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#1 2017-02-20 08:46:31

Cinvalo
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From: NSW
Registered: 2010-03-19
Posts: 616
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Australia Real Estate Bubble Talk (Part I)

720x90.jpg
Source:http://www.corruptionofrealmoney.com/education.php


Sydneybubble.jpg


The Reserve Bank of Australia (RBA) has about six more rates cut before the interest rate goes to zero. Since 2008, the RBA had artificially lower the interest rate from 7.25% in March 2008 down to 1.5% in February 2017. This decline in interest rate creates an exemplary environment that fuels the housing market in Australia (e.g. Sydney). Right now, household debt level had reached 123% of GDP, which is the third largest in the world.  This article is not about gloom and doom, but a more realistic way to understand the Australian (Sydney) Real Estate Market at present. Despite the home price of Sydney continue to climb; I think the Australian (Sydney) Real Estate Bubble is one of the easiest to spot. Here is why.


READ MORE: http://www.corruptionofrealmoney.com/di … Krj21zScx-

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#2 2017-02-20 17:41:14

projack
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From: Brisbane
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Re: Australia Real Estate Bubble Talk (Part I)

The house price is only one number. What most home buyers want to know, how much their minimum repayment to income ratio is. Half interest rate double house prices, double interest rate half house prices. Repayment to income ratio is still shows nearly the same home affordability.


The US dollars and Treasury debt called "risk off" because the global fiat system can only survive as long as that remains the case.

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#3 2017-02-20 20:47:06

Cinvalo
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From: NSW
Registered: 2010-03-19
Posts: 616
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Re: Australia Real Estate Bubble Talk (Part I)

Thank you for reading my post.

I definitely agree with what you say. Minimum repayment to income is an interesting figure to look at.

How much of an average Australian's salary goes to mortgage repayment. Home owners or investors can answer that well.

Personally, i am pessimistic about the future of employment. With robots and AI on the rise, it is becoming redundant for businesses to employ workers. Middle class's earning will be down in the foreseeable future, which means renters' income will be down. I think this will happen rather quickly.

There are too many people competing for too few jobs. This trend will only get worse.
Imagine if you have a portfolio of properties and renters fails to pay rent because no jobs can be found, you will have to reduce the rent.
Even at 1.5% interest rate, a lot of my friends are struggling because the price of the property is too high. The mortgages represent a large part of their income.

Back to the Sydney Real Estate Market, these are the six pillars I can think of, that are supporting the elevated price.
SydneyHousing.jpg
Source: http://www.corruptionofrealmoney.com/di … KuJOVzScx_


I will elaborated them on my future posts.

Rise and falls of each pillars, which weighted differently, and some reinforcing one another, are dictating the home price.

Last edited by Cinvalo (2017-02-20 20:57:33)


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#4 2017-02-20 21:27:13

silverbait
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From: Sydney, Kingsford
Registered: 2015-04-12
Posts: 590
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Re: Australia Real Estate Bubble Talk (Part I)

Any ideas where to buy (not bubbly yet) smile
Also very interesting number of auctions
Melbourne had 900
Sydney had 600
What are your interpretations on those auction numbers
Both cities have about the same population melbourne is about 250K more but I have no idea about no of houses or no houses for sale or available to for sale in both cities/states


"The real question is not whether life exists after death. The real question is whether you are alive before death."  OSHO

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#5 2017-02-20 21:28:27

silverbait
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Re: Australia Real Estate Bubble Talk (Part I)

Sorry Sydney is 250K more compared to Melbourne...


"The real question is not whether life exists after death. The real question is whether you are alive before death."  OSHO

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#6 2017-02-20 22:14:24

Cinvalo
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From: NSW
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Re: Australia Real Estate Bubble Talk (Part I)

"Population" is what the real estate investor uses. It makes a lot of sense as areas with increasing population always go higher.

However, if you boil everything down to the essence, it is not "population" that causes property price to elevate, but "credit growth".
Credit growth drives housing, which in turns drives economic growth.

Regarding to bubble, except in hindsight, it is not easy for people to spot when the bull, bear, or sideways begin and end, and there is no universal agreement on the magnitude and duration.  wink

But, in my opinion because it is a bubble, that is why it has a lot of opportunities. wink

A friend of mine just profited $1m, by putting in $1m into a $1.8m property and sold it for $2.8m, without paying capital gain tax.

