Property boom fuelled

[notpom]

There are few things of the common knowledge:

 

1. Property booms happen in the low interest rates environment

2. Interest rates become low in the low inflation environment, i.e. when prices of goods and services do not grow much

3. Australia is a vast country. Prices of goods and services largely depend on the cost of transport. Cost of transport largely dependent on the cost of fuel.

 

This is how cost of fuel fuels the property boom here.

 

http://www.smh.com.au/business/sydney-petrol-prices-drop-below-1-per-litre-20150106-12inna.html

 

Fuel now drops to the levels seen 10 years ago. This is what media says. Problem is that dollar is now almost twice as cheap as it was ten years ago, therefore in real dollars price of fuel went back almost 20 years.

 

In economical terms it simply means that Australian economy is now entered very dangerous zone - DEFLATION is written on the wall 3 meter high letters. Which simply means that dropping current rate of 2.5% to 0 probably will not be enough to save us from deflation. Reserve will have to resort to much more quantative easing measures than simple zeroing of interest rates.

 

What usually is done in situations like this - is stimulating lending by the banks - which means reversal of tightening of lending standards that Reserve engaged themselves into.

 

What we are going to have as a result - The Mother of all Property Booms.

[Diane]

What we are going to have as a result - The Mother of all Property Booms.

 

Just you keep telling yourself that! Anyone would think you were trying to talk up property prices for your own benefit! Got a place or two to sell, have you, or worrying your property portfolio is not increasing fast enough to fund your retirement?

 

Do you live in Adelaide, by the way, or are you interstate?

[notpom]

Just you keep telling yourself that! Anyone would think you were trying to talk up property prices for your own benefit! Got a place or two to sell, have you, or worrying your property portfolio is not increasing fast enough to fund your retirement?

 

Do you live in Adelaide, by the way, or are you interstate?

 

Diane,

 

If you pretend to be a property investor (like you do) - please learn that professional investors never sell. "Always buy and never sell" ia a corner stone of property investment.

 

The purpose of my messages is to get into the people's mind a very simple idea - it is always better to pay off your own mortgage and have the fruits of capital growth rather than pay someone else's mortgage (aka rent) and have nothing in return.

 

As I have pointed out in the previous thread - there are times in Adelaide when property prices go backwards and you can rent for a while. While you still throw away money, you do not suffer losses from not having any capital gains.

 

These times are over. And for the new comers it is important to realise that it is not a good time to lose money procrastinating.

 

In boom times your house usually earns more money than you do at your day job, and there is no point of losing that incomejust simply for a reason that you refuse to bend over and pick up cash near your foot.

 

After the fifth time you asked me if I live in Adelaide, I started to record your requests. This is question number 11 about where I live.

I live in Adelaide. I am connected to my private server in Melbourne. "Geolocation" is a big fallacy for people ignorant in IT.

[Diane]

Diane,

 

If you pretend to be a property investor (like you do) - please learn that professional investors never sell. "Always buy and never sell" ia a corner stone of property investment.

 

The purpose of my messages is to get into the people's mind a very simple idea - it is always better to pay off your own mortgage and have the fruits of capital growth rather than pay someone else's mortgage (aka rent) and have nothing in return.

 

As I have pointed out in the previous thread - there are times in Adelaide when property prices go backwards and you can rent for a while. While you still throw away money, you do not suffer losses from not having any capital gains.

 

These times are over. And for the new comers it is important to realise that it is not a good time to lose money procrastinating.

 

In boom times your house usually earns more money than you do at your day job, and there is no point of losing that incomejust simply for a reason that you refuse to bend over and pick up cash near your foot.

 

After the fifth time you asked me if I live in Adelaide, I started to record your requests. This is question number 11 about where I live.

I live in Adelaide. I am connected to my private server in Melbourne. "Geolocation" is a big fallacy for people ignorant in IT.

 

I don't pretend to be any sort of investor, you must be mistaking me for someone else! Oh yes, perhaps for someone who cares!!

 

I ask about where you live as your 'knowledge' with which you seem to keen to indoctrinate everyone seems to not be that of a local. New people coming out should be aware that some people have a vested interest in talking up the property market in particular areas (not of course that I'm saying that might be you!) and to not be taken in by hyperbole which may or may not have its basis in truth. There is an Australian expression - "spruiking" - which newcomers may not be aware of, which is the act of talking loudly and publicly about the virtues of something, usually with the aim to get them to buy it.

