All Topics / General Property / How do people “know” what the market is going to do?

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  • Profile photo of rudo1phrudo1ph
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    I'm pretty new about these parts, but the more I read the more confused I get.

    I've done a lot of research before jumping in and was happy with where I was at.  But now I am not so sure……..

    I am confused as to why people here seem to "know" that the market is definitely, 100%, without a doubt going to drop by next year.  How is it that you know this for sure?  This is a quote from another posting someone made yesterday in answer to a question I had…….."One thing I can guarantee you is that your house will lose at LEAST 10% value in the next year."  I don't understand the certainty of this statement, where does it come from?  Can people REALLY predict this?  If they can then what are they doing on a forum like this, why haven't they retired to Utopia, after they predicted a property boom, invested at the right time and made spondoodles of cash?  Please help me to understand this.

    I understand that there is a general slow down around the world and that prices in America and the UK are dropping.  For the moment Australia is not quite following this trend.  Yes, in some areas the prices are pretty flat and vendors are finding it harder to sell, but does this all mean that we will have a property crash in the next year?  It's been stated that houses in Australia are over-valued.  This may well be true, but does this mean that prices will crash?  Could it mean that prices will remain flat for a few years until everything catches up and prices are corrected?

    These are my understandings from the many many things I have read, but maybe I am just not getting something.

    Right now the Australian economy is healthy, so why would this lead to a property crash?

    Vacancy rates in the capital cities are very low, so surely buying now, with the thoughts of a long term investment, rather than a quick buck to be made overnight is a good idea – you will have an income on that property – ok, so you may be negatively geared, but if you have the funds to do this and as I say, are looking for long term growth, is this an issue?

    Immigration levels are massive in Australia and property needs are at a premium, demand is outstripping supply, ensuring rents remain high.

    Interest rates are pretty high now – they may go up more, they may go down.  Again though, if I have the money available to buy and cover higher interest payments, and am looking at a long term investment, is this a problem?  Maybe it is – please explain.

    I am hoping to buy in a bayside suburb.  It's an area which is growing and is set to continue to grow, so demand should remain high.

    What is it that I am not seeing?  Am I just seeing all this through rose coloured spectacles?  I'd really appreciate some discussion about all this before I leap into the property market.

    Rudi

    Profile photo of Paul22MPaul22M
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    Well I can tell u in perth I am confident house prices will drop espically at the lower end of the market, there is 17 000 houses and blocks for sale with hardly any buyers, houses are just sitting on the market, agents cant sell them . In my opinion in a years time there is going to be more people in morgage stress, so there is going to be even more houses for sale, what are people going to do that cant sell their house and need to? drop the price is what they will do , and eventally across the board i think prices will fall in perth. There is no guarantee but i think it makes alot more sense that prices will fall than increase, people cant afford to fork out more moneyto buy a house, now with higher interest rates, higher fuel prices, we are also paying more for food , water, council rates . Yields are also very low in perth and I can tell you now there is no investers buying property in perth not like when the boom was when every 2nd buyer was an invester and now its the investers that are flooding the market with houses for sale and making it harder for each other. I only really follow the perth market but ive heard inter state things arnt much better.

    Profile photo of newbi2newbi2
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    Rudi,

    You are right, there are no crystal balls, just educated (or in a lot of cases, uneducated) guesses. Some areas will remain stable and others will go up even in a nationally declining market, that is the nature of statistics and humans. At the end of the day, it is only your butt and $$ on the line, so that is why you must carry out and be confident with your own research (due diligence), especially in the current market. If you are unsure and not confident in the market, then there is no shame in holding off. OK, so you may miss an opportunity, but that is something you will learn if you stick around the game, there are always "opportunities". If you do decide to proceed, factor in a higher interest rate and see how you feel.
    Just my 2cw, Mick

    Profile photo of yarposyarpos
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    a couple hundred years ago people "knew" that all swans were white….then they discovered Australia and found that black swans actually existed.   I dont think the global house price crowd know anything for sure….they have a theory based on their perception of fundamentals and history.   We are going through unprecedented times with wars, peak oil, sub-prime, climate change all happening together,  and personally I think we will be discovering a few new black swans i.e. finding that things arent happening as they did in the past and/or new opportunities we didnt even consider now exist.

