Forums / Property Investing / Help Needed! / Best advice : Don’t invest into property : The australian market is CRASHING.

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  • Profile photo of I. R.Handy.I. R.Handy.
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    Scamp wrote:
    What I say is true. There's enough idiots who pushed themselves into huge debts and financial abyss already : We don't need more idiots to make the problem worse. Can't you see that 9 times annual wages per house is not sustainable and that the bubble is already bursting ?

    Property is a NO GO until at least 2011. Invest in gold and an economics study if you want to become investors.The fact you had to come here to get help means you are not prepared enough, or not smart enough, probably both.

    It sounds like I'm a boogieman, I'm not, my advice is the most valuable advice you will get on these forums : stay OUT of property and save yourself a whole lot of financial trouble.

    Hi Scamp.
    Is it safe can i come out of my bunker and invest yet (sarcasm)  Wheres the kboom???

    Profile photo of fWordfWord
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    Hey guys, let's keep bumping this thread. If we do it long enough, it would surely become a hot topic right when the property market bust commences.

    EVERYONE can predict a boom or a bust, if they keep saying it for long enough.

    Most of us know the end of the world is coming too. When is that going to be? We don't know. However if we talk about it for long enough, one day it will happen and we can claim the right to predicting the end of the world.

    Although the value of that prediction is going to be worth a crock of dog faeces by then (if that).

    Profile photo of xdrewxdrew
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    I think the funniest thing with this little thread is it started in 2008.

    Since then the properties in my area have added another 28% to their market value. And people are STILL quoting doom and gloom.

    There are two real possibilities for the near future ..

    Firstly in 2012 the world will end in a fiery blaze as predicted by the Mayans and this will seriously depreciate the values of my properties. Not only the end of the world .. but a decreased capital value !!!

    Or .. the world still remains wholesome and lush .. more people are born .. more properties are made and i have to continue making and re-assessing my portfolio.

    I prefer the second scenario somehow. Not only does it mean i get to keep my properties but i'm allergic to hellfire.

    Profile photo of g0biing0biin
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    Lol
    People make money in boom and bust.
    If I had a dollar for everytime time I had someone tell me not to invest in something I would would be a rich man. These same people never have anything in there life. :)

    Profile photo of Jacqui MiddletonJacqui Middleton
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    People require accommodation, crash or no crash.  End of story. 

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Robert 1sportRobert 1sport
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    I agree with others lets keep this going, it has gone right through the tough times and is about to come into the predicted 2011 boom, glad to see investors have made money in this time.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Perhaps we should all sell all of our properties (I'm not sure who to – since if there is a crash then there won't be a single person in the country buying property) and kick the tenants out and have them live in the street looking at the said empty properties.  Yes, that's the way forward.  Everyone in the country should live on the street, and all the houses should be empty and without owners hehehe

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of emptyvesselemptyvessel
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    bump – Caught this one during a random search.

    No bust. Can someone please get the original poster back here to defend himself? Pleeeeeaaaaaase!

    Profile photo of gfreergfreer
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    Surprisingly there are still many areas to invest where property prices are not nine times average wage and certainly not 9 x local wage.  Still we are all likely more prudent after the US and UK experience.  

    Profile photo of FreckleFreckle
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    xdrew wrote:
    I think the funniest thing with this little thread is it started in 2008.

    Since then the properties in my area have added another 28% to their market value.

    Which is on average 5%pa. That’s just enough for a PI to hold it’s buying power and cover maintenance costs. Neutral or negatively geared and you’re out the back door.

    Not what I’d call a profitable investment area.

    The Freckle

    Profile photo of JpcashflowJpcashflow
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    There will always be ways to $$$ in hard times. In fact most people who make large somes of money will make it in these times before another boom happens.

    I believe the properties are over valued at the moment and they may come down in price just a bit more. But i agree with most there are allot of people who make daily excuses.

    My wife and i are going into a new venture who knows if it will work or if we will get finance.

    But hey i would rather try and there are heaps of options out there.

    Cheers

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of TaylorChangTaylorChang
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    Now is 2012 !

    I totally don't understand what the original poster was thinking ?
    I am still waiting for what he/she mentioned in the first posting " Austalian property is crashing " ?

    when is that going to come ?

    what's crashing anyway ? a slightly adjustment in some areas drop 2%- 5% ? or some mining towns like Gladstone rising 2%-5% ?

    TaylorChang | Finance Broker
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    Home loan | Commercial loan | 0414 691 517

    Profile photo of BennyBenny
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    Well, I enjoyed reading that one. And yes, I enjoyed reading both sides of the debate.

    In early 2008 we were “enjoying” the rise in Interest Rates that followed newly-elected PM KRudd famously saying “The inflation genie is out of the bottle”, prompting the RBA to start raising interest rates as the rest of the world were madly cutting theirs (think GFC) !!

    Also in early 2008, I had the good fortune (?) to have some of my Fixed loans come out of 6.49% to be hit with 9% variable. A 2.5% increase? Nope, it was a 50+% increase. Things did get quite tight for me (and COULD have seen all of Australia become a buyers market quite quickly, except that the rates then got SMASHED later in the year when the RBA realised they had got it wrong).

