The future of Australian property prices

[young-gun]

No it's actually quite easy;

1. Aussie property is the biggest property bubble in the world.
2. This bubble has now lived it's course with the global credit bubble bursting.
3. The government will try this and that to prop it up - but in the end it will fail, and whatever pauses the government will manage to engineer will be nothing but a blip on a longer term (say 10 year) outlook.

No government is powerful enough to overcome market forces - this is not possible.

Therefore, house prices will continue fall. And they will accelerate in falls as negatively geared speculators and the newly retired pull out.

Demographics drive long-term boom and bust cycle - they have since the dawn of time. This is no magic and it is definitely, 100% predictable.

+1

when are people going to wake up and see demographic for what they are(which is everything). the debt bubble is jsut the beginning. builders, developers see a boom period and think for some reason that it's just going to keep on accelerating. the boomers have had their time. there isnt another generation the size of the boomers(or bigger) to come through and sustain their spending habbits.

so an entire generation stops upsizing renovating etc, but a whole industry keeps building in the belief that the demand will be there, simply because it has been the past 10-15 years. it isn't, and won't be there again until gen y comes through and they begin their typical spending habits.

 

[Glen48]

klogg
You want to hope your are right 30-50% drop would be nice but it will go lower than that.. once USA prices stop tanking we will have an idea where oZ prices will end..
We didn't have a housing boom, house prices most like only rose about in line with inflation.
We did and still have a credit boom just like some kid who finds a wallet full of $100's and goes on a spree and shouts his mates then the cops get him and he has to pay it back out of his paper run money only people don't buy papers as they are trying to save money for food.

 

[medicowallet]

Have signed a contract at the start of this week to purchase a PPOR (our first home).

Were not worried. LVR is 75%.

The current principal and interest repayment is going to be about 400ish a week (pretty much the same price as rent).

If one of us is out of work, we will still be able to make repayments.

Were almost smack bang between brisbane and the gold coast, only about 25km to brisbane cbd and similar to gold coast cbd. Short walk to trains and new shops and backs onto a large park ! house is a simple but neat and tidy 3b brick and tile home thats only 12yr old, on a decent 700sq block.

I think people are overhyping the 'omg itz a mega housing bubble' thing a bit much ...

We are just to avg wage people - im 24 my partner is 22 and have a combined income of just 100k, and we can quite capably afford this property ...

so ... err .. take that doomsayers.

The only thing im dissapointed about is ive sold all my stock ! Now just going to concentrate solely on smashing this non tax deductible mortgage.

1. where you have purchased has already tanked a lot, and it is not representative of Australian housing at the moment

2. Where you have purchased is bogan-ville.

3. You have probably made an ok purchase that may not drop, only because of 1 and 2.

Good luck keeping your household items safe, also I hope you can still get the same colour fence paint to cover the graffiti

 

[Mrmagoo]

1. where you have purchased has already tanked a lot, and it is not representative of Australian housing at the moment

2. Where you have purchased is bogan-ville.

3. You have probably made an ok purchase that may not drop, only because of 1 and 2.

Good luck keeping your household items safe, also I hope you can still get the same colour fence paint to cover the graffiti

Seriously ? I thought all houses were a good investment ! Bogan ville is just buying what you can afford ? Isn't it ! OMG HAVE I BEEN LIED TO !

 

[McLovin]

builders, developers see a boom period and think for some reason that it's just going to keep on accelerating.

On builders and developers, they all seem to be falling off their perch at the moment. Kell & Rigby, now Reed and I was told by someone this afternoon that another large builder is on teetering on the edge.

The question then becomes is this the inevitable shakeout and reset occuring or just the beginning.

 

[Klogg]

1. If unemployment rises, immigration will slow.
2. If unemployment rises, rents will fall in line with decreased income, which could be significant.
3. If unemployment rises, young people move back home / families move in with each other / share houses become more prevalent.


Still think housing only will go to 20% fall from peak.. how long? who knows, but it must not be picking up (last 2 months reported today = flat) as Robots is still silent (read: working)

MW
PS Where is Robots.

20% seems viable. In real terms, they've already dropped about 10%, so it's just another year the same as the last...

 

[ROE]

Have signed a contract at the start of this week to purchase a PPOR (our first home).

Were not worried. LVR is 75%.

The current principal and interest repayment is going to be about 400ish a week (pretty much the same price as rent).

If one of us is out of work, we will still be able to make repayments.

Were almost smack bang between brisbane and the gold coast, only about 25km to brisbane cbd and similar to gold coast cbd. Short walk to trains and new shops and backs onto a large park ! house is a simple but neat and tidy 3b brick and tile home thats only 12yr old, on a decent 700sq block.

I think people are overhyping the 'omg itz a mega housing bubble' thing a bit much ...

We are just to avg wage people - im 24 my partner is 22 and have a combined income of just 100k, and we can quite capably afford this property ...

so ... err .. take that doomsayers.

