The future of Australian property prices

[notting]

Just out of curiosity, is there an overall consensus here on whether we will have a crash (or whatever you want to call it) or not in the next few years?

I've been expecting it for about 7 years.
I was also thinking the stock market was way over priced when CBA went past $44 for the first time. 10 years later I was finally able to say "Told you so," and buy it back again at $28.00. Unfortunatly I missed something in between.
The financial world really is mental.

 

[kincella]

am afraid the only consensus you will get from your question is the bear mantra....
that the property market will crash,,,and by at least 50%
the majority oin this forum are the bears
the bulls are in the minority.....and seems like we just lost another bull...doubt he would like that description...but since he is not bearish.....
and only the two descriptions apply....one must call him a bull


unless you want to add some more descriptions for those in between...
as in a steer (ie a bull who had his nuts removed, as he is not required for breeding purposes, or not good enough)
bears being wild animals -are not subjected to the removal of their nuts....
so there is no similar, well known term to describe them...as far as I am aware
so should we just say....its a bear with no nuts

all the bears will come out and say ...dont buy...you must be nuts....
but the bulls will show that property has kept rising since 1986, the little slowdown in 2011 with a 1% median drop.....is a pittance

I say interest rates will drop, and we know what that does to housing......
watch the whole thing change from despair to confidence, just as soon as we get rid of the most incompetent govt in our history...
I am betting there will be a huge number of stock investors who will get out of stocks and into housing....after the deliberate fiasco this week.....
unfortunately the olds will have little choice than to move their super into cash,,,,

if you are looking to buy, stay aware from the inner city,with the overpriced dog boxes in there, and go further out into the suburbs,...where there are bigger houses for your money, at half the price....with good capital growth

 

[notting]

No. I believe in property.
When?
Doesn't matter.
I bought and sold two houses in the last 7 years and did very nicely.
Even though I thought the market was overpriced.
Inflation just means more expensive houses, even though interest rates go up and cause temporary stress.
Despite what you hear about the US the good property in good suburbs isn't nearly as bad as what the numbers and press paint.
Good location property wins.
And you can live in it when it's losing!

 

[Dowdy]

Just out of curiosity, is there an overall consensus here on whether we will have a crash (or whatever you want to call it) or not in the next few years?

I said at the start of this year that the market will remain flat for this year and you'll start to see declines next. (check my post history, it's there somewhere)

 

[Starcraftmazter]

am afraid the only consensus you will get from your question is the bear mantra....
that the property market will crash,,,and by at least 50%
the majority oin this forum are the bears
the bulls are in the minority.

Sounds good, I'm firmly predicting a crash myself - just curious as to what the populace of this forum thinks.

 

[medicowallet]

Sounds good, I'm firmly predicting a crash myself - just curious as to what the populace of this forum thinks.

I think that some of us are concerned what is happening in US and europe (read france now too!!)

Some of us seem concerned about hype and what we perceive is happening next door.

I just cannot see where all the money to keep gearing up is going to come from...

 

[cutz]

Sounds good, I'm firmly predicting a crash myself - just curious as to what the populace of this forum thinks.

IMO, no crash, just years if not decades of no growth/maybe negative growth, prices will eventually return to the long term average.

This is my own personal view based on gut feel and word on the street, remember most owners are not investors, those that are may still be in a position to take yearly interest losses in the hope of an eventual cap gain.

 

[satanoperca]

Well if some believe that a rise in unemployment is need to see property prices decrease, here it is, a start;

THE unemployment rate rose to a higher-than-expected 5.1 per cent in July, from 4.9 per cent in June, official data showed.

I would believe this is a lagging factor from a decrease in valuation of RE property across Australia over the last six months.

