House prices to stagnate for 'years'

Smurf1976 · 5 February 2007

robots said:
hello,

prices are still strong,

16mths for this thread, no crash no correction any idiot can see that

but hey the governments of the world are doing naughty things to help property owners, crap

thankyou
robots

Certainly in Sydney, Melbourne and Hobart house prices have ALREADY crashed heavily when measured against practically anything other than fiat currency.

Down compared to stocks
Down compared to oil
Down compared to gold
Down compared to zinc
Down compared to practically anything that isn't either fiat currency or comes with a remote control. :2twocents

Kauri · 5 February 2007

As my old father used to say... Son,their not making land anymore..

Ken · 5 February 2007

melbourne house prices crashed????

they still expensive to me.....

Realist · 5 February 2007

Kauri said:
As my old father used to say... Son,their not making land anymore..

Hmm, pretty silly logic.

The fact is we're not making people anymore either. The average number of kids for 2 parents is about 1.9.

Only immigration keeps Australia's population slowly rising.

Also younger people are much more likely to want to live in an apartment. Even if it is 10 stories up.

So we are building up not out.

Land in Australia is not at a premium, it is the emptiest country in the world. There's room for us each to have about 4 square kilometres - but no one wants it, most want to live cramped up near a city centre 3 levels up sharing with others.

Ken · 5 February 2007

i heard on the radio that housing in melbourne is among the most unaffordable in the world, compared to the average wage.

House prices have doubled and trippled over the past 10 years, will this have an effect down the line?

Those who have missed the housing boom, will not be able to afford inner city houses, even at present when they are in high demand.

Majority who home owners in inner city houses I would say are elderly, who have lived in homes for 50+ years. In the next 20 years, more of these inner city homes come on the market due to elderly passing away, wouldnt that cause a increased supply, and a drop in prices....

or will investors snap these houses up.

Kauri · 5 February 2007

Realist said:
Hmm, pretty silly logic.

The fact is we're not making people anymore either. The average number of kids for 2 parents is about 1.9.

Only immigration keeps Australia's population slowly rising.

Also younger people are much more likely to want to live in an apartment. Even if it is 10 stories up.

So we are building up not out.

Land in Australia is not at a premium, it is the emptiest country in the world. There's room for us each to have about 4 square kilometres - but no one wants it, most want to live cramped up near a city centre 3 levels up sharing with others.

I stand corrected...

The fact is we're not making people anymore either. The average number of kids for 2 parents is about 1.9.
Only immigration keeps Australia's population slowly rising.

Does it matter where the growth is coming from??

Also younger people are much more likely to want to live in an apartment. Even if it is 10 stories up.

Amazing, most people I know want houses, they settle for multi-level hi-density near communal living because it is all they can afford.

Land in Australia is not at a premium, it is the emptiest country in the world. There's room for us each to have about 4 square kilometres - but no one wants it, most want to live cramped up near a city centre 3 levels up sharing with others

Land isn't, serviced land with infrastructure is. Do you want to claim your 4 squares out in the Gibson Desert???

robots · 5 February 2007

hello,

why wouldnt Melb or Syd or Perth or Brisbane be the most unaffordable in the world

look at the country we live in , superb, far better than US (watch Cops tonight), europe or asia

when was the last property crash in AUS? because I have held property since 1986 and don't recall any issue

thankyou

robots

Realist · 5 February 2007

Kauri said:
Amazing, most people I know want houses, they settle for multi-level hi-density near communal living because it is all they can afford.

In WA yes, not in NSW and Vic where the majority of the population is though. In NSW young people accept and enjoy apartment living, you don't have the traffic issues we do. And the proximity to work and nightlife etc. makes apartments the best option. Price is also a huge factor I agree.

WA has had a ridiculous boom, and based on population and logic is now tremendously overpriced. I'm not surprised young people can not afford houses. I doubt they can even afford apartments.

chops_a_must · 5 February 2007

Realist said:
In WA yes

In WA you don't get a choice. Lol! Most of my friends would love to live in inner city apartments, but there aren't any. And the ones that do exist, are ridiculously expensive.

Smurf1976 · 5 February 2007

robots said:
hello,

why wouldnt Melb or Syd or Perth or Brisbane be the most unaffordable in the world

look at the country we live in , superb, far better than US (watch Cops tonight), europe or asia

when was the last property crash in AUS? because I have held property since 1986 and don't recall any issue

thankyou

robots

What has changed so much in the past 6 years? Why were Melbourne etc relatively cheap only 6 years ago? Has the rest of the world really become such a bad place in such a short time?

