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Hi all. It has been a couple of years since I visited this forum.
Haven't bought a property since 2006 and not looking to get one right now.
Like an increasing crowd I am somewhat concerned with how the global economy is playing out. Especially given that US is fuelling inflation whilst CB's like RBA is hawkish and don't mind raising rates.The two cents I however wanted to add;
Many people seem to assume that everything will be OK as long as they don't over committ and fix their interest rates.
This is however based on current situation. As it is now, living costs are sky rocketing whilst salaries aren't keeping up, so if you are negatively geared you may have shrinking capability to maintain the negative part of the monthly payments.
Secondly, if we indeed see a global recession or even depression, this will lead to increase in unemployment.
This could lead to forced sale of not only the investment property but also the home if this has been used as colatteral.So what I am urging is that when you do your risk assessment you take into consideration the worst case scenario as a possibility and look at minimising impact.
Not 100% sure about Australian mortgages, but I know some other countries have as standard that banks can request extra downpayments with short notice if the loan to value ration goes the wrong way.
Once you have protected yourself, I believe holding on to at least your home and another property for the long term is valuable.
If nothing else becasue of increasing replacement costs as cost of materials and energy is running wild. (Not to mention potential impact if we have passed peak oil production.)Right now more than since the 70's I however believe diversification into precious metals will be beneficial.
The market risks are not just inflationary/stagflationary/deflationary, but increasingly so counter party risk, when ripples from the credit debacle can have unexpected consequences in derivaties (Currently 1.2Quadrillion dollars in OTC's) and in banking/corporate defaults.
Especially physical gold/silver bars and legal tender coins. These can also be sold tax free and/or passed on to children/grand children tax free.