Cheers

 

[Bill M]

Here we are 4 years after sub prime hit the USA and all the gloomsters came out and said housing was going to crash in Australia, it hasn't happened in Sydney at least. I just raised my rent to $430 p/w for my small 80 sq unit on the Northern Beaches. There are plenty of people trying to rent at these prices so no shortages of tenants. Nothing has changed in the 4 years, there are still mobs of people turn up "open for rental inspection" on Saturday mornings then the agents have to pick and choose who gets the rental. Does this sound like a crash? Prices for units on the Northern Beaches are holding firm and on the Central Coast in my suburb they have dropped about 2 or 3% in the last year. Lots of Sydney Siders are selling the family home and are downsizing moving up this way and pocking the difference in prices, but no boom up here in housing. Things going on as normal.

So as far as house prices are concerned, in the Northern Beaches they are holding firm and I believe with increase rentals and low vacancy rates prices may move up. On the Central Coast prices are slightly declining or at best stagnating, cheers.

 

[medicowallet]

Here we are 4 years after sub prime hit the USA and all the gloomsters came out and said housing was going to crash in Australia, it hasn't happened in Sydney at least. I just raised my rent to $430 p/w for my small 80 sq unit on the Northern Beaches. There are plenty of people trying to rent at these prices so no shortages of tenants. Nothing has changed in the 4 years, there are still mobs of people turn up "open for rental inspection" on Saturday mornings then the agents have to pick and choose who gets the rental. Does this sound like a crash? Prices for units on the Northern Beaches are holding firm and on the Central Coast in my suburb they have dropped about 2 or 3% in the last year. Lots of Sydney Siders are selling the family home and are downsizing moving up this way and pocking the difference in prices, but no boom up here in housing. Things going on as normal.

So as far as house prices are concerned, in the Northern Beaches they are holding firm and I believe with increase rentals and low vacancy rates prices may move up. On the Central Coast prices are slightly declining or at best stagnating, cheers.

How long do you think investors will hold onto properties if the outlook is zero growth (ie negative return)..

Stagnation for 5-10 years is a massive pullback in real terms, just like the shares I purchased at $20 6 years ago, which are $20 now have made a capital loss in real terms.

Sure, most housing investors do not understand this (nor do they factor in replacement costs/maintenance/RE fees/stamp duty/accountant fees etc), but the smart ones do, and it is to them we should look, and I know a few who, having purchased relatively recently, are limiting their exposure.

 

[Bill M]

Sure, most housing investors do not understand this (nor do they factor in replacement costs/maintenance/RE fees/stamp duty/accountant fees etc), but the smart ones do, and it is to them we should look, and I know a few who, having purchased relatively recently, are limiting their exposure.

I am not most investors then. I have been doing this since the late 70's. Things have changed for the better now though and I have changed with the times. My accountant told me that I should get a Quantity Surveyor in to assess my unit. They provided a comprehensive depreciation schedule which will be used for my ATO tax return. As the unit is new I will get an $8,000 depreciation deduction for the last financial year. I also raised the rent in the mean time. Any refunds from the ATO will be put aside for refurbishment. At this present moment in time my investment property is the safest and easiest investment I have, I won't be selling it anytime soon, cheers.

 

[medicowallet]

I am not most investors then. I have been doing this since the late 70's. Things have changed for the better now though and I have changed with the times. My accountant told me that I should get a Quantity Surveyor in to assess my unit. They provided a comprehensive depreciation schedule which will be used for my ATO tax return. As the unit is new I will get an $8,000 depreciation deduction for the last financial year. I also raised the rent in the mean time. Any refunds from the ATO will be put aside for refurbishment. At this present moment in time my investment property is the safest and easiest investment I have, I won't be selling it anytime soon, cheers.

Sure, as long as there is capital growth to make up the shortfall between the tax benefit you get from the depreciation and the actual depreciation of the asset. This is what is questioned, not the fact that you can claim it on your tax.


On a lighter note,

The birds are singing, and the streets are quiet.

A soft rustle of for sale signs moving in the wind permeates my cold house. I have gotten to know each sound personally, as the signs have been there for some time.

