Explanation for the opposing attitudes for property

[kincella]

its called anchoring....a behaviour trait most of us have....relative to any subject in your life....but goes a long way to explaining why some of us are positive and others negative regarding property ownership...

a copy of my post from another site.. on the same subject......

seems its a simple explanation why we bulls have an attitude and bears are just as stubborn in their attitude.....and almost nothing will change either's attitude....once the attitude is taken, absolutley nothing will change our minds.....all the media, news research falls on deaf ears......

absolutley explains why we have the discussions on this site on property
.....in the old days it was something as simple as holden versus ford cars....or sydney versus melbourne for living...or footy versus rugby ( I think do not follow either)
its an interesting concept...and also goes some way to explain why each side can become frustrated with the other,
so bears appear to suffer the same 'we will not be moved from our belief' attitude the same as the bulls.

here is an extract......wikiepedia
During normal decision making, individuals anchor, or overly rely, on specific information or a specific value and then adjust to that value to account for other elements of the circumstance. Usually once the anchor is set, there is a bias toward that value.

Take, for example, a person looking to buy a used car. They may focus excessively on the odometer reading and model year of the car, and use those criteria as a basis for evaluating the value of the car, rather than considering how well the engine or the transmission is maintained.

http://en.wikipedia.org/wiki/Anchoring

--------------------------------------------------------------------------------

[Passive]

Saw that post and very true plus the post that followed which was good as well.

The reality is like converting anyone from a belief system. My point though is that ours is based on experience and the ease with which we have made money cycle after cycle. Then we are to be pitted against very poor non property commentators.

Watching, and enjoying the cricket, sorry - but who will challenge the authority of the panels of commentators - Benaud, Warnie, Greig - all experienced players whom we respect. So on property we have LE/Kincella/Warnie/Joe/etc and on the other side we have the no experience of wannabees telling us we have it wrong and how it should be with silly ratios devoid of reality.

Interesting that property in effect -if you exclude the carnage -sharemarket driven - of the top end and mismanagement at the bottom has actually been stable or slightly up.

I am anchored to my title deeds good and solid and my reward is fiscal not some type of mental virtual make believe simulation supported by equal pack mentality devoid of any real success..

[kincella]

ok watch the cricket..good idea...lot of criticism about the commentators and the betting....and james packer making wrong moves with that...and today he is selling the cattle stations...one generation builds it and the next one destroys it...
been doing too much blogging lately...memo ...must get a life....think things will be quiet until after hols from the 5.1.09 anyway....

ps a lot more prop bulls on that site...but just irregular posters..alacrity, booze,tcisboss, andyman, molonski, warnie, birdbreak etc etc
cheers

[Booz]

Obviously I will have to tone down my communication on Hotcopper? Still, a 3 day suspension is a light sentence.

I read the article titled "Why we don't understand house prices." It was a logical, well written piece, and as the author stated, it is a shame many journalists are not more anaytical in their appraoch when writing about the housing market.

[Passive]

Good to have you post here booz -can't believe you got busted - or should I say dubbed!

Your posts have been forthright but it appears freedom of speech is a one way street!

Hopefully this all takes off as time goes on - I will be MIA for 2 weeks - going to NZ.

[kincella]

Hi there, unfortunately I saw that coming yesterday....they have silenced LE the same way several times now...you need to be more general in your answers....the poster knows the answer is directed to him...but you do not address him as you, your etc

I had a load of fun yesterday....you know the thing with me just staring at a map on the wall etc....and the dog too....

see the list of members here, there are some moving across....

the anchoring subject today....may have made some stop and think...ie to each his own attitude

its much more interesting to discuss different ideas with property than arguing about owning or renting

there is also the aussiestockmarketforum site.....under 'general'
they have a couple of threads on property going on....which may interest you
thanks for coming over and look forward to chatting with you
cheers

[2BAD4U]

