All Topics / Help Needed! / Best advice : Don’t invest into property : The australian market is CRASHING.

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  • Profile photo of scott8aflscott8afl
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    Scramp,

    Now is the best time to invest in property. What you say makes no sense at all. but you wait till 2011 and buy property at the higher prices and well buy now when people need to get out so sell cheaper.

    so in 2011 look for a property I have for sale so I can make my profit from you.

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    amsjerm wrote:
    [The only thing i can think of are interest rates dropping, but by then I believe it's too late.

    I dont think so-look how long it took the market to move up on historically low rates-doesnt happen over night. Im still waiting for someone to explain to me how all thsi increasing debt (to cover your increasing property prices) is going to be funded??

    Another nail in the coffin-read an article food prices are expected to double over the next few years..it just gets better and better huh :)

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    scott8afl wrote:
    Scramp,

    Now is the best time to invest in property. What you say makes no sense at all. but you wait till 2011 and buy property at the higher prices and well buy now when people need to get out so sell cheaper.

    so in 2011 look for a property I have for sale so I can make my profit from you.

    Scramp makes no sense? What the?? You say "you wait till 2011 and buy property at the higher prices and well buy now ", by beeing 'cheaper' now I presume you mean after neglecting to take in mortgage repayments and various expense items? So tell me Scott-youhave obviously done your sums, what rate of capital gains do you need over the next 3 years just to break even? You can even throw in a 10% rental increase a year if you like. Please just tell me and I will go away….Im sure you have the numbers ready to  go?

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    Scamp wrote:
    Don't worry , I know a lot more than you think about the australian housing market. People are people.
    Yes , I know your goverment is corrupt and your housing minister has 14 investment properties
    Yes, I know you think (wish) there's a housing shortage, but in reality there are 800.000 empty dwellings. It just shows you haven't done research.
    Your market is just like any other market, it goes up , and it goes down. It went up twice as hard as it should possibly have gone without government help ( tax incentives etc ), it will fall twice as hard as anywhere else.
    Your market relies on money from outside coming in and buying the expensive houses. Poms are having a house crash as we speak, they won't buy the houses… who will ?
    Prices won't crash as long as people don't sell. Ofcourse, we could all together agree with eachother that we don't sell ANY houses for less than 1.000.000, however that doesn't work when people start 'cheating' their way down because of panic.

    The housing market in Australia is not a supply/demand market at all, it's a fear/greed market.
    In a boom ( upward cycle ) it goes like this :
    The fear of not being able to own a house, the fear of missing the boat and being outpriced for the rest of your life, the greed from sellers who want more more more, the greedy who were too eager to make profit too fast and too irresponsible.

    In a crash ( downward cycle ) it goes like this :
    Sellers fear not being able to pay off the interest rates, initially they fear not being able to sell, this turns into fear of losing money, this turns into fear of going bankrupt. The buyers on the other hand are greedy : They want MORE discount, lower prices, better locations and better quality houses.

    Which cycle do you think Australia is in now ?

    This is my first post on here and I'm no seasoned investor like A LOT of  you on here but I would like to say about the above Comment/ Input from SCAMP as well as his first input( which is what i meant to put up there :-) whoops!) and also GMH454's in put, that it is VERY INTERESTING and i can understand where you are coming from whether people on this forum believe SCAMP to have direct knowledge of the Australian market or not?
    I live on the Gold Coast and have done for most of my life and it is the Fastest growing region in the Country and all that SCAMP has said most definably relates  to My CITY  there are people form everywhere you can imagine still buying here it's out of control and a lot of GOLD COASTERS are suffering we  don't  all drive Ferrari's  and  a lot of people we're  scared  into Borrowing to the hilt ( not me, my wife and i were sensible and didn't over commit) These people along with the tourists have mad it bad for themselves( with todays interest rate) and stuffed it for the rest of us none RICH that still live here on the Coast!
    So in a way i have to say thank you SCAMP because there were/are a lot of Idiots here and Development Companies like STOCKLANDS have no problem in taking people's blood sweat and tears!!!
    LASTLY  i thank all on this forum it is very informative and look forward to reading and educating myself more!! Cheers

    Profile photo of scott8aflscott8afl
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    blogs wrote:
    scott8afl wrote:
    Scramp,

    Now is the best time to invest in property. What you say makes no sense at all. but you wait till 2011 and buy property at the higher prices and well buy now when people need to get out so sell cheaper.

    so in 2011 look for a property I have for sale so I can make my profit from you.

    Scramp makes no sense? What the?? You say "you wait till 2011 and buy property at the higher prices and well buy now ", by beeing 'cheaper' now I presume you mean after neglecting to take in mortgage repayments and various expense items? So tell me Scott-youhave obviously done your sums, what rate of capital gains do you need over the next 3 years just to break even? You can even throw in a 10% rental increase a year if you like. Please just tell me and I will go away….Im sure you have the numbers ready to  go?

