Why property chat ?

Ahhh @See Change, you remind me again about TheWive. Feels like just yesterday she teach me "how to fish"

 

Good post @Sea Change....I'll open up the shoulders a bit here
My only regret is I didn't stumble across this forum earlier when it was originally launched. I love this tangible asset class so much the majority of my adult working life has revolved around bricks & mortar. Even with combined 30yrs experience in RE sales, renovations, IP & having an undeniable advantage of being married to a bean counter life is pretty good ( I'm actually posting from a cracker of a place called elements @ byron bay sprawled out on a day bed ). My point is I'm still learning something different everyday, when the " you think you know it all " mindset creeps in I think you're setting yourself up for trouble, its always revolving.

The obvious trolling makes me laugh, who knows what motivates them, insecurities, jealousy etc so taken with a grain of salt here. I do enjoy listening to the members that are just starting their property journeys, imo it takes courage, and like someone said earlier, it all about attitude. This is a key element for success, because attitude will take you that extra mile, and that mile is less travelled.

Im so grateful to share & learn from so many like minded people....So I say thank you seasoned members, admin & the like....I enjoy being here .

 

Agree 110 % , but every so often I get sick of it and respond . As bob shovel pointed out on the original thread , there is an ignore button , which I have used on a regular basis for a couple of years .

Main reason I started this thread was we seemed to have had an influx of new members so I thought it needed to be said . I'm fairly certain I've done a similar post before ....

Cliff

 

Easily the most important thing I have learned here is risk management. Knowing when to deleverage is just as important as knowing when to buy.

 

@See Change I always appreciate your posts.

 

@Toon such a fantastic post!

 

Those who keep learning, will keep rising in life.
'I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.' - Charlie Munger

SC - great post. Repetition is a good way to learn.

 

Great quote, thanks for sharing!

 

Cliff,

Probably one of PChat's best liked posts, at a guess, (but @Simon Hampel could tell us the stats...) and if there were a Double-Like button, I would have clicked it.

TV

 

What people call "DD" on this forum is all too often greed that happened to turn out okay because of unchecked credit expansion.

Someone talking about buying 19 properties in one year. See how that strategy worked in Ireland 2006-2007. There are people who ruined their lives because they played that strategy, not realising they were the greater fool.

You'd think being an educated investor would mean also being a student of history. It would mean understanding psychology and mathematics.

But no, not here. Bring up Ireland and someone will literally say Australia isn't Ireland, as though that means zero can be understood and applied from that country to our own.

Bring up tulipmania and get crickets. Irrational exuberance? Not here. Greed? Stupidity? Nope.

Bring up basic mathematics and get anecdotes in return. In the past you had a dollar and something cost a dollar. Now people still only have a dollar but that same thing costs $10. But on here it's "affordable" or people will tell a story that basically boils down to: it was actually harder in the past, despite every single bit of factual evidence showing the opposite.

Feels beats reals badly on this forum.

Survivor bias is a real thing. It might be prudent to consider whether it affects you and the way you think.

Right now Vancouver is crashing hard. The Canadians inflated their housing too with cheap debt. Then a few rules changed and suddenly down it goes. And just like Ireland, the US, Spain, Japan, the dot com bubble, the south sea trading bubble, tulipmania and every other economic bubble created by people flooding money into a sure thing, they had people just like you and me having these same conversations.

The ones saying it will crash because mathematically housing prices can't outstrip wages forever and the ones proclaiming permanently high plateus or new normals. (And we know in all of those bubbles who was right).

Groupthink is strong here and threads like this one just make it worse. You want to push away anyone who disagrees.

The advice in the owning four IPs outright was astoundingly bad. It was bad because it's the identical advice given no matter the circumstances. The gulp huge debt, wait a short time for equity to rise, redraw and gulp again only works in a climate of ongoing credit expansion. Yet people are suggesting it when the total volume of money out there is declining.

But why do they suggest it? Because it worked for them in different economic circumstances years ago. So it will work now too... ignoring basic maths that shows us, again, that prices cannot inflate faster than the wages that support them.

Bring up that basic fact and in return you'll get "plateau"... just like Ireland plataued... no, wait, the US, damn, I meant Japan...

But that's groupthink for ya. Facts aren't facts and your story beats reality. Housing bubbles are a myth and they never break and hey, don't worry about the divorces, family breakdowns and suicides that follow those mythical crashes.

We all know there are legitimate educated property investors. We know there are stupid suckers, equity mate, borrow to the hilt, it always goes up.

We know there is greed and stupidity. We know that fortunes can be made by the clever and the lucky alike.

We know many of the clever have had their wealth inflated by the greedy.

But if you are a student of history we know that greed cannot continue. It breaks away from fundamentals and then it... just... breaks.

So excuse me if I call bs on some people here. If you don't know what tulipmania is then you're not the clever investor.

You're the other one.

If you think buy, wait for equity, buy again is the way to becoming a millionaire, you're the other one.

And finally, really think hard about whether you want to push all dissenting voices off this forum. DD requires prudence and looking at the hard questions. If you can't bring yourself to look at the idea that wealth grew not because you are a brilliant investor who "took a risk" but because of unchecked credit growth... well, you're the other one. The greater fool.