Fast and quick money are usually made like this. We are buying to flip and make cash, as long as there is another person who is going to take the risk and pay more.

Psychology-of-bubbles-plotted-by-investor-psychology-vs-value-Dr.-Rodrigue-Hofstra-university1.gif

That is why we will see high auction numbers. wink
And if you look at the cashflow of the properties, many of them are negative cashflow.  (Some of them are quite huge)
Do you think the Chinese people buys property to loss money?  We are expecting it to go up because Sydney price will always going to go higher. There is always going to be another fool who is willing to accept more losses.

The Sydney housing bubble might, or might not, go a lot higher. I will explain why in my future posts.

Last edited by Cinvalo (2017-02-20 22:17:22)


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#7 2017-02-20 23:18:59

House
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From: Stack City
Registered: 2012-04-30
Posts: 9,635
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Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

A friend of mine just profited $1m, by putting in $1m into a $1.8m property and sold it for $2.8m, without paying capital gain tax.

$1.8m+$1m= $2.8m. Where's the profit?!

Cinvalo wrote:

There are too many people competing for too few jobs. This trend will only get worse.
Imagine if you have a portfolio of properties and renters fails to pay rent because no jobs can be found, you will have to reduce the rent.
Even at 1.5% interest rate, a lot of my friends are struggling because the price of the property is too high. The mortgages represent a large part of their income.

That scenario is a long way away. Like in the agri industry age, people simply transitioned to new or different roles. Humans will not be usurped by robots to any mass extent

What are your friends earning and repayment figures? Disposable income?

We reached peak prices in Syd about 90 years ago!!!

PHq7qYZ.jpg


WBI- 41.16

"There's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years". Steve Keen, 2008.
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#8 2017-02-20 23:27:13

Cinvalo
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From: NSW
Registered: 2010-03-19
Posts: 616
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Re: Australia Real Estate Bubble Talk (Part I)

Downpayment = $1m
Borrowed $0.8m OPM (e.g bank).

1 year later,
Sold for $2.8m.

Paid back the back $0.8m.
Net $2m.
Profit = $2m - $1 (downpayment) = $1m (profit)


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#9 2017-02-20 23:29:52

Cinvalo
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From: NSW
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Re: Australia Real Estate Bubble Talk (Part I)

Not sure if i should give out too many info due to privacy. But it is a cracker deal, assembled using OPM strategies. She has a builder to help her and the project involves a lot of complex zoning issues.


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#10 2017-02-20 23:38:44

House
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Re: Australia Real Estate Bubble Talk (Part I)

Ah OPM. Misread it as it was her own money! Big risk = big reward. Good on her wink


WBI- 41.16

"There's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years". Steve Keen, 2008.
Stacker FAQ'S. New threads welcome- http://forums.silverstackers.com/topic- … faq-s.html

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#11 2017-02-21 09:05:06

long88
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From: Melbourne
Registered: 2012-06-19
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Re: Australia Real Estate Bubble Talk (Part I)

if it is like this, every one just speculate on property, why would everyone work anymore...


Cinvalo wrote:

Downpayment = $1m
Borrowed $0.8m OPM (e.g bank).

1 year later,
Sold for $2.8m.

Paid back the back $0.8m.
Net $2m.
Profit = $2m - $1 (downpayment) = $1m (profit)

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#12 2017-02-21 14:31:54

Ag bullet
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From: SE QLD
Registered: 2013-12-26
Posts: 533
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Re: Australia Real Estate Bubble Talk (Part I)

profit= income - expenses. i'm constantly amazed how this is simply forgotten with property.

-rates for a year
-CGT
-maintenance for a year
-loan interest and fees.
-etc
-etc

= not $1M


'let's get physical!'

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#13 2017-02-21 16:57:00

Ipv6Ready
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From: North Sydney
Registered: 2016-01-08
Posts: 2,214
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Re: Australia Real Estate Bubble Talk (Part I)

Ag bullet wrote:

profit= income - expenses. i'm constantly amazed how this is simply forgotten with property.