    Hey hey,

    Thats not what im saying. what im saying is scramp says that you should not buy. That is not the case at all.
    I own my own real estate company and let me tell you, Now is when you should be buying and for the exact reasons he tells you not to.
    Prices are dropping homes are becoming more affordable.
    The one thing he got wrong is that this has to happen in order for investors to buy property at "discounted rates". Now I believe that this price drop will continue to be prevelent for roughly 2 more years but if you dont buy now and you wait for the market to correct itself then you will be buying houses at retail price instead of wholesale price.

    Like some one once told me the best time to buy was 20 years ago, the second best time is now.

    So while there is a lot of relevance to his reasoning there is also little relevance to it. its a catch 22 really

    Profile photo of scott8aflscott8afl
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    sorry forgot to add that while the price of property may be dropping the rental market is stronger than ever with very few vacancies around but tonnes of people willing to rent

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    scott8afl wrote:
    [Now I believe that this price drop will continue to be prevelent for roughly 2 more years

    Excatly my man-so why bother buying now unless you come across a monty? My point to you is prove to me why it would be better financially to buy now and not in say 2 years time-and if so what rate of capital gains do you require in order to do so? Bear in mind inflation is running at almost 5% and will most likeley see another rise or two before the year is out.

    I like to crunch numbers-seems many people invlved in R.E dont….

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    scott8afl wrote:
    sorry forgot to add that while the price of property may be dropping the rental market is stronger than ever with very few vacancies around but tonnes of people willing to rent

    Sorry I also forgot to add-with so much 'demand' why are rental yields soooo crappy? Thought people would be able to put rents up to at least come close to covering their costs-most rents arnt even coming close to paying half the mortgage costs..

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    thats because the properties that were bought by these investors were highly negatively geared.

    When I was younger I used to work with a company that sold house and land packages ( i was there for 3 months) that was fine with me then I realised that they were offering rebates on the land then also on the house construction, which in turn put more people into worse debt becuase they had extra cash (roughly $30,000) to play with then blew it all. hense they eventually had to sell 6-12 months later very pissed off with the company.

    Im not saying this happened to every investor out there but it inflated the prices in the area above the market value at the time.

    This is a common problem when dealing with so called legitimate companies. Alot of people got burnt and by them trying to recoupe their costs burnt more people. So rental yields are crappy as you say because purchasers are forced to purchase at above market prices for the property they want

    I know that doesnt fully answer your question but it is a start.

    the second part is only an educated guess on my part but I dont believe that there will be to much more upwards pressure on interest rates which means that over the next 2 years prices will remain for the most part consistant with what we see today being that the market has corrected itself and now property is selling for marginally less than it was say 3 months ago

    Profile photo of Peak OilPeak Oil
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    How far or how long do you think it will take before Residential property prices start increasing in the non mining areas? And what would you say if I told you they wont for at least 15 to 25 years because of the coming economic collapse? If expenditure is up, food, fuel etc then this equals less disposable income. Crude oil prices are historically tied into recession, check the stats, the two go hand in hand.

    The fortune of the last 3 oil spikes was the fact that the increase in price at the pump came from political disruptions. The one we are experiencing at the moment is caused by geological factors, in other words, unlike the past 3 spikes this time the price at the pump ain't going to go down. If you have the time you should check out a flick called "The End Of Suburbia" quarter acre blocks sold to the post war people, the dream of a better life sold on the backbone of cheap energy (Oil)

    Did you know we consume 86 million barrels of oil globally? Did you know a barrel of crude could be bought for $9 US in 1999? Did you know that for every 1000 US citizens there are 900 automobiles, for China its only 6! What do you think may happen when they all want one each like us? Resource wars?

    Can you see a pattern starting to form here? I just want to help you guys from getting burnt. If you want to get some property then at least buy something productive guys like a farm perhaps.

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    Now your are talking ormeau-farming is going to be a gold mine-more and more mouths to feed and only so much farmable land-thow into the combination the changing iets of the two biggest populations in the world-India and China, and we are in foor a unforseen demand on staple grains such as wheat, and the factors that go into their production such as Phosphate-hence my move into MAK (Developing huge phos mine in the N.T EST S.P between $20-$40 by 2010).

     

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    blogs wrote:

    Now your are talking ormeau-farming is going to be a gold mine-more and more mouths to feed and only so much farmable land-thow into the combination the changing iets of the two biggest populations in the world-India and China, and we are in foor a unforseen demand on staple grains such as wheat, and the factors that go into their production such as Phosphate-hence my move into MAK (Developing huge phos mine in the N.T EST S.P between $20-$40 by 2010).