The only thing im dissapointed about is ive sold all my stock ! Now just going to concentrate solely on smashing this non tax deductible mortgage.

good stuff, you doing something rather than scare into doing nothing..
in 7 years your rent would have exceed your repayment on mortgage and in 14-15 year hopefully you live rent free for the rest of your life....the doom day predictor still be around and they predict some more doom stuff

Bogan-ville or what ever people label them are just relative, I used to live around government flats with majority of people probably unemployed but I was once never feel unsafe or got broke in....

you live well, you do no harm to anyone and no harm shall come to you

 

[ROE]

soon you guys can bet where the market going make sure you got your timing right
a 4 years wrong bet probably cost you a bit of money

http://www.rpdata.com/research/daily_indices.html

 

[young-gun]

On builders and developers, they all seem to be falling off their perch at the moment. Kell & Rigby, now Reed and I was told by someone this afternoon that another large builder is on teetering on the edge.

The question then becomes is this the inevitable shakeout and reset occuring or just the beginning.

indeed...and just the beginning imo. industries that take off with booms will inevitably crash. or have a sharp 'correction'. mining included. it took 40 years for prices to get here, most gains made in the last 10-15(easy credit, debt bubble etc). it will take alot longer than 12-18 months of small price drops to fix it. especially with government meddling.

 

[RandR]

1. where you have purchased has already tanked a lot, and it is not representative of Australian housing at the moment

2. Where you have purchased is bogan-ville.

3. You have probably made an ok purchase that may not drop, only because of 1 and 2.

Good luck keeping your household items safe, also I hope you can still get the same colour fence paint to cover the graffiti

LOL ... assume much ?

How did you know everyone in our street to be is either a petty thief or a graffiti vandal ?

 

[medicowallet]

LOL ... assume much ?

How did you know everyone in our street to be is either a petty thief or a graffiti vandal ?

Because you live half way between brisbane and the gold coast, where an awful lot reside..

That is, unless you are a petty thief and graffiti vandal, but if that is the case, you would be better off going somewhere nicer, slim pickings where you are now.

 

[Julia]

I understand that rents would fall slightly, but with rental vacancies around the 3% mark and immigration in Australia still fairly strong, I don't see how:

- Rents would drop significantly;

Which is it Klogg? First you say 'rents would fall slightly' and then you say 'rents would drop significantly'.

Have signed a contract at the start of this week to purchase a PPOR (our first home).

Good for you RandR. It's a great start and you have the sense to get into your own home where you've worked out you can still afford it if one of you loses your job.
Makes so much more sense than taking on ridiculous levels of debt because you want the ultimate in the first home. You'll have plenty of opportunity to move up on your own terms.

On builders and developers, they all seem to be falling off their perch at the moment. Kell & Rigby, now Reed and I was told by someone this afternoon that another large builder is on teetering on the edge.

Similar situation here. I've been looking at building in a development in a great position where sales have stalled in the last year. One of the builders associated with it is this area's top builder. When I went to see him he was engaged in the less than challenging task of completing reports for a resort (which he had nothing to do with building) with respect to various faults on which they wanted a independent opinion.
If I'd wanted him to start a house for me tomorrow, he could do that. Has nothing else happening right now.

 

[Gerkin]

LOL ... assume much ?

How did you know everyone in our street to be is either a petty thief or a graffiti vandal ?

youve doe well mate, 100k combined income and i presume you didnt overextend, yep at your age youve done well

dont listen to most of these people on here, most of them rent within a few kms of cbd paying over the top rent and putting there $$ into an asset that doesnt offer peace and mind

 

[Gerkin]

Which is it Klogg? First you say 'rents would fall slightly' and then you say 'rents would drop significantly'.


Good for you RandR. It's a great start and you have the sense to get into your own home where you've worked out you can still afford it if one of you loses your job.
Makes so much more sense than taking on ridiculous levels of debt because you want the ultimate in the first home. You'll have plenty of opportunity to move up on your own terms.


Similar situation here. I've been looking at building in a development in a great position where sales have stalled in the last year. One of the builders associated with it is this area's top builder. When I went to see him he was engaged in the less than challenging task of completing reports for a resort (which he had nothing to do with building) with respect to various faults on which they wanted a independent opinion.
If I'd wanted him to start a house for me tomorrow, he could do that. Has nothing else happening right now.

agreed, im in the process of town planning now, and the quotes for the 2 townhouses im getting are 10% cheaper than a few years ago when i was costing it up

 

[ROE]

youve doe well mate, 100k combined income and i presume you didnt overextend, yep at your age youve done well

dont listen to most of these people on here, most of them rent within a few kms of cbd paying over the top rent and putting there $$ into an asset that doesnt offer peace and mind

There is a simple maths to this and most people cant really understand...
Your mortgage repayment would probably go down over time but your rent

will just keep going up and up until you reach an interception where
your mortgage repayment is bugger all compared to rent.

When I start out I can rent for $180 a week or pay $250 in the mortgage
fast forward now 12 years later rent $400- $450 a week .. I pay no rent
magical number.

and there is something money cant buy that is a place you call home
and you live there as long as you like, do what the hell ever you want without
asking for permission and a roof over your head no one can take it away once you paid it off of course

 

[Bill M]

Have signed a contract at the start of this week to purchase a PPOR (our first home).

Were not worried. LVR is 75%.

