While Id agree with the sentiment of this article I think it is only true until the next bubble comes along.
The reason I say this is because once people get used to a certain lifestyle provided by an income not normally associated with their employment but in this case provided by rental income or sale of property they will wish to maintain this lifestyle and therefore accept more risk to do so.
The result of that as with the dotcom bubble and now the property bubble and god knows what the next will be (maybe the commodities bubble) a few people will win (the smart money that gets in before the herd and gets out when profits are realised and before the top of the market) but in general most people will have a sob story or get hurt.
People will need money to inflate another bubble. And most people don’t have money, and don’t have anyone who will give it to them. Not only do they not have money, they owe vast amounts of it.
From my own observations of the rental market (I’m looking to move over the next 6 months but only to the right place and the right price), I think the ‘high rents’ slant VIs have been spouting is also about to collapse, and will have done by later this year.
While I agree with your statement to a certain degree bugler I have to bring into this equation that not everyone bought between 2002 and 2006, a lot of people bought, inherited or were gifted property and people whose property has increased in value hugely since the 80s and 90s are people who are asset rich and will be cash poor as rental income decreases.
The people you are talking about are the majority of FTBs or trader uppers who maybe make up 30%+ of the market. When they bought they increased their debt and someone elses wealth so there is therefore an awful lot of money still sloshing around looking for a home when the right opportunity presents itself and as rental incomes decrease the urgency to find a better home for this increases to supplement to falling rental income.
The vast majority of people who made money from the property boom were purely lucky. They have no skills in finance. They simply rode a wave. Any muppet could have done it, you just had to be nieve enough to join in. These very same poeple are the ones who are sitting out the crash. Look around any property web site and you’ll see the ludicrous prices. Behind each of these prices is an accidental millionare who is loosing money faster than they can count it. Problem is they don’t know it. One day they will feel rich and the next they will come to the stark realisiation that they are not wealthy. It must be somethink akin to winning the lotto and then losing the ticket. They may need some counciling.
I agree bb and just as you say they are accidental millionaires who got lucky and these are the same people who inflate bubbles by backing fads in investment circles.
If we look over the last few years we see everything from property to cfds and similar investment vehicles. Again some people made money on these but the majority lost as with FTBs.
Bubbles are like buses there will be another one along anytime soon and it may not be aimed at the first time buyer market, it could be a “cheapo holiday apartments in Spain bubble where you buy one get one free”
If somethings sold well enough some people will buy anything, e.g. why do you think property values have fallen so slowly in this country 10-20% when its been proven that our bubble is bigger than the states.
Simple because attempts are being made to controll the market by VIs, the down side to this is that it will elongate the current problems over maybe 5 years or more instead of 2 or 3 and the only people who will benefit will be VIs.
" Bubble, Bubble, Toil & Trouble!"