Another global financial crisis?

[xelasnave]

I notice a little more negativity coming from folk I chat to about money.
One person I respect is predicting another major crash.
I have been trying to buy a property but after offering full price the owner says they want more.
I hate being screwed so I must let it go.
Then hearing my friends negative outlook I am thinking now may be the time not to buy after all.
He says we have a collapse about every seven years and that it is about that time again.
I started goggling but that is confusing.
What do you think, are things likely to get worse.
Also should I pay the new price the vendor wants or walk away on principle.

[Paul Haese]

The big spend up to avoid a depression in 2008 only forestalled the inevitable. I had thought at the time it was probably best to only have modest spending and let a recession form instead of a depression. That would have induced growth after a few years and probably reset the system. Instead the expenditure only propped up an over inflated system. Nothing has been done about the causes either, so the same event could happen again.

This time it could well be that a major depression is starting to form. Time will tell. Our fortunes are tied quite heavily to the Chinese economy and so the impact will be quite high for us if it progresses.

[dannat]

id walk away on principle, or offer 10K les than your original offer

[casstony]

There's a big ruckus going on in financial markets right now. If it's allowed to follow it's natural course stock markets will crash, confidence will be affected and housing markets will decline. If the US announces another round of quantitative easing and China decides to concrete over a bunch more farmers fields then the carnival will continue and asset prices will stay artificially high for a while longer. The next few weeks will be telling.

[xelasnave]

[QUOTE=dannat;1198691]id walk away on principle, or offer 10K les than your original offer[/QUOTE

I was buying it for my ex wife and our daughter.
I was in real estate and did a comparative market analysis.
In my view it is $50K overpriced based on sales to date.
So paying asking price way over the market but given my daughter wanted it and I have the cash I was prepared to pay asking price.
I feel they are really taking advantage of my desire to make my daughter happy.
They seemed to be nice people but I feel they are being very greedy.
I am not going to be played for a mug and will tell the agent I am walking away.
Even if they say they will proceed I have decided that I won't deal with them..now they can reduce the price by 100k and I won't deal with them.
I feel sorry for the agent he worked so hard and he won't get anything.
On the bright side my Sydney property valued at twice I thought it was worth.

[xelasnave]

Thank you Paul for your input.
I think you know what you are talking about.
I think these vendors may regret their greed but I wish them no harm
Greed has overcome their reason.

[xelasnave]

Thank you Tony you express similar views to my friend who I respect greatly.
The real estate prices in Sydney surprised me and seem over the top really and it would seem a correction is on the cards.
Thanks again.
I think holding cash may be the best in the short term.

[Baddad]

:) I like Daniel's strategy. The seller often thinks that when a potential buyer comes along that the set price is too low. They get greedy. Tell him that after research the price is too high. Offer less and give it time.

Other buyers may come. They will always offer under the asking price. so you will sit pretty.
I have bought and sold several properties and spent two years in the real estate industry as a sales person.
:)
Cheers

[xelasnave]

Thanks Marty
Good advice, I owned an office and consider myself a good negotiator.
I have tried pretty well what you suggest. But no go.
A fool like me comes by once in a life time and they have lost me.
Today in the shopping centre I picked up a telegraph newspaper and on page two was a page on the prospect of another crash which I found amusing considering my post.
The experts say no chance which I find suspicious, seemed like a talk up to me.

But best of all on the way to my ex and daughter I see a for sale sign.
Rang the agent, room for the horse, a creek, big house and ivy.closer to town, which they did not want. So I tell them and we drive out for a look outside.
My ex says she often looks at this house and thinks it's great nice setting trees etc...so they look tomorrow.
It is more money but that is not a problem.
Best of all they are selling.
I hope it comes together..
If nothing else it helps to put the other behind me.
My daughter likes it so far.
Best of all I don't have cancer got the news today.

[xelasnave]

I did not buy the telegraph if was left on a seat.

[JB80]

Firstly congrats on the good news Alexander!

Well thanks to the last meltdown which to be fair Australia mostly avoided we have just brought a house in Spain as the market is very close to rock bottom here and very affordable.
'La Crisis' as they call it hit here really bad and was caused mainly when the local housing bubble burst which while it was a big bubble is dwarfed by the Australian property bubble. No way would I expect Australia to fall as hard as Spain has done but I definitely think it's on the cards sooner rather than later, if anything it's needed. Seems to me that a few factors and not just housing are starting to rear their heads, as always it will come down to how it is managed by those who need to manage it.
I'd love to be able to afford to buy in Australia but not in today's market.

As for the cheeky seller I would say the offer stands for a week and then I will withdraw it, give him a time frame to think of. Worst case you walk away.

[PCH]

Just as an aside Jarrod, what sort of price do you have to pay in Spain and what do you get for your money?