The current principal and interest repayment is going to be about 400ish a week (pretty much the same price as rent).

You have done well, congratulations! You seem to have thought it out pretty well.

2. Where you have purchased is bogan-ville.

I can tell you that in suburbs like Seaforth and Balgowlah Heights where homes are worth $2 Million + you still have heaps of graffiti, smashed bus shelters and plenty of theft. It is a common problem pretty much anywhere in Australia these days.

good stuff, you doing something rather than scare into doing nothing..
in 7 years your rent would have exceed your repayment on mortgage and in 14-15 year hopefully you live rent free for the rest of your life....the doom day predictor still be around and they predict some more doom stuff

Yes you are correct, they said the same thing in the 70's and the early 90's. Prices were too high, they will collapse, the young ones can't buy a home, interest rates are too high, not a good investment, the recession........ heard it all before. Roll on 20 years and everything including housing has gone up. Same doomsday predictions now, nothings changed, life goes on and prices will go up as they always have over time.

When I start out I can rent for $180 a week or pay $250 in the mortgage
fast forward now 12 years later rent $400- $450 a week .. I pay no rent
magical number.

and there is something money cant buy that is a place you call home
and you live there as long as you like, do what the hell ever you want without
asking for permission and a roof over your head no one can take it away once you paid it off of course

When I first rented in Manly in 1980 I paid $100 p/w rent. Now that same unit would command $600 to $700 p/w. Now fast forward 30 years, if I had bought that unit back then I would have been paid off by now. The renter would still be paying $700 p/w.

I paid off my mortgage a long time ago, now I live rent and mortgage free. Buying a property was one of the best decisions I ever made. I would hate to be paying $700 p/w to anyone...

 

[craft]

Have signed a contract at the start of this week to purchase a PPOR (our first home).

Were not worried. LVR is 75%.

The current principal and interest repayment is going to be about 400ish a week (pretty much the same price as rent).

Hi R&R Congratulations from me also.

It’s hard to believe just how negative some are.

Have you considered borrowing all that you can (whilst avoiding the cost of mortgage insurance) and putting the left over in a 100% offset account? Also making minimum repayments (even consider interest only) with everything else going into the offset.

Reason – the offset account can be called on by you to buy time in the future if you ever get into a real jam, i.e. lose both jobs.

Other reason is that if you ever want to buy a new house for yourself down the track and retain the existing house as a rental then you put all the money from the offset towards the new house(non-deductable if you borrow) and you instantly have a deductable debt against your now rental property.

Just some thoughts to retain flexibility for the future.

Cheers

 

[moXJO]

On builders and developers, they all seem to be falling off their perch at the moment. Kell & Rigby, now Reed and I was told by someone this afternoon that another large builder is on teetering on the edge.

The question then becomes is this the inevitable shakeout and reset occuring or just the beginning.

Here’s what usually happens. We had the BER pump in funds that grew a lot of these building companies. Large contract work slows up and they get caught out on cashflow after paying out on ongoing expenses. Same thing happened roughly ten years back to a few builders (more a construction boom/bust that time). The majority don't know when, or simply can't adapt because they are too big and geared to a specific market.
A lot of those big guys are also badly managed on job sites to the point of sending the company broke in good times. OHS laws and the usual bureaucratic bs applied to construction doesn’t help.
For us smaller guys (NSW), well I'm flat out with work.

I am also seeing a massive exodus of experienced tradies leaving for the mines mainly because it's stable work and no more paperwork, customers, OHS, quoting, or long days and then bringing home the paperwork. If anything getting a decent tradie will be next to impossible in years to come.

ABS Building Approvals show that the number of dwellings approved rose 0.9% in January 2012, in seasonally adjusted terms, following a fall of 0.8% in December.

Dwelling approvals increased for the month of January in New South Wales (37.6%) and South Australia (6.9%) but fell in Queensland (-22.1%), Tasmania (-3.0%), Victoria (-2.7%) and Western Australia (-0.4%) in seasonally adjusted terms.

Will be interesting to see if NSW follows on with those increases. I'm seeing some really good bargains out there at the moment and would buy more housing if I wasn't such a tightass regarding leverage.

 

[McLovin]

Similar situation here. I've been looking at building in a development in a great position where sales have stalled in the last year. One of the builders associated with it is this area's top builder. When I went to see him he was engaged in the less than challenging task of completing reports for a resort (which he had nothing to do with building) with respect to various faults on which they wanted a independent opinion.
If I'd wanted him to start a house for me tomorrow, he could do that. Has nothing else happening right now.

Builders are the canary in the coalmine, always the first to go.

My old office was next to a building engineering firm and they went bust a couple of months ago.

 

[Starcraftmazter]

Referring to the bolded part - how can you be certain? What if we just have an endless circle of one institution propping up others (e.g. ECB lending to european banks, or even China coming in and lending to Europe)?
How long can that go on for before we finally see a 'collapse'?

I'll respond with a famous phrase; liquidity doesn't solve insolvency, and much of the world is insolvent.

Australians have close to 100% mortgage debt to GDP. It doesn't take a rocket scientist to understand that this has a limit and can't go up forever.