As for crashes, it's all relative since in the modern financial system there is no fixed measure of absolute value. Houses in Sydney etc have fallen pretty hard compared to lots of other physical things in recent times. But since cash has also lost a lot of value in that time, there hasn't been much of a fall in house prices relative to cash. It's all relative...

There is also the issue of timing where it is foolish to look only at the recent past. I'll use a weather example to make the point.

6 months ago the average daily maximum temperature in Hobart was around 12 degrees. Now it is around 22 degrees. Extrapolating that trend, we can confidently predict an average of 32 for July this year and 42 by this time next year. In January 2020 the average maximum temperature in Hobart will be over 160 degrees and the Derwent River will be literally boiling.

The ridiculous example above shows what happens when you only look at part of the cycle. Those with a bit more knowledge of the weather would say that we're at or near the peak of the seasonal temperature cycle and June 2007 isn't likely to be that much different to 12 months earlier. It goes up AND DOWN. Just like asset valuations (valuations as distinct from prices).

At some point average houses are near certain IMO to be back down around 3 - 4 times average earnings. The question is how we get there - house price crash versus wages explosion (or a combination of both) - how long it takes and what the broader economic and social consequences are.

Personally, I see the implosion of US sub-prime lenders at the rate of one every three days over the past two months as a sign of a looming credit crunch. Investors just won't buy the risky housing debt anymore thus undermining a key support for house prices. Financial happenings in the US have a habit of spreading to the rest of the world in due course. http://ml-implode.com/

Ken · 5 February 2007

will houses drop if there is a stock market crash??

Uncle Festivus · 5 February 2007

As for crashes, it's all relative since in the modern financial system there is no fixed measure of absolute value.

Measure of absolute value ..... Gold maybe.... how many ounces of gold did it take to buy a house 6 years ago as compared to today?.

Houses in Sydney etc have fallen pretty hard compared to lots of other physical things in recent times. But since cash has also lost a lot of value in that time, there hasn't been much of a fall in house prices relative to cash. It's all relative...

Looking at it the other way, as a house owner maybe, ie real inflation about 10%, house prices down 10 %, real loss = 20%?. That is, house prices 'to stagnate for years' only to become affordable when wages growth catches up.

I really have trouble when listening to advocates of property pronouncing 'property has gone up triple over the last 10 years. Yes, maybe but so has inflation and all the expenses that go with property, so the real gain is somewhat less.

Personally, I see the implosion of US sub-prime lenders at the rate of one every three days over the past two months as a sign of a looming credit crunch. Investors just won't buy the risky housing debt anymore thus undermining a key support for house prices. Financial happenings in the US have a habit of spreading to the rest of the world in due course.

Spot on there..... the US housing bust is not over yet, nor are the consequences.....

YChromozome · 5 February 2007

Ken said:
will houses drop if there is a stock market crash??

You need to look beyond the stock market to the overall economy. What causes the stock market crash?

Lets say consumers are spending more than they earn and credit growth is at double digit figures. This irrational exuberance is providing demand for goods and services and hence boosting company profits, and underpinning the PE ratio. These companies must employ extra people to meet demand, and the goods must be made from resources etc.

So if people run out of money, stop spending, the economy slows and suddenly the PE ratio doesn't look all that good, and future earnings look bleak, the Stock Market might crash. At the same time, lower earnings means these employers no longer need as many staff, nor as many resources from Australia . . Yes, people need to buy goods from China, so China can continue to grow.

As people become redundant, they can no longer meet mortgage repayments. If people do keep their jobs, many miners might find its no longer necessary to pay above award wages and hence people who brought houses under their depths on above award wages might struggle too.

There is also the 'wealth' effect that applies to houses and the stock market. Typically while people are making lots on money on these assets, consumer confidence is high and people poor this extra money into goods and services. Stock market crashes, people may tighten their belts.

robots · 5 February 2007

hello,

what a load of rubbish measuring it against other items etc

if the house doubles in value in 10years ie 150k to 300k and I have paid mortgage & costs similar to what rent is for that property then I have made 150k

forget inflation, forget real return etc I have 150k in my pocket if liquidate

prices have not crashed in Sydney or Melbourne

thankyou

robots

Uncle Festivus · 5 February 2007

hi robots

Yes you have an extra $150000, but not really.