Shares v Property, Holden v Ford and for those into cycling Carbon v Steel. Anchoring is well and truly alive in any debate. I've almost given up debating the point with the "non-property" crowd. I would rather discuss the topic with like minded people and throw the occassional hand grenade over on the stock forums. :deadhorse2:

[kincella]

the 'smarts' threw the grenades around in about 2006....the explosions are still detonating world wide....and its not over yet.....

in my earlier years it was the ford verus holden, syd v melb....melb conservative..versus syd risque ! I drove a ford and lived Melb...

oh and all the low value homes have been selling....not the normal average houses....so the median is dragged down..but not reflecting the average home....those figures will fool the renters...or the ones that use the price from the experts...'one size fits all world wide'.... and house prices dropping....

there is a big difference to what is selling and whats not on the market.....
I still believe money will come back to the property market....its been coming from first home buyers so far....and from investors IMO since last nov early dec...due to the drop in interest rates....
I saw this in mid 2000 after the tech wreck....and I can see the same pattern again
cheers

[Passive]

Have been watching this low end of town stuff selling in Perth and selling well. Suburbs 15 -20 kms away, north , of the CBD, 4/5 blocks away from the Ocean and older 3x1 keep selling in the 380 -450k range.

Many other newer suburbs have the same happening.

Additionally have had my eye on 2 bedroom upmarket apartment in heart of City waiting for a price drop -started looking at 290k a few years back - now 480k and still going up!

Some have negative equity in their homes on the outskirts but many take the view they are in , covered the cost of entry etc and are positioned to take advantage of future rises whilst they raise their kids and get on with the real life.

What is different to having negative equity to renting. One is that holding costs are coming down, total freedom to decorate house etc, what has the renter got? Rent rises, rent inspections and the knowledge they still have to save etc.

What a lot of the young share punters realise is that the halcyon days of making money trading are gone for at least 10 years as far as speccies are concerned. What a lot of them are saying share prices will rocket -so that may be true but the first 50% rise will help them to recover losses before they even see daylight - what a bad investment policy -quick fixes - really deluded most these guys are.

As for negative equity these plonkers will buy a 100k vehicle , loose 40k in 4 years, thats OK but 5k loss on home and its a crisis - give me a break - what a mindset!

[Passive]

Kincella

Word of compliment to you mate

Almost single handedly you have increased the membership by 20-30% over a very short period of time.

We need to do some brainstorming on how we can get this site more proactive especially as the wave of positives for real estate will increase and could be usefull to new punters.

Will do some brainstorming whilst away - need to avoid the endless sillyness and childishness on the other site. For the life of me if many of the advertisers realised how some sites have been taken over by the non capitalist low income low asset set I wonder how long before thay would pull their investment.

Credit has been abused - there is no question of that but it will continue to have its place in any society - even those poor ones where people are given cheap loans to set up business.

I am still thankful for those who lent me dough - like the banks etc for without them I would have a very different life.

[kincella]

I have been subtle about trying to bring others across to this site....do not want to be in trouble on the other....but will change my signature and add a link...see if that works.....no reason to stay at the other site, except there are some good prop posters on there...

similar arguments on the aussiestockforum site....but overall more knowledgable prop bull posters there....again will try to pursuade them to come over here....

I note from the former site...some of the bears have given up or not been posting about props....all their arguments shot down....
I like a good argument, am good for one anytime...but I expect rational and researched views...not the one liners of 50% falls etc...

