Aussie Dollar Plummets
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thinking_pilot, if you've paid cash for your toys, no-one can take them away, unless you decide yourself that you want to get rid of some (e.g. to get a better toy 
).
The problem is with people who don't think twice to defer debt by buying everything "interest free", loading up their credit card, and generally living beyond their means, thinking the equity in their houses is safe and will get them out of trouble at that point in the future when they'll possibly have to own up to their shopping sprees. They're so wrong it hurts!
Trouble is, it'll hurt the prudent guys too once the idiots are dispossessed en masse, as the stupid hordes will drag the whole economy down..
In today's Australian, there's a piece about rental increases, which shows pretty much no increase in almost all places save Darwin (Perth rents are even going down!). So if a realo or such like serves you BS about ever increasing rents to waffle you into buying property, tell them to f
k off!
).The problem is with people who don't think twice to defer debt by buying everything "interest free", loading up their credit card, and generally living beyond their means, thinking the equity in their houses is safe and will get them out of trouble at that point in the future when they'll possibly have to own up to their shopping sprees. They're so wrong it hurts!
Trouble is, it'll hurt the prudent guys too once the idiots are dispossessed en masse, as the stupid hordes will drag the whole economy down..
In today's Australian, there's a piece about rental increases, which shows pretty much no increase in almost all places save Darwin (Perth rents are even going down!). So if a realo or such like serves you BS about ever increasing rents to waffle you into buying property, tell them to f
k off!
I just put the rent up 25% on commercial holdings in BNE & 20% on a residential holding in MEL.
Prices are going down? But yields are up. Cashflow is what's really important in these times. Actually, with low debt I have really come to appreciate this most basic of concepts.
Interestingly, how many properties do the property detractors own on this thread? Seriously. How many? I often find positions of extreme negativity loaded with ulterior motive. No denying short term downward pressures on property. Beyond that?
I am after some more international property in the next 12 months and a Sydney apartment in need of a reno. Subject to an availability of bank funds.
Prices are going down? But yields are up. Cashflow is what's really important in these times. Actually, with low debt I have really come to appreciate this most basic of concepts.
Interestingly, how many properties do the property detractors own on this thread? Seriously. How many? I often find positions of extreme negativity loaded with ulterior motive. No denying short term downward pressures on property. Beyond that?
I am after some more international property in the next 12 months and a Sydney apartment in need of a reno. Subject to an availability of bank funds.
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Gnadenburg, I have owned property in London and have profited handsomely from it. I would never buy property here now unless I had money to burn.
Yields may go up when prices go down, but owning property only makes sense if it is set to rise in capital value within the period you're planning to own it for, at least on par with other forms of investment, or unless the risk of falling values is more than weighed up by the advantages of negative gearing.. For the latter to work you'd have to be pretty wealthy already..
Given it could take decades for values to recover after a practically unavoidable crash, I would seriously doubt it would make sense for 95% of the population at the moment to buy into the Aussie property market..
Yields may go up when prices go down, but owning property only makes sense if it is set to rise in capital value within the period you're planning to own it for, at least on par with other forms of investment, or unless the risk of falling values is more than weighed up by the advantages of negative gearing.. For the latter to work you'd have to be pretty wealthy already..
Given it could take decades for values to recover after a practically unavoidable crash, I would seriously doubt it would make sense for 95% of the population at the moment to buy into the Aussie property market..
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Chimbu..Chicken Little
You dont do hysterical...you are giving a good impression of someone who is.
There will be some industries...luxury producing industries...that will suffer as discretionary expenditure is re evalauated.
I have a B.Comm LL.B from UNSW which provides a reasonable understanding of what is going on...I liquidated every stock I had in July last year...not being smug or clever...but it was obvious that things were getting ridiculous.
Things are serious...sure...but there are opportuniites now that havent been avaialble for awhile.
Go down to the local mall..... is it empty?.
Are people living in cardboard boxes outside your house?
The interest rate hikes over the last 5 years made people re evaluate their debt levels...most did.
This puts most people in reasonable shape to ride this situation out.
Your arguments are repetitive and circular.