 

That an interesting comment from someone who has previously claimed that take away all the BS and it is only credit volumes that drive up prices. Why would we need to know about psychology then? Isn't that just BS?

That's right. I brought up stupidity with you and got a resounding nope.

So "Irrational exuberance" then? No, nothing to do with it?

I found the advice for him to proceed to buy 4 and pay them off astoundingly bad. Basically he was advised to spend $1.5m to purchase a mediocre asset base with an astonishingly bad return. If he just wanted to invest that amount of money, property is not the right asset class. Why was this not raised by the yeah, go ahead and waste 1.5m on crappy houses crowd? Astonishingly bad advice.

If you don't mind it when people call out your bs, that's fine. Happens all the time.

I can't speak for anyone else but I don't want to push all dissenting voices off this forum. As long as people post according to the forum rules. Go around calling everyone a clown and you won't last long though

As long as I can call it out when people post complete drivel, dissenting voices are always welcome.

 

Credit volume is the driver of prices.

You again seem to have not understood or are wilfully misunderstanding my point.

Here it is again: prices are 100% dependent on the volume of money in the market.

Focus on this fact and much of the BS falls away.

Perth is collapsing because the money volume has collapsed. It's always a direct correlation.

And yes, this is connected with psychology and human irrationality.

 

It's not a fact, it's your opinion and I believe it is wrong. I think you were correct when you said this:

And for the record, credit volume is an indicator of price movements, not a driver of prices. Prices are driven up and down by human psychology (herd behaviour, irrational exuberance, greed and fear).

 

I would like to address your comments on tulip mania and compare them to your claim that prices are 100% dependent on the volume of money in the market. I have quoted your posts in full so that you can't accuse me of quoting you out of context.

So if your claim was true, the price of tulips would have been 100% dependent on the volume of money in the market. This is not correct.

"In plain English, investors who had bought the right to buy tulips in the future were no longer obliged to buy them. If the market price was not high enough for investors’ liking, they could pay a small fine and cancel the contract. The balance between risk and reward in the tulip market was skewed massively in investors’ favour. The inevitable result was a huge increase in tulip options prices (see below right). (The price of options collapsed when the government saw sense and cancelled the contracts.) Spot prices (the price that traders paid for immediate delivery of tulips) and futures prices (the prices that traders would be compelled to pay for future delivery of tulips) were not volatile. And any movement of the spot/futures price was determined by simple supply and demand—the fall-out from the Thirty Years’ War, one of the bloodiest in European history, was one important factor. "​

http://www.economist.com/blogs/freeexchange/2013/10/economic-history

So prices were driven by simple supply and demand, as they always are. Supply and demand and their impact on prices is basic Economics 101. It is not a coincidence that the relationship between supply and demand perfectly demonstrates why prices are falling in Perth. To understand why prices are falling in Perth you just need to understand Supply, Demand and the relationship between Supply and Demand.

A. The Law of Demand
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded.

B. The Law of Supply
Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied.

1. Excess Supply
If the price is set too high, excess supply will be created within the economy and there will be allocative inefficiency. ​

Economics Basics: Supply and Demand | Investopedia

So it's simple. There are properties on the market (plenty of supply) and there are buyers (demand) but there are fewer sales and prices are falling. This is because much of the housing stock is overpriced. The price is set too high.

I have experienced this recently. Myself and my investment partner found a property that we liked listed at $580,000. Although we had a loan in place to purchase a property, we felt the price was too high. Note that credit was not a factor in our decision not to buy. The credit was 100% available. Later, the same property was listed at $480,000. We felt this was an appropriate price for the property and we bought it using the loan we had all along. What drove the price down? Was it a lack of credit or a lack of demand for that house at that price? Interestingly, we were competing with another buyer at the lower price and outbid them. It is interesting that lowering the price increased interest (demand) in the property that did not exist at the higher price. So once again, supply and demand determine the price of a property. It's fairly obvious when you think about it.

 

You're intent on threadjacking so here is the super simple answer for you:

It's auction day in Perth. Owners want $650K. Ten people turn up with varying amounts of money up to $600K. This is the total credit volume. It has an upper and lower bound.

No matter what, that property on that day has a maximum price of $600K because that restriction is inherent in the credit volume pool.

It's a fairly obvious observation but useful because it cuts through all the bs and lies. People can spruik that mangled word "demand" or immigration or whatever but on the day the only thing that determines that house price is total money volume available.

This leads to some obvious conclusions. Total money volume rising, prices rising in aggregate. Total falling, prices falling.

Why is Perth falling? Because people lost high paid jobs which reduced total credit pool which in turn reduces prices.

I really hope this is clear enough now.

Trying to threadjack is a crappy thing to do. Time to stop...

 

What do you think the trigger will be,the RBA can only cut the rates to zero then what happens?.

 

Sorry, not understanding... trigger for what?

 

Just trying to understand what you have posted,is the person a fool who bids at a auction and pays 500k more then the first bid ,then who is the bigger fool the title holder -the person who had the first bid-or the person who closed the sale..

 

All that this demonstrates is that you don't understand how the property market works. The price of the property is not set at $600k because the property would be passed in. Prices are only set at sale. No sale, no price. This money in the market nonsense is just that. Investors from Sydney have jobs and money but they are not buying. Why do you think that is? It's certainly not a lack of credit. I hope this is clear for you now.