The future of Australian property prices

[Starcraftmazter]

Don't re-quote me and nit-pick my post without providing numbers.

Your an engineer, much smarter than me in the field of maths.

Give me numbers, per year, from 2012 to 2020.

Do a spreadsheet if you have to, and go into detail.

Buddy I am not nit picking anything. I gather what you are asking is the exact percentage change in house prices year to year between 2012 and 2020? I have never said anything about such figures and I have never given them. I have only ever given 2 figures:

40% to 2020
60% to 2030

Both figures are real terms and from peak. I've never given any other figure. I really don't know how to make that any more clear.

 

[DB008]

40% to 2020
60% to 2030

Both figures are real terms and from peak. I've never given any other figure. I really don't know how to make that any more clear.

What are the 'real terms' and 'peak' numbers?
1) You have already stated that the 'crash/pop' has begun (your words)
2) Give me a 'peak' number from Jan/Feb or March so l can work out the 2020 figure.

 

[doctorj]

Let's keep the discussion focused on arguments rather than the individual making them.

The fact is, residential property prices could conceivably fall in Australia, even 40% or more. There are plenty of countries where this has happened over the last 2-3 years - so its not outside the realms of possibility. For example, I've been spending a lot of time in Romania looking at property portfolios, where residential property is probably on average 40% off its peak and much worse than that outside the capital (60% or more).

Now you can argue about the drivers for this and the merits of the USA, Romania or any other country vs Australia for ever more but being an investment forum, the 'why' doesn't really matter. It should be about risk/reward - ie the probability of above inflation price increases vs potential downside...

 

[Julia]

Report on present supply/demand situation in Australia.

While I largely agree with most of the things said there,

So here you are agreeing that there is undersupply of housing in Australia.

Fourth of all, there is significant over-supply across the country which will force prices down.

So here you are directly contradicting your earlier comment.
Not the first time you have done this by any means.

On that note, the quantity of properties on sale is at record heighs.

"Heighs"??? Hope your engineering skills are better than your spelling.

No, our economy will be in ruin. Millions underwater on their mortgages, and countless jobs will be lost. Complete and utter devastation. Personally, I'm planning to move to Switzerland.

Hard to know why you're hanging about here.
Would you like some help to pack?

I really don't understand why you said that you would wait until 2020 (before you leave the country out of frustration) when you have predicted continued falls until 2030 in this latest post. You clearly don't think there is any point buying a house here until the later date - so why even bother staying?

I know your position, but your targets never seem consistent to me.

+1.

Nice counter-arguments....not! Complete lack of substance from you two indicating a lack of knowledge of the subject matter.

I expect nothing more.

Now I don't know about you, but I am quite confident that I am better than at least 30% of other engineers in my field. Hell, I'd even say 99%

Self confidence is usually a good thing.
Brash, arrogant hubris from someone with no real experience is just a joke.

The question was not for you.

First of all, I never said anything about carboard boxes. You are basically putting words in my mouth trying to be a smartarse. This only makes you look a fool. Either contribute to the thread or don't post in it. If you have any counter-arguments, I'd love to hear them, but so far you have nothing, so perhaps you ought to consider saying less until you have something of substance to say.

It's hard to say whether you're deliberately being rude and inflammatory, or whether, sadly, you just have no manners or capacity for civilised discussion.

 

[Starcraftmazter]

What are the 'real terms' and 'peak' numbers?
1) You have already stated that the 'crash/pop' has begun (your words)
2) Give me a 'peak' number from Jan/Feb or March so l can work out the 2020 figure.

Real terms are deflated by CPI - so you get the real price, instead of a product of general inflation.

The peak did not happen this year, prices have been dropping for over a year now. I am not sure what the peak exactly is. One would probably need to get the RP Hedonic Price Index for several years back and deflate it by CPI, it would have been around 2010.

I cannot seem to find this data easily on their website, but I could let you know the next time I come across it (undoubtedly I will).

For example, I've been spending a lot of time in Romania looking at property portfolios, where residential property is probably on average 40% off its peak and much worse than that outside the capital (60% or more).

Are you looking to invest for rental yields? From what I've seen, yields in Romania are very good - however the economy is in bad shape, and I am personally unaware of just how safe it is to conduct such investments there. Have you got any comments on this?

Was it Romania where people typically borrow from foreign banks (Hungarian banks?) to pay for their home loans, who are now facing trouble because the Romanian currency has significantly devalued and they can't keep up interest payments?

So here you are agreeing that there is undersupply of housing in Australia.


