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Property investors who bought when everyone else was running away are now reaping the rewards
Topic Started: 25 Aug 2014, 06:15 PM (3,751 Views)
Smart Monaaayy
Unregistered

Alright you two lovebird trolls! Settle down now, think you'll find the smart money got out of 'the game' about 6-12 months ago so they could realise their 'equity maaaate'

Record high job losses
Youth Unemployment Sky Rocketing
Business Closures
Mining Boom tailing off
Foreign Workers failing to come over on approved work visas in the volumes previously seen (knock to our Skill Sets)
Interest Rates will need to rise at some point be it 6-12 or 18 months away, stemming any future debt binged purchases
Days on Market increasing
Auction Rates dropping (If you read the CORRECT numbers and not the made up Vested Interest reports)

Basically we're in for a long haul of minimal to no growth, restrictions in credit, downgrades, unemployment, increase in crime rate etc etc - basically a recession or worse if people continue to pile everything into just one thing (property) a depression.

That's all good for me though - Cash is King in a crisis, and while you starve I shall have my feast! :)
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stinkbug
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Frank Castle
26 Aug 2014, 09:34 AM
And when he starts getting out I will take notice.
Currently, he is still buying the same sort of sites I usually target.
He is indeed still buying and developing. He's currently in the process of developing a very nice set of three apartment buildings on a ratty old site that noone wanted, but that has views of a nice river and the ocean. He's already had heaps of presales.

For decades he developed small stuff, though, and always made modest but steady profits.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Lou Ellen
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Unused supply side capacity is sitting at recessionary highs. Companies aren’t investing because they have no need to. They have too much floor space, too many empty factories, too many idle machines and too many staff. Bashing them up for lacking confidence is some weird kind of moral socialism. Are these charities or businesses? The only reason to invest in this environment is to increase efficiency and that’s only going to make the problem worse in aggregate.

Why is that? Because the supply side slack is emanating from a paucity of demand relative to what was expected when the capacity was all installed. It doesn’t take Einstein to figure out why!

The Australian economy is 70% consumption so when households start to save, overcapacity appears quickly on the supply side.

Why are households saving you ask? House prices are rising, unemployment is still low, we’re still the lucky country. But a crucial link in the household consumption chain is broken. The twenty year rise of consumption-driven growth that ended in 2008 went hand-in-hand with rising house and share prices, the conversion of which into spending is obvious in the falling away of the savings rate from 1990 to 2008. But since the GFC, households no longer believe in spending everything they have and relying on asset inflation to save. They want real savings thanks very much, and so they should, after witnessing a cavalcade of asset bubbles mercilessly implode across the world for six years. Add in a aging population and, hey presto, people want reliable savings.

If you’re looking for a confidence problem it is here, not in businesses. Though I’d rather see this as the return of household rationality after a period of lunacy. As US behavioural economist Robert Shiller argues:

A critical aspect of animal spirits is trust, an emotional state that dismisses doubts about others. In talking about animal spirits, Keynes sought to convey the message that swings in confidence are not always logical. The business cycle is in good part driven by animal spirits. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people’s somewhat rash, impulsive decision-making is not discovered.

Unfortunately, we have just passed through a period in which confidence was blind. It was not based on rational evidence. The trust in our mortgage and housing markets that drove real-estate prices to unsustainable heights is one of the most dramatic examples of unbridled animal spirits we have ever seen.


Really, do we want to send everyone back to the old asset inflation delusion? It turned our banks into building societies, crowded out business lending and led directly to their nationalisation in the GFC. More of the same will result in more of the same. Besides, the RBA has already tried and failed. Even though it has managed to re-inflate the housing bubble with help from the Chinese, households still ain’t spending the “wealth” and, in all likelihood, won’t do so for another generation.

That brings us to the real issue. The RBA’s and Government’s mad chase for “confidence” has delivered another consequence. Housing inflation is really land price inflation, a crucial input cost for business that contributes to capital values, rents, wage demands, inflation, interest rates and, thus, the value of the Australian dollar. When you put all of these together and measure it against the same in other economies you get what is called the real effective exchange rate (REER).

Focus on the blue line. The REER is an index of the nation’s relative competitiveness and the RBA’s great re-inflation has succeeded in keeping it at astronomical levels. Normally, as mining boom prices fall away, the REER would fall with them via a depreciating Australian dollar and real wage deflation. But the RBA has stopped that in its tracks. As a result, Australia is being exposed as not only expensive but exorbitantly so. We’re now priced out of pretty much everything tradable – that is, exports and import competing businesses, roughly 40% of the economy - including staples such as coal, LNG, and any iron ore other than the super low cost reserves of BHP and Rio. For business there’s is simply no profit in investing in Australia versus other countries.

