60 posts in this topic

12 hours ago, MikeMelga said:

Companies can go bankrupt even with "free" money. Then they fire people and their suppliers and customers are affected. Snowball effect.

yes, companies can go bankrupt, but quantitative easing is now a means to limit this.

 

Zombie companies can borrow money at record lows and just keep on going and prevent staff being fired.

 

The Central Banks have the tools to keep this circus going.

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It´s not so easy for mid/small companies, who have much more trouble securing loans. Companies with negative working capital can be denied of access to loans.

Not to mention that non-AG companies have limited responsibility, but there is still personal liability from the partners, meaning unlimited loaning can signify personal bankruptcy, so they will not take the risk.

Also banks themselves cannot just give away money without some assurance, otherwise we have 2008 crisis all over again. A bank´s CEO does not want to lose his job and the bank´s shareholders don´t want to lose the investment.

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11 hours ago, jeremytwo said:

There isn't, but there is a natural evolution of fiat system which mean they run out of steam after 30 years. Ours started in 1971 and began to sputter out in 2008.

 

A new system is on the way.

 

21 minutes ago, RenegadeFurther said:

The Central Banks have the tools to keep this circus going.

 

Yep, called ZIRP and NIRP. Do you trust Christine LaGarde to oversee all of this?=

 

4 minutes ago, MikeMelga said:

Also banks themselves cannot just give away money without some assurance, otherwise we have 2008 crisis all over again. 

 

The present financial system has not been repaired since the 2008 crash. We will in the next decades enter an era free of central banks. Listen to this. Germany's economy is in deep trouble and this helps to explain why.

 

 

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1 hour ago, MikeMelga said:

It´s not so easy for mid/small companies, who have much more trouble securing loans. Companies with negative working capital can be denied of access to loans.

Not to mention that non-AG companies have limited responsibility, but there is still personal liability from the partners, meaning unlimited loaning can signify personal bankruptcy, so they will not take the risk.

Also banks themselves cannot just give away money without some assurance, otherwise we have 2008 crisis all over again. A bank´s CEO does not want to lose his job and the bank´s shareholders don´t want to lose the investment.

 

Some companies will fail but the majority of companies will have access to the money markets. We are not talking a few billions here we are talking trillions. T Where did this money go?

 

Stock and property and kept people in a job post 2008.

 

You can keep on waiting, but what Government wants to be responsible for a property crash and a recession.

 

The Central Banks will do all they can to prevent this.

 

 

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12 hours ago, LeChamois said:

That's what people thought in Japan in the 1980s...

 

 

I've just plotted for us the Real Estate Index for Munich, 1975-2018.  That stagnation between 1995-2010? That's the reason why I bought in 2010 - it was cheap back then. People were renting because of flexiblity, tradition, high initial costs, whatever. One argument that you can still find in TT was: the prices are stagnant since 20 years, it's a lousy investment. In Germany you rent. This in one of the wealthiest and most attractive to live in major cities in the World. We were due for a price correction.

 

Now, I'm of the opinion that the price correction has overheated and that the prices will swing down. But it will take a lot of economic damage to make real estate in München so cheap as it was in 2010, i.e in 1995.

 

 

immo_index_Munich.jpg

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Since it's a slow morning and I have all this data to play with (I love German efficiency), here's another correlation:

 

 

income_household.jpg.7d03cc1710cb9ae8ab3

 

 

 

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38 minutes ago, mtbiking said:

And another one to put things a bit in an international perspective.

 

immo_index_Munich_USA.jpg.26c760123cc8a9

 

 

What are the point of these graphs?

 

Just because house prices growth is detached from reality it does not prove that the growth can not continue indefinitely.

 

Stocks (post 2008) also show a similar pattern.

 

 

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48 minutes ago, RenegadeFurther said:

 

What are the point of these graphs?

 

Just because house prices growth is detached from reality it does not prove that the growth can not continue indefinitely.

 

Stocks (post 2008) also show a similar pattern.

 

 

 

Growth hasn't until recently been detached from reality, or it was but the other way around. In Germany prices were depressed for at least a decade and very few other than locals and professionals were buying even with ever higher available income (it wasn't fashionable or a hot market -> herd behaviour). As a result there was no fall in prices to be had when the global crisis hit in 2005-2008, and the correction (upwards) came with the global recovery plus cheap money.  Now the herd has been buying whatever crap is to be found in Germany and driving the prices ever higher. It has all been seen before, but my point is that prices won't fall to what they were in 2010.