The Sub prime mortgage situation in the US was bought about by home buyers being sold mortgage products that had nasty kickers.Introductory rates of 3% that balloned to 12 and 13 % after 5 years.Defaults on these mortgages were inevitable.
Hedge funds got in on the cheap money and were paying inflated prices for just about everything.
Fair value was destroyed and the gambling mentality took over.
The good times were never going to end...well they have...for awhile.
The Americans took their eye off their financial instituitons and let them run riot.
Not so in Australia...our exposure to sub prime was/is comparatively small.
None of our banks needs to be bailed out.Liquidity is a little tight.Thats not a bad thing.
The banks are solid...the real estate market is solid.The dole Qs havent lenghtened...nor will they lenghten appreciably over the next 12 months.There will however be a reallocation of labour.
Rudd is doing the right thing.
Spending is what ended the Great depression.
Give people a reason to spend..
Its the oil of economic machinery.
Consumers stop consuming ...game over.
Fair value is about to return to just about everything.
Go out and start bargain hunting.
Dont buy what you want...buy what you NEED.
Stupidity is about to be replaced by common sense.
The people who caused this problem now caused the problem in '87.
In another 20 years time they will cause another problem...if we let them
There will be some industries...luxury producing industries...that will suffer as discretionary expenditure is re evalauated.
I have a B.Comm LL.B from UNSW which provides a reasonable understanding of what is going on...I liquidated every stock I had in July last year...not being smug or clever...but it was obvious that things were getting ridiculous.
Things are serious...sure...but there are opportuniites now that havent been avaialble for awhile.
Go down to the local mall..... is it empty?.
Are people living in cardboard boxes outside your house?
The interest rate hikes over the last 5 years made people re evaluate their debt levels...most did.
This puts most people in reasonable shape to ride this situation out.
Your arguments are repetitive and circular.
The Sub prime mortgage situation in the US was bought about by home buyers being sold mortgage products that had nasty kickers.Introductory rates of 3% that balloned to 12 and 13 % after 5 years.Defaults on these mortgages were inevitable.
Hedge funds got in on the cheap money and were paying inflated prices for just about everything.
Fair value was destroyed and the gambling mentality took over.
The good times were never going to end...well they have...for awhile.
The Americans took their eye off their financial instituitons and let them run riot.
Not so in Australia...our exposure to sub prime was/is comparatively small.
None of our banks needs to be bailed out.Liquidity is a little tight.Thats not a bad thing.
The banks are solid...the real estate market is solid.The dole Qs havent lenghtened...nor will they lenghten appreciably over the next 12 months.There will however be a reallocation of labour.
Rudd is doing the right thing.
Spending is what ended the Great depression.
Give people a reason to spend..
Its the oil of economic machinery.
Consumers stop consuming ...game over.
Fair value is about to return to just about everything.
Go out and start bargain hunting.
Dont buy what you want...buy what you NEED.
Stupidity is about to be replaced by common sense.
The people who caused this problem now caused the problem in '87.
In another 20 years time they will cause another problem...if we let them
Yields may go up when prices go down, but owning property only makes sense if it is set to rise in capital value within the period you're planning to own it for, at least on par with other forms of investment, or unless the risk of falling values is more than weighed up by the advantages of negative gearing.. For the latter to work you'd have to be pretty wealthy already..
I though rents should be falling. As mentioned, I have hiked rents considerably in supposedly vulnerable areas- inner city commercial and residential holdings.
Good property could very well increase in value if this financial strain is sorted and we don't will ourselves into recession.
I am looking at Sydney apartments. I always wanted one. Water front, art deco. Rent it for a year than do a smart reno and run a depreciation schedule on the reno'. I reckon I will be happy with this strategy in 5 years.
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And for the love of god will someone shoot that stupid bitch Penny Wong...see her quoted in London in yesterdays media? ETS and saving the planet is a 'personal and moral' crusade that will go ahead in 2010 despite the meltdown.
Make it a grenade and do it when Garrat is standing next to her! (He should have stuck to singing!)
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Ka.Boom = Krudd?
Odds on that KB is a Kruddophile.
As usual CC your posts make good reading - and combined with the likes of OZBD, FB and more present a pretty plausible picture of things past and possibly to come.
