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Property to Boom over next 3 years.; Perth set for 22% gains over next 3 years
Topic Started: 18 Oct 2012, 11:45 AM (6,705 Views)
stinkbug
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Alvin
19 Oct 2012, 10:13 PM

I think the 'best' you can hope for (for the next 10+ years) is stagnet prices hovering around inflation.
While I agree with the general gist of your post, and especially this statement, I don't think it will take 10+ years. I think 4-7 years is more likely. Other prices (and wages) are creeping up constantly (low interest rates will help here), and we're a couple of years past the peak anyway I reckon.

A few years of stagnant prices is fine with me. I'll happily continue to collect growing rents while I wait for the next surge in prices.
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Alvin
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stinkbug
19 Oct 2012, 11:06 PM
While I agree with the general gist of your post, and especially this statement, I don't think it will take 10+ years. I think 4-7 years is more likely. Other prices (and wages) are creeping up constantly (low interest rates will help here), and we're a couple of years past the peak anyway I reckon.

A few years of stagnant prices is fine with me. I'll happily continue to collect growing rents while I wait for the next surge in prices.

10+ years...... haha, and I was trying to be conservative with our high debt to disposable income ratio currently @ +149%.

If conditions continue to worsen here, consumer confidence will erode with it. I dont see rate cuts encouraging people to rush out and start buying... I see people becoming more cautious and continuing to pay down debt, especially if unemployment keeps rising and employee working hours reduced or cut to part-time. A sudden surge in defaults(from unemployment or mortgage stress) will also put more downward pressure on houses. Those owning outright or with a high equity ratio need not worry, unless they have to sell.

I see 10+ as a minimum before all past mistakes are corrected and new money is allocated appropriately within all debted economies before a sound fundamental recovery/growth phase can happen.

This will 'NOT' be a quick fix. Not within the next 4-7 years IMO. Look how far we have come in 5 years post GFC.

The US has still to face the full consequences of its actions.

GREECE and Spain are in "depression, not recession", Nobel prize-winning economist Joseph Stiglitz said

Quote:
 
Mr Stiglitz, who served as a top advisor to former US president Bill Clinton, "I'm more pessimistic than they are (about growth)... I see significant risk of continuing turmoil,"

"Spain and Greece are in depression, not recession. That impact was brought about by austerity" with the countries now trapped in a vicious cycle of spending cuts and slumping growth, he said.

"Austerity is bringing Europe down and diminishes chances of making things work,"


http://www.theaustralian.com.au/business/in-depth/greece-spain-in-depression-nobel-winner-stiglitz/story-fnawdwo8-1226498310324


Greece will run out of money by November if the next tranche of international aid does not arrive,

Quote:
 
Greek Prime Minister Antonis Samaras said in an interview with a German newspaper published on Friday.

“Until the end of November. Then the coffers are empty,” Samaras told the business daily Handelsblatt, answering the question of how long the struggling country can hold on without the next credit tranche.


http://www.ibtimes.com/eurocrisis-greece-collapse-november-842479

Mass Job Cuts in Sweden

http://www.bloomberg.com/news/2012-10-18/mass-job-cuts-in-sweden-belie-government-optimism-nordic-credit.html


You know this all has a flow on effect.

Edited by Alvin, 20 Oct 2012, 10:49 PM.
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stinkbug
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Alvin
20 Oct 2012, 10:38 PM

I see 10+ as a minimum before all past mistakes are corrected and new money is allocated appropriately within all debted economies before a sound fundamental recovery/growth phase can happen.

If that's your view then fair enough, but don't underestimate the effect of inflation on improving affordability. 7 years is a long time, and added to the 5 we've already had makes 12 years since the start of the GFC.
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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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miw
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mango66
19 Oct 2012, 01:48 PM
Rents are increasing because landlords are selling up and tightening the rental market. Not everyone bought pre boom Dank. Anyone buying after 08 are sure to be doing their arse and probably have been for a while. I have a few friends now moving because both their rentals are for sale. Don't look int it too much, remember don't over rub that Chrystal ball. You could allways borrow Shadows time machine if you want to accurately predict the future but his has a problem with dates....it doesn't go past 2015.
Huh? If landlords are selling up and OOs are not buying, then where are those dwellings going? I would say right back on the rental market. I'd say they are not being demolished.

It's pretty normal for rents to rise while property prices are flat. I've seen this in a couple of cycles now. Over the long term, rents pretty-much track prices, but prices and rents move in different parts of the cycle. Rents will continue to rise until the investors get ahead of themselves again. Could be a while.

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Jolinar Maktub
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miw
21 Oct 2012, 12:37 AM
Huh? If landlords are selling up and OOs are not buying, then where are those dwellings going? I would say right back on the rental market. I'd say they are not being demolished.

It's pretty normal for rents to rise while property prices are flat. I've seen this in a couple of cycles now. Over the long term, rents pretty-much track prices, but prices and rents move in different parts of the cycle. Rents will continue to rise until the investors get ahead of themselves again. Could be a while.
I generally find that if prices decline or stay flat, it takes 6 to 12 months for rents to rise in response. Most tenants are on 6-12 month leases. Soon after this you tend to see a lot more industrial action, starting with those who are employed by the state (nurses,teachers etc), and followed by private sector unions. Rising wages puts pressure on margins, which often results in a dual response by business owners of rising prices or redundancies, which historically has led the RBA to raise rates in response to inflation, which feeds back into asset prices and income stress.

This time though, there seems to be a break from the historical cycle. The RBA is participating in the great zero interest rate experiment, and using rates to prop up the disposable income of mortgagees to ease pressure on wage inflation. That they need to throw renters and savers under the bus to do this highlights just where the political priorities lie for governments of the Western world. The only problem with this approach is that it has been such a monumental failure in the US and the EU.

