Agreed. Just personally don't think housing is the best choice at the moment.
But i wouldnt want to be in non-appreciating assets with all the printing going on. The trick is to get those assets in time for the inevitable surge in inflation but to reduce your debt once interest rates rise to curb the soaring inflation. Tight window but one of great opportunity
Hi Flying Fox
Interesting "thoughts", I am doing a part time leadership course at night. Last night was very interesting, My lecture is on the board of a BIG 4 Bank and I can’t name him or bank for certain reasons, But I asked him last night, from the point of view OF THE BANK how does the Australian economy look from a domestic and international point of view.
He basically said this, He has been working for the bank for 20 + years and the Australian property market will remain very steady for the next 5 years, He said “maybe” on average 5% growth over the next two years for property.
His biggest concern is this, Lending has shrunk to alarming levels, They were writing more loans in the GFC then they are now.
His other concern is this, he said “its true” Australia might have a undersupply of homes, but at the moment not much people are actually borrowing.
I then said this, HEY the share market is a bit bullish lately, before I could even say anything else he has warned me that the market “could turn” in any second because money is drying up from overseas. He also advised that the RBA will be making some drastic reductions in interest rates and the figures that the bank are predicting are pretty dam low.
So if these chain of events occur the postive thing is this:
1) If homes don’t go up in value, Then buying into your first home would be allot easier, more time save, when the boom was on before you could even saved the property went up more then people saved
2) Interest rates are going to be low for quite some time
3) I honestly think a recession is needed to put allot of things back into prospective
4) Prices are high for two reasons: Land: Land is very expensive in OZ but also building cost, we have so much red tape, licenses, unions, OH &S, high wages “etc” this drives up the price for building material, builders and tradesman.
Agree with you about comparing different economies and countries. However we do live in a global economy these days and money of all things flows a lot more easily than it used to. While a direct one-to-one comparison is ill advised, relative comparisons will teach us a lot. Why are those economies behaving differently? How are they different to us?
Hong Kong and Singapore are actually outliers because they are one of the few countries where land currently is a finite and restrictive resource.
Inflation works due to two reasons:
1) Fundamental demand: People want to buy something for whatever reason e.g I really really want that house. More people, more demand.
2) Oversupply of money/ cheap money/printing: The cheaper money is spent and or "invested". e.g Buy houses, their price will double in 7 years.
I argue that inflation built into our economic system so that public and private debt can be grown much higher than would be allowed otherwise. Buy controlling the money, governments control inflation and combined with pop increase this has been positive for much of last century and and a half. The money supply was used to iron out ripples in the inflation curve.
If the fundamental demand falls (due to whatever reasons), then you have to print much more. The problem is that if you continue to print money, people will lose faith in it. It has happened in the past.
P.S I hope this wasn't directed at prawn_86.
Imagine if you applied the same logic to comparing fruit prices and you picked apples, oranges and bananas. They're grown in different climates and areas of the world (generally) and are affected differently by different seasons. They're also shaped differently, weigh differently and taste differently. It would be silly to compare them in the same way. Maybe there's a global fad for bananas and we've reached peak banana production? Etc etc
Agree with your points above - at the moment we have a LOT of situation (2) occuring (in fact, it really scares me) but not a lot of situation (1)... yet. (1) will come back with a vengeance and probably quicker than most realise. By the time people will realise it's happening prices will be at/above peaks.
I'm really really worried about inflation - or more specifically, the devaluation of money. A lot of people are going to suffer a lot over the coming years. The divide between the upper and lower class is going to get a lot bigger - the middle class will be hollowed out. You can see a lot of it happening in the US and it is happening here too.
I'm really really worried about inflation - or more specifically, the devaluation of money. A lot of people are going to suffer a lot over the coming years. The divide between the upper and lower class is going to get a lot bigger - the middle class will be hollowed out. You can see a lot of it happening in the US and it is happening here too.
I would argue that it is more like the same type of fruit just grown in 3 different regions.
What do you think will cause inflation to come back? With a high dollar, manufacturing continually declining, building down in the dumps, i just cant see what is going to kick off inflation agin. Obviously i could be wrong but a 5 - 10 yr sideways cycle a la Japan certainly isn't out of the question imo.
Or is it money printing you are more worried about? IE those holding cash at bank who will be effected the most and those holding assets such as houses will at least keep even.
