If rates rise by 0.5%....

@Perthguy I am talking about a system collapse.

We have been kicking the can down the road for a long time, we are all tied to the US $ , look at Japan, look at the EU, look at the US....look at how quick the US is paying back debt.

Sorry my friend, you can think what you like, but if the stuff really hits the fan, there will be nowhere to hide, and no telling of who will be a winner and who will be a loser.

I really do not care if prices drop 30% say in Sydney, that is not a major system change or crisis, although if it drops like that and rates go north of 10% quickly, well you may be ok, but a lot won't.

So we are probably thinking of different things. If talking just about our property markets, we *must* have the system continue to do what it has done, not as fast as in Sydney, but if there is no growth, or it is continually going South as a permanent new normal, then it will have no one attracted to it, it would become a problem that also effects those wanting a home to live, even home owners benefit from a growing market.

 

Unlikely this will happen.

We have been kicking the can down the road for a long time, borrowing too much and our housing is overvalued in at least Sydney and Melbourne. The most likely scenario is a recession and property price correction.

You can't say that unless you know the financial position that people are in. I am deleveraged and cashed up. If the property market collapses I will be a buyer

Some people won't be ok. This is normal after a boom and subsequent interest rate rises. Others will step in an profit from their misfortune. This is inevitable.

I am thinking of the whole economy, which is going into a recession. But I am been through a major recession in Australia and the GFC. They are not the end of the world.

Of course the property market will do what is has always done... boom and correct. It always has, it always will. I didn't think that your comment "Also, the real problem, as I see it, is if we can keep the system going as it has..." meant "we *must* have the system continue to do what it has done". Those two things are different to me.

My opinion is that to the system going as it has means retaining Negative Gearing and Capital Gains Tax Concessions in their current form. I don't think they have remain in their current form. They could be capped or scrapped. It would make no difference to the property market in the long run. The property market boomed and corrected before negative gearing and capital gains tax and will boom and correct long after they are removed.

I guess the real issue is, are you prepared for a property price correction, higher interest rates and a prolonged economic downturn in Australia? I saw it coming and so I got ready before it happened.

 

If rates increase by 0.5%:

• Drop you Netflix account to 1 device instead of 3
• Turn off the drama package on your Foxtel subscription
• Change your internet from unlimited to 500GB. This should still allow enough to download Game of Thrones which you just lost with your drama package.

Obviously I'm taking the pi.. a little bit but point is if $25 a week is going to cause you hardship you shouldn't have a mortgage.

 

I think we are on the same page now.

A large system collapse is all I am concerned about, and you can see things are not reversing, unlikely, maybe, possible - yes, what if someone launches a nuke with success(like the Korean crack pot or a group of sorts) or some other international incidents. We have been a long time without real war & a few are itching for it would seem to me.

Anyway, apart from these major problems, it is all swings and roundabouts, as long as you are not forced to sell and realise losses, then may as well be in, rather than out was my point, if your out and there are major problems, you probably won't be safe either, that is what I was saying.

 

True. We could be invaded by aliens or a meteorite could crash into the earth, a major plague could wipe out half the worlds population, or we could be invaded and occupied. Anything is possible. However, do you prepare for the likely or the improbable? What are your risk mitigation strategies for an alien invasion?

I worry about reasonable risks that I can mitigate.

 

Reminds me of years back when petrol was just starting to climb to $1.50 levels and there were all these news stories about people needing to change jobs because they can't afford to drive to work anymore. Realistically its a $10 - $30 a week difference and if you're that much against the wall financially, you've got bigger problems to sort out first

 

Tin foil hat should work

 

Tell you what is a certainty to come. The pension.

Prepare for that beast.

 

What's a pension?

But really, when I look at affordability for my next IP, I run that on a 7% interest rate and no tenanants for 6 months. If I can afford it under those conditions, I go ahead and buy. Risk mitigation.

 

I suggest going for a nice hike to clear your head.

 

Aliens, watch out, they are real and bad news for local property markets.

 

Nope, not getting closer to them there aliens !!!


Gotta love the internet, context can be lost quickly.

I am off now to get some worry beads before the end is upon us.

 

Forget the worry beads. Here is a documentary to help you prepare for the inevitable system collapse:

Doomsday Preppers - National Geographic Channel

And just be glad that in these uncertain economic times that you are not a risk assessment analyst or you'd be worrying even more than you are!

 

There is always a way. Don't borrow and you will never worry about rates going up, banks tightening, negative gearing and all other stuff that goes with borrowing.

 

After APRA, most investment loans has already risen 0.5%, I don't think this has much impact for the majority of mortgage holders. I think the article meant 5%, because if it does that, it will completely shift people to negative cashflow and if negative gearing goes as well, good bye to the Australian property market.

 

0.5% is nothing.

If rates rise by 5% on the other hand

 

I like your thinking. This should initiate people to start doing scenario planning.
Seeing the uncertainty is the most difficult thing to do and then be able to create scenarios based on them is even more difficult. And to plan for those scenarios require commitment and an open mindset.