What if the market tanks??

Wow. Rough lesson for flying too close to the sun.

 

Could have been worse I guess; like your joke for instance!

 

.....and that is what comes after a boom cycle .. BUST
Been happening for many decades, its easier to ignore, cos properties double every ten years that's what the gurus say

MTR

 

Possibly, but thats a likely outcome presently without some other yet be determined catalyst. Wage growth will need to take off. If you look at the period 1990 to 2001 thats what we may be looking at. Without leverage it might not look as good but returns with it will hopefully be okay.

 

Not all property double every 10 years cause if you buy in Sydney now it might be a bit hard to get double in 10 years, however if you purchased 3 years ago you would be well on track to get double.

Some people buy in regional towns right before the mines come and make huge profit and sell, they make excellent capital gains however the person that bought right before the mine announced it was going to cease operation in 12 months time are left holding the baby...

 

I think what they were saying they would still be happy if it took 15 years instead of 10 years. Some people are not in it to retire overnight (or 10 years), some people's plans might be to retire comfortably in 30 years and are going to keep to what they like.

Does it mean they could do better for sure, but lower risk less reward.

 

Look at melbourne for example. If median prices are 1m if 15 years from now that would mean it barely beats inflation. Is that in any way, shape or form a good investment?

 

Maybe it comes down to your timing ?

I know many people who did well buying in rocky and Mackay .

A friend of mine recently sold their investment property in Wynnum , having bought it seven years for the same money . They complained that Wynnum will never go up ......

We bought in Wynnum two years ago and it's higher than when we bought it and the market seems to be picking up .

Cliff

 

I would think Melbourne they were thinking 1.5M and would be happy even if it made it in 15 years.

 

Reminds me of my parents with Mansfield (Brisbane) nothing in 8 years and basically quadrupled in the next 9.

 

I know, it was a joke.

 

Tbh I don't know how well I'd do in a 20% downturn... I don't have the confidence to say I'd be rosy and fine, because I probably wouldn't be...

I'm at around 76/24 LVR and have an 'ok' cash reserve in offsets but if the 'puppy' (as PC likes to sensor the poo word !?) Hits the fan, I'd be in strife about about 6 months or so of flailing.

 

Why would you be in trouble if the value of your properties declined 20%? Or are you saying you'd be in trouble if that happened AND you became unemployed for an extended period?

 

Hey Steven, probably the latter. Downturn of that size would surely have some collateral in high unemployment too...

Mind you, high unemployment in Australia's future is looking more and more likely :/

 

The OP raises a legitimate point about the market. Take a listen to a recent ABC podcast, which tackles the issues of property with a strong historical perspective that is worth your 30 minutes.

 

As long as you can service your debt, a paper loss caused by a slump in the market wont really hurt you. It will reduce your equity gains of course, which some people consider a loss - but it's not a realised loss in the same way an actual red ink loss is , so it's not a loss so much as a step backwards. Of course, if you saw a slump in prices and you were unable to service the debt, you'd certainly have a problem that would involve red ink

 

Good point @euro73

 

Really?
My approach is very boring long term buy and hold.
I would obviously prefer higher returns, but IF it takes that long to get good growth from a multi million dollar asset base is it really that bad?
Short term market stagnation/falls doesn't scare me, long term stagnation does.....it's not likely based on history though is my point I guess.

 

This is what happened to us during the gfc. We bought a massive development site at the peak of the gfc. Heavily negatively geared, but luckily I had high income at the time. Market tanked and it probably dropped by 40%. We ummed and ahhed about whether to offload it or hold on until the market recovered. We eventually held it and sold it 7 years later for what we paid for it.

The biggest impact was the opportunity cost of being out of the market during that whole period.

 

Onwards and upwards.