in rising and falling markets.

I don’t own any property in Sydney and Melbourne. So, I wasn’t “fortunate to experience one of best rising markets in modern times”.

I got there without it. I used the magic of time and CG to climb my mountain .

 

Is that satire? Historically the last 40 years has been a very fortunate period even beyond Sydney/Melbourne.... for all of us...



To suggest otherwise is pure fiction... look at any economic data over the past 100+ yrs..... we have experienced the best economic period in modern history in our lifetimes. Fact.

 

And I am hoping the next 40 years will be even better as I want to be part of it .

Let’s catch up in 2059 and compare notes .

 

OK Fellas, calm down. I was referring to the 69% of Australians who own their residence, I was not referring to investors. You know, the voting public.

 

If you have a mortgage, you don't own the property,the mortgagee does. So, of the 69% I wonder how many actually "Own" their property i.e. Unencumbered.

 

We own a couple outright with a third just around the corner and big falls in property prices with increased yields would be music to my ears.
All those pesky taxes suddenly get a lot cheaper when purchasing more property
The big losers would obviously be those still carrying large amounts of debt and many investors that were not very good at paying down debt.

 

Using 2016 ABS Census figures-

Australians who owned their own home outright declined from 32.1 per cent in 2011 to 31 per cent. In the last 25 years this has declined by more than 10 per cent.Those still paying off a mortgage also decreased slightly from 34.9 per cent to 34.5 per cent. In contrast those renting increased slightly from 29.6 per cent to 30.9 per cent in 2016.

 

Not responding to you direct TAJ but this highlights my point better below. Also believe it something like 30% of homeowners own their homes.

So what would happen to the big four banks if house prices were to half? Share prices would get hammered, knock on to superannuation etc. There way more downside to a housing crash than there is upside in property prices. In that scenario would likely see rising unemployment etc good luck getting a mortgage without a job.

 

Not if you have the money and power, China would be heaven. Only for those without both, then it is a hell of a life.

 

Would you mind elaborating on your post please as I'm curious as to your reasoning.

 

Would you continue to hold a property with a 900k mortgage if it was only valued at 450k? Why would the banks? As you say they hold the majority of the equity in the housing market if their loan book value had its asset base halved they would in similar strife with their own lenders overseas. The health/quality of the asset base for the banks has a big impact on their share price.

The ASX is heavily weighted towards the banks in regards to market cap. Most superannuation funds are invested in ASX in blue chip shares etc so most people would see their super balance crash along with the banks.

Have a look at Ireland, USA etc. We have some different variables in Australia but the hypothetical is 50% drop in house prices across the board. I'd be suprised if all of the banks could survive that kind of hit.

And for Joe blogs you are sitting their with your 900k mortgage on a 450k house. What are you going to do with your spare cash? Spend it or try and pay the debt down quicker and dig yourself out of the whole? Sentiment would be in the toilet and everyone would be tighter than a fishes ******** with their spare cash. All those things tend to lead to recessions which means rising unemployment etc etc.

For clarity I don't we're looking at anything this dramatic. Would have to be a perfect storm of ****ery for something like that. More likely we have 18 months of declines bottoming out 25% down with sentiment turning after Royal Commission findings are handed out, election is dealt with and lending criteria is loosened again as banks try and claw back some losses from the Royal Commission.

Australia population is still growing and becoming even more concentrated in the capital cities of each state. New housing will be required for growing population and infrastructure spending looks to be increasing in most states to pick up some slack from a slump in building approvals. Supply/Demand will turn quickly as there is big lag between building approval and housing supplied to the market. If we're having an approval slump now the flow on affects of that slump may not be felt until 2 years down the track.

My opinion only happy for anyone to critique my thinking

 

I remember 45 years ago (when I was 17), my grandfather told me he felt so sorry for me (and my generation) as property was so unaffordable.

Even though I had a lot of respect for my grandfather, I took no notice of his words. I was young and brash - I just gave property one big go.

Now we are looking back in time to find how great property has been.

I bet there are a lot of grandparents around Australia right now repeating my grandfather‘s famous last words.

Not this grandfather. I am telling my kids and, in time, my grandkids to give property a big go. So far they are listening and doing well (a lot better than me at their age).

I think I know how the next 40 years will go .

 

In this scenario then I'd guess most would take their cash and invest elsewhere i.e. offshore. Then that boom busts...

I've heard this over and over before by older people.

My 2 cents is that there was linear economic and scientific progression in society that led to

Today's limit is mobile phones, will tech and economies growth even futher? Yes with all the automation and so forth creating generally greater wealth. However, I think it will be more evenly spread, it's much harder to get ahead of the game or richer if you will.

 

Its amazing how quickly we forget history , it was only 90 years ago that many lost everything in the great depression.The comfortable middle class that had their own houses , and a business were almost wiped out due to the fact that they carried debt.
Any money that they had in the bank disappeared, and it was never to be seen again.
My grandparents were no different ,and my dad was 4 when the depression hit.
Then as an 18 year old was sent off to war in WW2.
They didnt care about buying multiple houses, all they wanted was a happy life for their family , free of war , mad dictators intent on mass destuction and hopefully avoiding anything that resembled what happened in 1929.
Carrying lots of debt was frowned upon after growing in the aftermath of the depression , and for many they also saw the destruction of their neighbourhoods with millions and millions of people displaced by the late 40s with only the shirts on their backs.
The baby boomers and the next generation after that grew up in an era with unprecedented growth in countries like Australia compared to the previous generations.
Weather that growth can be replicated again will be interesting , but with wage growth stalling years ago and really low inflation I think the writing is on the wall that the economy is misfiring with many households carrying to much debt that is unproductive.
People are forced to spend less and as we are finding out its a vicious circle of low inflation ,low wage growth with interest rates at their lowest in a very long time.
Its very hard to kick start an economy when interest rates are already set really low.
And without good wage growth banks cannot continue to write out bigger and bigger loans
Not sure where people are expecting housing growth to come from in the future

But as my dad used to say when we were kids , I'll just go and pick some money of the money tree in the back garden

 

Yeah, my Dad was nine. He had memories of what it was like to live through the GD.

I had many conversations with my grandparents about GD, WW1 and WW2. They were “lucky” as they came out the other side of all of these relatively unscathed. I believe some credit should go to the way they lived their lives, being risk averse, hard working, never giving up, ...

I consider myself a relatively conservative investor. I believe I got many attributes from my grandparents, based on the way they lived their lives and the lessons they learnt.

This made me laugh. When our kids were younger (now in their 30’s), whenever money was tight, they would suggest we go to an ATM and just get some more .

Innocence is so beautiful.

 

I was talking to a person within one of the banks I invest in within the risk management team about this ,if house prices drop over 50% at a recent AGM what happens next..All he said was it's already happening and mathematically if you were to scale every house within Australia it would be different each month and the financial value loss different ..Just combine that with Bill Shorten plans and wealthy will become meaningless..