 

If you are in Adelaide at the moment, I find it hard that you think we are living in 'boom times' at the moment!

[snifter]

Thank you for sharing your thoughts on the subject.

 

I don't have a crystal ball so await to see if your predictions are realised

[notpom]

There are few things of the common knowledge:

 

1. Property booms happen in the low interest rates environment

2. Interest rates become low in the low inflation environment, i.e. when prices of goods and services do not grow much

3. Australia is a vast country. Prices of goods and services largely depend on the cost of transport. Cost of transport largely dependent on the cost of fuel.

 

This is how cost of fuel fuels the property boom here.

 

http://www.smh.com.au/business/sydney-petrol-prices-drop-below-1-per-litre-20150106-12inna.html

 

Fuel now drops to the levels seen 10 years ago. This is what media says. Problem is that dollar is now almost twice as cheap as it was ten years ago, therefore in real dollars price of fuel went back almost 20 years.

 

In economical terms it simply means that Australian economy is now entered very dangerous zone - DEFLATION is written on the wall 3 meter high letters. Which simply means that dropping current rate of 2.5% to 0 probably will not be enough to save us from deflation. Reserve will have to resort to much more quantative easing measures than simple zeroing of interest rates.

 

What usually is done in situations like this - is stimulating lending by the banks - which means reversal of tightening of lending standards that Reserve engaged themselves into.

 

What we are going to have as a result - The Mother of all Property Booms.

 

 

I was sort of hoping for a single soul to sow signs of constructive attitude on this forum.

I purposefully "conveniently forgotten" the second side of fuel price drop effect. Yes, it indeed does force interest rates down.

 

But I was expecting for someone to point out that oil price crash also acts as a substantial booster to property market.

 

First, consumers get direct savings due to the fuel price drop, and these savings are greater than savings to the mortgage interest payments through the RBA rate cuts.

Second, lower transport costs sooner or later start to get passed onto consumer prices. This causes interesting effect. People actually stop buying "clutter" - cars, boats, furniture, appliances, etc. What is the point of buying today if tomorrow it is going to be cheaper?

Minds switch to the things that matter - place to live. And with the dwelling shortage of the proportion Australia has - property prices for the next decade at least have only one way to go. Up, Up, and up.

 

And get over this "it is only your opinion" mantra so popular on this forum. This is not the opinion, this is what people do for centuries. It is safer to bet on it than to bet that sun will rise tomorrow.

 

 

Not a rocket science really. But only if you free up your mind from this "I have got more chest hair than you" thingy/

 

 

Arghhhhh, BTW - "surprise-surprise" - economists are shocked inflation dived under 2% - making interest cut a certainty.

I am also surprised - but in different way. Something is obviously wrong with ABS methodology. In the reality we in the best case have 0% inflation, but most likely we gone into the slippery slope of deflation.

 

Which means that if RBA fails to deliver meaningful cut to rates - then we will be in for extraordinary government measures to get property market to a boil.

 

Just in case you do not know - property - is the engine room of Australian economy. Not mining, not agriculture - our economy wholly depends on the state of the property market.

Edited January 28, 2015 by noworriesmate
removed personal comment

[Lazy Cow]

You are funny, notpom!

 

LC

[notpom]

Have a look at here:

 

http://news.domain.com.au/domain/real-estate-news/back-to-boom-sydney-house-prices-jumped-14-per-cent-in-2014-20150128-1304n8.html

 

Lets not talk about high performing areas of Sydney. Lets talk about the West - where people who are "happy without money" live.

 

Median price there is $597K. Rate of growth 15.9% a year. Average income in this area is about $45K per year.

 

In other words, people who own houses in this area earned last year on average $45K, but their houses earned on average $95K a year. Total earn - $140K a year.

People who chose to rent forked out $25K of their earned $45K to pay someone's mortgage. Total earn - $20K.

 

Main question - have you noticed the flaw in these calculations?

Flaw is that income from your day job is taxable, you never bring $45K home. But amount your house earns for you is tax free.

So the difference between renters and home owners is MUCH more staggering.

 

All I am trying to say is that property boom has already come to Adelaide.

And property investment or not, it is a crunch time for you - be the winner or remain the loser.

Edited January 30, 2015 by noworriesmate
taking out personal comments

[noworriesmate]

OK - I've removed personal digs and comments. Please stick to debating the topic and not the poster.