Pics would be good if you can grab a couple easily enough.

Cheers :)

[JB80]

Well it does of course depend on what and where you are but there is no shortage of stand alone detached 3 or 4 bed properties for 150,000EU or less like this one http://www.idealista.com/en/inmueble/27873667/ with around 2000msq the standardish parcel.
If you can go to 200 there are more modern homes like this http://www.idealista.com/en/inmueble/28753102/ but if you move a suburb over that can go for 150 or 300 depending on location and it's highly likely that they will never get the asking price, 20% off seems to be the done thing.

There is also a large amount of cheap bank properties and lots of fixer uppers and terraced or semidetached near the beach that are well under 100G.

And the further inland you go the more you get http://www.idealista.com/en/inmueble/28661117/
http://www.idealista.com/en/inmueble/29523143/

But that is just this region there are an estimated 2 million empty house in Spain so you can really find anything you want at nearly any price.

Interestingly only yesterday I was looking at Adelaide and KI houses, there is no way you would get anything in the area I grew up in Adelaide that would resemble a 3bed detached house for the price we paid here even taking into account the currency coversion.
KI on the other hand represents better value but I wonder what the employment opportunities are like there.

[gary]

Hi Alex,

The volatility in the current global stock markets, as you will be aware, is
mostly a direct result of the collapse of the Chinese stock markets.

The collapse of the Chinese markets is the result of a massive bubble
caused by the Chinese themselves.

This bubble was self evident to many analysts for many months prior
to the collapse and widely reported. Unfortunately it was obviously
not self evident to the many new Chinese investors who got caught up
in the fervour during that same period.

One financial commentator, Jesse Felder, published an insightful article
at businessinsider.com back in late June (http://www.businessinsider.com/china-is-a-bona-fide-financial-bubble-2015-6?IR=T). The article was interesting
and alarming to read at the time and the various mind boggling
statistics it quoted are still fascinating to read today even for those
with a passing interest in such matters.

A couple of graphs really stood out for me in the Felder article.
One from Bloomberg showed the median of projected 12-month
price earnings for markets around the world including countries such
as the US, Japan and Germany.
You can find the graph by following the link here and I have also reproduced
it the bottom of this post -
http://www.bloomberg.com/news/articles/2015-06-16/real-cost-of-china-stocks-dwarfs-2007-bubble-as-valuations-jump#media-1

The most telling bar on the graph is that for China.



One way some might value the worth of a stock is its price to
earnings ratio.

Whereas global stocks might be slightly overvalued, Chinese stocks
were incredibly overvalued.

The second telling graph shows the number of new stock investors in
China and the amount of Yuan in those funds since Jan 2010 to early 2015.
The graph can be viewed at this link here but I have also reproduced it
at the bottom of this post -
http://edge.alluremedia.com.au/uploads/businessinsider/2015/06/China-stock-account-openings-CBA.jpg

Notice the massive spike in millions of investors and trillions of Yuan
particularly starting around the beginning of this year.

Unlike in Australia where large institutional investors play a major part,
the Chinese market is dominated by individuals.

It was a classic bubble. As more and more people saw friends and relatives
making massive amounts of money through playing the stock market,
they quickly joined in the rush too.

But rather than buying stock with cash, a very large number took out
margin loans to buy them. And there was very little regulation on margin
loans.

And rather than buying stocks for the long term, the turnover was
phenomenal, with most stocks being held for only a week.

As prices rose, it became the biggest game of pass the parcel in the
world.

One of the most forehead slapping stories that came out in recent
months was reported in the Wall Street Journal and Felder repeated
in his article. Some Chinese manufacturing companies shut down their
operations and put all their cash into the stock market.

As Felder put it at the time, "It’s hard to fathom just how insane this is: Manufacturers realizing they can make more money trading each others’ stocks than actually running their manufacturing businesses."

Felder article - http://www.businessinsider.com/china-is-a-bona-fide-financial-bubble-2015-6#ixzz3juxSVX00

[gregbradley]

That's a great article Gary - thanks.

Greg.

[ZeroID]

Best news of all Alex, enjoy life. :thumbsup:

We're mortgage free so real estate prices are meaningless, you sell and buy on the same market, it's all realitivistic. We could move away from our prime spot and buy cheaper elsewhere and have a lot of spare cash but we like where we are so no problem. (Except rates of course !! :shrug: )

I'm no financial wizard but this latest scenario looks awfully familiar to previous crashes except from starting in China instead of the USA. My biggest concern with that is the Chinese are less sensitive to the effects of taking drastic action to try and correct. They'll be far more ruthless with whatever they do and a lot more people will be hurt than when the USA went through it's big kick back.