So here you are directly contradicting your earlier comment.
Not the first time you have done this by any means.

I am not contradicting anything - perhaps you ought to re-read my post. I said largely - not completely. Then I even went on to say why I disagree with their undersupply argument. I cannot understand why you thought I would agree with it when I was clearly arguing against it in that very post?

Hard to know why you're hanging about here.
Would you like some help to pack?

Moving countries is quite a big task. Leaving behind friends, family. Your qualifications might not be accepted in other countries. You don't have any references there. You don't know anyone there. Personally, I don't know the languages spoken in any of the countries I'd like to move to either.

Surely you understand the complexity in all this?

It's hard to say whether you're deliberately being rude and inflammatory, or whether, sadly, you just have no manners or capacity for civilised discussion.

Who me? Or the other posters in this thread? I'm confused - compared to certain other individuals, I am a beacon of civility.

 

[trainspotter]

BWaahahahhahaaahahh *gasp* gagagahahhagagahaha *cough* gegeggegeeggeggg

I almost threw up a lung.

DONT FEED THE TROLL !

 

[doctorj]

Are you looking to invest for rental yields? From what I've seen, yields in Romania are very good - however the economy is in bad shape, and I am personally unaware of just how safe it is to conduct such investments there. Have you got any comments on this?

Was it Romania where people typically borrow from foreign banks (Hungarian banks?) to pay for their home loans, who are now facing trouble because the Romanian currency has significantly devalued and they can't keep up interest payments?

Let's not take this too far off topic. My point was that it is possible for property prices to fall significantly and quickly. If you want to discuss international property markets, start another thread and I will participate if I have anything remotely intelligent to say.

We're not looking for rental yields on this one. I don't want to say anything more about the transaction as it's ongoing, suffice to say it's sufficiently large (measured in percentage points of GDP type large) that we have a pretty good idea of what can happen to property markets.

That said, there are some lessons that could be learned in terms of downside risk factors to keep an eye out for in Australia - eg availability of credit (bank access to funding, willingness to lend), concentrated exposure to a country's trading partners. In terms of warning signs, I'd look at credit growth, bank NPLs, avg equity by householders in their house and transaction volumes, particularly in smaller cities which tend to be more vulnerable and may move first.

FX lending wasn't an issue in Romania to my knowledge, at least not to the extent as it was/is in Poland and Hungary.

 

[Julia]

I am not contradicting anything - perhaps you ought to re-read my post. I said largely - not completely.

Oh, don't be ridiculous. If you say you largely agree with something, then you are making pretty clear that you do not disagree with it.
You then later completely contradicted this. Finish. End of story.

Moving countries is quite a big task. Leaving behind friends, family. Your qualifications might not be accepted in other countries. You don't have any references there. You don't know anyone there. Personally, I don't know the languages spoken in any of the countries I'd like to move to either.

Surely you understand the complexity in all this?

Many of us here have managed to do it. For someone of your astonishing level of brilliance and infallibility, it should be no problem at all.
Perhaps, though, it's a case of all talk and no hope of walking the walk.
Just a scared kid underneath all the hubristic nonsense.

 

[Starcraftmazter]

Oh, don't be ridiculous. If you say you largely agree with something, then you are making pretty clear that you do not disagree with it.
You then later completely contradicted this. Finish. End of story.

Did you re-read my post again? Maybe you should. Me contradicting myself in the same post makes no sense, I'm not sure how you don't realise this.

It's quite simply, I agree largely with what is said there, with the exception of their supply problem claim. In that very post I went on to describe why. I cannot fathom how you could possibly misinterpret that.

Many of us here have managed to do it. For someone of your astonishing level of brilliance and infallibility, it should be no problem at all.
Perhaps, though, it's a case of all talk and no hope of walking the walk.
Just a scared kid underneath all the hubristic nonsense.

Did you also do it straight out of uni as you begin your career? If so, I'd love to hear about your experience.

 

[kincella]

horses for courses....
my parents died when I was quite young, my mother before my 18th , and my father at 25....but they left me with a huge legacy, of ethics, morality, hard work, AND a substantial education, and then they topped it off with empathy, for all living things,,,
plus a family history of being leaders, educators in their chosen fields of expertise...

the internet attracts everyone, the blind leading the blind,.... the loudmouths, the noisy ones, suddenly everyone has a voice .....
but at the end of the day, if you really, truly want to become really wealthy or successful, you may need to revisit your grass roots beginnings,, and take control of your own destiny,
in my case, I was superman, doing the popular media based popular moves,'
until I found it was not working......
only when I reverted to my parents ethics, was I finally succesful
take control of your own destiny, do not leave financial desicions to others, do not allow others to control your financials....educate yourself....do the hard yards, then reap the rewards

 

[trainspotter]

Ok Ok Ok I will say it again for the great unwashed masses.