I just cant see how as per Techs example that in 20yrs time the average house price will be double what it is now (well maybe 20 but i highly doubt 10yrs). Hopefully for my sake i'm not wrong... At this stage i am just not willing to put our entire savings in to one asset class that i do not understand how it will perform/grow over the coming years
EDIT - with that being said i would be happy to purchase a property through a SMSF for a long term hedge, just dont have enough funds in Super ot make it viable as yet
THE federal government is understood to be looking at reintroducing a limit on tax-free superannuation payouts, imposing an exit tax on funds carrying balances close to $1 million
I wonder how this will affect properties held under a SMSF if it was to be changed:
https://www.aussiestockforums.com/forums/showthread.php?t=24666
I wonder how this will affect properties held under a SMSF if it was to be changed:
https://www.aussiestockforums.com/forums/showthread.php?t=24666
they not printing anymore because the paper is starting to cost too much ... just making trillion dollar coins
- Grown in three regions that will have different climates that will affect supply (and thus demand). Kind of house each of the countries have a different economy both at the macro and local levels that will affect supply and demand
- They each are shaped differently and weigh a different amount. If bananas cost $2 per kg and apples cost $3 per kg does that make apples 50% overvalued? I liken this to comparing Japanese property to ours - they have a higher comparitive density of aparments and units owing to their population. We have very few in comparison (as a % of population) we're more McMansion style. Different sized homes, different sized land, different prices
On the surface it's just fruit (property) but dig a bit deeper and it becomes hard to make direct comparisons.
Now if we had a graph with all major countries on it that would be quite interesting
I'm mostly concerned about the money printing aspect. It will indirectly cause inflation at some point down the track as currencies are being devalued. We're all connected and it's only a matter of time before it hits our shores. Money will flow into the Sharemarket and RE and other assets to compensate for the devaluation. You'll then cause inflation as price of assets go up -> goods go up -> wages follow. The RBA will then come in and ramp up the cash rate (quickly - i'm talking 50-80 bp moves a quarter) and bring it all to a screeching halt.
Either that or we get runaway inflation and cop another 80's/90's 'recession we had to have'
Maybe i'm being alarmist here and have it all wrong I don't know. All I know is you can't print the huge volumes they're printing now without devaluing your currency and stoking inflation (after all, they're doing this to stoke inflation). As we're all connected it's only a matter of time before we feel it too.
I wonder how this will affect properties held under a SMSF if it was to be changed:
The problem I can't reconcile with buying a property in a SMSF is the historic rental return is quite poor after costs.
As the property is revalued annually and assuming its value is increasing, there will be a requirement to make larger drawdowns on your capital. It doesn't really stack up well against franked dividends.IMO
How does one deal with the increasing draw down requirement if you own property in your SMSF?
And in twenty years time when wages are 150k plus a year and petrol $5.00 a llitre
The $500 k home we see now bought with a deposit of 80k
What do you think that will now be.
Do you think the guy who struggled 20 yrs ago will be struggling now.
The young guy then wanting to buy will he not be singing the same tune of desperation?
Impossible
The scene you describe was 20 yrs ago
20 years before that the average weekly wage was $35 a week.
Rent $10 a house $12 k the same house worth a staggering 500k today.
Don't be complacent
Look for opportunity and take it.
I’m a bit thick – could somebody please explain this money printing concept discussed in this thread.
All I can see is sovereigns increasing their balance sheet to offset private balance sheet shrinkage but lack of velocity is making the job difficult even at near / actual negative real interest rates, a sign of deflation risk rather than inflation.
At no stage has any sovereign (Zimbabwe excluded) printed without a corresponding commitment to repay at some stage so I see no lack of tools for containing inflation if/when velocity does pick up.
The real money creation enabler occurred prior to the GFC and was a result of trade imbalances and manipulation of some currencies causing major run ups in those countries foreign reserves and in turn funding lower than appropriate interest rates in an optimistic period. – That all seems to be currently and continuing to unwind.
It’s not just my understanding of capital creation that is at odds with the printing press story; the actual statistics don’t compute either.
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If somebody could explain it to me I would be pleased to learn something.
What I think most people miss is the current shenanigans has never been attempted on this scale before.............ever, what the end game is I don't think anyone really knows but inflation will absolutely be part of the picture.
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