NZ is not so sensitive to Oil, Coal financials, small, relatively independent so it would be a bit easier over here but my advice is to sit back and wait for the bottom and the swing back nonetheless.

The second property you're looking at ? That's an emotional decision, only you can call it and you say you have the money. I'm divorced and my kids are grown up, I've bailed one out financially so far and I can't and won't comment on your relationship with your ex and daughter and the situation. But I've left my kids to fend for themselves basically, and my ex for that matter so just be careful as to why you are going down that path is all I can say.

Cheers
Brent

[xelasnave]

Thank you Garry that is wonderful.
How would you like to be my financial advisor.
Really thanks for taking so much of your valuable time to put that together.

And thank you Brent.
Wise words.
My ex is one in a million no one in a billion.
When we broke up she asked for nothing. No access problems.
We worked in the Family Court so we both learnt from others mistakes.
Our daughter in my view needs a little tuff luv but I am going to try a gentle approach.
Once I rules over everything and others had to follow but I am not convinced I did in fact know everything.
I know people will say I am wrong on that score but if nothing else I have found the world does function without my input.

I must go as I am on the road again.
I will cover more replies and thanks later.

[xelasnave]

Thanks Jarrod.
Setting a time limit is a powerful took.
I have used your method when in the office.
I would say to vendors to consider an offer..sleep on it..well do you think anyone sleeps when an offer is before them.
Next say they were usually reasonable.
Prices up here are cheap.
In Casino you can still buy a house for under 200k in town and a nice little block.
Acres can be cheap. I recon my 200 acres would only fetch $160k.
It's a long way out but that is why I got it in the first place..light pollution free.
Thanks again.

[Baddad]

Hi Alex,:)
No cancer. :) That is always great news. I have experienced it too.
Look after yourself.

Cheers:)

[xelasnave]

Thanks Marty
I was worried and maybe a little grumpy.

In Sydney again my Dad is in hospital so onto new worries.

The other house passed inspection but I want to see it before I buy it.

[astroboof]

Well you know what they always say, traditionally, bad news makes bad times. The rest is up to the common man with his voting ticket or placard, Far out! :question:

Great news Alex, all the best, from a fellow boat nut.

Cheers for the chuckles Dan. :rofl:

[xelasnave]

Hi Dan the boat was for a vicking funeral but I realise I won't need it because the world in coming to end.
Yes very happy.

[AussieTrooper]

So am I, but prices still affect you.
Rates are calculated on property values, higher value, higher rates.
Same with stamp duty and real estate agent commissions when you move.
The big hit comes when it's time for your kids to get a home. There's just no way to do it now without a lot of help from mum and dad.

[AussieTrooper]

I wouldn't put off buying too long.
I'm not so sure that this really is a 'bubble' as such. A lot of what is driving prices up here in Melbourne is the huge population growth. There's never going to be much more land made available in the middle and inner suburbs that is anything other than blocks of flats.
Things like the 888 visa (you can now buy permanent residency via property) will continue to put upwards pressure on prices, regardless of what happens in China. If anything, conditions going bad there are likely to increase the flow of people to here.

[xelasnave]

OK the latest house seems ok leaving aside price but all of a sudden there are 4 other enquiries.
What happens next..will it be snapped up, evidencing a fierce market or will it hang.
I won't play until the others fold.
That may mean I lose it.
But that will indicate market temp as hot.

I have 3 rules for buying real estate and lately I seem prepared to break them all.

[xelasnave]

Hi Ben
Prices around here are thru the roof.
And there is heavy Chinese pressure.
I go to Eastwood shops and it is so busy. So many businesses.
And the University, and then Epping is supposed to be a huge cbd one day.
I would hate to try and buy anywhere in Sydney really.
Thinking more I would like a good cattle property ..when the crash hits maybe.
All it has to do is rise where your selling and crashed where you are buying.
Timing is key.

[ZeroID]

Yeah, rates is rates, no stamp duty in NZ. My kids have done their thing long ago, they are on their own two feet now. Our home value has qradrupled over what we paid for it on CV, market will pay about 6 x CV value where we are in the 'golden triangle' for a highly preferred secondary school and access to CBD, Rail, M'way, shops etc etc. A very fortuitous purchase on our part about 13 years ago.

Financially we are pretty good, no HP, no debt, quite a bit in savings and my wife being 19 years younger and in a damn good job I think we can hack the rates stuff for a bit longer. If it gets too hard later we'll sell up and move south where house prices are about 25% of Auckland.

I do feel sorry for young people though, it must be very frustrating trying to get on the property ladder. The interesting thing though is the shift towards apartment liviig over here with the large number of Asian population who are accustomed to it. It will be a paradigm shift in thinking over the next 10-20 years as peoples expectations change.