So, what is the answer here? Is it to gather with the “leadership” boffins of Australian Davos Connection on Hayman Island to whine about slack confidence? Is it to earnestly discuss the rise of regulation over a pina colada? Is it to bluster from your banana chair about a lack of innovation? Is it to start picking winners and building hubs around bureaucratic favourites as you haul in a fat coral trout? What are they then? Tech? You’re going to compete with Silicon Valley are you? Agriculture? Sort of but it’s not really growing much either. Resources? Guess so but hasn’t the super cycle ended? Manufacturing? Of what that China won’t rip off in six weeks? The picking winners thesis is throwing darts with a blindfold on. Pass the sun tan lotion will you!

The real answer is to address the REER. Improving Australian competitiveness in general will repair the price signal that brings business investment to life in all sorts of expected and unexpected ways, as history has shown us. Everyone expected resource exports to benefit when the REER was repaired in the 1980s following the seventies mining boom but nobody reckoned on Australian business taking control of global markets for blood products, shipping pallets, shopping malls and board shorts. More to the point of today’s Pasconomic narrative, confidence and innovation will flow automatically with the return of a competitive edge, not the other way around.

One final point. The notion of improving competitiveness should not be confused with some simplistic drive by corporate Australia to neuter unions and drive down wage costs. That is the US path that has resulted in the hollowing out of its middle classes and has dramatically widened the welfare gap, as well as undermining demand for the very products that the same corporates sell, creating a feedback loop. Australia’s lack of competitiveness is a capital mis-allocation problem as much as it is wages related (see Hayman Island productivity plunge!). Capital waste is at unbelievable proportions in housing, mining, utilities and, soon enough thanks to Abbott pork, in infrastructure.

Repairing the REER is a national interest project in which all parties must participate on the basis of mutual sacrifice and protection of the vulnerable. It requires monetary, wage, tax, productivity and competition reform. Right now the RBA has done far more harm than good in cutting interest rates without using macroprudential policy to contain housing prices so that the dollar could fall, and the Abbott Government has directed policy diametrically backwards in its assault upon the vulnerable and protection of rent-seeking corporate margins.

If Australia wants to remain a high wage, high cost economy - and it should – directing effort towards restoring innovation and sophisticated value-adding is the right thing to do, as the RBA’s Phil Lowe argues. But it can’t be done when the REER is so outrageously bloated and policy so ill-directed at protecting rent-seekers.

A simple example makes the point better than I can. Blood products manufacturer CSL is one of the outstanding success stories of Australia’s 1908s REER repair job. It’s exactly the kind of high wage, high value-add global niche business that Australia can excel in. It’s still investing it’s butt off, announcing a new factory just last week. But it’s going to be built in Switzerland where the REER has been held in check by adult macroeconomic policies that include a currency peg to the euro, low house prices, very low inflation and competitive tax rates. Nobody there is whining about “confidence”, they’re too busy making money.
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skamy
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goldbug
26 Aug 2014, 08:27 AM
Property is a good long term investment, how would know until you held it for a long time spammy? You have to trust other people's word on it don't you, and their projections. But who are these other people? 9 times out of 10 they are the ones making a direct profit from your investment.

I doubt 1 in 1000 bulls on property would have bothered seeking out a few elderly landlords to get their honest take on it, I have and what they all do is bitch about the low yield on their worn out old homes, the maintenance costs, taxes incurred if they sell and the free government handouts they don't qualify for because of the property they own.

And that folks, is after 40 years of booming house prices. What do think you are in for in the next 40? Not pretty when you look at the big picture around the world is it.
Rent controls
Falling prices
Land taxes
Impoverished tennants screwing you over
Higher maintenance costs
Competition from everyone with a granny flat or a few spare rooms to rent out.

I think that last point may become a real elephant too. Many retiring baby boomers have large incomes now but small super funds and as austerity begins to bite hard they will rent out a few spare rooms. Why not, they are the generation that invented share houses in the first place.
Gold bug I bought my first property 33 years ago. I am more long in the teeth than green at the gills.

I am well aware of who else profits. The point is if you do not have property and pay rent all your life you lose long term, that is undeniable.

This elderly landlady is happy enough and considers herself very lucky to be well enough off to have a property investment.

You are hanging around with the wrong crowd, they sound like a crowd of old moany whingers.

