Why property chat ?

I think you're asking: who is the greater fool, the person who pays $500K more than they should or the person who sold?

Is that right? Your post is a bit unclear to me.

The greater fool idea is easy to understand: Greater fool theory - Wikipedia

I'm not trying to use it as an insult. It's the idea that people buy things (like property) with the idea that sometime later another person will buy it from them at a higher price.

Of course, that person has bought using the same logic and must sell to another person who pays more, who is buying for the same reason and expects someone else to buy from them.

Hence the idea of the "greater fool" - it's okay to pay an high price for property because there will always be a "greater fool" who will pay more for it later when they buy it from you.

Is this what you were talking about?

I again repeat, I'm not trying to call people fools. I'm using the term that exists already. Just like Tulipmania is not saying that you as a person are gripped by mania.

 

What i'm talking about what trigger do you think will the down-turn start on a massive scale and why in property prices ,you go along to any auction in inner Brisbane and you will see some narcissistic individuals who by the way they carry on think they are the central residents of the world till they see the end price result,and some small inner city southside pockets have been going 12% per year for the last 30 years..

 

I agree with @emza about greater fool. If you want to make money in property you want to sell to the greater fool not be the greater fool.

The same concept is to be fearful when others are greedy and greedy when others are fearful.

 

Oh, okay, sure.

There are plenty of triggers for the bubble breaking.

You have basic mathematical hard limits. You can't pay 100% of your income to a mortgage. Prices are escalating faster than the wages that can support them, we're getting two income couples taking out I/O loans for their home, we have widespread mortgage broker fraud, we have some unknown level of illegal money flowing in, we have mining continuing the slow collapse...

You honestly don't need a "trigger" at all. Have a look at the sheer number of investor loans and then I/O loans. Tens of billions negatively geared who need capital appreciation or they're just losing money.

They can't have a plateau. Growth lower than inflation is just a loss. How long will they hold on when prices flatline?

In the end, you can look at a million things. It's easy to complicate it to the point that it seems overwhelming.

The simple answer is: this bubble will break like all the others because that's what bubbles do.

The sentiment that drove it is irrational and there are plenty of greedy players out there. For every property investor who thinks they are prudent and educated (and they do exist and many are on this forum) there are many more fools who are literally buying because property goes up and the last one went up and so this one will and let's go mate!

What triggered Ireland? Overbuilding and then a tiny % drop. A drop after record growth month on month. A drop that accelerated and down it all went. They're still bulldozing vacant homes over there.

What triggered the US? Sub-prime finally exploding. A single bank unable to continue doing what it did every single day for years.

The single "trigger" idea is a way to look at history but it's rarely so neat.

Next year maybe the LNP finally get that stupid "access your super for a deposit" up and running. Then the bubble keeps going for a while more. They flood some more immigration. They double the FHB again.

They can kick this can for a while.

But again, remember we just had an election that the LNP barely won where housing was a major issue.

All these articles about smashed avocados, homelessness, youth unemployment and underemployment, the rise of One Nation... it all ties back to a central point about inequality. Wealth disparity. A group of the population taking all the wealth gains and starving the rest.

That never ends well. It never has.

So the can might get kicked but perhaps we'll hit another election and suddenly in will come that ban on NG for established homes.

Or we'll look to Canada and see their recent moves and bring them in here ourselves. It's not too much to ask for the financial stability of our country that deposits be higher, right?

I think we're already in the burst. It's happening in Perth and regional Australia and many just don't know it yet.

The cause was humans being humans and the trigger is just the same, humans being humans.

 

Sounds like you read a lot,but greed always overtakes fear ,till fear comes into the markets..if you can get a copy of these 2 books a well worth a read..
Flatland - Wikipedia
http://fooledbyrandomness.com/ARTE.pdf

 

You do understand since APRA stepped in that servicing is actually fairly conservative these days. 7%+ based on P&I for most as a assessment rate, higher MLE, existing repayments with buffers, yield maximums, restrictions to o/seas borrowers/income. These all restrict your credit volumes you're going on about, these put limits on price but don't mean they put property into a bubble - thats exactly why they're implemented.

Question do you own your own property or do you rent?
What asset class do you invest, property, super, shares, cash?

 

APRA are a joke.

There is a massive pile of evidence regarding mortgage fraud on the part of banks and brokers. ASIC looked at I/O and found 40% of loans had serious problems.

APRA have failed comprehensively, allowing rampart crime and fraud to proliferate.

I rent. I invest in three main areas - standard vanguard index, an unhedged vanguard international index and my own business.

I walk my talk as the saying goes. I know there is a bubble and when it goes so does Australia and our currency - hence the unhedged index.

Investing back in my own business returns far higher growth but there is a capped limit there. For example, last year I reinvested $72K that this year is approaching making back $72K and next year will make 50-100% of that again before settling to approx 50% ongoing.

 

Hi emza, could you elaborate on the evidence of mortgage fraud please? Before the GFC happened, Michael Burry had his research to back his call.

Thanks.

 

Actually I think what APRA have done was the right move - likely could have come earlier, but that's like most things.
They applied enough pressure on the banks to get results, changes happened, they weren't small changes, they affected a lot of people.

I believe this is the report @emza is referring to.
http://asic.gov.au/about-asic/media...tandards-following-interest-only-loan-review/

I think you would find that the APRA changes would have a major impact on new applications going forward.

Looking more recently article being last month - ASIC look like they're happier with brokers and IO - doesn't mean it right but on the improve, not decline which would be a 'flag'
http://asic.gov.au/about-asic/media...ices-in-relation-to-interest-only-home-loans/

If a bubble does occur like you're suggesting it is, which you feel so strongly about.
How do you think the standard index will perform?
Not sure what your business is, but would have a guess it would have some impact if there was a bubble...