    So I do recall WHY some of the gloomers were saying what they were, with 50% drops in values, etc.

    They also used the US as a mirror of what would happen to Australia. But the US uses mainly non-recourse loans – you can take the keys to a house to the bank and walk away from any mortgage. WE can’t do that here. Thus, our market would never be subjected to the wild swings tht their system makes possible (in my humble opinion).

    And the comments made about “house costs equal to 9 times wages”? Yes, we do see spikes now and then (it was similar in late 80’s wasn’t it? I recall values doubling almost overnight) but a comment today from Steve included this :-

    Of interest, RBA Governor Glenn Stevens recently made this comment about a possible Aussie property bubble:

    “You can never be 100 per cent sure. But the price to income ratio has been around four times … for about 10 years, so a very long-running bubble, if it is a bubble. Most do not last that long.“

    Steve’s article is now off the front page of the forum, but you can read it all here :-
    https://www.propertyinvesting.com/heading-property-crash/

    If the long-term cost is around “4 times earnings”, then a sudden doubling in price would quickly become “8 times earnings” – until wages caught up again.

    I just wanted to bump that old thread. Times change, and it is always useful to keep a weather eye on developments in real estate, so I appreciate threads like this one. Certainly, along with the raw emotion, there were some very pertinent comments made therein.

    Benny

    Profile photo of Long JohnLong John
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    I just wanted to bump that old thread. Times change, and it is always useful to keep a weather eye on developments in real estate, so I appreciate threads like this one. Certainly, along with the raw emotion, there were some very pertinent comments made therein.

    You talk as if the threat is over and everything is honky-dory again…

    Profile photo of BennyBenny
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    Hi Long John,

    You talk as if the threat is over and everything is honky-dory again…

    We are seeing a “cycle” as we have seen over decades. And yes, there are peaks and troughs. I believe we will see harder times, and easier times. And we will see decisions made by Govts that help, and others that don’t help.

    If, as Glenn Stevens says, we are at “cost equals 4 times earnings” for the most part, where’s the bubble? I don’t know exactly what this figure is today, but it will rise and it will fall from time to time.

    Keep in mind, if houses screamed up 100%, it only takes a 50% drop to have them back where they started – so talk of a 50% drop is HUGE – and some here were talking 60% drops!!

    While ever people talk at the extremes, their words will be challenged. As someone earlier pointed out in this epic, somewhere in the middle (between “boomers” and “gloomers”) is where the truth lies.

    Benny

    Profile photo of Long JohnLong John
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    We are seeing a “cycle” as we have seen over decades. And yes, there are peaks and troughs. I believe we will see harder times, and easier times. And we will see decisions made by Govts that help, and others that don’t help.

    You should be a poly Benny. You’re talking a lot without really saying anything or committing to any position. That usually indicates one doesn’t understand the problem or have an inkling of which way things are going.

    As for the RTA quote; CB’s wouldn’t know a bubble if it blew up in their face. Steven’s is well known for waxing lyrical but not actually saying anything. It’s why reporters spend numerous hours dissecting CB speak for hidden messages which generally leads the MSM to slant their finding in favor of their masters agenda. Given that Murdock controls the media in Australia you know even bad news will invariably be tweeked to mollify the masses.

     

    Profile photo of BennyBenny
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    Hi Long John,

    You should be a poly Benny. You’re talking a lot without really saying anything or committing to any position. That usually indicates one doesn’t understand the problem or have an inkling of which way things are going.

    Well if you think that, you either didn’t comprehend my words, or you choose to continue to promote your personal bias and take a shot at anyone who puts an opposing view.

    Anyway, for the sake of others who might have thought I “wasn’t taking a position”, let me share a very interesting link (showing “house cost vs Income ratios for 2014” – for the whole world !!!!) Let me preface it with this quote from my earlier post:-

    If, as Glenn Stevens says, we are at “cost equals 4 times earnings” for the most part, where’s the bubble? I don’t know exactly what this figure is today, but it will rise and it will fall from time to time.

    http://www.numbeo.com/property-investment/gmaps_rankings.jsp

    Now, I know what that figure is – and Glenn Stevens wasn’t far off…

    There is good ol’ Aussie, with ratios of 3 or 4 in most areas, but with capital cities a bit higher (Sydney and Melbourne in the 8’s – gee, it must be a bubble… :p) No, they have had a recent climb in values, so it will take a while to taper and/or allow wages to catch up. I guess they may never quite get down to 4 like less popular cities, as immigration and overseas investors will see to that.

    If you want to see real pain, click on some of the Red paddles. Now THEY have a problem. Probably where it takes three generations to pay off a home?

    And my position? I’m a “middle of the roader” – I’m not bullish on property at all times. I endeavour to take a balanced view, but to retain the ability be a “swinging voter” as times and circs dictate. Right now, warm on property.

    Re the world situation, well hey, I am not in any position to be able to influence anyone except myself, so the best I can do is to do my best. If it all goes to hell in a handbasket, I guess I won’t be alone, and hopefully better prepared than many.