As usual CC your posts make good reading - and combined with the likes of OZBD, FB and more present a pretty plausible picture of things past and possibly to come.
I often go to pilots for financial advice. And then do the opposite to what they suggest.
Can anyone explain why my rents are increasing dramatically???
Housing shortage, historically low unemployment rate, almost silly levels of immigration; or some things just bullet proof- even in recession?
Can anyone explain why my rents are increasing dramatically???
Housing shortage, historically low unemployment rate, almost silly levels of immigration; or some things just bullet proof- even in recession?
Last edited by Gnadenburg; 17th Oct 2008 at 08:41.
Grandpa Aerotart
Oo look...someone with a degree...last I looked people with degrees got us into this mess
I'll grant you that FDR's New Deal helped end the Great Depression but so did WW2 (so you should credit Adolf and Hirohito too) for the yanks anyway. They didn't give away all that stuff that flew, rolled, floated and went BANG!!...and eventually everyone else...when we finished paying the yanks off...was it last year or the one before?
What effect did Herbert Hoover's largesse have in 1929/30? Certainly it wasn't a 'soft landing'.
Perhaps you could use your degree to explain to all what the effect is on a currency not backed up by anything, besides good will, when the printing presses get put into turbo boost?
The Icelandic Govt has just guaranteed to rescue its failed banking system..at a cost of 500k/ Icelandic man, women and child. Could be some VERY good deals there on all manner of stuff...don't expect any capital gains for a few generations though...or 7.
Swiss bank UBS has just been effectively nationalised and Credit Swiss just sold a chunk of itself to...wait for it...Qatar Soveriegn Wealth Fund..for 9.4 billion or thereabouts...but they said they didn't really need any help.
One Australian bank has written off best part of 900 million $ in US exposure and reckons on recovering 55% of defaulting mortgages...in fact 50% is becoming a very common number in relation to real estate values.
The western economies are in completely uncharted waters and you're calling a bottom. Gutsy Move Mav.
Even the Oracle from Omaha isn't game for that...suggesting long and deep but it will recover eventually. Listened to him at length the other night...a REAL unreconstructed glass half full type. "It has never paid to write off the US economy since 1776 and it doesn't pay to do it in 2008" and "I only ever buy companies that are so GREAT that even an idiot could run them...because eventually one will...just like Govts"
Chumbu chuckles. ATPL(lots), PHD GynA
I'll grant you that FDR's New Deal helped end the Great Depression but so did WW2 (so you should credit Adolf and Hirohito too) for the yanks anyway. They didn't give away all that stuff that flew, rolled, floated and went BANG!!...and eventually everyone else...when we finished paying the yanks off...was it last year or the one before?
What effect did Herbert Hoover's largesse have in 1929/30? Certainly it wasn't a 'soft landing'.
Perhaps you could use your degree to explain to all what the effect is on a currency not backed up by anything, besides good will, when the printing presses get put into turbo boost?
The Icelandic Govt has just guaranteed to rescue its failed banking system..at a cost of 500k/ Icelandic man, women and child. Could be some VERY good deals there on all manner of stuff...don't expect any capital gains for a few generations though...or 7.
Swiss bank UBS has just been effectively nationalised and Credit Swiss just sold a chunk of itself to...wait for it...Qatar Soveriegn Wealth Fund..for 9.4 billion or thereabouts...but they said they didn't really need any help.
One Australian bank has written off best part of 900 million $ in US exposure and reckons on recovering 55% of defaulting mortgages...in fact 50% is becoming a very common number in relation to real estate values.
The western economies are in completely uncharted waters and you're calling a bottom. Gutsy Move Mav.
Even the Oracle from Omaha isn't game for that...suggesting long and deep but it will recover eventually. Listened to him at length the other night...a REAL unreconstructed glass half full type. "It has never paid to write off the US economy since 1776 and it doesn't pay to do it in 2008" and "I only ever buy companies that are so GREAT that even an idiot could run them...because eventually one will...just like Govts"
Chumbu chuckles. ATPL(lots), PHD GynA
Last edited by Chimbu chuckles; 17th Oct 2008 at 04:46.
