The garbage may be about to hit the fan in Sydney

You remind me of one of those fitness infomercials where they get paid actors to give testimonials.

 

It could.....but it is is the fire sales which will be interesting...

Sub 400k is very possible as a median....just look at WA.......if building industry slows in NSW and the economy hits bump...that is definitely on the cards

 

LOL thats great. But in all seriousness I'm sure there are huge amount of people still making money in Sydney. A lot of bitter guys on PC and also guys not on PC that are upset they missed and continue to miss out on the gains in Sydney.

 

If Mt Druitt drops below $400k (which it will not) - I will buy as many houses I can there. I would even consider selling some of my other houses closer to the CBD and rebuy in the Druitt in a heartbeat -

Some people still cannot see the big potential the west has. Keep being in denial but i;ve said this a few times now - when you see Billions and Billions going into investment and you cant see the opportunity vs risk well good luck to you.

 

As long as interest rates are low and migration/pop. increase keeps up there wont be a problem, especially out west in Sydney.

However I am pretty sure if there was a recession and rates went back above 7%, coupled with gov policies that would limit immigration, Australian property may not be an asset class worth putting too much money in.

Of course no one would even think it would happen, but a 2.5 decade boom in property here could reverse into a 2.5 decade bust in property in the worst case.

 

I understand you are very bearish, but if I/r's are to go above 7% that is a sign the RBA is increasing rates to slow an economy that is accelerating to avoid excessive inflation not a recession.

If there was a recession (unlikely but let's say), I/R's are reduced by the RBA to stimulate the economy and encourage growth, employment etc.

As a simple example - Check out the mining boom and higher i/r's when Aust was flying to slow down economy and then reduction in i/r's when gfc hit to encourage economic activity.

Hope that helps your understanding.
Cheers

 

Shots fired!

 

Correct. But if a recession or gfc type event were to occur now, we no longer have that option.

 

That's a lovely textbook definition of central bank actions...
However it is incomplete.

There are many external events that could cause interest rates to rise. Particularly considering our reliance on foreign borrowing (60%).

One example if there was military conflict in Asian region expect rates to jump at least 2% overnight.

 

Correct. 5000 year lows. Only one direction for interest rates

 

Technically we could go into negative rates, apparently this results in having to pay intrest to the banks on your own savings.

 

So last time, did someone say '4000 year lows' or '4500 year lows'? Couple of monks drinking beer, scribbling loan records by candlelight....

 

Still got another 150 basis points

 

Yep google deflation. Ouch for ppl with debt.

 

Ha no, negative interest rates would never had made sense without the radical financilisation of economy that has been orchestrated recently.

Would require lots of beer before this would make sense to monks

 

shame. i was waiting for some sumerian wisdom.

 

That may not always be the case.

If anything negative were to happen China side and commodities like iron ore/coal/gas were to take another big hit, our economy would slow even more. Unemployment would rise, and economy would be bad. Sure RBA will drop rates in such a scenario and do a stimulus. But what if oil prices suddenly went up at the same time? Think current situation in Perth and if oil prices suddenly went sky high.

There's something called stagflation where you get high unemployment and flat or shrinking economy/GDP but with high inflation
An Explanation Of Stagflation

[An effective method of addressing stagflation once it occurs is equally elusive. During the 1970s, stagflation persisted in the U.S. despite the government's best efforts to contain it. The trend was finally broken when the Federal Reserve hiked interest rates to the point where borrowing was impossible for many segments of the economy, and the country fell into a deep recession.]

Such a case as could very well happen if our economy went into a downcycle. Whilst at the moment this is not a very likely scenario, given RBA can still do a bit of rate cutting and more stimulus (our debt to GDP is still not that massive yet) in the longer term, with most of the big economies not doing well at all, USA, Japan, China, Euro all massively debt laden and subpar economic growth, we could run into this scenario at some point in time.

 

TBH we can all speculate but nothing major or catastrophic is going to happen to the economy in the foreseeable future. Even the issue with North Korea and if **** hit the roof I don't see major major worldwide implications if the US wiped out the government there. Their contribution to the worldwide economy is minute and insignificant.

The only issue is if they did try bomb Japan or something which by reading a major article their biggest missile would cause large fatalities but nothing compared to what the US can do. They would be gone very very quickly and Mr Rocket man does not want a death wish. He cant be that stupid.

If we speculate something long enough it will eventually come true wont it? The guys that have kept saying its a bubble since before the GFC are still saying it's a bubble - I said this exact same thing to a naysayer today at the gym. "If you predict something for long enough it will eventually come true"

 

Just watched an interesting clip where they discussed this possibility. Also a prediction of an impending US financial criises.

 

Zerohedge quality.