 

NWM

[ShouldIStayOrShouldIGo]

OK - I've removed personal digs and comments. Please stick to debating the topic and not the poster.

 

NWM

Thank you for removing my post as I now have chosen to ignore the antagonist but if you are going to remove posts on one thread due to being defamatory then could you please be consistent with your moderation of these posts and address quite a few other threads where this poster defames many other long standing members of the forum. Am I permitted to call the poster a drama queen? If not then I’m sure Tyke would appreciate the same comment made about him on another thread removed also.

[noworriesmate]

The poster has a certain 'style' that many may not like but the long standing members you talk of have given as good as they have got. The thread you mention has been moderated by admin, infractions issued and now closed - I am not going to edit it any further.

 

For future reference, if you have a problem with a poster then please put them on ignore, if you have a problem with a post then report the post and finally if you have a problem with the way the site is moderated then please contact admin rather than posting on the forum.

 

NWM

[notpom]

The poster has a certain 'style' that many may not like but the long standing members you talk of have given as good as they have got. The thread you mention has been moderated by admin, infractions issued and now closed - I am not going to edit it any further.

 

For future reference, if you have a problem with a poster then please put them on ignore, if you have a problem with a post then report the post and finally if you have a problem with the way the site is moderated then please contact admin rather than posting on the forum.

 

NWM

 

All right, it appears Deutsche Bank reads my mind.

http://www.smh.com.au/business/the-economy/low-petrol-prices-the-same-as-two-rate-cuts-deutsche-bank-20150130-131xve.html

 

I am alarmed.

 

BTW, they mention Saul Eslake. In 2008 he was working for ANZ, and back then he predicted that as soon as resource boom ends, Australia to experience "mother of all property booms". At that time only only lazy people did not wipe their dirty feet off Saul. Myth of property crash was very popular. And I am proud that at this time I was drowning in the sea of spits for attempts to defend Mr Eslake.

Edited January 30, 2015 by noworriesmate
removed unnecessary comments

[NicF]

Is anyone actually saving $50 or $60 a month on petrol costs? I know we're not - we just don't use that much petrol to be able to save anything like that much.

 

I'm not sure that the low petrol prices are going to result in a property boom though. There are a lot more factors at play than just what the interest rates (or equivalent savings in this case) are. Consumer confidence for one thing. And the state of the job market. Here in SA the job market is very subdued and unemployment is set to rise with the closure of Holden and the risk to various related industries. To me things in SA are looking at lot like they did in the UK when the GFC hit. Interest rates were at an all time low but property prices outside of the South East took a huge hit. I hope I'm wrong and you are right @notpom though. It will be interesting to see what happens.

[snifter]

Is anyone actually saving $50 or $60 a month on petrol costs? I know we're not - we just don't use that much petrol to be able to save anything like that much.

 

I'm not sure that the low petrol prices are going to result in a property boom though. There are a lot more factors at play than just what the interest rates (or equivalent savings in this case) are. Consumer confidence for one thing. And the state of the job market. Here in SA the job market is very subdued and unemployment is set to rise with the closure of Holden and the risk to various related industries. To me things in SA are looking at lot like they did in the UK when the GFC hit. Interest rates were at an all time low but property prices outside of the South East took a huge hit. I hope I'm wrong and you are right @notpom though. It will be interesting to see what happens.

 

We possibly are. I've not totted it up tbh, I just go with the flow, fill the tank as and when. We've done a fair bit of driving over the summer so it has added up. Now its back to school it will settle down again I'd think.

 

I know it cost me $41 to fill up the tank the other day. A fair bit more when prices are at $1.30, 1.40 or so. Not sure its anything like $50-60 a month though.

[notpom]

We possibly are. I've not totted it up tbh, I just go with the flow, fill the tank as and when. We've done a fair bit of driving over the summer so it has added up. Now its back to school it will settle down again I'd think.

 

I know it cost me $41 to fill up the tank the other day. A fair bit more when prices are at $1.30, 1.40 or so. Not sure its anything like $50-60 a month though.

 

Just back from the petrol station at Moana. Unleaded 97.7, 93.7 with the Woolies voucher.

 

Direct savings on the tank of petrol is nothing comparing with the price deflation when businesses will start to pass at least part of the savings on fuel back to consumer. Besides low inflation (or rather deflation) is a trigger for RBA to lower rates even further.

