What comes next?

So although there is a lot of debate on this forum, I think we can all generally agree that we are long term positive on property and most have not been sitting around forever waiting for the bubble to pop.

However, I am sure we have all met people who claim that they are waiting for it to burst to pounce.

So assuming for the sake of this hypothetical that nothing catastrophic happens (recession / 30-40% drops) and we have a more likely 10-20% drop and some stagnation for a few years at worst case.

My question is- what do you think comes next for all the people who spent the last 5 years complaining about prices?

Do you think they all go and buy? or do you think they keep waiting for a bottom they never identify?

It’s easy to say you will buy when a bubble bursts. It’s had to put large sums of money where your mouth is.

 

I'll be buying (Owner Occ). My deposit saved is multiples of my annual income. I'll be buying approaching a bottom:
Responsible lending: Check, more BankingRC still to come.
Fed budget Balance -/+ 1% GDP: Check,
Global price of money at a positive real rate of interest: (trend underway),
10YR Bond rates somewhat reflective of Nominal GDP growth: no
Australian price of money at a positive real rate: No

ETA Q4 2019 - Q2 2020?

Basel IV 2022 increased capital floors this will limit how quickly the RE market bounces.

 

Most won't buy. What kept/keeps most of them from buying isn't prices . It's their philosophical approach to buying which is flawed.

 

Some people will buy, some won’t.

10-20% is definitely not a worst case scenario. 10% is pretty much what agents are reporting in Sydney and Melb already, 20% seems inevitable based on the acceleration of the headwinds.

 

I honestly think a lot will not buy. If they can find excuses during one of the greatest wealth building opportunities of our generation then they will find excuses in any market. I don't have a problem with that.

People on this forum complaining about prices and debt in 2015 and 2016 made a choice not to participate in the market. If you look at Sydney and Melbourne particularly between then and now they have sacrificed a huge opportunity to make money. That's their choice and they have to live with it.

As long as they don't continually insist that others should not participate then I don't really care what they choose to do.

 

Not really sure this is true. We are heading quickly back to 2016 prices, add in holding costs, interest, maintenance, rates, agent costs, stamp duty and you are looking at a big loss.

Same money invested in stocks would likely have been multiple times better off over this period.

 

Depends if you sell or hold resi property. I sold and reinvested into other projects.

It also depends what stocks you buy. Hit and miss. If you are looking at the index, from 2015 to 2018 both Sydney and Melbourne resi property outperformed the index.

My point is if these people couldn't find opportunities in one of our greatest ever booms then they likely never will.

 

I don't really get who are "these people"are. Seems like a sweeping generalization.

Some people invest. Some people don't. There's a spectrum of people and spectrum of reasons.

 

If you were around in 2014/15 you would know. They are a group of people claiming the market was overpriced and would collapse any minute now.

For example an article was discussed for months along the lines of: Australia’s banking system is a ponzi scheme and it is about to collapse posted in 2015 I believe

 

Most ppl I spoke to pre Sydney boom about buying were very negative on RE as prices weren't going anywhere .

Most ppl I spoke to once prices were rising were cautious and wanted to see how the economy plays out first .

Most ppl I spoke to once prices were well underway became afriad to buy in a heated market.

The same cycle goes round and round for a large segment of people who'd "like to buy" but can't seem to get in.

Prices wasnt the problem. Mindset was.

Only now it's much worse . Mindset AND prices will be the problem . Game over for many. Permanently.

 

Oh, and I don't have any objection to people who choose not to invest. It's up to them. What I object to is people who join a property forum and try to convince (bully) other members not to invest in property because it is "bad" and/or because the market is about to collapse. If they can find an excuse not to buy in 2015 or 2016 then they can find an excuse any time

 

I know some who complained about the price and everything is overpriced before the boom back in 2011 or 2012. But bite the bullet and brought two in 2016 and 2017 when the boom was well underway and thinking its not going to drop. Herd mentality I say.

 

It'll be a mindset thing.

In Darwin we've had a fair dinkum crash (-30%).

There have been about half of my friends who have seen this as an opportunity and switched from renting to buying. All of them can't believe how good they've got it.

The other half are not thinking about buying, have other priorities or want flexibility to move.

Neither are wrong. Just different ways of looking at the world!

 

Unfortunately many people simply buy at the wrong times. They want to buy when the markets are very optimistic (many get burnt at the top of booms) and are too afraid to buy when markets are flattish or moving slowly (miss out on some great opportunities).

Personally, I believe counter sentiment buying is the way to go. Buy when markets are flat to moving slowly. You will be able to get a much better deal than when markets have moved or moved significantly , your overall risk will be lower and you will get the full monetary benefit of being in a market from the beginning of a boom to the top.

When markets are flatish or moving slowly, I get very excited and buy. When markets have already moved and moving fast, I get excited to watch my asset grow. NOT buy during those times.

Not saying you can't make money buying once a boom is underway. Just saying to many people try to time it and miss completely then are locked out. Getting in 'close enough' to a good part of a cycle is a lot better than trying to get perfect timing and missing out altogether, which many experience.

 

increase 20% In my share portfolio last week, thank you trump and mr xi

also settling on a property in melbourne, next month.. my money is not in my mouth anymore xD.

anyways, seriously you also have to consider the reason the market is falling, one reason in our states are because of credit crunch, for those who cant afford because of prices, now cant afford because of finance, makes no difference to them, they just cant buy

thats just for people who sold or are selling now tho.

 

What comes next?

For those that are patient.... Christmas comes next.

But, you must be lucky and ensure preparedness meets the opportunity that will present

 

Unfortunately there are a lot of cynics out there. They refuse to accept there is any opportunity anywhere with property.

I don't mind the sceptics so much because there is a chance they could be convinced of another way if they're presented with the right argument or data.

On the other hand, most cynics have given up, but they haven't shut up...

 

Proof that it can be done!

Maybe. It depends on whether you see property as a marathon or a sprint. I seriously doubt that in 20 years people who bought in Sydney or Melbourne in 2015 or 2016 are going to regret it.

Then again, I bought in a peak in Melbourne and never regretted it.

 

Is it limited to Syd/melb?,
What about many investors who bought in at the peak of perth cycle, say 2007, on credit and have still not recovered the cost of their purchase?
transaction cost, holding & opportunity cost for more then a decade now?

Keeping the argument of MWM aside,
Do you think a lost decade in Syd/melb similar to perth is next to impossible?

How likely is it that the peak price in syd/melb do not recover by 2025 given the headwinds this time are much harsher?

Would be very interested in what people think on this? @Leo2413

 

I have not thought about it. I was looking to purchase in Perth in 2007 but my analysis suggested it was overpriced so Iooked to other markets. Every person who wanted to invest in Perth in 2007 had that option.

I don't really understand your question though. You are asking if I feel the same about investors who invested in one market well before that market peaked and investors who bought in a completely different market at the peak. No, I don't feel the same way about those investors. Why would you think that I would? It's a rather odd question.

Of course I don't. How many times have I quoted Sydney 2003 to 2013 now? Of course a market can be flat for 10 years. I have never suggested otherwise