    Well I guess the only way to go is sustainable living as best you can, 48% of all produce related costs are now fuel. Imagine the cost when it hits $200 per barrel?

    The politicians still cant say the word "Peak Oil". They can only invent fuel watch schemes and talk of reduction of tariffs. We are running out and we don't have a plan.

     

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    scott8afl wrote:
    thats because the properties that were bought by these investors were highly negatively geared.

      Yep, which is the majority of properties, so you would admit then its not going to take a hell of a lot to push them close to the edge?

    scott8afl wrote:
    So rental yields are crappy as you say because purchasers are forced to purchase at above market prices for the property they want

     Which could be said for the market as a whole-I personaly think its horifically overpriced. Either way you look at it its screwed, people try to argue that 'its only the house that have been sold overt the last few years that are over valued and risk dropping in price'-so in that case what they are saying is really the entire market is over valued-as latest sales price is what eveyone boast when valuing their house?

    scott8afl wrote:
    the second part is only an educated guess on my part but I dont believe that there will be to much more upwards pressure on interest rates which means that over the next 2 years prices will remain for the most part consistant with what we see today being that the market has corrected itself and now property is selling for marginally less than it was say 3 months ago

    O.K, so you are saying that the market has largely corrected itself, or will at least remain stagnate for the next couple of years-then why on earth would you bother buying today? If my investment is going to have 2 years of no appreciation then whats the point? I would rather be savoing the repayments, eithe rinvet them or play it safe in a term deposit an dthen put it toward she property in 2 years time-just think of the repayments alone you would save!!!

    Look in some respects I hope Im wrong, but I fear I am right-no matter which way you look at it we are in for a bumpy couple of years, and propertuy aint gunna increase much when people are going to be scrimping and scrounging just to pay for petrol and food…

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    I see that people want me to explain further why houseprices will drop, and what the signs are for recovery.
    First of all, and most importantly, never trust anyone but yourself. Yes, take advice, try and get as many views as possible, then analyze them yourself and figure out with your own intellect if they make sense to you. Many people will talk about a certain region or priceclass, this may not apply to your area of interest. That being said, my own reasons of why houseprices will drop :

    There's no housing shortage. If there was, how possibly could there be more and more houses for sale on the market ? There is a MONEY shortage, not a housing shortage. People cannot pay the houses anymore, hence they have to rent. Since everyone wants to rent near the CBD or nice places, those rental places will be gone , hence everyone believes that there is a rental shortage as well.
    Anecdote : When I look on the roads, I see very very few Ferrari's. Does this mean there's a shortage of Ferrari's ? No, it just means that they are overpriced and thus people buy other types of cars. Same goes for the housing market. Everyone wants to buy a house near work, or next to the water or in a nice area. If they look further out ( which they will do when they start losing their jobs ) they will find many cheap houses.

    I have said a few times on GlobalHousePriceCrash.com that for my area of interest the prices will probably bottom out around january 2009. Why not before ?

    Even if interest rates go down, the monthly repayments will still go UP. How can this be ?
    For one, banks will individually rise interestrates, whatever RBA does doesn't matter. They do this with a good reason which I won't explain here, fact is simply they will do it. But more importantly, a lot of 5-year and 3-year fixed mortgages will be reset to variable interestrates around september 2008 up to june 2009. That means many people who used to pay 6% will now have to pay 10%. This means on average an increase of 1500$ per month extra payments. This, on top of the higher oil prices, the higher food prices and the loans and credit cards they have, is a very bad economic climate. This will lead to forced foreclosures as people will use credit cards to pay off monthly mortgages, and eventually go bust.

    Oil prices are at an all-time high now. People think that this is limited to their car petrol prices only, but this is very short-sighted. In every production chain, there is oil involved making the process more expensive. Think of transport costs, plastics, energy costs, commute costs .. just to name a few.

    Debt levels are at extremely high levels. Everyone seems to have a debt nowadays, people used their equity to buy new cars and luxury items. Mobile phones, internet shopping etc…

    Unemployment is looming around the corner. Unemployment is said to rise from 4% to 5% in the next few months.

    China's economy is said to slow down. China is a major buyer of Australian export goods.

    USA is in recession, their economic problems are not over yet, it seems they are in for a second crisis. This means two things : Oil prices will keep going up , and war. ( Iran ? )

    UK has always been a major immigration country for Australia. Poms ( UK people ) are having a huge housing crash. This means they have less money to spend in Australian houses, *IF* they are able to migrate at all.

    Rudd will fight inflation at all costs : That's his goal. When houseprices are overpriced, you can only solve it in 2 ways :
    – Let inflation catch up with house prices
    – Let house prices deflate to catch up with buyers affordability
    If inflation is fought , house prices can only go 1 way, and that's down.

