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It’s Not All Doom And Gloom

Discussion in 'Real Estate' started by Billv, 18th Sep, 2008.

  1. Billv

    Billv Getting there

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    Extract from the September Residex newsletter

    There’s been a lot of negative attention being given to the current state of the housing market with commentators suggesting property prices might fall to well below those reached before the ’boom’ began nationally. I suppose what you choose to believe depends on what branch of the tree you’re currently sitting on. To me I think these commentators like to throw these tid-bits of fear into the market place because it works for them, it helps to sell their wares and stir up a frenzy.

    I’m more pragmatic. Yes I said some time ago that the market might be looking at a once in 100 year event, however since the RBA’s moves to cut interest rates I’m less inclined to think that and believe the RBA has acted to manufacture a soft landing. I don’t think the housing market is going to collapse as it has in the USA, nor do I think you will see prices falling away to the levels these commentators suggest. But don’t call me an optimist, I’m a pragmatist, and the latest Residex statistics in fact show there’s still money to be made in the market.

    These figures show that generally, while property sales are down, the values are not falling away significantly. Yes the capital growth might have slowed to the point of zero or a little less, but the market is still relatively stable.

    As these stats show, we have seen in the last three months a very significant slow down in the capital growth rates of properties, both houses and units, across the country. For the last two years most capital cities have witnessed capital growth rates jumping leaps and bounds. Adelaide, Brisbane, Darwin and Melbourne and Perth have averaged double digit growth which was simply unsustainable. Similarly, the growth rates of every regional market across the country have also sky-rocketed with an average showing double digits over the last ten years.

    The only exception to this double digit growth has been Sydney and regional New South Wales. However, although capital growth rates have generally had much smaller percentage increases, property prices in Sydney as well as the New South Wales regionals are higher than their counterparts in other states which suggest any increase in capital growth expressed as a percentage is generally worth slightly more in dollar figures than the other capital cities and regional areas.

    These statistics show that this is not anywhere near a collapse in property values, it’s the market positioning itself for a soft landing.

    While property sales have fallen away sharply and capital growth stagnated, rental returns are still performing well. The difficulty however lies in finding the better investment opportunities. This is especially the case given the housing affordability problems making it more difficult for investors to purchase additional properties.
     
  2. Jacque

    Jacque Team InvestEd

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    A realistic viewpoint by John Edwards here. Though he's known to be wildly optimistic in the past with some of his forecast growth rates I do think his comments make a lot of sense in this article.
    Affordability remains the largest factor, particularly in Sydney, for being the reason home buyers and investors have been staying away. As the "soft landing" continues, and prices get a chance to "catch up" with reality (or people's perception of it) movement will occur in the marketplace. Rising yields are one sign, but consumer confidence is quite another.
     
  3. DaveJ

    DaveJ Well-Known Member

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    Of course things will 'eventually' go up again and everything will be fine. But isn't the idea to remain solvent long enough to be proved right(or see the good times again)

    I don't think it is a good idea to put your head in the sand and just sing 'la la la la la la la la la la' until the sun comes out again...:eek:

    If anything in times like this we should have our eyes WIDE open, observing what is happening, so we learn and develop as investors... This way when the next Share or Property boom comes along we don't Leverage to 105% and buy 10 Properties with deposit bonds when we don't have $5 to our names...or start trading CFDs with xxx leverage because we all know 'Bank shares only go up' and we have never seen a stock market correction.


    My $0.02 (Which i borrowed) ;)
     
  4. 02bsure

    02bsure Well-Known Member

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    2 things.

    - There is no such thing as a soft landing.

    - Exactly what doom and gloom is he talking about? Personally I think the
    correction is great news. I suppose his vested position is merely different
    from mine.
     
  5. Billv

    Billv Getting there

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    02

    I think there is and we are seeing it right now.
    I also believe that as the US have now started addressing the problems
    the pressure in credit markets will ease.

    IMHO

    Cheers
     
  6. 02bsure

    02bsure Well-Known Member

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    Bill, I believe you're making a terrible mistake if you really think this is contained.

    All thats happening right now is a slowing down of the inevitable. The global financial system is mortally wounded.

    We are at best one third the way through and by the time the world emerges from the other side, nothing financial will be as it is today.

    Only time will tell.
     
  7. Billv

    Billv Getting there

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    Ok then, lets wait and see.
    Are you also saying that I should not touch bank stocks??
    Oz banks seem very cheap atm...

    Cheers
     
  8. 02bsure

    02bsure Well-Known Member

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    If you have to play, then play the indicies and avoid individual stocks.

    I sold SDS yesterday @ 77.65 and bought SSO today @ 48.45 ...I'll sell it tomorrow in the am.

    Looks like there will be a move up from here for a period of months but at the end of that, run for the hills.
     
  9. Billv

    Billv Getting there

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    Actually I don't have much play money left and I don't want to touch my PPOR's offset account so I'll have to wait for a bit longer.

    Why do you think we will have to run for the hills?

    Cheers
     
    Last edited by a moderator: 19th Sep, 2008
  10. 02bsure

    02bsure Well-Known Member

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    None of the problems have been resolved, none. Central banks have bought themselves a bit more time and thats all that happened. Remember that the strongest bull rallies always take place within secular bear markets (very sharp but also relatively short in time span).

    When this secular bear market rally ends you want to make sure you're out of the market or short (if its allowed , lol ...what a joke...free capilatistic market, what bs).

    When will this rally end? imo, we will rally again today (which I'll sell into), then we'll have a down day next week(which I will buy into) then a steady positive climb will begin which will continue for a period of months (I'll hold through that).

    The US will try to inflate its way out of its enormous (growing) debts. The loser will be the USD and the taxpayer. The same debt problems exists throughout the developed world so you can expect the same solutions.

    I tend to go with this line of thinking for the longer term...

    DJIA falls 7% while gold rises 14%: DJIA/gold ratio reversion continues - iTulip.com Forums
     
    Last edited by a moderator: 19th Sep, 2008
  11. Billv

    Billv Getting there

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    It sounds like a gr8 plan.

    I am thinking though that if in the next few months things do improve,
    Markets could possibly skip the "run for the hills" part
    and could keep going for a few more years.

    Cheers