If you don't know what you are doing in the property field then DON'T put your big toe in the bathtub.

It takes YEARS of experience as well as balls of steel to play as well as a HUGE amount of capital to cover contingencies that crop up along the way.

Having said that there is still opportunities out there and money to be had. This is from a developers point of view.

From a FHB angle my advice is to make sure that you do your research and have job security. Remember that you will lose 50% of income once the female of the species becomes in bloom. Can you afford this? What is the worst case scenario? Is it a saleable item? What peripheral debts do you have that will sap mortgage repayments?

Other possibility is go and RENT !!!!!!!!!!! I love my tenants ....... hahahahaaaaaaaaa !

Once more for comedy purposes only. The RE in Australia is trancing sideways ATM. Yes yes yes Gold Coast has lost 20% + in CERTAIN areas as well as a lot of other places. There is also A LOT of other areas that have gone UP. DYOR and stop being so narrow minded. I have known properties that I would not give 350k for that have sold for over 400k because the buyer fell in LOVE with the property. One born every minute scenario.

Does this mean property prices will fall 40% by 2020 ....... I think not !!!

And I am not an engineer recently graduated.

 

[doctorj]

Does this mean property prices will fall 40% by 2020 ....... I think not !!!

2020 is a long way away…. What do you think residential property prices will do in the next 3-5 years? Do you think rental yields or ratios of property prices to average income is relevant and if so, what do you see those metrics doing? Are you bullish on the macro situation?

 

[trainspotter]

2020 is a long way away…. What do you think residential property prices will do in the next 3-5 years? Do you think rental yields or ratios of property prices to average income is relevant and if so, what do you see those metrics doing? Are you bullish on the macro situation?

2020 is a long way away…. What do you think residential property prices will do in the next 3-5 years? Do you think rental yields or ratios of property prices to average income is relevant and if so, what do you see those metrics doing? Are you bullish on the macro situation?

2020 is upon us already. Banks here are lending 10 years at 7.69%

http://www.anz.com/aus/RateFee/InterestRates/Rates.asp?section=PHL#PHL

I believe that a 5% reduction is necessary to facilitate this ratio (overall) I also believe that there are places YET to be discovered. Harumph. Been done before.

Wages will increase and meet PP/AI .......... yields on rents WILL RISE !! It is happening now !! Labor in power and all that palava.

Metrics is mathmatical. You have to live somewhere right? Plenty of properties at a bargain price that return great yields. Problem is that capital growth is a stinker. What do you want? Investment or turnover?

As for the macro situation I am not bullish at all. I am experienced in Australia only. I am off to Portugal in 2 days for a month. I will report after this fact finding mission.

 

[doctorj]

Wages will increase and meet PP/AI .......... yields on rents WILL RISE !! It is happening now !! Labor in power and all that palava.

As for the macro situation I am not bullish at all. I am experienced in Australia only. I am off to Portugal in 2 days for a month. I will report after this fact finding mission.

Interesting... how do you reconcile the two positions - rising wages and flat or poor GDP growth?

 

[trainspotter]

Interesting... how do you reconcile the two positions - rising wages and flat or poor GDP growth?

GDP to CPI is a behemoth. We are currently in a stagflation of wage growth. As fast as the Unions want the proletariat to be paid it is gobbled up by CPI and other indexes. We are treading water at best. Rich get richer and the poor get the picture.


The more wages surge to combat CPI the better off we are IMO. Inflation means wage rises. Wage rises means increase in CPI. It is a dirty circle. Expenditure meets income sort of thing.

As long as OZ land is looked upon as a great big hole in the ground for it's mineral wealth and China (let alone India) is prepared to take our product I really don't see an issue. Dont get me started on our Uranium deposits.

The banks here are the most profitable IN THE WORLD !!!!!!!!!!! Their loan books are FAT and their trades to FX is minimal at best. They also have a Guvmint guarantee for a bailout as well as a disaproportinate LVR ratio to keep them honest. I understand it is around 38% so therefore exposure riddle needs over 60% wholesale across the board drops for effect.

Mummy & Daddy in Australalia is a slave to the debt merchants and the culture survives !!