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Stupidity is about to be replaced by common sense.
You know when you claim you made something idiot proof, nature goes away and breeds a better class of idiot!
J
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And check this out............
'Top Model' judge's boyfriend on fraud charge
So if you call the cops and claim it was fraud, you can't then be seen to be negligent.
They say its fraud, I say its BANK STUPIDITY
.
Wkers!
J
'Top Model' judge's boyfriend on fraud charge
So if you call the cops and claim it was fraud, you can't then be seen to be negligent.
They say its fraud, I say its BANK STUPIDITY
.W
kers!J
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Fewer Aussies keen on new credit: survey
I think a lot of people will be relieved they don't have to keep spending to keep up with the Jones or maybe discussion over BBQ s may now change from "how many and what investment properties" to "how much one is knocking off the mortgage"
I think a lot of people will be relieved they don't have to keep spending to keep up with the Jones or maybe discussion over BBQ s may now change from "how many and what investment properties" to "how much one is knocking off the mortgage"
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Chimbu:Response and Clarification
I vote neither labour or liberal...both are inept
Most of those responsible for this mess ..those on Wall Street DONT have degrees..part of the problem.
The Great Depression was ended by stimulus..... the development and production of war machines...it put people to work and paid them.
They spent their wages and bought goods and services,which in turn increased demand and in so doing provided more jobs.
Chimbu you are a pilot and a historian.
As a non pilot I defer to your expertise in matters related to flying.
Perhaps you could extend me the same courtesy without the thinly veiled insults.
Just to reiterate....Rudd is doing the right thing.
The sky will not fall.
Opportunities abound for those who can see them.
Think 10 years from now...not 10 days,not 10 months,but 10 years and you will prosper from investment decisions made now
Most of those responsible for this mess ..those on Wall Street DONT have degrees..part of the problem.
The Great Depression was ended by stimulus..... the development and production of war machines...it put people to work and paid them.
They spent their wages and bought goods and services,which in turn increased demand and in so doing provided more jobs.
Chimbu you are a pilot and a historian.
As a non pilot I defer to your expertise in matters related to flying.
Perhaps you could extend me the same courtesy without the thinly veiled insults.
Just to reiterate....Rudd is doing the right thing.
The sky will not fall.
Opportunities abound for those who can see them.
Think 10 years from now...not 10 days,not 10 months,but 10 years and you will prosper from investment decisions made now
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Degrees
Some do ..many didnt.
Like many in the Aviation industry.
Look at Dixon...doesnt even have an MBA
Lets Be clear...having a degree doesnt make you infallible.
My grandfather referred to many university graduates as educated idiots.
A degree should/can provide insight.... but not always.
If you are 70 years old and have degree you completed in 1952 you are not really in the game irrespective of which campus you attended.
Having an ATPL doesnt make you a fantastic pilot.
It does provide some potential however.
This is irrelevant.
This thread is about a number of things.
Primarily about cause,effect and a way forward.
There is a way forward...particularly in Australia
The decisions being made at a federal level are not being made by one man....he is the spokesperson
Lots of heads better than yours mine and his are very active in determining a positive outcome for this country.
Like it or not this is a work in progress...the situaton is volatile and decisions need to be made in response to the ever changing circumstances.
If anyone in this forum feels that they are better informed and better equipped to resolve the situation then please, by all means, make your way to Canberra.
Meanwhile let these guys do their job and stop being sideline sports mums.
Like many in the Aviation industry.
Look at Dixon...doesnt even have an MBA
Lets Be clear...having a degree doesnt make you infallible.
My grandfather referred to many university graduates as educated idiots.
A degree should/can provide insight.... but not always.
If you are 70 years old and have degree you completed in 1952 you are not really in the game irrespective of which campus you attended.
Having an ATPL doesnt make you a fantastic pilot.
It does provide some potential however.
This is irrelevant.
This thread is about a number of things.
Primarily about cause,effect and a way forward.
There is a way forward...particularly in Australia
The decisions being made at a federal level are not being made by one man....he is the spokesperson
Lots of heads better than yours mine and his are very active in determining a positive outcome for this country.