    Since LJ put a burr under my saddle, I went looking for information to either back his POV, or mine. I found both types, but for ME, this one makes a whole lot of sense, and probably explains why LJ, Scamp, et al have been posting what they have :-

    http://australianpropertyforum.com/blog/entry/3174279/8081

    Seems like some “Demographia survey” has been widely quoted as saying Australia is unaffordable. Well boys, read THAT link, then see if you feel the same way. It sure put my mind at ease, ‘cos frankly, I just couldn’t see the doom and gloom that you were belting us with !! That link shines a very bright light on what may have been a massive chunk of mis-information.

    Benny

    • This reply was modified 5 years, 3 months ago by Profile photo of Benny Benny.
    Profile photo of Long JohnLong John
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    Double posted for some reason. This WYSIWYG text box editor needs a rebuild for sure. I thought the last was bad but at least it wasn’t too much of an effort with workarounds. This one is a real grind.

    • This reply was modified 5 years, 3 months ago by Profile photo of Long John Long John.
    Profile photo of Long JohnLong John
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    Beny you’re a good guy who means well but some of the stuff you write is ..well ….rubbish. For example;

     But the US uses mainly non-recourse loans…Thus, our market would never be subjected to the wild swings that their system makes possible (in my humble opinion). 

    Well no it’s not. last time I looked;

    National Consumer Law Center (NCLC), at least 10 states can be generally classified as non-recourse for residential mortgages:

    Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, Washington

    Recent legislation also makes Nevada non-recourse in most cases for residential purchasers for mortgages obtained on or after October 1, 2009

    10/11 out of 52 States??

    Note that some states like Florida which are full recourse actually got smashed the hardest. The Atlanta FED debates the recourse Vs non recourse research with researchers of a paper about their findings with regard to types of mortgages and how they affected the crises.

    Did nonrecourse mortgages cause the mortgage crisis?

    The US housing market collapsed because of the way derivatives (MBS) where developed, packaged, sold and other derivatives (CDS) where used to bet against them. While subprime loans are another product that is often named as cause of the crash that’s not correct either. Subprime default rates where in line with trend. The market lost confidence in MBS and the price crashed triggering massive CDS volumes that swamped Lehman’s and AIG.

     The rest is history as they say. The US and Australian markets are as different as chalk and cheese. To make comparisons and try to cross link causal affects is to not understand either market or its fundamental dynamics.

    The affordability debate is a red herring. Affordability realistically only affects <13% of wannabe property owners. They’re price takers not price makers and have little to no discernible impact on the market.

    The fundamental drivers of Australia’s market is credit availability (bank liquidity), investor sentiment (do they feel there is a viable safe market) and foreign (particularly Chinese) buyers. Mess with any one of those and the market is in trouble.

    • This reply was modified 5 years, 3 months ago by Profile photo of Long John Long John.
    Profile photo of BennyBenny
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    Hi LJ,

    Wow, sounds like you are having two bob each way !!! I thought you were saying it was me doing that. :p

    The US and Australian markets are as different as chalk and cheese. To make comparisons and try to cross link causal affects is to not understand either market or its fundamental dynamics.

    Isn’t all of your talk about a “property crash in australia” arrived at by comparing to the US crash?

    And then, there was this :-

    National Consumer Law Center (NCLC), at least 10 states can be generally classified as non-recourse for residential mortgages:

    Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, Washington

    (The bolding was mine !!) So, if “at least” 10 states are non-recourse, that is way different to “at most” – in fact, it could mean that double that number, or more, are actually non-recourse, couldn’t it? A quick read of the “Overseas Forum” sees some members discussing Altanta and Florida having non-recourse loans – these two didn’t make your list. Could it really be “at least 20” States after all? Who knows – I don’t !!

    Yes, I am aware the GFC trigger was more about the “AAA rated” junk notes (so-called “backed by Real Estate”) that were peddled all around the world (some Local Councils in Australia lost money over them). Add to those though the “every man in the US should be able to buy a house” message, where banks were encouraged to lend to anyone/everyone at a low honeymoon rate a few years earlier. The kicker came when the rates were due to revert from (say) a 2% loan into a 3.5% loan. That 1.5% increase was really a 75% increase, wasn’t it?

    With no-one chasing them over a mortgage (non-recourse) many just handed the keys back to the bank, leaving them with truckloads of houses that they didn’t want, and this MUST have had an effect on their RE market, wouldn’t you say? Probably additive to the whole GFC thing, even if not the CAUSE.

    In Australia, I am not aware of anyone who has a non-recourse loan – thus, if you walk away from a house, and the bank can’t get their mortgage back, the Mortgage Insurers will settle with the banks, then chase YOU down for the rest. A way different scenario. Therefore, the same laissez faire approach to a mortgage doesn’t exist here as does in many areas of the US.

    In summary then, I still believe the differences in the way US handles RE as a whole is so far removed from the system used here, that such a violent crash is unlikely to occur in our market. But yes, there will be ups and downs over time.

    Benny

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