The future of Australian property prices

[explod]

Back to the thread. What do forumites think will happen to property prices with today's decrease in interest rates? At this stage only the Bank of Queensland have lowered their rates by the full .25%. It'll be interesting to see whether the other banks will follow suit.

Too late in my view, general community productivity is on the slide and though it may be a bit of a relief to some the pain will continue.

We will see.

 

[Aussiejeff]

Back to the thread. What do forumites think will happen to property prices with today's decrease in interest rates? At this stage only the Bank of Queensland have lowered their rates by the full .25%. It'll be interesting to see whether the other banks will follow suit.

IMO prices will continue to slide along with rates. Like the UK & US et all.

There is NO housing shortage. That is a myth perpetrated by gummint & housing industry gallahs. Thousands of EXTRA houses are listed for sale each week. The pile of unsold properties is steadily growing. Time to sell is growing. Check here and get a feel for how long properties are waiting to sell and how much they are beginning to discount the asking price http://www.refindhouseprices.com/

However, there IS a chronic and growing shortage of AFFORDABLE housing. While that remains the case, downward pressure should continue ad-infinitum for those resellers trying to achieve big profits out of their property "investments".

IMHO.

Good luck....

 

[young-gun]

Too late in my view, general community productivity is on the slide and though it may be a bit of a relief to some the pain will continue.

We will see.

+1, if we have learnt anything from the US its that cutting interest rates to virtually nothing wont even stop prices from falling. we're in a huge demographic shift that cannot be stopped. on a side note explod even if rates were cut 6 months ago i still think we would be in a very similar position to where we are now.

agree with you also jeff, the media, banks and government are doing their best to pull the wool over the poor families and couples that dont know any better. i truly feel for people who have recently gone out on a limb to buy their first family home.

 

[Miss Hale]

Well after all the expectation it appears the major banks are not going to pass this on afterall. This might be worse for the property market (in terms of confidence) than not having a rate cut at all.

 

[Aussiejeff]

Well after all the expectation it appears the major banks are not going to pass this on afterall. This might be worse for the property market (in terms of confidence) than not having a rate cut at all.

US Fed loan rate to banks = 0% - 0.25%
US 30 year mortgage = 3.75% (ave)

So, the margin for banks borrowing Fed money to on-lend to home buyers = 3.5% - 3.75% (approx.)


AUS RBA loan rate to banks = 4.25%
AUS Standard Variable Rate = 7.8% (ave)

So, the margin for banks borrowing RBA money to on-lend to home buyers = 3.55% (approx.)

In other words, even with the latest drop in RBA loan cost to them,our banks are still running tighter margins than most US mortgage lenders! If they drop in tandem with the RBA, (to 3.3% margin), that doesn't improve their margin and maintains them well under the going margin rate in the US.

Also, if they agree to lower their rates now, it might encourage the RBA to move again quickly. What about in the New Year the RBA drops another .5%?

Fun 'n games a'comin', metinks.

 

[McLovin]

US Fed loan rate to banks = 0% - 0.25%
US 30 year mortgage = 3.75% (ave)

So, the margin for banks borrowing Fed money to on-lend to home buyers = 3.5% - 3.75% (approx.)


AUS RBA loan rate to banks = 4.25%
AUS Standard Variable Rate = 7.8% (ave)

So, the margin for banks borrowing RBA money to on-lend to home buyers = 3.55% (approx.)

In other words, even with the latest drop in RBA loan cost to them,our banks are still running tighter margins than most US mortgage lenders! If they drop in tandem with the RBA, (to 3.3% margin), that doesn't improve their margin and maintains them well under the going margin rate in the US.

Also, if they agree to lower their rates now, it might encourage the RBA to move again quickly. What about in the New Year the RBA drops another .5%?

Fun 'n games a'comin', metinks.

Most mortgages in the US are fixed for the entire term, unlike Australia. Most banks in the US are not borrowing in the cash market, or the Fed window, to lend fixed at 30 years (duration matching, liquidity and interest rate risk could become a serious issue). The whole point of Operation Twist was to try and flatten the yield curve so that banks could access cheaper 10/20/30 year finance. In the US currently, AAA rated 10 year corporate bonds are yielding ~2.5%, 20 year bonds are yielding ~4.4%.