:dry:
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stinkbug
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Smart Monaaayy
26 Aug 2014, 10:09 AM
Alright you two lovebird trolls! Settle down now, think you'll find the smart money got out of 'the game' about 6-12 months ago so they could realise their 'equity maaaate'

Record high job losses
Youth Unemployment Sky Rocketing
Business Closures
Mining Boom tailing off
Foreign Workers failing to come over on approved work visas in the volumes previously seen (knock to our Skill Sets)
Interest Rates will need to rise at some point be it 6-12 or 18 months away, stemming any future debt binged purchases
Days on Market increasing
Auction Rates dropping (If you read the CORRECT numbers and not the made up Vested Interest reports)

Basically we're in for a long haul of minimal to no growth, restrictions in credit, downgrades, unemployment, increase in crime rate etc etc - basically a recession or worse if people continue to pile everything into just one thing (property) a depression.

That's all good for me though - Cash is King in a crisis, and while you starve I shall have my feast! :)
Disagree.

When you are executing a strategy using many assets across multiple decades what we have now is nothing more than a few bumps in the road. We've had it before and we'll have it again.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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SittingOnDeFence
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skamy
26 Aug 2014, 03:35 AM
You seriously believe people would do that?

IMHO that is such an arrogant stupid appraisal of how the average investor operates. Many are the same people who are taking out all the selective high school places for their kids, now that I have mentioned it you know I am correct hey?

The gold buyers were the idiots, the property investors were the wise ones, as always.



And
IMHO you have been very stupid indeed.

Property is a good long term investment- it is just stupid to sell everything on a gamble and a speculation


In Melbourne CBD, there are stalls in the QVB food hall every week selling apartments, as well as in Melbourne Central (beneath the clock)

Have you not seen them?

I would say I'm not the one being stupid and arrogant
Edited by SittingOnDeFence, 26 Aug 2014, 11:26 AM.
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skamy
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Guest
26 Aug 2014, 09:53 AM
But you dopez don't seem to realize or understand that this downturn we are in is like nothing we have seen or experienced over the last fifty years or within your mentors 70 years stinky.

This is the great depression all over on a scale that dwarfs the great depression and for the last six years they have bden trying to aviod total collapze by jamming ratez at zero for six years and pumping 10 trillion in fake money in over the same time.

The cover up that is still going strong six years on.

You 70 year old mentor never saw zero rates or the bullshit the sorld is goimg through now.

Why do you people sit like dopes and just ignore the most obviuos.

On top of the bullshit we face, we now have to deal with dirt cheap asain labour on top of this.

You clowns look so stupid discarding the reality ALL around you. :wak:
You are believing hogwash. Nothing much has changed at all, during every crash in my long life there are idiots selling get rich quick strategies to fools who believe the world has changed they tell kids that it is either going to boom forever or bust forever.

Don't keep sucking on that miserable lemon it will make you very very bitter in a few years when you finally realise your Granddad was right after all and these doom and gloom merchants were charlatans.
Smart Monaaayy
26 Aug 2014, 10:09 AM
Alright you two lovebird trolls! Settle down now, think you'll find the smart money got out of 'the game' about 6-12 months ago so they could realise their 'equity maaaate'

Record high job losses
Youth Unemployment Sky Rocketing
Business Closures
Mining Boom tailing off
Foreign Workers failing to come over on approved work visas in the volumes previously seen (knock to our Skill Sets)
Interest Rates will need to rise at some point be it 6-12 or 18 months away, stemming any future debt binged purchases
Days on Market increasing
Auction Rates dropping (If you read the CORRECT numbers and not the made up Vested Interest reports)

Basically we're in for a long haul of minimal to no growth, restrictions in credit, downgrades, unemployment, increase in crime rate etc etc - basically a recession or worse if people continue to pile everything into just one thing (property) a depression.

That's all good for me though - Cash is King in a crisis, and while you starve I shall have my feast! :)
Jeez a fool and his money hey?

Only an eejit would sell up all their property on a gamble, property is for the long term.
Edited by skamy, 26 Aug 2014, 11:11 AM.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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stinkbug
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Guest
26 Aug 2014, 09:53 AM
But you dopez don't seem to realize or understand that this downturn we are in is like nothing we have seen or experienced over the last fifty years or within your mentors 70 years stinky.

This is the great depression all over on a scale that dwarfs the great depression and for the last six years they have bden trying to aviod total collapze by jamming ratez at zero for six years and pumping 10 trillion in fake money in over the same time.

