Stocks to crash up to 80% and real estate up to 60%.

Discussion in 'Property Market Economics' started by Sackie, 1st Mar, 2018.

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  1. Sackie

    Sackie Well-Known Member

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  2. Perthguy

    Perthguy Well-Known Member

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  3. TMNT

    TMNT Well-Known Member

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    Opinions are like ............

    Everybody has one!!!
     
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  4. Perthguy

    Perthguy Well-Known Member

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    Yeah, but I don't paid to make up ****.
     
  5. Propertunity

    Propertunity Well-Known Member

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    Harry Dent again......? Yes
    Launching another book is he.......? Yes
    Why do we give this guy oxygen?
     
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  6. highlighter

    highlighter Well-Known Member

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    For stocks to drop 80% they'd have to be overvalued in the first place, and valuations to prices are sitting right on the long term mean. As for his house prices could drop 20-60% argument, well... it has happened in major cities all over the world, so. It's really not that much of a remarkable prediction. Not saying it will happen, but it sure as bejesus might. If prices can grow 20% in a single year (Sydney) we can easily see a correction of that magnitude.
     
    Last edited: 1st Mar, 2018
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  7. TMNT

    TMNT Well-Known Member

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    Make enough predictions, you're bound to get one righr! And at some point in time
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    But he keeps making the same prediction, what do they say about a person who keeps repeating the same experiment expecting a different outcome?
     
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  9. TMNT

    TMNT Well-Known Member

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    Mr einstein !!!!!:)
     
  10. Nadine Cross

    Nadine Cross Well-Known Member

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    What about plain old investor sentiment?...I've observed a few times the market crashes due to plain old panic...look at what happened to the Dow the other week when some guy made a bad announcement on the media...all economic rationale jumps out the windows.
     
  11. kierank

    kierank Well-Known Member

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    Yawn! Yawn!!
     
  12. highlighter

    highlighter Well-Known Member

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    Well, I can't think of an example where such an extreme drop happened without stocks being wildly overpriced to begin with, but anything's possible. If it did happen, wow it'd be an incredible buying opportunity.
     
  13. Perthguy

    Perthguy Well-Known Member

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    20% is possible. 60% is wildly unrealistic IMO. Some catastrophic event could cause a 60% drop but could not be predicted. Aside from that, Sydney and Melbourne are not mining towns.
     
  14. Knights of Ni

    Knights of Ni Well-Known Member

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    Somebody selling their $1M house for $400k....yeah right. Australia is quite simply not like the rest of the world....people pushing sensationalism are just trying to sell books...been done for centuries.
     
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  15. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    I have a couple of clients that are crazy full time traders. Crazy as in they live and breathe equities and plot charts on different stuff.

    They are expecting there to be a significant US correction. Originally this year or next. Now they also think Trump's tax cuts and other stuff may extend it out till he gets the boot, or starts a war.

    But I think their significant correction is approaching 20%.

    Has there even been a drop of even 50%? Except in the minds of someone selling a book or a speaking tour
     
  16. Sackie

    Sackie Well-Known Member

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    Imagine Double Bay apartments going from 1.5m to 600k! That's more delusional than people on clozapine.
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

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    I'll take 3 on Bay St, even if I have to put up with the noise and traffic. (I didn't say that I'd live there)
     
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  18. HomePage

    HomePage Well-Known Member

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    Australian stocks yes, but US stocks are well above their long term valuation mean. The relevance is that if US stocks correct significantly, the Oz market will likely follow in sympathy regardless of how good our own fundamentals look.
     
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  19. Befuddled

    Befuddled Well-Known Member

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    Couple days ago it was 40%, now it's 60%

    Saw an interview of Dent. I think he literally echoed the headline and promoted his new book in the same sentence. What a champion
     
  20. highlighter

    highlighter Well-Known Member

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    I thought it was wildly unrealistic to see Dublin drop over 50%. Same for LA, Miami, Barcelona etc.

    But I think there's something we all need to remember about these huge forecast drops.

    One, they happened over several years, with only one year (2009) of particularly rapid slides (25%).

    Two, they're also medians, and so not all assets lose that amount by any means. Most of Dublin's crash in particular was concentrated in newly built assets. If a huge swathe of those lose 80-90%, and most other assets lose 20% max, then it can balance out so to speak and average 50%. It's all about choosing the right assets. With apartments, especially those out in the sticks, growth has been almost entirely driven by recent investors. I have a hard time seeing many of these investors even paying P&I let alone holding on patiently if price growth continues stalling.

    Sydney isn't a mining town, but it's seen a pretty striking rate of growth, completely independent of rationality, taking average prices to 12-14 times the long term mean, in a period where credit, incomes and populations are contracting. Sydney could absolutely see a deep correction (though again, it is most likely to happen in fringe estates and apartments, those recent vulnerable, often still under development areas where most buyers are at risk of dipping into negative equity very quickly).

    I'm not sure I can imagine a 50% fall in Sydney either, but I sure didn't imagine one in Dublin. And look at it this way. Sydney has grown some 75% in five years. Even 20% would be a retrace of a single year, and slowdowns in property markets almost always last quite a lot longer than a single year, as the forces that prod them along move very slowly.

    Since 2012, population growth and incomes have gone backwards, as supply construction has undergone an unprecedented boom. Add in high principals and hard-to-get credit and I'm not sure I see where growth is or even can come from through the next five years, and the market's already looking very wobbly. If the market did go down 50%, it wouldn't be remarkable, and it would put Sydney back in line with the long term mean (actually still somewhat above it).

    If falling price growth levels off into a stagnant period as many expect, we risk seeing recent investors selling those assets already in high supply, or if more builders in the outer suburbs keep discounting, or is experienced investors decide it's time to cash out at the top... there's definitely a real risk. It's not pie-in-the-sky, or far-fetched, to imagine a steep correction for Sydney. By god let's hope for a soft landing, but I think the chance of there being a landing of some kind is very strong by now, and the trouble with landings is people invest in property to make money. Those recent FOMO investors who bought into Parramatta apartments or suburbia at the foot of the Blue Mountains might be in for a very rude shock.

    For those holding high quality assets in decent suburbs, assuming you didn't buy very recently and aren't mortgaged to the eyeballs and unable to handle the slightest market change, you're probably better off not getting into any panic (if one gets going, and remember I'm by no means saying that it will, just that it certainly can). Because you're right, Sydney is not a mining town.

    People will always want to live in Sydney, and after a correction, home buyers quickly replace investors as the prominent purchasing group. If the banks clam up, or if that group wants to sit on the sidelines in a slow market, the best way to continue making money is to appeal to them. This is why in Dublin rents for quality houses in popular areas went through the roof, even during the recession (and after several previous years of low yields). It's also why quality, family homes in good suburbs recovered very quickly.

    So if you own in Sydney and suppose the worst case scenario did happen, understand that as long as you don't own a very crappy asset (one where your competition in the form of similar assets on offer e.g. stock standard 1 or 2-bedders where there are hundreds going up around you) you are going to almost certainly see very contained drops, especially if you own in a suburb dominated by owner-occupiers mostly paid up on the mortgage (I mean why would they get into a selling frenzy?) You'll also be likely to attract tenants, and you'll be likely to sell easily after the dust settles, because good family homes will become the primary driver of demand in a market many investors have fled.

    The same logic can be applied to most of Australia. In a contracting market, be very aware of choosing good assets whose main market is owner-occupiers or tenants, in popular areas, and look to cash flow as your main way to earn money.

    In a 50% drop, the majority of that drop is just stalled projects (builders or developers going bust, overdeveloped areas not selling).
     
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