US property

[daletournier]

Fly in the wall moment coming.

I truly believe we are in a historical "moment", how long is this moment? I don't know!

As you said it will be interesting to look back 50 years from now "the era of debt" or misuse of debt.

The problem as I see it is "markets can potentially stay irrational longer than I can stay solvent".... I think I know what will happen and why it will happen BUT when?

Like you I've paided cash and will pay cash for the same reasons, and yes privileged to be able to do so, I truly understand that.

The other privilege I have is time, time to to think, learn and understand what's happening, many are to busy trying to make ends meet, raise kids and spent most of their waking hours doing stuff they don't want to do, no time or energy to understand how this crazy world of cheap money works and the potential consequences.

My girlfriend has two beautiful young grand daughters, I often wonder how the world may change as they grow.

[daletournier]

This highlights my concerns.

How does more debt solve a major debt problem?

The below clearly states that the Rba will use QE to stimulate the economy if needed. Creating money from nothing to buy their own bonds. It truly makes me believe the academics running the show truly don't understand monetary history or anything other than the economic model they've been trained to apply.

This is not new to the US but is to us, they will sacrifice the Aud if need be. For those wishing to invest its critical to understand the implications of this.

https://mobile.abc.net.au/news/2018-...en-qe/10593562

We don't have the luxury of being a reserve currency, a QE program will have serious implications to the Aud in my opinion.

I'm not sure if the article covers the bit where he says "we don't know how much leverage (debt) the economy can handle"... Wow! that's the second in charge of the Rba saying that! It's actually easy to know the answer, look at the data and the low interest rates.... Just crazy.

Rant over.

[arsenelupiga]

Originally Posted by valhalla360

He might be right...he might be wrong...

But when you are talking about a 90yr cycle, a tiny sample of only 3 cycles takes you back to around 1750...I seriously doubt the mechanics are the same as they were in 1750.

It is same cycle like 2000 years ago, as people live same number of years, give or take depends who you believe. After 60 years of upturn all that have witnessed property downturn are dead or not listened to. So everyone view is optimistic and no caution present. No better time for large players to trigger downturn and make $$$ again. Sell high now, buy low in 30 years

[Orson]

Originally Posted by daletournier

I'm familiar with Martin Armstrong and don't think much of him, BUT I do concur that there maybe some truth in what he says. The world is drowning in non producing debt, it's not just Australia.

I focus on income not capital gain, prices can go up and down but as long as income keeps coming in, the world is ok . A speculator is different from a cash flow investor IMO. Paper wealth will most likely take a big hit in future years.

I believe that during a downturn solid income producing real estate, fundamentally sound businesses that sell stuff people need and no debt (specifically in a deflationary environment) put one in a good position. Precious metals also have a place.

Thanks for your input.

You've listed interesting local and dynamic factors within the Syndey and Aussie market. Let me widen the market oulook by outlining a macroeconomic trend.

You see, what's interested me has been this decade's asset RE pricing bubble first manifest Down Under, in London, Vancouver and Toronto, and SF, Seattle, and New York.

Then it spread beyond, to many US Coastal cities and Euro Capitals, and then finally, most recently, inland to third-tier cities like Chicago, Dallas, Denver. And beyond Melbourne and Sydney.

The best (perhaps only?) explanation for this English-speaking world led current asset bubble, followed by a deleveraging - or bubble "popping" - over the past year, appears to be the geopolitical consequence of leveraged Chinese flight capital seeking safe-havens abroad, as president Xi moves to an oppressive, centrally controlled political regime along Maoist lines (eg, Xi is now president for life, abandoning decades of 5-year leadership terms since Deng Shao Peng pushed proto-capitalist development).

China's opaque economy and wild, rapid economic growth, has been said to make it impossible for anyone to authoritatively know anything much about the whole economy. Thus, investors are left seeking clues about internal performance through external observable factors regarding China.

The international housing bubble tended to follow on the ground observation. and later growing or alarming irritation, at Chinese corporate front or family investment in condos from Vancouver to Sydney to Toronto - both in nations more familiar to the Chinese (via trade flows, travel and secondary language), and both with easier and better-known residency rules and citizenship opportunities.

The actual bubble seems to have peaked in coincidence with the bitcoin bubble-bust a year ago, and consequent bust as the safety of the new cryptocurrencies faced failures and intense scrutiny as a transnational "dark" asset.

And all this market reversal, coinciding with a contraction in Chinese economic growth? And the latter has nothing to do with the two former trends? Internal political Chinese clampdown with capital flight? (And, one ought to add, Trump's tariff protectionist threats against Chinase chief trade partner, the US.)

I don't think so.

Has anybody got something macro and illuminating to contextualize the foregoing?

In RE, as in all investing, the trend is your friend when you stay on the right side of it. (And going against the trend is like not being King Canuute and his tides.)