As I stated on a site yesterday...we need the renters, if they all became owners we landlords would be in strife....but thats not going to happen...
I like to encourage people to think beyond the media headlines...and delve down to discover the truth.....
for eg; a link yesterday to the REIA report....in it , they stated the value of houses was made up of 2/3rds land component and 1/3rd building....that split only applies to inner city suburbs...within 15klms of the CBD....
so without a detailed explanation...a potential home buyer would be thrown offside by that statement...when they are faced with an equal cost of land plus building...aka 200,000 land and 200,000 building,,,or worse in the newest estates...builders and developers are offering house and land packages for 270,000....the land value about 70,000....no wonder they get confused...

and to compound the mistake that a group such as REIA could make...the land in inner city areas had no start up costs that councils charge...compared to charges of betweeen 25,000- 50,000 in Melb and double that in Syd....for newly released land packages.....
no wonder they can be timid, expecially if they know a subtantial amount of the cost is going to councils.....
I have no problem with councils charging an upfront fee....in the old days all landowners paid the costs for new developments...seems fairer today for the builder to absorb the charges....
I will get off my soap box now...cheers talk again later
not seen you on ASF recently ?

[Passive]

Lets hope that 2009 is a good year for all - including the bears - keep hearing about how bad things have been -are going to get - how bad it has been!

Sure the erosion of wealth has been great for many but tangibly only a few are really affected in this great country. Yes , you have lost on the ASX - I was a little luckier - stopped trading an withdrew July. My super affected but only a problem when I withdraw and that would apply to the majority.

Property Investors like you and I can only see blue sky at the moment. More bad times for us equals more rate drops. More bad times for us equals more opportunities, the longer the bad times roll the longer our real estate makes us rental positive cash flow. The longer it lasts the more time we have to fix and get lower rates and the more equity we have the more we can buy and the added income will help serviceability.

Ruminating on all this and reading other posts we property investors have learnt to tighten our belts for years now. We have learnt the disciplines and times like this are normal. All my vehicles are paid, no personal loans, house fully paid, other stuff low geared and income improving. That is the reward of enforced real estate discipline that requires frugal living for a decade to reap rewards.

Are we as a nation really doing it tough? Come on!

We have a lot to be thankful for and real estate investing has been so beneficial esp because of tax breaks and that word leverage.

Hope its is a good one for you Kincella and all the other posters and I remain convinced all good decisions made on real estate in the next 12 months are going to be fruitful.

Have not been on ASF as I plan to post here mainly and look to ways to improve my content - but not with cut and paste nor with after the fact stats but with interpreting patterns and trends using those tools.

Cheers - and no 2009 aint going to be so tough for most of us!

[kincella]

Hi Passive,...you are up and about early today..agree about the hard work and yakka we prop investers have to endure....the slogan...no pain no gain applies ...intermittently....while we adapt to changing attitudes....re adjust the plans etc...but then it also provides us with plenty of free time...to spend with family and on hobbies etc....
I believe property will prove very rewarding...and a surprise to most pundits in 2009 and beyond...lot of angry retirees and investors will not be hanging around and leaving their money in stocks and super or even cash.
The younger generation is also angry...thought of losing their jobs and independence.....
interesting the media have acted ruthlessly in gloating over the demise of property and impending unemployment...for the sake of selling papers.....but most people get angry...are not going to sit back and watch their lifestyle degenerate....they react....and if possible will take counter action against a forecast....not everyone can change their lifestyle....but there will be a reaction.....and it will be interesting to watch....
A lot of very intelligent young people out there...they are not all sheep to be goaded into falling over a cliff...simply because of big government and the fraudsters who started and then compounded this problem.

The most telling thing so far with property has been the consistent sales at the bottom end of the market...obvious those people were not listening to the media with its dour forecasts....but watching interest rate cuts...
I look forward to 2009....it wont be easy....

Ps... reading Greenspan again this morning....very similar situation occurred in 1988...1990 recession....banks not lending...fed lowered rates...almost a replica of 2008...but the fruad was on a lesser scale....stockmarket had jumped 40% before the 1987 crash....the fed was bailing out the banks, who had loaned massive amounts on shaky deals....sounds familiar today
cheers

[Passive]

Very true about the angry reaction of investors - mainly the boomers.