-rates for a year
-CGT
-maintenance for a year
-loan interest and fees.
-etc
-etc

= not $1M

Even if all the cost is $700,000 it is still $300,000 profit.

30% reward and low downside risk.

However if the market turns and goes down 50% sux to be her. Though 50% collapses is unlikely with all the jobs

Last edited by Ipv6Ready (2017-02-21 17:00:33)


WTB 4 to 6 grams of pure gold. Don't care if it is coin, bar or granules. Near spot, suits anyone who has been tempted to open a certicard or just have some granules to make a ring

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#14 2017-02-21 17:55:43

clear
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From: WA
Registered: 2012-01-12
Posts: 992
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Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

Downpayment = $1m
Borrowed $0.8m OPM (e.g bank).

1 year later,
Sold for $2.8m.

Paid back the back $0.8m.
Net $2m.
Profit = $2m - $1 (downpayment) = $1m (profit)

excellent, now you know the secret why don't you go and do it as well.

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#15 2017-02-21 18:00:39

clear
Member
From: WA
Registered: 2012-01-12
Posts: 992
Trades :   65 

Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

Not sure if i should give out too many info due to privacy. But it is a cracker deal, assembled using OPM strategies. She has a builder to help her and the project involves a lot of complex zoning issues.

yes don't give too much away, just go and get a job mate and stop wasting your time.

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#16 2017-02-21 18:09:50

clear
Member
From: WA
Registered: 2012-01-12
Posts: 992
Trades :   65 

Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

Not sure if i should give out too many info due to privacy. But it is a cracker deal, assembled using OPM strategies. She has a builder to help her and the project involves a lot of complex zoning issues.


you're a cracker deal.

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#17 2017-02-21 22:29:48

Cinvalo
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From: NSW
Registered: 2010-03-19
Posts: 616
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Re: Australia Real Estate Bubble Talk (Part I)

Great assumption. How do you know i am not doing it. lol wink

It is not so much of a secret. 99% of the people will just sit in their office to earn a paycheque anyway.

Even my post is talking about Australia Real Estate Bubble, i never say the opportunities are no more. You need to just "do it". Take actions.

In fact, if you know what you are doing, you can make money whether the market is up or down.

I challenge you to do a small exercise, print 2000 flyers tonight, saying you want to BUY property and you are not real estate agent.
In the flyer you should specifically say you are looking for people are going through a divorce, a financial mess, or anything that want to settle quick. Don't worry about whether you can buy it or not. Just go out there and put theses flyers into as many mail box as you can tonight in your neighbourhood.

Let us know if you receive any calls tomorrow wink


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#18 2017-02-21 22:58:08

Ag bullet
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From: SE QLD
Registered: 2013-12-26
Posts: 533
Trades :   10 

Re: Australia Real Estate Bubble Talk (Part I)

Ipv6Ready wrote:
Ag bullet wrote:

profit= income - expenses. i'm constantly amazed how this is simply forgotten with property.

-rates for a year
-CGT
-maintenance for a year
-loan interest and fees.
-etc
-etc

= not $1M

Even if all the cost is $700,000 it is still $300,000 profit.

30% reward and low downside risk.

However if the market turns and goes down 50% sux to be her. Though 50% collapses is unlikely with all the jobs

Sounds more if you say 1/3 of $1m.


'let's get physical!'

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#19 2017-02-22 04:24:06

SilverDJ
Member
From: Australia
Registered: 2014-11-01
Posts: 2,528

Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

Regarding to bubble, except in hindsight, it is not easy for people to spot when the bull, bear, or sideways begin and end, and there is no universal agreement on the magnitude and duration.  wink

The last two flat periods in Sydney lasted 4+ years IIRC.

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#20 2017-02-22 04:45:06

clear
Member
From: WA
Registered: 2012-01-12
Posts: 992
Trades :   65 

Re: Australia Real Estate Bubble Talk (Part I)

Cinvalo wrote:

Great assumption. How do you know i am not doing it. lol wink

It is not so much of a secret. 99% of the people will just sit in their office to earn a paycheque anyway.

Even my post is talking about Australia Real Estate Bubble, i never say the opportunities are no more. You need to just "do it". Take actions.

In fact, if you know what you are doing, you can make money whether the market is up or down.

