There is a lot of fear, uncertainty and doubt circulating around the property market at the moment. While the naysayers warn against disaster, those too fearful to take action stay losers and the system keeps on going.
The best way to break free from this cycle is to ignore the naysayers and educate yourself about the economy.
In order to dispel the negativity that is holding many people back, Nathan shares his views about the current market and the economy at large.
The economy is in a tight position.
Nathan says, the economy is not the best at the moment, in fact, there are many hurdles that it will need to overcome. Having said this though, Government intervention is likely to keep it going.
There are a lot of Government backed initiatives happening at the moment, and with increased Government spending comes increased Government debt.
So, if interest rates rise, what will this mean for Government debt? It will rise too.
What will happen with interest rates?
It seems this is the question that is on everyone’s lips at the moment. Most people seem to be waiting for them to go up again – everyone except Nathan, that is.
He says, if you look at rates over the last 30 years or so, they have travelled downwards in trend terms. Each cycle has ended with rates lower than they were before, moving closer and closer towards zero per cent.
Nathan believes we will hit zero per cent in the not too distant future.
He says, if rates were to go up by just two per cent the Government and householders would be in serious strife.
This could result in a glut of properties for sale due to an increase in bank repossessions.
When the GFC hit in 2008, the RBA dropped rates by 100 basis points over three consecutive months. Over four months, rates were at half of what they were before.
The RBA did this in order to starve off a recession. As a result, it has become very difficult to bring them up again.
Nathan believes interest rates are set to stay the same for some time. In the long run, however, he thinks they will head towards zero per cent or lower.
If rates go down, debt becomes cheaper. This means more people will be likely to spend with borrowed money which will cause inflation to rise even more.
Are we in a bubble?
This is another question that is on everybody’s lips. Nathan doesn’t believe that we are in a property bubble at the moment.
He recalls when, as a 13-year-old back in 1998, three bedroom houses in Parramatta were selling for $200,000. Today, the same types of properties are going for between $1.2 million and $1.4 million.
He says the US market was a bubble back in 2007. Prices became inflated due to the Ponzi scheme underpinning it. Today, many of those houses are worth even more than they were before the GFC occurs.
This begs the question, even if a bubble causes the market to crash, will the properties still retain value over the long term? If prices drop by ten per cent over a couple of years, it is likely they will continue to rise over the long term thanks to inflation.
Has the market peaked?
Under normal circumstances, Nathan would say that, yes, the market has now peaked. But, the market isn’t normal at the moment. He says, we are dealing with a monetary system that is going off course at a rapid pace. People are feeling poorer due to the silent tax of inflation.
How can the market keep going up?
Since we are a young country that needs migration in order to flourish, we will continue to need more housing. If we can’t keep building more accommodation, we will either see prices go up again or rental prices rise.
Is it the right time to be investing?
Everyone’s situation is different. Whether or not it is the right time to invest depends on the financial position and goals of the buyer.
Most people become overwhelmed at the idea of investing. They end up spending more time and energy watching sport or following celebrity gossip than they do on their own financial future.
If you can spend as much time devising a strategy to financial freedom and taking action on your goals as you do watching Netflix or following Facebook – you will be ahead of everyone else.
Avoiding the naysayers.
If Nathan had listened to all those people who told him he would go bust through investing, he would not be in the position he is in today. Instead, he educated himself and came up with a plan that he took action on.
He says the system is designed around those who are too scared to take action. The system thrives because we are all enslaved to it. If we all broke out of our cages and lived for our passions and not our income, the world would be a different place.
What do you need to do?
Knowing what you need to do to get ahead is the first step towards getting there. Do you need to educate yourself, develop a plan, wait or take action?
Unfortunately, most people don’t even figure out what they need to do let alone get started on doing it.
Nathan says the wealthiest place in the world is the cemetery because so many people take their dreams and aspirations to the grave with them.
So, what is your goal in life?
If you’re not sure, then think about it this way – what would you be doing if you didn’t have to work?
If money wasn’t an issue, how would you be living your life?
Think of anything? The next step is to figure out how you will get to this point…
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What would you be doing if money wasn’t an issue? Please share your experiences in the comments section below.