 

It does not matter if someone believes or does not believe it will cause property boom.

Property boom does not care. It is already here. After 12 years from the last peak - you can bang your head on the wall and scream property crash - property boom will go ahead.

 

The question is not whether we are having property boom. The question is "How intense it will be?". And every single indicator tells - it will be extraordinary intense and long, putting the last boom into insignificance.

[Blossom]

That just got me thinking. If I were still driving to work, and using just petrol, not gas, then I'd be saving about $35 per week! (Going off petrol being 50c a litre cheaper than it has been).

As I mostly use gas I wouldn't actually be much better off as that price hasn't changed much.

[Guest vikkiann]

I'm saving a minimum of $30 per week on fuel at the moment but I do a fair bit of driving, living out in the sticks in Aldinga and driving to Glenelg most days

[NicF]

Just back from the petrol station at Moana. Unleaded 97.7, 93.7 with the Woolies voucher.

 

Direct savings on the tank of petrol is nothing comparing with the price deflation when businesses will start to pass at least part of the savings on fuel back to consumer. Besides low inflation (or rather deflation) is a trigger for RBA to lower rates even further.

 

It does not matter if someone believes or does not believe it will cause property boom.

Property boom does not care. It is already here. After 12 years from the last peak - you can bang your head on the wall and scream property crash - property boom will go ahead.

 

The question is not whether we are having property boom. The question is "How intense it will be?". And every single indicator tells - it will be extraordinary intense and long, putting the last boom into insignificance.

 

Love your optimism, and again I hope you are right but I suspect the consumer will see little of the benefit outside of the petrol station forecourt but business profits will improve.

[notpom]

Love your optimism, and again I hope you are right but I suspect the consumer will see little of the benefit outside of the petrol station forecourt but business profits will improve.

 

Strictly speaking the speed of passing savings back to the consumer depends on the fiercity of competition in particular industry.

 

The thing I came here for - another bunch of people got into my head and reading my mind.

 

http://news.domain.com.au/domain/interest-rate-cut-likely-to-turbocharge-sydney-houseprice-growth-20150203-134qd6.html

 

If seriously - not. Because if they read my mind, they would not talk such a rubbish. With all the respect to Andrew Wilson who fiercely resisted a myth of a property crash - in the years of boom his thinking has become directionless.

"Sydney does not need a rate cut". Sydney needs it the most. It has run out of land back in 2003 and it is a mystery why all the Sydney was not in a state of the boom all the time. Mesmerized by property crash in Detroit. As if in Australia we do not have a 50c per hectare land.

 

Now average price over $800K, people need every cent to have a chance to fulfill an Australian dream. "Different interest rates for different states". Complete absurd. How the property expert does not know basic things, namely:

 

1/ All booms start in Sydney, then they ripple through the rest of the country.

2. Every boom does not start not with the growth in median price, but the opposite - drop in the median price. This is simple as a whistle. Median price - is a price of the property where 50% of the homes sold above that price and 50% of the homes sold below this price. People snap the bargains first - so when median drops - it means that you have got to get closer look at the market. If it appears that there is increased volume of sales below median - get out, mortgage your kids and mother in law, and bitre more than you can chew. Than chew like mad.

3. Medians increased in 2014 in every capital cities - which means - the best bargains gone, people must settle for the second best.

 

Why say would you need a lower interest rate for Adelaide if subdued price growth here is due to the abundance of vacant land? (Unless it is waterfront of course).

 

It never ceases to amase me that people do not notice the obvious. What Sydney does not need is not a rate cut. What Sydney does not need - is all those people there.

Now that NBN is coming into every corner - all those office workers - do they really need to work in Sydney? What difference would it make if programmer say works from Adelaide? Just give tax concession to the companies who do not hire Sydneysiders - make them move out of that sweaty smelly dump.

 

Why companies are not doing this? I think reason is insane. All this "middle management" will get to manage nobody and becomes redundant. And they fear it like I do not know what.

[notpom]

It seems like lately hit has become fashionable to get inside my head.

 

http://www.adelaidenow.com.au/messenger/west-beaches/seacliff-top-performer-for-median-house-price-increase-across-metropolitan-adelaide/story-fni9llx9-1227204859320

 

42.6% price growth is not bad for Adelaide. And Seacliff is in Southern direction.

