Thought I would list out some non technical things I have noticed, that indicate we are in a bubble.
Mortgage Brokers
I attend a local networking group for small business every fortnight. At one point we had up to 50 people attending. 10 of which were mortgage brokers.
There were a couple that had been in the game for some time, but most had just started up. They also came from all walks of life. One mortgage broker I knew had recently shut down his pizza business to become a mortgage broker.
Mortgage Brokers have virtually no responsibility: "My client can afford a $500k loan, but bank will lend them $1 Million and I will get more commission. If they end up going broke down the track, I just loose my trailing commission."
Real Estate Agents
There seems to be a new real estate agent starting up in our area every week. Every Saturday, I see Open Houses for Real Estate agents I have never seen or heard of before.
Too many people eating from the same pie.
Property Investment Firms
Everywhere I go, there seems to be new Property Investment, Property Consultants, Property Advisors, Development Firms popping up.
Where did they all come from?
The News
Every night, there is a new story about property prices on the mainstream news. Record Highs, Auction Results etc
Fuelling the fire.
Reality TV Shows
The Block, Renovating shows, property shows. Every night my wife is watching these shows. Her favourite show is a U.S show called Flipping Out. It's first episode was aired July 31st 2007, right at the peak of the GFC, when interest in property would have been at its highest.
Now this show is almost 10 years old, and all of a sudden finds it way to Australian TV.
TV Stations give people what they want, and people want property shows, which drives even more interest in property.
Keeping up with the Jones'
Property Valuator
A family member of mine recently got a job as a property valuer. They are in their early fifties and had been out of the workforce for 10 years. They did a 1 year tafe course, and are now earning $500 a day working for a Bank doing property valuations.
A neighbor of mine is in is early 20's and studying to be a brain surgeon. He reckons it is going to take him 8 years of full time study and doesnt expect to be earning anywhere near that straight away.
It doesnt make sense
Property Valuation
This same family member said they recently had to value a recently developed townhouse in the Sutherland Shire for a Chinese investor who had purchased the property. The Chinese investor had put a deposit down, however was unable to get a loan in China, as their government had tightened up rules on foreign lending.
This fellow had purchased the property for $1.6 Million off the plan and needed a loan. The bank valued the property at $800,000.
How many of these types of properties are out there?
Financial Planners
I have spoken to 5 financial planners, and I ask them all the same two questions:
Q. Where are you pushing your clients into?
Q. What percentage of your clients own or have exposure to Gold?
There answers were all:
A. Property Investment and Managed Funds
B. Zero
What is this doing to the price of Property, Shares and Gold?
Property Advisor
I was recently at a meeting where a property investment advisor was giving a presentation. They told a story from when they were a property valuer, and it was there job to go in and value the houses of people who could no longer afford to pay their mortgage and had to sell their house. They give this one example of this time, when she went into the empty house, and the family with kids where there and they were all crying. She said that they property was in the wrong area and the people had paid to much for a property, where the fundamentals where just wrong. She now helps advising 1000's of people on buying homes and investment properties. She also went onto say, that we arent in a property bubble. It is just a normal part of the cycle.
After the presentation, I had the chance to ask her a couple of questions. Here is how it went.
Q. So you don't believe we are in a property bubble?
A. No, prices go up, and then go flat for a period of time. But history shows they always go up in the long run, doubling in price roughly every 10 years. This is just a normal part of the cycle
Q. What percentage of people out there do you feel are invested in properties, similar to the story you told of the family who lost their house?
A. Easily over 60%
Q. Do you think the U.S Government will ever be able to pay back their $19 Trillion Debt
A. Well, that is a really complexed and complicated question, and not really one that I have got enough time to go into now.
What Debt???
Iphones & New Cars
Everywhere I go, 17yo school girls are driving around in brand new cars, wearing designer clothes and talking on the latest iphones.
How is this being funded?
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