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What if interest rates stay below 5% for 30 years; Would this be the lucky time to buy?
Topic Started: 14 Dec 2013, 09:17 PM (3,051 Views)
peter fraser
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hoofarted
14 Dec 2013, 11:17 PM
The UK has basically had interest rates below 7% for the last 2 decades. In that time, 2 housing crashes. So, what does that tell us?
Which cities in the UK have house prices below where they were two decades ago?

What cities in the UK have house prices below where they were one decade ago?
Count du Monet
14 Dec 2013, 11:19 PM
Well there's no good or bad luck. Luck has nothing to do with it. It's Central Bank and Government intentional policy that creates the instability. Mature markets didn't vary in the 19th century.
Central Banks do manipulate interest rates - that's their job.

But borrowing in an era when rates remain low is "Luckier" than borrowing in an era when rates skyrocket upwards.
Edited by peter fraser, 14 Dec 2013, 11:24 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Foxy
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Zero is coming...

It's supply and demand.
If we have people from oversea coming here buying houses then it does not matter what interest rates do.
Peter
:pop:
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Will
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Actually, some clever people on this forum have mentioned that LCD TV's and cars have fallen in price despite easy credit.

The real reason for expensive housing can be found in Claws 'Ten Steps to a Housing Crisis',

Or to put it anther way, be a home owner and see what the Brisbane City Council requires if you want to increase the space for humans to live in. On your own patch of dirt.

Oh and by the way, the Brisbane City Council is actually an assembly of people democratically elected by the community to represent them.
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GloomBoomDoom
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peter fraser
14 Dec 2013, 11:22 PM
But borrowing in an era when rates remain low is "Luckier" than borrowing in an era when rates skyrocket upwards.
That's rubbish. I would prefer to buy when rates are high with a bigger deposit. Odds are rates are more likely to fall and your asset more likely to appreciate as a result.
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those
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I don't think it's as simple as low rates=good, high rates = bad.

Low and high rates are used to balance other things. E.g, low rates could also mean low inflation and wage growth, so large debts don't get easier to pay like they do when rates are high, inflation is high, and wage growth is high.
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herbie
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GloomBoomDoom
15 Dec 2013, 02:19 AM
That's rubbish. I would prefer to buy when rates are high with a bigger deposit. Odds are rates are more likely to fall and your asset more likely to appreciate as a result.
Perhaps Peter means 'luckier' for all the 'unlucky' people who DON'T have 'bigger deposits'? :re:

I reckon we all just should get a petition together telling Glen Stevens just how much he should care about us 'lucky' folk what do have bigger deposits 'n email it to him hey GBD? ... :D
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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goldbug
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So this is the last hope for Australian housing is it? Decades and decades of emergency interest rates.
O how the mighty fundamentals have fallen :lol
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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CSI
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You really seem to be asking if maintaining low interest rates for 30 years will result in property prices continuing to grow rapidly as they have done for the past 30 years - which would be good news for property investors, bad news for first time home buyers. Or whether it will merely maintain property prices at their current levels without significant growth - bad news for everyone.
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peter fraser
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GloomBoomDoom
15 Dec 2013, 02:19 AM
That's rubbish. I would prefer to buy when rates are high with a bigger deposit. Odds are rates are more likely to fall and your asset more likely to appreciate as a result.
The people that need assistance the most don't usually have large deposits.
I wasn't meaning you specifically, but the populace in general. Think average First Time Buyers.
goldbug
15 Dec 2013, 05:50 AM
So this is the last hope for Australian housing is it? Decades and decades of emergency interest rates.
O how the mighty fundamentals have fallen :lol
Why do you call them emergency rates. the world has seen these rates before. Why do you look at rates between 1975 and 2000 and assume they are the natural setting - 25 years in the history of finance is a very short time frame.

What were the rates in 1932? What were the rates in 1864? What were they in 1775? They had banks then.
CSI
15 Dec 2013, 06:34 AM
You really seem to be asking if maintaining low interest rates for 30 years will result in property prices continuing to grow rapidly as they have done for the past 30 years - which would be good news for property investors, bad news for first time home buyers. Or whether it will merely maintain property prices at their current levels without significant growth - bad news for everyone.
I don't believe that a continuation of low rates will cause house prices to continue to grow quickly. Initially when rates fall they do, but then as prices rise the rates have little effect and price rises should revert to following wage growth.

barns made a Sydney prediction in another thread that you should read. I would expect the other capitals to follow Sydney but be behind them in the timing, plus or minus local influences.

Will in a post above made mention of the Claws 10 points. I don't recall seeing those points although I'm sure that I will have read them many times in the Claws posts. Perhaps we should look at those points. I'll try to dig them up.
Edited by peter fraser, 15 Dec 2013, 08:23 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Bardon
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Kieran Trass wrote a good book on the property cycle and in the book he concludes that interest rates are not a propety market cycle driver. From memory he sees sentiments as the biggest driver.

To answer your question if they did stay below 5% then I think it would be positive for my investments in the current context. There may be some long term unintended consequences that could creep in that could offset the positive outlook in todays terms.

http://www.amazon.com/Grow-Property-Cycle-Kieran-Trass/dp/0143019430
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