too much debt we have now?

As a potential property investor currently refinancing for possible investment, I've been educating myself heaps on the property side of things, but have only recently started to take a very wide macro view of the situation.

There genuinely does seem to be major considerations to take into account jumping into investing in the current climate. With regards to property debt, and personal debt, Australia seems to be following the history of other nations. We partly seem to have 'borrowed' our way out of the GFC (yes it wasn't the only factor, but part of it) and surely unless there's some hidden economic unicorn set to aid the nation this record smashing level of debt is seemingly going to hurt?

I know that there are ups and downs through out history, and worrying about the next 'doomsday' situation can have you never doing anything.
The thing is I was so set on jumping into the IP market quite soon, though all the broader indicators have me double taking. How many more tricks are left in the tank to keep it propped up? Growth based so much around ever increasing debt ratios logically has a sealing, and a worse if other factors make times tough.

 

This is certainly a very different environment to invest in. Investors need to understand the challenged and adapt their strategies accordingly. The strategies of the past won't cut it in the environment we are in now. For me this has meant selling down an asset to deleverage and position myself to take advantage of deals I would not otherwise have been able to take advantage of. I keep my LVR low and keep a cash buffer as well.

 

Yes in Kahiba

 

your analysis is great!

I also sat there wondering what tricks "the *******s who are not being kept honest " could pull out of their tank. The trick with enticing wealthy immigrants from Beijing eluded me because that is getting close to treason against ones own people , at the very least its economic terrorism of ones own people. I never expected the Goverment would do that but I realise know that nothing is sacred to our politicians and also nothing is sacred to the Aussie out on the street. There are no ideals around anymore to support families, to build a nation of equity, to build facilities like swimming pools and or to provide education for all for free or very cheaply. Australia is dead on ideals and values. I was in China today, oops sorry Sydney, and it's essentially on its way to becoming a Singapore style city. Apartments and houses strewn around aimlessly amongst badly planned streets with property prices that are crazy and Chinese billboards everywhere in Chinese letters so it's not even readable to English readers. On the train the language spoken was mandarin and as I pondered this I thought good. The Chinese will do a better job with this country and civilise it. I look forward to that change, and am signing my kids up for mandarin lessons.

People are carrying on about an apartment glut in Sydney and Melbourne, what the developers know and the Goverment knows and the real estate agents know is that of course there is a glut, however there are many, many fools Who will buy the properties and then the Goverment will open up the border as has been pre-agreed with the developers and real estate agents body, to let in the cheap labour. The cheap labour is required to do the jobs that nobody else wants to do in the ageing population that is moving out of Sydney or into aged care or into retirement living or Into the cruise ships. By simple analogy, the Aussie council cleaner close to retirement owned a house in Sydney and has sold it for a million bucks to a Chinese family. He has moved to some cheap unit in a regional fishing town and has 500k left over. The council has farmed out his job to a subcontracting company that is bringing in cheap foreign labour under the new laws that were brought in courtesy of Gina Rineheart and this cheap labour will rent the apartment out with three others like him. This can be seen in Newcastle at the moment, lunchtime take a walk along honeysuckle drive and see the Filipino fisherman that work on the construction sites building the apartments and offices here. Just like Singapore has tens of thousands of dirt cheap labour , so that is also the plan for Australia.

Anyway the boom is only in Sydney, central coast near Sydney and Melbourne. Newcastle is booming for a bust. The Novocastrians think this boom in Sydney naturally applies to them but they are deluded. It's 2.5 hours by train marginally less by car. It's like expecting bunbury to boom from a construction boom in Perth.

Just save your money and build up cash, with property prices this high, it ain't going anywhere and if Sydney prices do not return to normal prices don't be surprised, that city is now an anomaly and the Goverment wants it to become a Singapore. It will become a Chinese city within 20 years and the locals will be displaced as the Chinese monopoly on jobs increases and the businesses are bought out. This to I have seen in other cities around the world. But the Chinese want to live in enclaves in Sydney, or Melbourne they won't easily move to ther cities.

The tricks they can pull out of their bag are many and expect many. They think very short term so they do things quickly. Look at what has happened in 4 years in Sydney. Property prices went from $600k median to 1.2 million.

The Chinese will be the ones that can afford to take a hit when interest rates rise, but I tell you one thing I am sure of, anybody buying at today's prices in Sydney, Melbourne, Newcastle and Central coast is going to be rueing the day they bought anything in 2015, 2016, 2017 and 2018. There will be suicides and family tragedies aplenty. Seen it all before.

 

170% debt to income, that'd be nice! Over 2500% in our case!

 

Yep mines sitting at 1200%

 

Just as there is damaged caused by reading to many prornographic magazines. So is there damage caused by reading too many property investing magazines.

Realise that there is something called propaganda.

Every time a median property sells a real estate agent makes $20000 and a state government makes $20000 and a bank makes $20000 that they lend out and make 48% interest on and then on top of that take $20000 interest after a year from you from money created out of thin air in their computer.

Who do you think in Australia wants you to buy and sell houses? What's that market worth to them?
It's a trillion dollar industry.

Do you really think they will not invest in the media to promote the business? The glossy property magazines and news artIckles on domain and the Reno rescue program types of tv. It's all paid for commercial television to keep the Aussie consumer fixated on what they want for Aussies.

 

Any buyer of a property with half a brain will just hang back, stop going to home opens and save money and pay their debts down now. Property prices are not going anywhere. Let the Chinese buy your property if they want to pay crazy prices, it will eventually drop.

I gave up this weekend in looking to buy a property in Newcastle. I don't see the value in paying over half a million dollars plus for a rubbish 3 bedders miners cottage that was always the house of the poorest classes and getting it sold as something exclusive by a pinhead agent.

If nobody else can see how crazy that is good luck to them.
It would just take 4 weeks of nobody going to home opens and buying nothing to bring the whole house of cards down to its knees and property prices to plummet. Now that ain't going to happen. So I will wait for the coming economic meltdown.

Hello high interest rates, I was expecting you. No, no my neighbours all thought that low interest rates were a way of life.

 

I

I agree with you about holding off but not about the miner's cottage thing. A friend of mine has a miner's cottage in Erskineville and it is beautiful - and a nice size. He has taken out a wall or two. Apart from that it's heritage listed. A pain for renovating, yes, but worth a lot now.

 

I agree with much of this. However, it's a global phenomenon affecting developed economies tied economically to China and governments as firm believers in laissez-faire capitalism. An over reliance on expecting people to spend excessively has led to country's relying on property to boost fragile economies. The speculation on property is undoing many locals and allowing the world's wealthy, particularly those from developing nations, to cherry pick property in what appears to be safe, secure econmic environments such as Australia.

China often gets dragged through the mud in this regard but justifiably so. With a massive population, growing middle class and authoritative government looking to solidify it's standing in Mainland China as the only entity of power, naturally the Chinese want to secure their future assets in the case it all goes tits up there at some point in the future.

This is globalisation, something many didn't wish for, but we're told to accept and embrace. I'm critical of it yet I enjoy the privileges of it, living as an expat, which probably places me in the hypocritical category....haha.

TL;DR - Governments are struggling to find ways to stimulate economies and are a selling out their locals to satisfy short term, next election growth targets.

P.s. I do own property so go to town on me