Kuta Beach

Kuta Beach

Sunday, 6 July 2008

Buying the Wrong House

Many people believe that property is safe because it is less volatile than the share market. In a thread called Shares vs Property at the Big Footy forums, someone said the following:

It's quite simple:

100% of the share market react to trends. Meaning when there's a crash, a large percentage of share holders react (ie sell up). This causes bigger crashes.

Conversely, 70% of the property market do not sell/react when the housing market downturns.

This means the property market is more stable.

However, in the news today there is an article called Dream Home Becomes a Nightmare, which is about a family that purchased a house and rented it to others. The renters turned out to be murderers who let a little girl starve to death, and now nobody wants to buy or rent the house. Effectively the house is worth nothing. This story illustrates the risks of property investments.

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