Like it or not this is a work in progress...the situaton is volatile and decisions need to be made in response to the ever changing circumstances.
If anyone in this forum feels that they are better informed and better equipped to resolve the situation then please, by all means, make your way to Canberra.
Meanwhile let these guys do their job and stop being sideline sports mums.
Last edited by Ka.Boom; 17th Oct 2008 at 09:01.
Ka.Boom,
Just one question.
Do you suggest that housing prices of 7-9x a person's income is sustainable, and that we could possibly increase this?
The globally recognised standard is 3x the average income.
Just one question.
Do you suggest that housing prices of 7-9x a person's income is sustainable, and that we could possibly increase this?
The globally recognised standard is 3x the average income.
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Clarify
A multiple of 7 to 9 of whose income?
Yours mine or Jamie Packers?
The real estate market in each country is different.
You can't compare the Australian market with that in Thailand or Japan.
Different legislation different cutural mindset,different economic circumstances
The Spanish prefer to rent and spend their money on lifestyle.
Australians want their 1/4 acre block.
Whose wrong...whose right?
In the UK you dont buy a property you buy a lease on property in many cases.
Some properties are freehold some are leasehold.
The price reflects this
Yours mine or Jamie Packers?
The real estate market in each country is different.
You can't compare the Australian market with that in Thailand or Japan.
Different legislation different cutural mindset,different economic circumstances
The Spanish prefer to rent and spend their money on lifestyle.
Australians want their 1/4 acre block.
Whose wrong...whose right?
In the UK you dont buy a property you buy a lease on property in many cases.
Some properties are freehold some are leasehold.
The price reflects this
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Ka.boom, get real!
Ka.boom, you obviously have no idea what you're talking about.
The relation average annual income to average house price is 3 to 3.5 in the rest of the developed world. This is consistent across all sort of different cultures, whether they are ownership focussed or not.
7.5 times annual income as we have it here at the moment, is clearly not sustainable for a number of reasons including affordability for first home buyers (basically if this continues, Joe Average would only be able to buy his first house at 40), long term growth (in a couple of decades with these growth rates, the average owner would not be able to pay off his mortgage during his working life), interest and a few other reasons.
Your comment re. the Spanish is total BS, I have lived and worked in Spain, and they like ownership almost as much as the Anglo-Saxons. Incidentally, they are just suffering through a housing price crash at the moment because they had similarly unsustainable price hikes over the last five or so years!
Re. the UK, I've lived there too, believe it or not, and I've owned property in London, and unless you buy a very short leasehold (i.e. 50 years or shorter), the difference in price to freehold is negligible. Most purchases are actually long leaseholds (mine was 999 years) because it makes it easier to administer the development, or in case of London, whole blocks are in the freehold of the crown or other aristocracy. I got offered the freehold of my flat for less than 5% of the purchase price after a few years when the developer wanted to get rid of it..
So before you spout bullsh!t here next time, get your facts straight and read a bit, it's all here on the net, mate
The relation average annual income to average house price is 3 to 3.5 in the rest of the developed world. This is consistent across all sort of different cultures, whether they are ownership focussed or not.
7.5 times annual income as we have it here at the moment, is clearly not sustainable for a number of reasons including affordability for first home buyers (basically if this continues, Joe Average would only be able to buy his first house at 40), long term growth (in a couple of decades with these growth rates, the average owner would not be able to pay off his mortgage during his working life), interest and a few other reasons.
Your comment re. the Spanish is total BS, I have lived and worked in Spain, and they like ownership almost as much as the Anglo-Saxons. Incidentally, they are just suffering through a housing price crash at the moment because they had similarly unsustainable price hikes over the last five or so years!
Re. the UK, I've lived there too, believe it or not, and I've owned property in London, and unless you buy a very short leasehold (i.e. 50 years or shorter), the difference in price to freehold is negligible. Most purchases are actually long leaseholds (mine was 999 years) because it makes it easier to administer the development, or in case of London, whole blocks are in the freehold of the crown or other aristocracy. I got offered the freehold of my flat for less than 5% of the purchase price after a few years when the developer wanted to get rid of it..
