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| Thread ID: 71279 | 2006-08-01 03:01:00 | Residential Property a good investment ... ? | KiwiTT_NZ (233) | PC World Chat |
| Post ID | Timestamp | Content | User | ||
| 475090 | 2006-08-01 03:01:00 | In the US, it looks like their much more massive bubble is heading for a crash. LINK (www.tompaine.com) All the economists who missed the stock bubble—this is almost all economists—are just about to be embarrassed again. Several reports released this week provide the strongest evidence yet that the housing bubble may finally be deflating. Ordinarily, house prices rise at roughly the same rate as other prices. Nationwide, house prices stayed virtually even with the overall rate of inflation from 1950 to 1995. However, in the last 10 years they rose by more than 50 percent, after adjusting for inflation. This created more than $5 trillion in housing bubble wealth. The indirect effect of the bubble was even larger, as people took advantage of the rapidly growing value of their homes to borrow huge amounts of money. The weakening of the housing market was further assisted by an entirely predictable rise in mortgage interest rates. ... With inflation picking up steam due to the oil price spike, higher import prices, weaker productivity growth, and a stronger labor market, interest rates are rising back to more normal levels. The crash and post-crash world will not be pretty. Millions of people will lose their jobs and their homes. Unfortunately, the economists who led us down this path are not likely to be among the ones who suffer severe consequences.Even our own Reserve Bank Governor is warning of a correction. The Real Estate Institute and the agents are denying, but they can not be entirely unbiased ... true? Yes property prices have been rising steadily (similar to the US). Even keeping ahead of inflation, over the last 50 years. However, rising inflation and interest rates, will be the two-edged sword that might "prick" the bubble. If you are buying your own house, go ahead and buy it. However, don't depend on being able to sell it is 10-20 years times to fund your retirement. You won't get what you paid for it. i.e. purchase price + interest paid (mortgage). Therefore buy a modest house to suit your needs. Do not buy it as an investment. If you have a rental that is covering the mortgage payments, good on you. Once the mortgage is paid off you can earn the rental income in your retirement. My advice to you if you are in residential housing investment. Review your position. If you are still having to top up your mortgage payments on top of the rent received, look to be getting out. |
KiwiTT_NZ (233) | ||
| 475091 | 2006-08-01 03:55:00 | Agreed in general terms. Low price houses will hold their value normally because there is a base price that new home owners are prepared to pay. Logically all houses should fall in price equally but this doesn't happen. The botom stays pretty stable. Oddly the top bracket tends to stay up too. So it is the middle bracket of housing where there is the greatest potential for price drops to occur. It doesn't happen overnight and not for every house but generally I think we are going to experience people selling houses for less than they paid for them. It has happened before and is just part of the normal market cycle. |
Winston001 (3612) | ||
| 475092 | 2006-08-01 04:20:00 | It has happened before and is just part of the normal market cycle.Actually what is not part of the normal cycle is the people between the ages of 38-58 (i.e. the baby-boomers). These people are in their peak earning years now and can afford the interest payments and mortgages now. (The banks are making money now while they can.) When they start think about retirement and many are, they will review all their expenditure and reconsider their investment positions, to ensure they have enough in retirement. | KiwiTT_NZ (233) | ||
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