Here are a collection of Googled-up headlines from economic news illustrating my claims:

https://www.zerohedge.com/news/2014-...ow-enabling-it
Apr 3, 2014 ... In fact, in some cases large chunks of land are actually being given to them. Yes, you read that correctly. China is on the way to becoming the ...
China is the SECRET Behind the US & Canada Real Estate BUBBLE!

https://www.youtube.com/watch?v=MM8HcmgKzEI

Mar 30, 2016
...
Western Cities Want to Slow Flood of Chinese Home Buying ...
https://www.wsj.com/articles/western...rks-1528294587
Jun 6, 2018 ... The hot pursuit of places to park money abroad by Chinese investors drove an estimated $100 billion in property purchases outside China in ...
Look Out Manhattan - Chinese Foreign Real-Estate Spending ...
https://www.zerohedge.com/news/2017-...ing-plunges-82
Aug 11, 2017 ... “According to official data, outbound investment by China's real estate sector fell 82% year-on-year in the first half, to comprise just 2% of all ...
...
Stevenson-Yang Warns "China Is About To Hit A Wall" | Zero Hedge
https://www.zerohedge.com/news/2017-...about-hit-wall
...
Aug 28, 2017 ... Everyone in China – from the government at every level to the people who work in banks, construction companies and real estate companies .
...
Chinese Firms Are Net Sellers Of U.S. Commercial Real Estate ...
https://www.zerohedge.com/news/2018-...irst-time-2008
Jul 26, 2018 ... “The China-US outbound cross-border real estate climate has been negatively impacted by the geopolitical climate,” said David Blumenfeld,
...
[And over the past year, many headlines of RE bubble popping within China, generating local or regional instability.]

[john61ct]

As with any investment type, look for genuine value driven by fundamentals that you understand.

Unless you're playing with funny money yourself and are willing to lose it.

[daletournier]

Originally Posted by john61ct

As with any investment type, look for genuine value driven by fundamentals that you understand.

Unless you're playing with funny money yourself and are willing to lose it.

That's the point, value hasn't been used to around for quite some time. Fundamentals stopped applying a while back.

[daletournier]

Hi Orson, obviously I was aware of the Chinese having an impact on property values around the world, this has been apparent in Melbourne, the city I grew up in.

I am also aware that places like New Zealand and Australia have tightened the rules making it hard for foreigners to purchase. Your post has got me thinking I may have underestimated just how much of an impact they had and in their absence are now having!

Relating the Crypto top to the real estate peak is also something that hadn't occurred to me,probably coincidence?

Thanks for the post.

[daletournier]

Sorry about predictive text...again!!

[john61ct]

Originally Posted by daletournier

That's the point, value hasn't been used to around for quite some time. Fundamentals stopped applying a while back.

My point exactly, people who view RE speculation as "less risky" are usually kidding themselves.

Also the view is growing that affordable housing for the bottom 90% is just as much a right of citizenship as decent healthcare and food security.

And that tax policies favoring home ownership are regressive, subsidies for the wealthy that should be terminated.

[hpeer]

China has something like 1/4 acre of arable land per person, about 0ne fourth of what India has and much less than USA, Canada, Oz or Russia.

They are looking outside the country to buy or lease BIG farms.

If that land is ever nationalized or if export bans are enacted look out.

[daletournier]

Robert Shiller is a Noble prize winning economist.

https://www.nytimes.com/2018/12/07/b...n-it-last.html

[hellosailor]

+1 on how critical a good property manager can be. A friend of mine, with several units in a condominium/hotel building, just finished up over a year of appearances and legal proceedings involved with getting the former resident manager removed from the property to allow a new (and way better) one to take over. they literally had to sue to get rid of the existing manager!

Now if you're a foreigner coming to the US market...you've got 50 states and 11 insular possessions and the laws are different in all of them. And different in every city or township. Without knowing the local laws, or at least the state laws? That's a quagmire. Hot markets with good returns? Not really, there are those markets that are in solid vacation areas, which will be pricey, and those with rapid new growth, which may be more risky. There are numbers on all of that, which will show you what areas are experiencing what growth (numbers of units available, sold, in construction) and what the market values have been and are likely to be. A really sharp realtor should be able to get those kinds of figures and work with you on it. But there's an incredible amount of homework to do, unless you just pick "something overpriced in a well known resort area" which is most likely to have a high occupancy and resale price.

And then, you've still got to find that great property manager. Real estate is NOT an easy game, if you really want something that isn't terribly risky as well. Our crash of 2008 kinda proves that and our current market...makes folks worry.

I think I read something last week about Chinese realty investors selling off over a billion dollars (small change) in US real estate investments last year, that's something that has happened more than once before as well.

[Paul L]

Originally Posted by daletournier

Robert Shiller is a Noble prize winning economist.

https://www.nytimes.com/2018/12/07/b...n-it-last.html

Interesting but pretty noncommittal.

[belizesailor]

While Oz & NZ have passed laws restricting foreign investment, Im not aware of any in the USA markets Im familiar with. In fact they buyer of the last USA property I sold was from Tiawan.

[Paul L]

Originally Posted by belizesailor

While Oz & NZ have passed laws restricting foreign investment, Im not aware of any in the USA markets Im familiar with. In fact they buyer of the last USA property I sold was from Tiawan.

I think the primary restrictions in tbe US are the hoops you have to go through due to the anti-money laundering laws.