to burst in the next few (less than 5) years. What do I base that on?
Well, if you look at the figures, house prices are just going up and up.
But that isn't just supply and demand, surely? There has to be more at
play here?
I get the feeling that the Australian public (well, property investors)
are of the opinion that house prices don't go down. In fact, most loans
are taken out against houses and apartments on the grounds that the
house will gain 10% in value every year. But, seeing that inflation
rates and the current interest rates are keeping steady for quite some
time now, the purchasers just can't keep up with those price rises.
Something has to give in a situation like that - even a layman like me
can see that.
So, I'm predicting that the house prices are going to stall at some
point, and the real estate agents are going to freak out. Houses are
going to remain on the market for longer than usual and the mortgages
will still need to be paid off. Even without the 10% price rise year on
year happening. So, reluctantly, house prices will have to fall - and
they'll fall to a level that will allow the owners to sell and bail out
of a burning ship. Once a few go, the rest will follow and the prices
will crumble as people will no longer want the $1.7million house for
sale by the investors that are only just covering their monthly
repayments, when the one down the road is selling at $1.2m.
If you don't agree with my point of view, that's fine, but do take a
look at the US property market of the last two or three years. The
financial crisis pretty much rooted everyone and house prices dropped
from those investors who understood when to jump ship. Of the ones that
decided to hang on, a large part of them had to go through the horror of
the banks forclosing on them.
At first, I thought that investing in the US housing market would be the
way to go - after all, something so low can't stay low forever. Can it?
Well, maybe it can - there are many more factors involved in each market
(cash, stocks, property, "the other ones I can't recall on the spot").
America keeps going off to war lately, and that kind of action usually
requires money. And the amount of money being spent by the US is
approximately 27 fucktons of dollars. Now, that sounds like a lot, and
it certainly is. And that's the problem, as long as they are off
spending their money around the globe blowing stuff up, the less money
they have to spend at home. Infrastructure, schools, healthcare - it's
all suffering. And as long as the basics aren't taken care of, the more
likely it is that the people of the US won't want to engage themselves
in mortgages. So, if buyers don't look like they are close by, what is
the point in buying property if all you'll have to do is pay for it's
upkeep? And, not only that, but you will have to employ someone else
in-country to make sure it's not on fire every other week. Too much
hassle for the kind of portfolio i have in mind.
Next post I will be talking about the giggling-excitement I'm in over my
new trading account! Woooooooo!
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