The cover up that is still going strong six years on.

You 70 year old mentor never saw zero rates or the bullshit the sorld is goimg through now.

Why do you people sit like dopes and just ignore the most obviuos.

On top of the bullshit we face, we now have to deal with dirt cheap asain labour on top of this.

You clowns look so stupid discarding the reality ALL around you. :wak:
My mentor dealt with being forcibly removed from his country of origin and leaving with nothing, war, depression, high inflation, recession and all the other bad things of the last 70+ years. He maintains that property bought well, managed well, rented well and with a path to redevelopment is the lowest risk way to get rich slowly. He has told me to expect setbacks and problems, but also that success will come when you don't necessarily expect it.

You can continue to believe life as we know it is over if you want. If you are right, then there won't be any assets that are realistically worth having anyway. Alternatively, you could realise that we are a wealthy country located in a region with enormous potential as it develops, and that despite all those things you harp on about we are growing steadily larger and wealthier over time.

What you see as great disasters is really the seeds of the destruction of the middle class. So the question is: do you want to be in the middle class?
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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skamy
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SittingOnDeFence
26 Aug 2014, 11:08 AM


In Melbourne CBD, there are stalls in the QVB food hall every week selling apartments, as well as in Melbourne Central (beneath the clock)

Have you not seen them?
What do you know about these people you look down your nose at?

If they were rich folk buying off the plan through their financial managers are they still stupid?

Who do you think should be allowed to buy property?

Each and every one of those buyers whom you sneer at, if they hold for 10 years will be financially so much better off than people like you who sit on the fence waiting. You guys wait around for some fantasy housing fire sale in a country where the average person is way ahead on their mortgages and savings outstrip debt hugely. This rich country could probably take 2 years of 10% unemployment before the market drops more that gains last year.
It is greed for a massive gain than feeds your dreams, people who run sites like macrobusiness know their market well.

You think putting all your money in property is risky but the truth is gambling all your money refusing to buy until there is a housing fire-sale is much more risky. House prices mostly rise and rarely fall you are the one with the long odds.

You are free to keep sucking the doom and gloom lemons for a few more years if you wish but why be such a pompous snob about the home buyers who have actually done so well over the last few year.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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SittingOnDeFence
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skamy
26 Aug 2014, 11:28 AM
What do you know about these people you look down your nose at?

If they were rich folk buying off the plan through their financial managers are they still stupid?

Who do you think should be allowed to buy property?

Each and every one of those buyers whom you sneer at, if they hold for 10 years will be financially so much better off than people like you who sit on the fence waiting. You guys wait around for some fantasy housing fire sale in a country where the average person is way ahead on their mortgages and savings outstrip debt hugely. This rich country could probably take 2 years of 10% unemployment before the market drops more that gains last year.
It is greed for a massive gain than feeds your dreams, people who run sites like macrobusiness know their market well.

You think putting all your money in property is risky but the truth is gambling all your money refusing to buy until there is a housing fire-sale is much more risky. House prices mostly rise and rarely fall you are the one with the long odds.

You are free to keep sucking the doom and gloom lemons for a few more years if you wish but why be such a pompous snob about the home buyers who have actually done so well over the last few year.
Here are the answers to your questions

I think they need to buy and they are being conned

Rich folk probably won't be buying now - generally any rich folk I've known live well within their means, that's why they are rich

Those that can afford at least 20% deposit

I'm not sneering at them, I feel sorry for them and I hope they don't get caught in negative equity if there's a property crash. Likewise I'd hope they realise they know what risk they are getting into and that they have a get out plan.

I don't think there will be a fantasy housing firesale, there might be for apartments, but chances are they will poorly built and not worth buying. I think it will always be as difficult to buy a house in the future as it is now, regardless of the price. I think that the only thing that determines the price is credit, and so while at the moment my partner and I qualify for 5-6 times our income in a mortgage, we're aiming much lower and have 20-30% deposit. The only thing that could cause a property crash here would be a credit crunch (I reckon). Those with enough cash to buy a place will be few and far between in reality, and so the prices will just have to drop to whatever the banks can lend, which, granted, might be nothing.

It's quite arrogant of you to assume that I'm a greedy person, really I'm just sick of the bullshit property sruiking that goes on in this country when all people want is a place to live.

Quote:
 
This rich country could probably take 2 years of 10% unemployment before the market drops more that gains last year.


Maybe, but could it take 2 years of falling growth in China?
Edited by SittingOnDeFence, 26 Aug 2014, 11:40 AM.
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