Unfortunately for me, my peace and quiet was interrupted by door knockers, I am not sure who it was, but I think Enzo was door knocking earlier, he looked desperate, and was dressed in a black suit and drove into the street in a lexus.

I just smiled, took a sip of my tea, and pondered doing some gardening. I am not much of a gardener, but I like to get my hands dirty. I looked over at my neighbours, who, in their 2010's Mcmansion were having a cafe late. They were on their patio, french doors open, heat pump warming the neighbourhood. Their gardener started early, and their cavoodle was being washed by the hydrodog man. I sure hope that they were watching what is happening in the world at the moment on their 42 inch plasma on their patio...

I look down at my garden, and remember the scrawny carrots it produced last time, I don't know why I bother. I prefer my neighbours garden, their gardener does a great job, I give up... Perhaps I would be better off just offering them 25% less than they paid for their house, they will probably take it, I mean a painter and a checkout operator in a $750000+ house in the suburbs, will be in for a bit of a shock if the govt does not pump up the building industry again...

I am patient... nah I think I will stay in my place. There are better investments than a Mcmansion at some pathetic return on investment, ah return on investment, I remember when it used to matter.


Sunshine and lollipops

I am looking forward to the tainted clearance rates today,

MW

 

[singlefished]

How long do you think investors will hold onto properties if the outlook is zero growth (ie negative return)..

Stagnation for 5-10 years is a massive pullback in real terms, just like the shares I purchased at $20 6 years ago, which are $20 now have made a capital loss in real terms.

Sure, most housing investors do not understand this (nor do they factor in replacement costs/maintenance/RE fees/stamp duty/accountant fees etc), but the smart ones do, and it is to them we should look, and I know a few who, having purchased relatively recently, are limiting their exposure.

http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=nsw&u=manly

Looks like they're already used to the 10 years of capital stagnation scenario in Manly at least...

Check out the capital growth for units over the last 10 years:

2002 median - $570K
June 2011 median $520K

Sounds like rents are increasing so a median $600pw for a 2 bed unit may now cover about 2/3 of the monthly $3614 repayments on an assumed $500K mortgage taken out 10 years ago (guessing with an average interest of 7.25% over the last 10 years...)

median rent - http://www.housing.nsw.gov.au/About+Us/Reports+Plans+and+Papers/Rent+and+Sales+Reports/Latest+Issue/

 

[Aussiejeff]

Wonder how this will pan out?

A NEW green scheme threatens to wipe tens of thousands of dollars from the market price of energy-guzzling old homes and McMansions.

The Federal Government aims to introduce mandatory energy star ratings for homes being sold or rented out as soon as next year.

http://www.heraldsun.com.au/news/mo...s-and-mcmansions/story-fn7x8me2-1226114121243

Yes, yes, yes, it is all a bit of a media beat-up as usual, but in reality, will the energy ratings competition really force some home values to drop significantly under the scheme?

What next? A landlord rating scheme where tenants get to rate their landlords on a scale 0-10, where 0=Total Bastard and 10=Living God??

 

[banco]

Wonder how this will pan out?

http://www.heraldsun.com.au/news/mo...s-and-mcmansions/story-fn7x8me2-1226114121243

Yes, yes, yes, it is all a bit of a media beat-up as usual, but in reality, will the energy ratings competition really force some home values to drop significantly under the scheme?

What next? A landlord rating scheme where tenants get to rate their landlords on a scale 0-10, where 0=Total Bastard and 10=Living God??

I think they've had them in the ACT for some time. It's pretty obvious what a house's rating is anyway. You don't need a rating to know that a large, older house is going to cost more to heat than a smaller house.

 

[medicowallet]

This weekend the clearance rate is 56 per cent compared to 54 per cent last weekend and 67 per cent this time last year.

Those looking to sell their home over spring will be hoping that speculation of an interest rate cut last week becomes a reality as it would boost buyer confidence just at the right time.