 

[doctorj]

Interesting... how do you reconcile the two positions - rising wages and flat or poor GDP growth?

GDP to CPI is a behemoth. We are currently in a stagflation of wage growth. As fast as the Unions want the proletariat to be paid it is gobbled up by CPI and other indexes. We are treading water at best. Rich get richer and the poor get the picture.

As long as OZ land is looked upon as a great big hole in the ground for it's mineral wealth and China (let alone India) is prepared to take our product I really don't see an issue. Dont get me started on our Uranium deposits.

The banks here are the most profitable IN THE WORLD !!!!!!!!!!! Their loan books are FAT

Trainspotter - in a relatively illiquid market (relative to other instruments) and with relatively few good data points to rely on, it seems to me its hard to be objective. As you pointed out, in any market, there will always be winners and losers and if you only have a small number of properties your experience may vary widely from the average. It seems to me to be very difficult to be scientific about property prices - emotion and bravado seem to reign supreme and people's opinions appear highly correlated to their vested interests...

 

[trainspotter]

Trainspotter - in a relatively illiquid market (relative to other instruments) and with relatively few good data points to rely on, it seems to me its hard to be objective. As you pointed out, in any market, there will always be winners and losers and if you only have a small number of properties your experience may vary widely from the average. It seems to me to be very difficult to be scientific about property prices - emotion and bravado seem to reign supreme and people's opinions appear highly correlated to their vested interests...

As it is always DoctorJ, My limitations extend to 23 years and over 300 houses as well as numerous subdivisions and strata companies.

My experience is limited to Australalaia only which is why I am going to Portugal to be a grown up and see if it is relevant over there?

Nice talking to you my friend. Keep smiling

 

[Aussiejeff]

...emotion and bravado seem to reign supreme and people's opinions appear highly correlated to their vested interests...

Describes this and a few other threads to a tee, Doc...

Here's some interesting links that should reinforce "caveat emptor" - the rug may get pulled from under any one of us at any time by bad government etc. - let alone bad personal decisions.

http://www.news.com.au/money/proper...orporate-charges/story-e6frfmd0-1226317257979

http://www.news.com.au/money/proper...rt-homes-for-all/story-e6frfmd0-1226319120810

Good luck to all in the remaining year.

Ciao.

 

[tech/a]

As it is always DoctorJ, My limitations extend to 23 years and over 300 houses as well as numerous subdivisions and strata companies.

My experience is limited to Australalaia only which is why I am going to Portugal to be a grown up and see if it is relevant over there?

Nice talking to you my friend. Keep smiling

Did 7 weeks in Spain France Italy Germany last year.

Spain was amazing
It's completely stuffed.
I saw on one of the coastal resort towns 200 esplanade apartments
All perfect and all completed for sale --- they had been that way for 3 years!
200 meters down the road another 200 these under construction materials Cranes and temporary fencing all in place.
But not a sole to be seen--- that had also been lik that for 3 years
Just walked away!

Friends have a villa in one of these.
Paid €300.000
they are trying to sell it at € 99,000
but around 30 in the block of 100 want €60,000

Now I have also spent 9 weeks in the US and have a few friends who are well healed in both commercial and domestic property there.
But those delivering their views here are just regurgitating media rubbish.Australia isn't remotely similar to either the US or EUROPE.

I can't be bothered discussing subjects where people just bludgeon their views on posters who quite frankly are streets in front of their theories.

Anyway carry on
Circular rubbish which satisfies your view of sitting and watching
Is exactly what you should have

 

[wayneL]

Did 7 weeks in Spain France Italy Germany last year.

Spain was amazing
It's completely stuffed.
I saw on one of the coastal resort towns 200 esplanade apartments
All perfect and all completed for sale --- they had been that way for 3 years!
200 meters down the road another 200 these under construction materials Cranes and temporary fencing all in place.
But not a sole to be seen--- that had also been lik that for 3 years
Just walked away!

Friends have a villa in one of these.
Paid €300.000
they are trying to sell it at € 99,000
but around 30 in the block of 100 want €60,000

Now I have also spent 9 weeks in the US and have a few friends who are well healed in both commercial and domestic property there.
But those delivering their views here are just regurgitating media rubbish.Australia isn't remotely similar to either the US or EUROPE.

I can't be bothered discussing subjects where people just bludgeon their views on posters who quite frankly are streets in front of their theories.

Anyway carry on
Circular rubbish which satisfies your view of sitting and watching
Is exactly what you should have

I guess those developers in Spain were streets ahead too.