My own personal theory as to why the ZIRP approach has failed is that capital markets have a long bias. That is, the upside is unlimited, but the downside has a boundary of zero. Rates cannot go below zero, so once you hit that lower boundary, the only way to continue to prop up the disposable income of mortgagees is to just give them free money. Historically, once that happens, your economy is toast. Who would go to work and earn money when the government will pay you to live in your house for free?


"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works". -- John Stuart Mill
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Trojan
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Jolinar Maktub
21 Oct 2012, 08:49 AM
My own personal theory as to why the ZIRP approach has failed is that capital markets have a long bias. That is, the upside is unlimited, but the downside has a boundary of zero. Rates cannot go below zero, so once you hit that lower boundary, the only way to continue to prop up the disposable income of mortgagees is to just give them free money. Historically, once that happens, your economy is toast. Who would go to work and earn money when the government will pay you to live in your house for free?
When the economy is bad enough to warrant ZIRP, then without a job, you won't be able to get a loan.
You don't see record number of loans being written in countries where the interest rate hits zero.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Pig Iron
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Bogan scum

Alvin
20 Oct 2012, 10:38 PM

You know this all has a flow on effect.

why is it that your ilk only think bad news has a flow on effect?
I am the love child of Tony Abbott and Pauline Hanson
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Jolinar Maktub
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Trojan
21 Oct 2012, 12:56 PM
When the economy is bad enough to warrant ZIRP, then without a job, you won't be able to get a loan.
If the interest rate is zero, the next step is to extend the term. Picture this as the final destination of ZIRP. You can borrow for 120 years at 50bps. For a million dollars that works out to be $309 per week. If I were unemployed, I and my wife would receive a total of $444 per week from Centrelink for my newstart allowance. Ok, so maybe it would be as stretch to pay off a million dollar house on unemployment benefits, but how about a 465,000 dollar house? That would be a mortgage payment $144 per week, and there is your magic ratio for serviceability.

In fact, I am warming to this idea now. Here's how it could play out. Interest rates go to zero, lose job, apply for unemployment benefits, purchase house, pay off house while living on the dole. The entity paying off the debt in this case is the federal government, whose faith and credit are unmatched, so the bank has no exposure, and can lend 100% of the purchase price. Bank receives interest and has a long term asset on it's balance sheet with no prepayment or default risk. Purchaser owns the title to the house, and no longer has to rent. If the government starts to run out of money to pay unemployment benefits, it can just sell more bonds. As b_b says, the government can print an unlimited amount of money without consequence. There is nothing wrong with this plan! I need to contact Wayne Swan immediately.

Quote:
 
You don't see record number of loans being written in countries where the interest rate hits zero.

In which country is a record number of loans being written?


"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works". -- John Stuart Mill
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Alvin
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stinkbug
20 Oct 2012, 11:04 PM
but don't underestimate the effect of inflation on improving affordability. 7 years is a long time, and added to the 5 we've already had makes 12 years since the start of the GFC.

Can you please explain what you mean by these broad statements?

Inflation in what?

Improving affordability for what?


So your assuming that the first 5 years post GFC account for a healthy economic fundamental restructure for the next growth phase?

I say its been made worse. And is continuing to become worse.


timmy
21 Oct 2012, 01:01 PM
why is it that your ilk only think bad news has a flow on effect?

Huhh?

Is that a serious question?

Euphoric, Party time, herd/bull mentality does too. What do you think creates bubbles?

Are you implying I have said 'only Bad news has a flow on effect'??

What 'ilk' are you grouping me in?


Using the words of your mum (Pauline Hanson).... "Please explain"?



Edited by Alvin, 21 Oct 2012, 04:36 PM.
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Trojan
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Jolinar Maktub
21 Oct 2012, 03:28 PM
If the interest rate is zero, the next step is to extend the term. Picture this as the final destination of ZIRP. You can borrow for 120 years at 50bps. For a million dollars that works out to be $309 per week. If I were unemployed, I and my wife would receive a total of $444 per week from Centrelink for my newstart allowance. Ok, so maybe it would be as stretch to pay off a million dollar house on unemployment benefits, but how about a 465,000 dollar house? That would be a mortgage payment $144 per week, and there is your magic ratio for serviceability.

In fact, I am warming to this idea now. Here's how it could play out. Interest rates go to zero, lose job, apply for unemployment benefits, purchase house, pay off house while living on the dole. The entity paying off the debt in this case is the federal government, whose faith and credit are unmatched, so the bank has no exposure, and can lend 100% of the purchase price. Bank receives interest and has a long term asset on it's balance sheet with no prepayment or default risk. Purchaser owns the title to the house, and no longer has to rent. If the government starts to run out of money to pay unemployment benefits, it can just sell more bonds. As b_b says, the government can print an unlimited amount of money without consequence. There is nothing wrong with this plan! I need to contact Wayne Swan immediately.



In which country is a record number of loans being written?
When the economy is bad enough to warrant ZIRP, then without a job, you won't be able to get a loan.
Sorry, you are dreaming if you think the bank will lend you a million dollars (or even $465k) when you guys only receive $444pw from centerlink.
Just because your $444pw is enough to cover the repayments at 0.5%, it doesn't mean the banks will lend it to you. I suggest you read up on serviceability calculation of banks and how they work.


You don't see record number of loans being written in countries where the interest rate hits zero.
That's exactly my point, despite some countries being on ZIRP, no countries are writing out a record number of loans
Edited by Trojan, 21 Oct 2012, 04:40 PM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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