 

[kincella]

amazing response from gen y,x debate

apparently the bears views on this forum is not in line with the rest of the community....

I know, its a very small community here....like a union org...or a closed shop
so the same old, same old..is trotted out.... bears do the chest thumping....
houses are too expensive...so just wait until the prices crash...as in Japan in the
1980's, or the US, Iceland, Ireland etc etc etc...

and steve keen is the guru.....he predicted the 40% price crash...and to prove it , he sold his house/unit....(which has possibly increased in value by 25% since that date)

how long are you prepared to wait....10 years or more ?

I bet those bears who are in a serious relationship, are at risk, if the little woman is planning on nesting....because she will not nest, unless there is definate plan to buy the nest egg...
and she will only wait so long...it is not an open ended contract

some of the angst we all see, stems from the 'gung ho' types, who believed the steve keens of this world, and sold the family home, and placed their families in rentals....

some families have been split by this action....and the prospect of buying back cheaper in the same neighbourhood....has evaporated.....hence the angst
..............but look at this....

spotted an article , on the news site,
(which I believe is aimed at the young viewers, with all the crap about celebs, fashion and requires only a 2 minute concentration span)

hosted by a very young woman, discussing the pro's and con's of renting versus buying...
so I read it....it was actually a good balanced article... regardless of my attitude...it really is a good article...covers all the basics....and the responses are really informative...for those seeking information, outside of the industry gurus
(amazing, considering the source)

but then when I looked at the 100 responses, I expected to see the same comments we get from the bears on this site....
you know...yadda yadda yadda....renting is best, houses too expensive, the young need to travel and invest their money in stocks....

but the responses are amazing...all these young people, who have purchased a house, and are happy.....
?????? who would have thought.....

it is certainly a change from responses I have seen on the same web site in the past....
wow....there is definately a shift in sentiment from the younger generation....where on earth did it come from...
was it the reality of the GFC that hit home...?

http://blogs.news.com.au/moneystuff/index.php/news/comments/property_do_you_prefer_to_rent_or_buy/

ps...look outside the square you live in...
or picture yourself, in other's shoes....situations....

most of you would aspire to become a Warren Buffet.....but he owns real estate.....
he recognised the asset of providing a stable home for his family....and most, if not all the wealthiest people in the world, actually own their own homes....there is an intrisic value there....and it is not the monetary value...that the bears ascribe to...
it is a far greater value....it has no price

 

[explod]

amazing response from gen y,x debate

apparently the bears views on this forum is not in line with the rest of the community....

Yep, lambs to the slaughter in my view.

 

[young-gun]

amazing response from gen y,x debate

but then when I looked at the 100 responses, I expected to see the same comments we get from the bears on this site....
you know...yadda yadda yadda....renting is best, houses too expensive, the young need to travel and invest their money in stocks....

but the responses are amazing...all these young people, who have purchased a house, and are happy.....
?????? who would have thought.....

i dont even need to read the article as i guarantee there will be no arguments for or against that i havent already read or developed myself.

you have managed to find 100 people that wont be happy shortly. everyone(apart from the 'few bears') in every nation on earth has been bullish on property to the day that it crashes. i am still amazed that people honestly believe australia is different.

history is your friend kincella, but hey dont let me stop you from buying.

 

[Garpal Gumnut]

re Inevitable increases in property prices.

Tell that to Emmanuel Cassimatis.

His pad in Townsville has dropped from $3.8 to $1.1754 in two years.

And that is on sold data, not dodgy projections.

gg

 

[Dowdy]

amazing response from gen y,x debate

apparently the bears views on this forum is not in line with the rest of the community....

Really, are you sure? or you like to wrap yourself into your own little bubble, oblivious to your surroundings

and steve keen is the guru.....he predicted the 40% price crash...and to prove it , he sold his house/unit....(which has possibly increased in value by 25% since that date)

I think you use Keen in your comments more then anyone else in here...

....sold the family home, and placed their families in rentals....

some families have been split by this action....and the prospect of buying back cheaper in the same neighbourhood....has evaporated.....hence the angst
..............but look at this....