There was a total of 408 auctions reported this weekend, of which 229 sold and 179 were passed in, 117 of those on a vendors bid.

Next weekend the REIV expects around 490 auctions.

Enzo Raimondo
CEO REIV



--------------------------------------------------------------------------------

I note the 400 auctions reported is a wee bit short of the 500 predicted. I can only wonder why last year had 681 auctions reported and apparently there are 40% more houses listed for sale this year.

Obviously real estate agents are taking it easy this year, doing around 60% of the work of last year with 40% more listings.

I can assume that over the next few months, reported auctions will have to drop to 300 to maintain around 60% clearance... unless juliar decides to give tradies a welcome boost to their bulging bottom lines.

 

[moXJO]

Lots of people at the open houses today in my local area. I was very surprised (all must have decided the stock market isn’t worth the risk after this week). Shops were all full during the day, as well as restaurants across 5 suburbs I drove through tonight. Actually found a house I am interested in today but I bet some sneaky bugger beats me to the punch while I do the figures.
Bounce coming? I hope not

 

[greebly24]

I don't think there will be an interest rate cut. Inflation is simply too high. Aust CPI was around 3.5%, which is half a percent above the RBA's target band of 2-3%.

But real inflation, in things you actually need like food and gas and electricity, is actually way higher. Not to mention govt charges/fees/levies etc.

The way the CPI is calculated is based on a basket, can be misleading as it includes both things you need & things you'd like.

"The total basket is divided into a number of major commodity groups, subgroups and expenditure classes. It covers items such as food, alcohol and tobacco, clothing and footwear, housing, household contents and services, health, transportation, communication, recreation, education and financial and insurance services."

Food, electricity, gas, water, transportation and healthcare are going up. But things like clothing, footwear and even TVs (household contents) are dropping as struggling retailers drop prices or people shop online instead. So food prices could double and TV prices halve, and there would be no CPI change.

But really, global money printing & currency devaluation is pushing up global inflation.

So I don't think the RBA will lower rates. Combine that with the extra pressure families are feeling from their grocery and energy bills, and as a result now have less money to spend on servicing their mortgages and that won't be positive for house prices which will continue stagnating for a few years yet IMHO.

 

[greebly24]

There seems to be a lot of arguments on shares v property on this thread. Arguments about the relevant superiority of asset classes are fairly pointless. Both have booms & busts & varying yields, just like all investments. I think the main things to keep in mind are your risk tolerance, your level of financial education and your trading frequency.

If you're a "set-and-forget" type, then you're probably better off in property. They call mortgages "forced savings for dumb people". You're forced to put money into something every month and it'll make money over the long term. But so would a savings account.

If you're an educated active trader, and can handle a bit of risk, then you're probably better off in shares. Buy on dips and sell on peaks. Or learn how to short-sell. You can make money when shares go up, or down, if you educate yourself a bit. Then a share crash becomes just another money-making opportunity.

Or in a booming housing market you can mix the two, and trade properties. "Flippers" made great money on property during the boom. Mate bought Gold Coast property on-line and sold six months later for $50k net profit. Besides a photo, he never even saw it.

But you don't really hear about "flippers" anymore. Not sure why?

While the property bubble here hasn't burst, sounds like its deflating now. Got mates offering cash bids with 3-month windows on properties at 20% discounts to advertised price. Amazing how keen RE agents are (esp. on properties on market for 6 months+), despite stubborn/romantic vendors still holding out.

Guess that pretty much sums up Aust property market at the mo.

 

[Wysiwyg]

But really, global money printing & currency devaluation is pushing up global inflation.

So I don't think the RBA will lower rates. Combine that with the extra pressure families are feeling from their grocery and energy bills, and as a result now have less money to spend on servicing their mortgages and that won't be positive for house prices which will continue stagnating for a few years yet IMHO.

Do Australian banks borrow funds from overseas at presently very low % rates and sell loans to Australians at a higher % rate average set by the Reserve Bank while pocketing the margin?