 

for the young and the ones with a short attention span:

 

https://www.theguardian.com/money/2011/mar/19/brits-buy-germans-rent *

 

*Note that their example of a possible purchase wasn't well chosen. €400,000 bought you a small but nice DHH or RMH in somewhere like Ramersforf or Giesing in 2010, or a nice 80-90 sqm apartment in Bogenhausen. Enough for a family. I still have my old Datasheet as proof.

 

 

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A lot depends on the activity of the central banks, who do not serve the people just themselves. In the US, they have admitted something is wrong:

 

https://www.zerohedge.com/markets/fed-just-let-cat-out-bag-admits-being-forced-fuel-asset-bubble

 

Things are worse in the US than thought. Now i'd love data on the relationship between the US and EU central banks and how in sync they are or otherwise.

 

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On 1/15/2020, 10:04:11, LeChamois said:

That's what people thought in Japan in the 1980s...

 

 

japanese-home-prices globalhousingbubble.com.png


Japan 1989-2010 is a special case because:

 

1. Deflation.
2. Older houses are not renovated and earthquake technology is moving fast, therefore people buy houses to tear them down and build a new one with the latest technology.

 

If you look at the prices from 2010 onwards, the house prices rise again and at their peak in major cities at the moment. 
 

Land value will generally not go down, unless it’s a nuclear cesspit. 

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On 1/15/2020, 3:05:36, fraufruit said:

The option I'm not seeing here is just to buy a small rental, finance for 10 yrs. and then you have a steady stream of income. When the first is paid off, buy another. More income. 

You would still have to opportunity to sell at a later date if needed. 

 

We bought one small rental to supplement our retirement income. It has worked out well. We could now sell it for about triple what we paid for it but we'd rather have the steady income. It pays for our beer and wine. The selling option remains. You only hear all the nightmare stories about renters. We've never had a problem. 

 

Oh, before retirement, we invested the rental income so you can have it both ways.

 

 

I’m doing the same. But with low yield, I don’t see the rents will pay off the property in 10 years. In our case, IRRs will be positive after 25+ years. Perhaps also because our rentals are not that small either. 

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6 hours ago, LeChamois said:

If you think you can see the future of real estate prices in a graph ignore this one at your peril...

 

 

1200px-Germanypop.svg.png

Everybody knows about German demographics story. Politicians are discussing it everyday. Measures are taken against it (e.g. the latest one is the new immigration law to ease entry for high demand jobs such as nursing and hospitality Ausbildung). More importantly, real estate prices are driven by several factors, not only demographics. Showing a demographics snapshot from 2017 doesn’t really tell anyone anything.

Here are some German residential property reports that can give better insight:

 

https://www.jll.de/content/dam/jll-com/documents/pdf/research/emea/germany/en/Residential-Market-Overview-JLL-Germany.pdf

 

 

https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000488315/German_property_and_metropolis_market_outlook_2019.pdf

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11 hours ago, desdemona said:

But with low yield, I don’t see the rents will pay off the property in 10 years.

 

We paid about half down and then made an extra couple of payments each year so that it was paid off in 8 years. It was very cheap when we bought. 

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14 hours ago, desdemona said:


Japan 1989-2010 is a special case because:

[...]

If you look at the prices from 2010 onwards, the house prices rise again and at their peak in major cities at the moment. 

 

What a load of crap...

 

area chart of Japan Real Residential Property Price Index from September 2016 to June 2019

 

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13 hours ago, desdemona said:

Showing a demographics snapshot from 2017 doesn’t really tell anyone anything.

 

A snapshot, yes, demographics tend to change dramatically every 3 years or so...

It might not tell you anything because as demonstrated above you can't read a chart

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8 hours ago, fraufruit said:

 

We paid about half down and then made an extra couple of payments each year so that it was paid off in 8 years. It was very cheap when we bought. 

Oh so the rents alone did not pay the mortgage. That makes sense.

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6 hours ago, LeChamois said:

 

What a load of crap...

 

area chart of Japan Real Residential Property Price Index from September 2016 to June 2019

 

At their peak after the long term deflation that ended in 2010. Why must you be so bitchy? Can’t you discuss without resorting to bickery? 

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Now that wouldn't be much fun, besides, the notion that prices in Japan are currently at their peak just screams out for a strong rebuttle.

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