Actual case - client of mine was telling me that when Costello was hyping up super he was advised to borrow against his PPOR - to the tune of 250k - was fully paid by the way -then use the 250k and drop into super. That super is down substantially - his mortgage rates went up, value of his house has held steady despite the host of so called WA doomsayers who have not even owned a portable dunny in their lives, and now all his plans are stuffed.

His reaction - 6 months time I am back into real estate he says - anecdoal stuff like that I hear about almost weekly. The tide will turn , many of us are self employed, many of us as a nation, 90% or more will keep our jobs and as you correctly said the bottom end of the market is rolling.

You quote Greenspan and I am sure that he is a clever man , however my gripe with him was that to push up rates month in month out as he did - surely he could figure out which end of the market was going to suffer? The
carnage that has brought on is mindblowing. I mean the banks when they lend you money factor in a 2% margin for the unexpected - but with policies like his 2-3% on increased mortgages, sometimes 2 to 3 times higher than at historical levels translates to rises of 4-5% pa in dollar times. Surely he could have worked that out and been a little less brutal. Such a fine balance and look how by getting it wrong it has all unravelled and the game of snakes and ladders has begun all over again.

This time I believe the Central Bankers will think twice at raising rates so savagely plus with responsible lending we could have such low rates for years to come that it will see the Australian property investor so far ahead of the pack that the bonus it will deliver us will be incredible.

[kincella]

I know a lot of people blame Greenspan.....but he was really only the spokesperson for the Reserve Board... as Chairman he was obliged to do what the board told him...they all voted for a decision it was not his decison alone to make....think there were 8 members...and additional committees who made decisions....

When a similar situation to todays...arose after the 1987 stock market crash..he wanted to ease interest rates to slow the carnage....but the other members of the board voted against him and raised the rates instead.

He was blamed for dropping interest rates too much in the later years, and hence the cheap money being blamed for the housing crisis in the US....he has apologized this year in light of this crisis.... however I disagree...he should not have apologised for keeping interest rates low...
the low interest rates were not the problem...it was the fraud committed from bundling worthless sub prime loans and selling them off as tripled rated AAA deposits...world wide that created this mess.

I spoke to a client today...he was planning on retiring Dcc 08....had to put if off ...superfund is down the gurgler....wife has put up the rents on her properties....I told her to actively chase the banks for better deals on rate cuts....
am expecting awful retail figures out by mid Jan...then the companies reporting by end of Feb for Dec half year figures should give a hint of the downturn....it will be ugly in the first quarter 09
cheers

[kincella]

Hi there...good to see you over here..look forward to discussions
and Happy New Year to you
cheers

[Passive]

Greenspan admittedly was the main man but to be fair it was in his watch and he was happy to take the cuedos and now he must take the brickbats - but as you rightly point out he was one of a committee and they , mainly unknowns to the rest of the world - bear a huge responsibility.


May be a case for total transparency in being told who voted for each move, that way a little more accountability.

I am totally with you that it was not a drop in rates that was the issue and them being low - rather the fact that these devious, for clever they are not, graduates came up with this highly complex schemes to sell securities. Property has never ever been the culprit either - it was manipulated by these hotshots. Hope there is never a definitive way to value all real estate for therein lies its protection.

Watching Bloomberg and orange juice is down because.... What crud is that?
As soon as something has a value its speculated with - best example is the price of a barrel of oil - where on earth can you justify a differential of over $100pb on something that is now $40? All within 6 months!

Leave rates low for a long time, nationalise and regulate the banking system which in most of world is happening - go back to stodgy values - equity and serviceability requirements, etc etc and allow people to afford their home as a result.

With retail you may be right - hope not - I believe part of that wave ran through the economy viciously in Oct / Nov, Christmas gave it respite and I believe we will see tentative correction upwards for next 6 months. This big spend in Dec will help many retailers hold on longer - some will go and that will be an added help to the survivors. I am a little more optimistic than you as I believe this chicken has been overcooked. You may be right but I hope Iam , not for my ego's sake but for everyones.