    Nobody knows what is going to happen.  If you really have a long term view and but a place that has points of difference (not yet another generic 3-4BR house in a massive subdivision) you will be less effected by a slump.  At the end of the day the price fluctuations only matter if you are a short term investor or they are large and relatively permanent as the doomsayers suggest.   If you want a relatively risk free life then pop the money in a term deposit and take the 8% while you sit on the sidelines,   at the moment there doesnt seem to be a strong growth train you are going to miss.

    Profile photo of thiseldothiseldo
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    Nobody knows what is going to happen and nobody can predict if prices will increase or decrease and by how much.

    No matter what there will be some areas that will increase and some will decrease – this means that one can make a profit, they just need to be a bit more vigilent on where they are purchasing compared to when there is a 'boom' and pretty much everything goes up.

    The only thing you can do is use logic and get your hands on as much information as possible before spending your hard-earned on an investment.

    Also by the fact you said that you are not looking for a quick profit so long as you stick to the golden rules of quality property in quality areas you should be able to ride out any possible little hiccups that are to come before the market starts to increase properly again.

    Profile photo of ScampScamp
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    Rudi,

    – In september the first wave of 6% interest mortgages will reset to the ( by then ) 10% interest mortages.
    That's 4% more interest , which equates to more or less 100% extra mortgage stress. ( you can do the maths if you want ). People cannot pay this. This will go on until July 2009 when most of the 6% fixed mortgages will have reset.

    – Credit is not easily available anymore. It's also more expensive ( 10% rather than 6% ) while other factors have only gotten worse. People have less money, need to pay more for a house than 5 years ago, and money is more expensive than the last 12 years.

    – You need a deposit now to buy a house. No more 100% loans. This means banks have lost trust in the financial system and need more deposits ( sometimes up to 20%… ). How many average people do you know can pay 80.000 cash, and then 4000$ per month ? The average Australian is heavily indebted, they have less money than 0. ( negative money ).

    – immigrants aren't cashed up anymore, they have lost their money in UK / Spain / USA / shares / stocks / etc…

    – Bank interest rates *will* go up. Whatever the RBA does ( they should really up the rates also, but it doesn't matter, even if they don't the banks will ). This makes money even more expensive.

    – Recession is coming, Australia won't escape it. This is not the time to get yourself in debt.

    There you got a few reasons why I told you houseprices will go down by AT LEAST 10% in the upcoming year.
    Ofcourse.. I might be wrong…. :)

    If you have cash , and you're in love with a house, then by all means buy it. If you have money and you want to invest it, then you're better off with the extremely high savings account interest from the banks. Just put your money on the bank and get 16% in the next 2 years or more. It's better than flatlining or losing money, AND.. it doesn't take much of your time which you can much better spend with family or on the beach enjoying the safety of not having to worry about property / insurances / stock market / fuel prices etc.

    Profile photo of ScampScamp
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    Fresh from the press ( not very surprisingly )

    http://www.news.com.au/adelaidenow/story/0,22606,24082209-5012798,00.html

    In short :

    HOUSE prices fell in more than 60 Adelaide suburbs in the first six months of the year, new figures from the Valuer-General show.

    Profile photo of Scott No MatesScott No Mates
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    Scamp wrote:
    Fresh from the press ( not very surprisingly )

    http://www.news.com.au/adelaidenow/story/0,22606,24082209-5012798,00.html

    In short :

    HOUSE prices fell in more than 60 Adelaide suburbs in the first six months of the year, new figures from the Valuer-General show.

    VG prices for unimproved capital value cannot be used as a gauge of property prices on face value unless you have a good understanding of the model used, bulk valuation scenarios and the information (sales) which were analysed and adjusted to establish the ucv. VG puts out its values every 3 years generally,( 4 in country areas or areas with few sales).

    Profile photo of rudo1phrudo1ph
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    Scamp wrote:
    and you're in love with a house,

    Buying an investment property is not about falling in love with a house – that's what you do with your home.  It's about seeing an opportunity and making it work for you.

    Just my opinion

    Rudi

    Profile photo of ScampScamp
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    rudo1ph wrote:
    Scamp wrote:
    and you're in love with a house,

    Buying an investment property is not about falling in love with a house – that's what you do with your home.  It's about seeing an opportunity and making it work for you.

    Just my opinion

    Rudi

    Yes, that was what I was saying ( try and read between the lines )

    I didn't want to boldly say : if you're investing in property now you're an idiot.
    Rather, I say : If you love a house and don't mind paying twice the correct price for it, then you should.