You've probably paid twice that in interest alone, so how can you be ahead??

In real life we can't dismiss inflation, costs or interest. Over the 10 years you have gone backwards financially, at best break even. Inflation is the reason we don't have or need 1c & 2c coins (and the 5c soon to follow)

Kauri · 5 February 2007

Compared to renting??

Uncle Festivus said:
hi robots

Yes you have an extra $150000, but not really.

You've probably paid twice that in interest alone, so how can you be ahead??

In real life we can't dismiss inflation, costs or interest. Over the 10 years you have gone backwards financially, at best break even. Inflation is the reason we don't have or need 1c & 2c coins (and the 5c soon to follow)

if the house doubles in value in 10years ie 150k to 300k and I have paid mortgage & costs similar to what rent is for that property then I have made 150k

Uncle Festivus · 5 February 2007

Kauri said:
Compared to renting??

Huh? Where or why does rent come into it?

robots · 5 February 2007

Uncle Festivus said:
hi robots

Yes you have an extra $150000, but not really.

You've probably paid twice that in interest alone, so how can you be ahead??

In real life we can't dismiss inflation, costs or interest. Over the 10 years you have gone backwards financially, at best break even. Inflation is the reason we don't have or need 1c & 2c coins (and the 5c soon to follow)

hello,

over a 25yr mortgage the interest would be around that of original loan balance so you're dreaming

thankyou
robots

wayneL · 5 February 2007

Listen folks,

The last seven or eight years (give or take depending on where) has been an excellent time for owners of real estate, no question about that.

The question is, whether current valuations are sustainable. I, and other bears say no. The bulls obviously say yes.

The bears case is well documented and is starting to play out in parts of the US. Signs of it starting to play out in parts of Oz, UK and other places are in place also.

Gu'mints and VI's are desperate to prop the market up and they have been very successful at it up till now. Economies DEPEND on it. They could keep it going a while longer too, but not forever. The depression has been hidden by an explosion of credit and fiat money; we have been living well beyond our means, as individuals, institutions and government.

There will come a time when:

a/ the credit limit has been reached and can no longer be extended

b/ we will have to start paying down the balance

Traditionally, the tactic has been to inflate our way out of it. But this is contingent on wages being able to rise lock-step with inflation. As we have offshored much of our actual production (the true engine of an economy) it will be very difficult to have wage inflation as well.

At the risk of labouring the point, western economies almost totally rely on house price inflation/building. When this reaches it limit, we are in deep doo-doo.

Make hay while the sun shines folks, but no party lasts forever.

Realist · 5 February 2007

robots said:
hello,

what a load of rubbish measuring it against other items etc

if the house doubles in value in 10years ie 150k to 300k and I have paid mortgage & costs similar to what rent is for that property then I have made 150k

forget inflation, forget real return etc I have 150k in my pocket if liquidate

prices have not crashed in Sydney or Melbourne

thankyou

robots

That is far too simplistic to be accurate Robots.

First of all ignoring inflation, rents, and interest rates etc. if you buy a house for $150K and it doubles to $300K, you may very well have an extra $150K in your pocket but what are you going to do with it?

Buy a better house? Well surprise, surprise every house has doubled.

That $250K house you looked at 10 years ago is now $500K and you still can't afford it.

You are no better off at all.

And speaking for Sydney there is no way you can buy for the same price as you rent.

I rent a place worth $650K for $350 a week of which I pay half. I pay no water, rates, body corporate fees, repairs, maintenance, or tax.

Owners are paying highish interest rates, agents fees, stamp duties and all the other expenses.

Capital gains on housing advantage only those who own more than a few houses.

Owning 1 house and house prices going up infact disadvantages you. If you want to move into a bigger house you've got bigger stamp duties, rates, and agents fees on a more expensive house just as a start.

House prices to stagnate for 'years'

Smurf1976

Kauri

E/W Learner

Ken

Realist

Billie Jean is not my lover

Ken

Kauri

E/W Learner

robots

hello

Realist

Billie Jean is not my lover

chops_a_must

Printing My Own Money

Smurf1976

Ken

Uncle Festivus

YChromozome

robots

hello

Uncle Festivus

Kauri

E/W Learner

Uncle Festivus

robots

hello

wayneL

VIVA LA LIBERTAD, CARAJO!

Realist

Billie Jean is not my lover

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