 

Google has plenty to say on the subject:

You don’t need a “good job” to get a mortgage if your loan documents bump up your salary by $288,000.

Pile of evidence here (was presented to Senate): http://www.bfcsa.com.au/

Another article from a survey: If you lied on your mortgage application, you're far from alone

QBE paper on mortgage fraud: https://www.qbelmi.com/Uploads/Documents/bf78f10b-d888-4b64-aaf3-f2c79f346f2a.pdf

Bank fraud rife, institutions fudge loan applications: economists

And most recently: http://www.theaustralian.com.au/bus...k=81fe7580ee406f86c565ecaf03cf4b9b-1477272490

You can keep going of course. Look up Chinese lender fraud. Mortgage broker fraud. Loan application alteration.

 

The standard index will be hammered. It is 40% AU plus another 5% directly into property. When you start to do the sums (given the size of banks as a % of our stock market), it's very heavy AU and extremely exposed to property in particular.

That money is a very long-term horizon for me (and isn't the bulk of it). Cash I put in today isn't coming out for another thirty years or longer. I have been considering moving more of it out of AU exposure but then I start to hit moral/ethical issues such as whether I have any obligation to my own country to invest here.

I work in a digital business, not connected to Australia. I can live anywhere. The biggest impact on my business is actually the US economy. Australia could crash as hard as Ireland and it wouldn't touch what I do unless of course the contagion spread to the US.

 

That is not evidence, that is anecdotes.

If your own "evidence" it states that there is no evidence! Most of what you linked to is just nonsense from Lindsay David and Philip Soos who are passed off by the media as economists but aren't actually economists. The only credible source you linked to says this:

Mortgage Fraud is a rising concern in the Australian Lending Market and whilst no statistical data is available on the outlay of fraud, anecdotal evidence suggests it has cost the Australian banking and finance industry millions of dollars per year.​

https://www.qbelmi.com/Uploads/Documents/bf78f10b-d888-4b64-aaf3-f2c79f346f2a.pdf

It is not factually correct to state "There is a massive pile of evidence regarding mortgage fraud on the part of banks and brokers" when the "evidence" is anecdotal. The reality is that we simply don't know how widespread mortgage fraud is.

 

Interesting that you believe it will be hammered and yet you continue to invest.
Furthermore to your intrigue is that you view it acceptable for index investing to be long term and not property, I don't plan to sell any of my property in the next 5-30+ years.
Do you think that people here are all property traders, yes there are developers, this is higher risk - also higher reward. Those that do it well hopefully play with reserves in the tank.
So thought of taking funds elsewhere but now investing emotionally as a patriot?

Best of luck in however you proceed, but based on your responses you wont hear anymore from me.

 

I do believe it will be hammered which is why I mentioned my thoughts of moving money out of the AU exposed and putting it elsewhere. I'm still deciding because my business is growing and I may simply reinvest in myself for a much higher ROI.

Property can be a long-term investment but that's not what is happening in Australia. We have had tax law changes which produced a massive surge in cheap credit flowing into housing. Buying a house for $700K and thinking you'll be fine if you hold it for thirty years isn't the reality. The reality is that you've bought into a bubble, just like Ireland. Significant real dollar losses will eventuate.

I talk about feeling conflicted because this is still my country, my children will grow up here and flooding out investment can really screw things up. I hate what the property bubble has done to Australia. We're headed in the direction of Argentina, our industries hollowed out, everything sacrificed to the God of Rising House Prices. It's sickening.

 

Emza

If you want to change things ( and many around here believe the current set up is less than ideal , but it's the system we have ) stand for parliament , get elected and make changes . You're more likely to achieve something by doing that , than making unsubstantiated and rediculous claims on the forum . We're too smart for that .

Making those sorts of claims have worked , to a degree for the Donald so maybe it'll work for you in politics . I mean Pauline Hanson got elected , so you don't have to be intelligent to get into politics . You do sound intelligent , the problem is you'Ve picked the wrong topic and the wrong audience

The issues you raise are things that the vast majority of forum members are well aware of . We have to be in order to be educated informed investors .

Good luck

Cliff

 

I for one cant wait until 2021 so i can repost some of these doom and gloomers comments then update on the wealth I've continued to create with deals over the next 5 years. There is always money to make in the markets, just need to know how to do it. Which market, what strategy, what price, what risk measures. This debate will go on forever. I hope it does because the market needs all sorts of ppl in order for deals to be found.

 

Denise Brailey presented her evidence to the senate. So did Soos and David.

Again with this... I get you don't like me contradicting you but you're starting to get into realms of absurdity in your desire to win here. There is plenty of evidence of mortgage fraud. If you've google "mortgage fraud australia" you can find studies, blog posts, senate hearing documents and much more.

Again, another pointless hill to die on.

 

So what I say is unsubstantiated and ridiculous... but the vast majority of forum members are aware of these issues in order to be educated informed investors?

Can't be both, can it?

I was happy to make a comment in a separate thread about luck vs planning... it was odd to have an entire thread be started by you from that and then to see it devolve into people just telling each other how awesome everything here is. Probably could have just started that thread without involving me at all...

 

I have no desire to win. All I did was point out that the "evidence" that you linked to stated:

Mortgage Fraud is a rising concern in the Australian Lending Market and whilst no statistical data is available on the outlay of fraud, anecdotal evidence suggests it has cost the Australian banking and finance industry millions of dollars per year.
​

You have claimed before that anecdotes are not evidence.

Again you falsely claim that I have chosen a hill to die on. That is false and absurd. You don't seem to be able to have a reasonable conversation so it's clearly pointless to try to engage with you. You won't be hearing from me again.

 

That will be a relief