Where is the evidence for this crap you're peddling

most of you would aspire to become a Warren Buffet.....but he owns real estate.....
he recognised the asset of providing a stable home for his family....and most, if not all the wealthiest people in the world, actually own their own homes....there is an intrisic value there....and it is not the monetary value...that the bears ascribe to...
it is a far greater value....it has no price

Very touching, put a tear to my eye

 

[medicowallet]

Yep, lambs to the slaughter in my view.

Until you actually experience a financial disaster, you cannot properly risk manage or assess yourself.

ie the young ones who lost in the sharemarket imo will be much better investors from now on.. property investors, many of whom have no experience of the last time property was doing it tough, will be better after the inevitable correction.


The over confidence is akin to army recruits, and the bravado before ever having a bullet fired at them (not that I have), but through discussions with my father and grandfather, and commanding officers who have seen active combat, the value they place on "experience" is amazing.

 

[medicowallet]

Swann is looking weaker by the day... kind of like the housing market prospects.

 

[Mr Z]

re Inevitable increases in property prices.

Tell that to Emmanuel Cassimatis.

His pad in Townsville has dropped from $3.8 to $1.1754 in two years.

And that is on sold data, not dodgy projections.

gg

I bet you go to church just to cuss

BLASPHEME!!!!!!

Get thee behind me Lucifer.

 

[satanoperca]

how long are you prepared to wait....10 years or more ?

Not that long.

Nationally RE down -4.0%
Melbourne down -5.4%
and look at that build up of upsold properties on the market.

Cheers

 

[TMC93]

I live in Mackay and i am thinking about buying my first home. I saw an add in the paper offering House & Land packages for $158,000 in a good area. Only catch is that i have to rent the house back at cheaper rates (~$300) than what is the normal(~$450-500). I don't plan on living in it as i am going to uni in Brisbane but for me personally i see more potential growth in Mackay than in Brisbane. I still need to do a lot more research but it would be a great deal especially with the Governments new housing grant. Has anyone done the same thing for an investment home?

PS: those rental prices above i just plucked from thin air so don't quote me

 

[Mr Z]

Keep in mind that it only takes a -50% correction to wipe out a +100% gain.

 

[Agentm]

banks are of the view that cash aint gunna be any cheaper, so they wont lower rates, one may try b4 christmas as a PR stunt imho..



with banks seeing things bleakly, talking up hugely on all interviews that the fact the rates they have to chase are higher than it was last time, they are giving up on australia and giving up on the housing sector big time, forget record profits, they see the bubble bursting and have signalled they are not in it any more for the fun ride, its time to turn their collective backs on the housing sector, offer no relief and disregard the RBA..

kincella

keen was a minority of 1, but he at least has the balls to say it as it is. the bubble was spirited along by many planned economic measures and events, as you well know, and only now that it has peaked it cannot increase anymore, so what speed it falls at is entirely up local and global factors.

 

[Mr Z]

with banks seeing things bleakly, talking up hugely on all interviews that the fact the rates they have to chase are higher than it was last time, they are giving up on australia and giving up on the housing sector big time, forget record profits, they see the bubble bursting and have signalled they are not in it any more for the fun ride, its time to turn their collective backs on the housing sector, offer no relief and disregard the RBA..

Can they actually do that an survive? I doubt it, I think they need a controlled descent and soft landing at the worst so in essence surely they will have to support a fight against any rapid move in property prices.

 

[robz7777]

i truly feel for people who have recently gone out on a limb to buy their first family home.

For the most part I would imagine that most first home buyers will have purchased in the low-mid price bracket for their area and have the added 'buffer' of the FHOG before eating into their profit/loss should they be forced to sell..

Question: When prices fall is it the top end and low end that fall the hardest??

I would be more concerned for investors leveraged to the eyeballs into residential or commercial properties they were sold by spruikers with vested interests.. While the market is moving sideways (or down) those negatively geared are burning money..
I know of a couple who purchased a commercial property with a 2 year rent guarantee, after 3 years they have never had a tennant and are down nearly 50%..