 

You do not have to be the rocket scientist to figure out where the next hotspot would be. Really no-brainer. It is ever-popular Hallett Cove.

 

That is what crowd surely would do.

 

But I wonder.... How much time it would take for the crowd to figure out that Seaford is roughly the same travelling time from CBD as Hallett Cove (thanks to the expressway) and that in Seaford building site costs are MUCH lower.

 

Sooner or later they would.

[Guest vikkiann]

It seems like lately hit has become fashionable to get inside my head.

 

http://www.adelaidenow.com.au/messenger/west-beaches/seacliff-top-performer-for-median-house-price-increase-across-metropolitan-adelaide/story-fni9llx9-1227204859320

 

42.6% price growth is not bad for Adelaide. And Seacliff is in Southern direction.

 

You do not have to be the rocket scientist to figure out where the next hotspot would be. Really no-brainer. It is ever-popular Hallett Cove.

 

That is what crowd surely would do.

 

But I wonder.... How much time it would take for the crowd to figure out that Seaford is roughly the same travelling time from CBD as Hallett Cove (thanks to the expressway) and that in Seaford building site costs are MUCH lower.

 

Sooner or later they would.

 

Personally I would never build in HC but each to their own!

[notpom]

Personally I would never build in HC but each to their own!

 

Yep, sit tight in Aldinga beach. Train is coming your way, but slightly later.

 

Mechanics of the process are simple. Say yesterday rate cut was like a bucket of petrol poured into Sydney's market. 10% and 14% over the last two years correspondingly, plus minimum 20% over the next 12 months.

 

That would put Sydney property out of reach for the investors. Both in the term of price (borrowing capacity) and rental returns. Where returns fall below 3%, investors stop buying.

 

Adelaide at the moment has highest rental returns in the country. Where would investors come?

 

Wait for the train. It is funny to watch it. Cavalcades of Mercedeces and Porches stopping at every real estate sign on the waterfront, and getting out their mobile phones. This is the phase one.

 

Phase two - they stopping at every house on the Esplanade and door knock. Mailbox gets the leaflets with the offers almost daily.

 

All you have got to do - is pat yourself on the shoulder and say to yourself - "Mate, you are real intelligent!".

[notpom]

"At present, interest rate markets are pricing in a cash rate that falls to 2 per cent in the coming months."

 

Read more: http://www.smh.com.au/business/the-economy/rba-revises-2015-growth-forecasts-will-watch-housing-carefully-20150206-137qvd.html#ixzz3Qvu5NIeS

[notpom]

"At present, interest rate markets are pricing in a cash rate that falls to 2 per cent in the coming months."

 

Read more: http://www.smh.com.au/business/the-economy/rba-revises-2015-growth-forecasts-will-watch-housing-carefully-20150206-137qvd.html#ixzz3Qvu5NIeS

 

Do not remember if I told you, I am convinced that interest rates will inevitably go to 0. And it is still not enough to give a kick to the economy.

 

Couple of more quotations about the directions of interest rates and property market. If you say that these projections are made by a person who is more responsible than myself and not that extremist, I would agree.

 

But unfortunately you do not know that since 1980 I always wanted to make a mistake in economic prognosis, but for some obscure reason I was always right.

May be little bit off with timing.

 

"I am also upgrading my forecast for median residential property price gains to 10 per cent from 5 per cent in 2015"

 

Read more: http://www.smh.com.au/business/markets/currencies/bell-potters-charlie-aitken-tips-australian-dollar-to-fall-below-us68162-20150211-13blxg.html#ixzz3RQYaX5X8

 

My prognosis - Adelaide may be 10%. Sydney - between 20 and 30%.

 

"However, against a global backdrop of deflationary forces and competitive currency devaluations, I think there is very real possibility of the cash rate with a '1' handle at some stage over the next 12-18 months,"

 

Read more: http://www.smh.com.au/business/markets/currencies/bell-potters-charlie-aitken-tips-australian-dollar-to-fall-below-us68162-20150211-13blxg.html#ixzz3RQw1Oyx9

 

I would agree with that. While we MUST have 0% RIGHT NOW to dodge the deflation, I personally know couple of chaps on RBA board. I would not trust them even to clean my toilet.

[Tamara (Homes Down Under)]

I personally know couple of chaps on RBA board. I would not trust them even to clean my toilet.

 

 

You crack me up!