So before you spout bullsh!t here next time, get your facts straight and read a bit, it's all here on the net, mate
Grandpa Aerotart
KB we agree on something...I have never voted in an election in my life.
In this case we are talking multiples average wage vs average house.
When the rest of the western world is around 3 and we USED to be around 3 but now, or very recently, it was more like 7 we are talking an imbalance by any standard. We are not comparing Australia/UK/EU/US to Thailand.
So we should all just shut up and keep our opinions to ourselves?
Good..shut down all BBs...no more exchange of ideas allowed on the worldwide interner webby thingy...KB says so.
I agree with your Grandpa but am prepared to admit you might be the exception so on that basis please accept my humble apology.
No one seems the least interested in my PHD in amateur gynecology...I'd thought just a LITTLE nibble
In this case we are talking multiples average wage vs average house.
When the rest of the western world is around 3 and we USED to be around 3 but now, or very recently, it was more like 7 we are talking an imbalance by any standard. We are not comparing Australia/UK/EU/US to Thailand.
So we should all just shut up and keep our opinions to ourselves?
Good..shut down all BBs...no more exchange of ideas allowed on the worldwide interner webby thingy...KB says so.
I agree with your Grandpa but am prepared to admit you might be the exception so on that basis please accept my humble apology.
No one seems the least interested in my PHD in amateur gynecology...I'd thought just a LITTLE nibble
Hysteria
There does appear to be no lack of doomsayers in the market today. Personally, you do have to wonder if things are really that bad. I took a quick look at some numbers (and I know the statisticians are now salivating) today in the Perth market. REIWA website - Perth median prices. (say what you want about their validity)
In 1999, the median house price was $150K and no boom was happening. Historically, property does about 10-11% per annum (8% in real terms) - hence the real estate agents 'doubles every 7' catch cry. So in 2006 the median house price should have been around $300K but it was more like $400K, quite an overshoot. (33% too high)
The median price 'should' be $368K this year, in Sep quarter it was $426 however, and it looks like the the peak is definitely tracking back closer to the norm. In fact by 2010, according to the long term average, the median price should be close to $450K. (triple 150K) So to me it appears a natural historical level rate of return is emerging, and I take that to mean that there will be little to no growth in the market for two years.
The fact that people are predicting 30% drops, particularly Perth, suggests the median should be around $330 (based on the 2007 peak) but historical data doesn't bear that out. Granted there may be an overswing correction, but the lowering of interest rates should mean homeowners have less reason to sell.
The great thing about stats is you can make them say whatever you want, but sometimes they're needed to counter some pretty emotional commentary. Australia is 5 mins away from a market of 2 billion people on the Asian sub-continent who all want a better lifestyle. Even with the doom and gloom being shoved down our throats (no shortage of experts on how bad things are) I have difficulty believing we are headed anywhere near a depression if we are smart and confident in our economy.
But the pundits have us scared out of our wits and will will us into one.
In 1999, the median house price was $150K and no boom was happening. Historically, property does about 10-11% per annum (8% in real terms) - hence the real estate agents 'doubles every 7' catch cry. So in 2006 the median house price should have been around $300K but it was more like $400K, quite an overshoot. (33% too high)
The median price 'should' be $368K this year, in Sep quarter it was $426 however, and it looks like the the peak is definitely tracking back closer to the norm. In fact by 2010, according to the long term average, the median price should be close to $450K. (triple 150K) So to me it appears a natural historical level rate of return is emerging, and I take that to mean that there will be little to no growth in the market for two years.
The fact that people are predicting 30% drops, particularly Perth, suggests the median should be around $330 (based on the 2007 peak) but historical data doesn't bear that out. Granted there may be an overswing correction, but the lowering of interest rates should mean homeowners have less reason to sell.
The great thing about stats is you can make them say whatever you want, but sometimes they're needed to counter some pretty emotional commentary. Australia is 5 mins away from a market of 2 billion people on the Asian sub-continent who all want a better lifestyle. Even with the doom and gloom being shoved down our throats (no shortage of experts on how bad things are) I have difficulty believing we are headed anywhere near a depression if we are smart and confident in our economy.
But the pundits have us scared out of our wits and will will us into one.