I challenge you to do a small exercise, print 2000 flyers tonight, saying you want to BUY property and you are not real estate agent.
In the flyer you should specifically say you are looking for people are going through a divorce, a financial mess, or anything that want to settle quick. Don't worry about whether you can buy it or not. Just go out there and put theses flyers into as many mail box as you can tonight in your neighbourhood.

Let us know if you receive any calls tomorrow wink

Hi Cincalo,  I dont need you to tell me the sellers outnumber buyers right now and your saying you have a way of making a profit in real estate in a falling market  - good luck.

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#21 2017-02-22 05:36:46

House
Moderator/ Legend
From: Stack City
Registered: 2012-04-30
Posts: 9,635
Trades :   232 

Re: Australia Real Estate Bubble Talk (Part I)

clear wrote:
Cinvalo wrote:

Great assumption. How do you know i am not doing it. lol wink

It is not so much of a secret. 99% of the people will just sit in their office to earn a paycheque anyway.

Even my post is talking about Australia Real Estate Bubble, i never say the opportunities are no more. You need to just "do it". Take actions.

In fact, if you know what you are doing, you can make money whether the market is up or down.

I challenge you to do a small exercise, print 2000 flyers tonight, saying you want to BUY property and you are not real estate agent.
In the flyer you should specifically say you are looking for people are going through a divorce, a financial mess, or anything that want to settle quick. Don't worry about whether you can buy it or not. Just go out there and put theses flyers into as many mail box as you can tonight in your neighbourhood.

Let us know if you receive any calls tomorrow wink

Hi Cincalo,  I dont need you to tell me the sellers outnumber buyers right now and your saying you have a way of making a profit in real estate in a falling market  - good luck.

Ah but they don't wink What falling market? Still powering along quite nicely. House in Blacktown sold for $1m, 100 inspections and 32 registered bidders.


WBI- 41.16

"There's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years". Steve Keen, 2008.
Stacker FAQ'S. New threads welcome- http://forums.silverstackers.com/topic- … faq-s.html

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#22 2017-02-22 05:40:37

willrocks
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From: Yesterday
Registered: 2012-05-10
Posts: 7,629
Trades :   29 

Re: Australia Real Estate Bubble Talk (Part I)

Some reason that it's not a bubble because:

In the good old days we had: Much higher interest rates = much lower house prices relative to incomes

Today we have: Ultra low interest rates = much higher house prices relative to incomes

In both cases affordability (repayments) are not that dissimilar. Leading many to reason that repayment affordability, and not nominal prices, is the key indicator of an asset bubble.


"You can ignore reality, but you cannot ignore the consequences of ignoring reality." - Ayn Rand

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#23 2017-02-22 05:46:01

SilverDJ
Member
From: Australia
Registered: 2014-11-01
Posts: 2,528

Re: Australia Real Estate Bubble Talk (Part I)

Ipv6Ready wrote:

Even if all the cost is $700,000 it is still $300,000 profit.
30% reward and low downside risk.

Low downside risk maybe, but far from a guaranteed upside.
She could have just as easily spent $1.8M and not found a buyer to pay that $1M more a year later. That was a 55% gain in 1 year when the average is, what, 10% or less in the last year?
This is on the extreme end of a good result, it it very far from typical.

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#24 2017-02-22 05:56:15

SpacePete
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Registered: 2014-03-01
Posts: 13,437
Trades :   122 
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Re: Australia Real Estate Bubble Talk (Part I)

willrocks wrote:

Some reason that it's not a bubble because:

In the good old days we had: Much higher interest rates = much lower house prices relative to incomes

Today we have: Ultra low interest rates = much higher house prices relative to incomes

In both cases affordability (repayments) are not that dissimilar. Leading many to reason that repayment affordability, and not nominal prices, is the key indicator of an asset bubble.

Does that factor in the change from wage earner income to household income when measuring affordability? People tell me they often bought a house back then on a single income rather than the combined income of a husband and wife.


Catus amat piscem, sed non vult tingere plantas

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#25 2017-02-22 06:10:22

SpacePete
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Registered: 2014-03-01
Posts: 13,437
Trades :   122 
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Re: Australia Real Estate Bubble Talk (Part I)

I saw these stats recently. Note that its 2015 interest rates which have gone down since then.

eVCZ9U8.png


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