[kincella]

Down in Chapel St last evening..buying the dog KFC...a very popular restaurant always packed, was closing at 6.00pm lst night....now maybe they close due to the gangs looking for trouble ???? on New Years EVE...cannot think of any other reason....just unbelievable that its packed from lunch onwards all the tables on the sidewalk......the only other time I saw it empty was one evening in mid October....
Chapel St is very young so probably not a good indicator for the economy....but a lot of restaurants in Melb are doing it tough and have been since Sept...quite a few in Docklands have closed down...too many anyway
just keep your eyes and ears open
cheers

[Passive]

if 1991 recession we had to have was anything to go by - all those involved with businesses that rely on discretionary spending suffer.

Interestingly enough though Kincella, and I stand to be corrected, but its shops like KFC/HJ/MACCAS that thrive in times like this and that I got from a dude in Perth who owns 3 franchises of the Golden Arches - so you figure!

You are right tho keep eyes and ears open for now the opportunities arise with those who did not plan for winter as happens with any downturn.

By the way - despite all the experts prognostications on HC and elsewhere - we ARE NOT IN A RECESSION until its official. It is a contrived bit of nonsense anyway. 2 qtrs negative growth if I am right- sounds OK - but mention the R word and we shudder.

All the stimulus in Dec may have been a ploy to keep us out of it. Now it can only be confirmed next 2 quarters and by then the positives are creeping in and it won't matter. Very clever not so.

[kincella]

passive...I know, food is the ultimate seller in any type of downturn....especially cheap takeaway....you can buy a snack box for 3.25, a drumstick and a handful of chips...woollies/safeway/coles is the stock to be in...liquour is the next big seller...people get drunk..they are depressed and then there is entertainment., movies and home entertainment is popular....the local $2 shop or reject shop is also a money spinner....people reduce their spending...so the better restaurants go bust...one here in melb had been operating for 40 years and had to close this year...too much competition...
its all so knee jerk reaction.....2 quarters or 6 months of a slow down and the economy turns to a halt....what a joke....wonder who spun that one on everyone...just imagine what the farmers would do if they measured rain and a drought in similar terms.....
lot people out there telling furphy's.....just repeating what others have said...no one actually looks deeper into the situation

with the food thing...thats why I purchased a retail shop that would be used as a restaurant.....not a high class expensive one...an affordable one....it should always be in demand
cheers

[Passive]

Kincella

You did well when you did -looking here but most of the stuff is overpriced and does not fit suggested criteria.

Will keep looking but here every man and his dog are flaming proactive to bargains. One of my neighbours , unassuming fella in nearby unit - talk to him often - in on bargains long before me with commercial. Often puzzled me - bit untidy and messy bloke then I find out he owns an office multistorey, 20 -30 commercial sites and commercial stuff in Melb bought at about the time Kennett got in.

Will keep looking - no use asking this guy though he has now beaten me to the punch twice!

[kincella]

I have sent you a private message about the subject....and a PM on the asf site as well
cheers

[kincella]

I assume you guys do this over there..people the same the world over....just say you find a spot that you are intersted in.....chat to the neighbours next door...find out who the owner is (other avenues once you get a name)......then ask if they are interested in selling.....I have had people contact me over the years about my shops...had another set of shops in another town....they phoned and asked if I would sell...sometimes they just go to the local commercial agent and ask them...they may do it on your behalf....you probably know all this...really just suggesting once you have identified what you want then go and get it....
\
had a client looking for rural land...part of a plan we put together...he went chatting and got to know the neighbours in the area he was interested in....lo and behold one of them came back to him...said he had not thought of selling before but since he (client ) was interested...farmer decided he would like to retire now......voila...a private sale . and at a lower than mv price but the farmer was more than happy with it(no agents fees so saved there)...been a bit of drought and things were hard for him
cheers