    The Australian news and reporters are now aware of the overpriced houses, sellers AND buyers are aware of overpriced houses. This means the market has turned from a sellers market to a buyers market. Since houseprices aren't made up by shortage or supply like any normal market, but by feelings ( fear and greed ) this means that house prices are bound to go down.

    Buyers can afford to wait, sellers can not. Everyone realizes this now, it's just a matter of time before something has to give : Initially, sellers ( real estate agents really ) will keep the asking prices high, in an attempt to keep houseprices fictionally high, but when real estate agents get in financial trouble they will change their tactics. Instead of selling fewer houses are outrageously high prices, they will sell a LOT of houses at outrageously low prices. The competition will turn from pushing prices up , to pushing prices down so they ( the real estate agents ) can keep earning money by selling more houses for cheaper prices. If this becomes a trend, then the crash really starts. If you see things like "foreclosure bus tours" you know things aren't rose-colored anymore.

    Well, that's just some of the reasons. For more indepth articles , just go to http://www.globalhousepricecrash.com

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    Well said Scamp

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    scamp you are sooo full of sh!t, everyone knows house prices are just gunna keep going up, dont get all logical here mate-dreams carry much more weight lol why face reality when you can live comfortably in la la land?;)

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    Well analysed scamp… 'We will witness Major property collapse in 2009' if your prediction is true.
    Let's wait to proof who is wrong…Another 12 months are not long to wait.

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    god_of_money wrote:
    Well analysed scamp… 'We will witness Major property collapse in 2009' if your prediction is true.
    Let's wait to proof who is wrong…Another 12 months are not long to wait.

    is it analysis or just opinon ?  there are so many "it is said"s and unsupported assurances it hard see much more than a bunch of re-gurgitated media grabs.  Try looking at parts that can be substantiated  e.g. the UK immigrant statement…….UK immigrants make up 15% of total immigration (ABS).   Would part of 15% share of immigation really be noticed? people continually queue to come to OZ,  immigration dont beat the bushes to find punters.   These views ,  for me, at least represent one extreme end of the possible outcomes and blogs la la land people the other.  There is another long running thread predicting gloom and doom for two years +,  eventually it has to be true if you beleive in economic cycles thats not new news or insight,  it will be interesting to see where the real landing zone is.

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    I have also predicted that banks will be limited ( by law ) in mortgaging people. I think the law will be amended to 4 times your raw yearly income. As soon as this is officially implemented, the houseprices will come under even more pressure. This, in my opinion, will be the major factor in dropping houseprices. More so even than the interestrates rise. Even if interest rates rise 1-2% ( which they will do ) people will still be able to find ways to fund their mortgages by taking up a second job. Taking away buying-power, by limiting the amounts of mortgage to be given by banks ( monitored by RBA ? ) will do a much better job at driving house prices back. The major reason why houseprices have bubbled is after all, as we all know, only because banks have been borrowing people more than ever before. Without this money, there would be no bubble in the first place, since wages would determine the house price. Banks will either limit themselves to 4 times salary, or they will be limited by law to adhere to this ( for instance.. after a big bank falls because of the subprime crisis ). They have been bailed out once, there will be no money to bail them out a second time.

    That said, someone asked for signs of recovery :
    – more houses sold than houses being put up for sale is a good indicator
    – rising wages
    – good consumer sentiment ( this, btw , is now at an all time low )

    Basically, when asking prices go up , it says nothing. The actual price for which a house sells ( about 50k-100k less than asking price atm ) is important. And even then, there are people who still have money at the moment. In my opinion, the few houses that are being sold at the moment are houses that people 'always wanted but never were for sale'. They are for sale now, so people buy them up , even if they have to pay asking price ( which is too high ). Soon these sales will stop as people realize they won't be able to pay the interest and food and oil.

    Also, 'median' houseprices can ( usually DO ) go up in a stagnating or lowering housing market. This is because the amounts of cheap houses don't sell, but the loaded up people still sell and buy their houses ( the McMansions ). The rich aren't affected by the bubble or economic times as much as the poor are, therefor the median houseprice can go up, don't be fooled to think that 'median' means anything more than a spruiker term.

    The only 'median' you should use to determine if prices go up or down are prices in the area you want. Comparable houses. Anyway, I think I have already proven that the market crashed, just look at the news. Anywhere between 10% – 50% price reductions all over. This is just the start.
    It seems the new motto is "Better sell now at 20% less , than in 1 year at 50% less"

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    Unfortunately, like most investors, their ideals for the future are based on exponential growth, in other words copulation and reproduction between the human species to sustain growth. If you chose to ignore the fact that this will end, well, what can one say? 100 years of industrialisation, 60 years from the Write brothers to putting Niel Armstrong on the moon. Boom….Bust

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