    Profile photo of MisterMister
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    Personally I don't think we'd need to be a rocket scientist on this one in Australia .
    We have close to the dearest houses in the world for what you get, hell we have very close to the dearest everything in the world we get ripped off left right and center to be honest . Even interest rates.
    I've been saying for two yrs now though our house prices are ridiculous and in no way justifiable , gotta be a serious correction to come it's the only way it can go I don't think we've seen anything yet .
    But , I don't reckon all is lost . If you buy bargain stuff in good spots or in spots that are going to have something others aren't and that have 2 or 3 back up earning scenarios – extra land , room for more rentals – dividable – house able to be changed into duplex – an outer suburb people will need to jump on soon . Good if you can wait a year or two but if not look for 30% off or don't touch, forget the 10% stuff.
    Actually I've only done three places but I have used all of the above for everything I look at and it really pays, now more than ever but – me too bit nervous these days.
    Cheers

    Profile photo of MisterMister
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    Actually I reckon 40 % if you can , with a min' 100% plus earning potential or in future equity that way if it really hits the fan it will still be good for costs plus 30 or 40 and hopefully the old butt is covered .  I have one on the boil now , still nervous though !.

    Cheers

    Profile photo of ScampScamp
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    Rudi : Just go to http://www.globalhousepricecrash.com to learn why and how.

    Profile photo of longterminvestorlongterminvestor
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    Here it comes.  What most believe will not happen here.  The inevitable.  Markets are just that – markets – driven by fear and greed.

    Profile photo of pufflpuffl
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    Scamp wrote:
    – Bank interest rates *will* go up. Whatever the RBA does ( they should really up the rates also, but it doesn't matter, even if they don't the banks will ). This makes money even more expensive.

    – Recession is coming, Australia won't escape it. This is not the time to get yourself in debt.

    Scamp, if a recession is coming, why do you think the RBA should lift interest rates? That makes no sense whatsoever.

    Profile photo of ScampScamp
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    puffl wrote:
    Scamp wrote:
    – Bank interest rates *will* go up. Whatever the RBA does ( they should really up the rates also, but it doesn't matter, even if they don't the banks will ). This makes money even more expensive.

    – Recession is coming, Australia won't escape it. This is not the time to get yourself in debt.

    Scamp, if a recession is coming, why do you think the RBA should lift interest rates? That makes no sense whatsoever.

    Banks will keep raising interestrates because credit is expensive. What RBA does is futile.

    Profile photo of harbharb
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    Scamp wrote:
    – Bank interest rates *will* go up. Whatever the RBA does ( they should really up the rates also, but it doesn't matter, even if they don't the banks will ). This makes money even more expensive.

    – Recession is coming, Australia won't escape it. This is not the time to get yourself in debt.

    Getting a bit desperate, are we ?

    Profile photo of ScampScamp
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    http://www.news.com.au/business/money/story/0,25479,24105428-5013951,00.html

    on news.com.au :

    THE weakest market in four years has seen house prices drop in most capitals with predictions next year could see 10 per cent falls.

    Profile photo of pufflpuffl
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    Scamp wrote:
    [
    Banks will keep raising interestrates because credit is expensive. What RBA does is futile.

    That doesn't answer my question. Nor does pointing to yesterday's APM figures.

    What I'm asking is why you think the RBA should increase interest rates even though, as you say, there's a recession coming.

    In saying that you believe a recession is coming and that the RBA should increase interest rates, you're either arguing that the RBA should purposefully deepen the recession (I don't think many Australians would agree with you), or you're exposing your lack of economic understanding.

    Which is it?

    Profile photo of harbharb
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    Scamp wrote:
    http://www.news.com.au/business/money/story/0,25479,24105428-5013951,00.html

    on news.com.au :

    THE weakest market in four years has seen house prices drop in most capitals with predictions next year could see 10 per cent falls.

    You forgot this part "Weak market blamed on high interest rates"

    on news.com.au today :

    "For starters, prepare for official interest rate cuts now. The Reserve Bank wants to cut next week. It will cut next month. "

    http://www.news.com.au/business/money/story/0,25479,24111198-5016110,00.html

    If the rates eventually come down, lets say 2% over the next year, do you think the rents will also come down by a similar $ amount ? Or do you think investors will return and if so what would that do to house prices ?

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