Hi guys,
This is with reference to a great article by @redux on "dark days for WA property market." Many thanks for that.
IMHO, the photo at the bottom suggesting that the premier's woes may have only just begun should have been the headline because I feel that is the actual situation.
I've started only 3 threads on property in the past
I mentioned several bullet points here of the main fundamental reasons why property needs to fall. There are numerous discussions and debates in the thread later on, where I've gone on to explain many more finer points.
I went on to also explain how property might continue irrationally rising but the same will inevitably lead to stagflation and worse as it starts to damage the rest of the economy
As the title suggests, I warned here that commodity bust will continue to hit both the economy and property, how there will be huge job losses and I specifically ended my comment saying that "WA and Perth should be the worst hit"
Well we have had huge job losses in mining sector since and now we have an article of dark days for WA.
I linked to an ABC article which confirmed everything I had said in the earlier 2 months about how property is artificially high due to easy central bank monetary policy, how the rise will crush Australia, how a point will come when central banks might not be effective anymore, etc. among numerous other points.
I had already explained most of the situation in my 1st 2 threads and so did not have anything more to contribute to the property forum, and have hence only been lurking around here from time to time without commenting. Contributing anything else would be just a repetition. Seeing the ABC article in Feb reminded me of my earlier comments and I had to start the 3rd thread.
4) Global macro risks
Now seeing the article of dark days for WA, I had to comment once more because this is going exactly as anticipated. I always thought the impact of the commodity bust should have been a no brainer. All this cannot logically end well. I'll link to another recent comment of mine now. Here is a thread I started last week on the gold forum.
While it is on gold, one cannot really analyse gold until you analyse the broader global macro economy. I can't remember the exact contents of my earlier property threads but I think a substantial portion of it was just restricted to Australia.
My above comment explains some other parts of the global economy and several other bubbles which IMHO are yet to burst, impact of global QE, US interest rates, fluctuations in currency, alternative global issues in coming years, signs of global overvaluations, etc. Just the bursting of the commodity bubble has caused so much damage to property. Imagine what will happen if all bubbles burst. And this is not impossible, as bursting of 1 bubble often causes a contagion effect
5) Conclusion My simple conclusion is the same as it has always been - Aussie property is grossly overvalued. It may or may not continue its irrational rise but if it rises, it will cause more harm in the longer run in the form of stagflation or worse.
Property is intrinsically a great investment but like all investments, it too is cyclical and perhaps even more cyclical than others, and the cycle can cause greater pain due to lack of liquidity and ability to dispose of the same easily. Property bulls often say that they heard the same in 2000, 2005, 2008, etc. and how because the bears will wrong all along, they will be wrong now too. Well more power to you if you are right but what if you are wrong. Do the bulls really believe that any asset can rise endlessly upwards forever. Of course not - then why is property immune from this? I think those sitting on property investments still have a good opportunity to get out with huge profits, and it is a huge gamble hanging on further. Property also needs to be much lower or it will start to severely hit other parts of the economy in the time to come (Refer point 3)
I'm not into making predictions and timelines but only into commenting on facts and fundamentals. The fundamentals are the fundamentals whether they materialise or not. Definitely all IMHO, DYOR and all that stuff.
