If... we see a property crash, will you be better off....?

Originally posted by speculator101 ↑

So.. I have been pondering this for ages.

Simple question really.

Is it better to borrow big like the vast majority of Australia citizens (and perhaps this could be broadened to across the globe) or, be conservative and be debt free?

I ask because, to date, I have yet to see any government or Federal bank, not bend over backwards to support asset prices. BOJ, US FED, EU FED, etc etc etc. I mean, there are now negative interest rates in most of the largest economics in the world. When I see articles like this - First Denmark, Now Belgium Is Paying People To Take Out A Mortgage

I just wonder, have I been wrong all along (how I live my life and run my finances)? Should I have followed the herd and borrowed up to my eyeballs? Biggest house I could afford?? With what to me seems like an almost guarantee that governments across the globe will not support me in my largess? At the expense of savers?

I may post this question on the Economics thread to, as I feel it has multiple dimensions to it.

Just to put a further example out there as to my frustration with the current financial system, I was speaking to a 28 year Australia, who recently returned from the UK. She had bought an apartment in London (a small one). It had gone up quite a bit in the past 5 years. She drew out all the equity she could, ($180k AUD) and brought it home to buy another property here. Why.... because her home loan in the UK, is 1.24%!!!!! Bloody crazy and yet... I makes me wonder, why the hell would I not do the same if I could....

So in summary, I am looking at buying a bigger house, in a suburb near to my work, because in the end, where you live is very important, and if I can do so, with some certainty that even thought I am taking on more 'risk' by borrowing more, its still barely going to compare to the rest of Australia who has already done so, without, perhaps thinking things through to the same extent I have.

Looking forward to hearing others thoughts on this.

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The bigger question is , will we have a property crash ? I think that if we were to have a proper crash i.e. 40-50 then everyone except those that own their house outright would be in a bit of strife . Even those that own houses might find themselves out of a job as I expect unemployment would rise significantly .

Consider what things would be like if the unemployment rate went to 15% . House building would stop . House renovating would stop . Local holidaying would stop etc etc . Things would be pretty quiet .

Aside of all the doom and gloom that some people like to post , have a look around you . People are getting on with life . The population is growing , people are moving forward . When that stops happening , then start worrying . Sure , prices in inner Sydney are off their head but there's an awful lot of Australia than has hardly moved in 10 years . At the same time Australians still tend to be good savers or debt payers so we are still making progress .

I'm leaning more to a flattening ( reductions in some i.e apartments ) for a period until the world economy picks up . In my view that is still a couple of years away .

So , in the meantime , the normal investing rules still apply . Borrow sensibly and make your money work for you . Take advantage of low interest rates . If it turns out that they stay low for a long time then you won't have gained but you won't have lost anything either .

Even if property stayed flat for the next 10 years , if you were in the property market you would have made 10 years progress on your mortgage .

Call it compulsory saving if you like . The sooner you can own a property the better off you are . Then all you have to worry about is an income to live . In Australia that doesn't necessarily mean working .