forecasters, page-3

Case Study

1992 in Perth suburb called Mullaloo. Man has beautiful home, one street back from the great beach at Mullaloo.
Owns a software co. Bank Manager, based on info from one of the expert commentary places , tells my acquaintance that he would be well advised to sell his house, not borrow for his business, market will drop and then get back in when it does. You see prices had gone up to unaffordable levels. What is unaffordable often should read unnaccustomed.

This bloke sells at $440,000. Good price at the time but off the top thanks to stupid forecaster and the easily spooked WA market.

Fast forward 6 years, same house now worth $1,000,000+. He rented another house in the meantime and has just re-entered at $880,000 in a cheaper suburb with a mortgage of $500,000+ , can't get the exact figure from him.

Business still battling along and has decided to rearrange finance as he has Kippers at home etc and would rather have the tribe around him. Fair enough.


This only happens when people believe a house is a commodity and if you get it wrong - it is one hell of a costly exercise. Have had a similar scenario with an ex-tenant of mine.


That means the guy is worse off, with a debt he never had before because he listened to some snotty nosed Eastern states forecaster.


This example does not factor in the entry/exit costs and the fact that the CGT would have been free. Now the mortgage has to be paid with after tax dollars.

I am sure the cost of lost opportunity like this has happened anywhere, like Darwin , where there has been rapid growth. Being cashed up never really tells the real story does it and can account why some people become so dark with real estate - they have not lost in actual terms , but have been losers in the real sense. Work it out!