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A good thread. Very important issues.
I have only recently come up with a few simple rules which is purely for my own benefit.
1. Our current global situation has never been seen before, so take expert advice and history's lessons with a grain of salt. Nobody is an expert today, and if you listen to some of the best financial advisers out there, they will say, don't go after profits in this climate, just make sure you don't lose, don't look at historical data, just run with logic and your gut feeling.
2. Play it safe. Today is all about minimalizing risk...that includes de-leveraging (off-loading as much debt as possible).
3. Go in the opposite direction as the masses so you can take advantage of supply and demand. I mentioned in another thread, that sub-division of land/property is so wide-spread that what's becoming rare is bigger blocks with a single house. Supply and demand will dictate that things like this will be highly sought after, and of course demand higher dollars.
4. If the property bubble bursts the banks won't reduce your mortgage repayments or the principle. So if the property bubble does burst (and many experts say it is inevitable) and we lose 40% value overnight like what happened in Florida, then your 60% LVR turns into 100% LVR and you've effectively lost every cent.
5. The banks are marketing towards Mum & Dad investors why is that? Why are banks greeting you and offering you mints at the door these days? They've not done that for 30 years, so why now? Have they lost somewhere else (think about the GFC).
6. Loose credit is dead. Banks are now going back to branch managers which have asset/liabilities on their own books and less through the mortgage brokers. And because they're doing that, liar loans have ceased to exist. So banks are now able to qualify every place that their money goes out to.
7. Your property is only worth what the next generation are able to pay. It's that simple, and the Australian property market bubble actually needs overseas investor money to stay pressurized, otherwise, it's deflate down to what the next generation can pay.
Will Australia have a property bubble burst? Many experts say yes and that it's inevitable. I personally don't know, but I do know one thing; if ever there was a time to sell-up, it's now, just before the new legislation on foreign investing (visas) comes into play, because scaring-off foreign investors could easily trigger a sudden deflation in the property market bubbles.
These are only my personal opinions, they are not right, nor are they wrong.
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