property opinion

Originally posted by Barg ↑

I've seen all this before (market highs and market lows), and it can change on a dime. Here's an example that 'may' parallel todays situation, or rather the potential future RE market.
Some 36 years ago (I was 27ish) : ten years into my RE career, raised in the industry by a father that managed the real property of deceased estates. By the age of 15 I had already attended circa 1,000 auctions and, through my old man, knew every prominent RE principal along the east coast. So, like most young bucks at 27, I thought I knew it all. Hu! The market was pumping back then (mid-1970's). I'd made a fortune buying, renovating and selling. The world was my oyster: the boom times would never end - I thought. I was filthy rich. Then came the crash. Interest rates doubled within 4 months and the value of property fell by circa 40%. Out of the six properties I was still holding I was only highly leveraged on one to the tune of $250,000. Big money in those day's. In any case to finance that debt I had to sell everything, some for half price. In the end I was debt free, but had lost EVERYTHING. A salient lesson, which took me ten years to recover from. A mistake I would not and did not repeat. Lesson learnt!
Today, I'm watching a similar market unfold. The TV is awash with young property moguls flipping RE. They are highly leveraged and under the illusion that the good times will last forever. They have not seen a property market crash in their lifetime - the last being in the early 90's. I'm seeing young couples borrowing huge sums to enter the market, thinking they and their jobs are secure. And while history does not always repeat itself, given the change in world economic dynamics, there is one thing that never changes: and that is economic cycles. She goes up, and she goes down. No matter what anyone of age in the RE industry is saying in public, behind closed doors they are all saying the same thing: sooner or later this market will end in tears.
So be aware. There will be winners and losers. The cashed up swoop and the highly leveraged fall.

In conclusion, I came on this property forum to help folks, given my experience in the RE industry. Its a purely altruistic gesture. I make nothing from it. So beware any who think to insult me or make gratuitous return comments. I am the RE soup Nazi. There will be no RE soup for you. The 'ignore button' will prevail

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Hi Barg,

Thanks for you're input it's always good to hear views from someone who has had decades of experience in the industry.

That is an interesting point you have made about not getting into too much debt as it can cripple you, over the last few decades as everyone knows interest rates have been dropping (image attached below) and can't get much lower and sooner or later interest rates will start heading back up do you think the likelihood of rising interest rate rises over the next few decades will limit the possible capital gains?

This is also another thing that I think will limit house price increases as people are getting paid less and literally can't afford to pay more for a house, There was also an article recently from the RBA saying wages will be flat until 2020.

In the past the baby boomers were really in the sweet spot they had rising incomes and a low house price/income ratio but the mining boom, increased overseas migration and investment has distorted the house price/income ratio. But the current and future generations won't have that luxury as interest rates are at record lows looking to move higher and house price/income ratio is at record highs.

so my other question is do you think real estate investment in Australia will even be worth it in the years ahead? Because the massive gains look to be a thing of the past.