The future of Australian property prices

[young-gun]

I stumbled onto a Florida (US) real estate site today wow is our real estate over priced, i mean OMG have a look at what you can buy around Miami.

http://www.opendoormiami.idxco.com/idx/4211/details.php?idxID=001&listingID=A1533174

Map: http://maps.google.com/maps?q=25.693903960928104,+-80.44805471049371

• Two story, 4 Bedrooms, 2 Bathrooms,1 Partial Baths - 2351 Square Ft, Year Built: 1992
• Price: $345,900 USD
• 11 Kilometres to the beach, 30 clicks by road to the centre of Miami

I showed this to my partner, and asked her how much we might pay for it, 850k almost fell of her chair when she knew it was 350.

Or how about a 2 bedroom ocean view Apartment in Key Biscayne.

http://www.opendoormiami.idxco.com/idx/4211/details.php?idxID=001&listingID=A1621518

Map: http://maps.google.com/maps?q=25.6836070,+-80.1570300

• Ocean View, 2 Bedrooms, 2 Bathrooms - 1782 Square Ft
• Price: $899,000 USD
• Property adjoins ocean and nature reserve.

You would easily pay more than twice that for a top end beach front unit at moloolaba, and they would be smaller by the looks of the photos.

I wasnt talking specifically to you, young gun, quite a few had said the same thing.

Sorry, didn't realise.

Fair enough, good luck.

You too.

 

[Aussiejeff]

http://www.theage.com.au/victoria/housing-glut-hits-suburbs-20120707-21o6k.html

"record 55,290 unsold homes in Melbourne in June - the highest number of any capital city in Australia "

This can't be true, there is an UNDERSUPPLY of houses.

Ties in nicely with this data
http://sqmresearch.com.au/graph_stock_on_market.php?region=vic::North+West+Melbourne&t=1

Click on all the other Melbourne outer suburban "ex-housing boom" localities - the trend is very similar. Sharply rising unsold listings during sharply falling interest rate period. Not a good outlook I'm afraid. Compare Melbourne to other capitals and it stands out as by far the worst.

Very interesting REIV reporting today = so few auctions reported.. I can see in the next six months or so they might have to report a negative amount to keep their clearance rates for the year over 50%.

Sunshine and lollipops

MW

Gee, how long has Enzo been fudging the mid-50's % now? He's like a crazy-cracked record..LOL

PS Where is Robots?

Look no further than i sparticus = i robots.

Happy bargain hunting..

 

[damien275x]

Attended two more auctions this weekend. Both passed in. This is Melbourne's West. I have no idea why properties were selling in the middle of nowhere like Point Cook for $400,000+ at one point. They don't even have infrastructure there, it's just a hole. Not to mention all the welfare leeches who don't work who are around your home while you are at work !

I feel sorry for a lot of the ones who were lied to. I know of at least three families who are massively over leveraged. They borrowed against borrowed against borrowed, banking on capital appreciation on all 3x homes. They are well and truly in the ****ter now in negativity equity and facing job loss. This is not uncommon either, it's a growing trend out that way. For a decade the only investment middle class people have been into is property. I hope they don't go down too much because it could be a horrible deflation spiral. :S Then when they crash the 1% will take them at basement prices and grow even wealthier, and we don't want that.

Makes me wonder if there was such a shortage of homes they would be selling right now? I think we've all been lied to. I don't know how anyone could believe statistics RE agents roll out. It's the same thing as listening to a new car salesman tell you all about how great the car is, or the Foxtel guy at the door trying to convince you to buy 55 channels. They have a strong, vested interest as they directly benefit from making a sale!!

Very thankful we have the internet. If I did not have the Internet, I would have bought a 400,000 home in the middle of nowhere in 2008 during GFC when everyone was barking "Get in now.." .. even my parents were. Think for yourself! The Internet allows you to access all the information the "experts' do .. and make your own calls!

 

[Glen48]

Why do we have laws and rules about truth in advertising, yet any one can be a RE expert and make any outlandish statement about growth, shortage of house's , migration etc they wish.

When some one is duded over a few bucks for some scam Heaven and Earth are moved to stop it, yet here we have the biggest financial disaster about to hit Australia causing all manner of heartache to thousands in the years to come and it is all acceptable and continuing all in the name of money, big banks and power for the feds.

 

[medicowallet]

For a decade the only investment middle class people have been into is property.

And as our moronic governments have been propping up the bubble, it has diverted investment from the sharemarket, decreasing growth, and allowing foreigners to pick up our good companies at bargain basement prices... so when the jobs need to go, they will go, and go fast.

Interesting times ahead

MW

PS Where is Robots?

 

[Glen48]

First we lose Robots now Kirk Douglas has gorn??????

 

[prawn_86]

I'm not generally one for posting sensationalist articles but this one seems reasonably balanced, albeit on the bearish side:
http://theage.domain.com.au/real-es...g-loan-repayment-disaster-20120708-21pkl.html

New figures from Commonwealth Bank show the annual average pace of housing appreciation in Australia has been 1.8 per cent since the financial crisis, substantially below the 8 per cent average over the prior 20 years. It warned that a lower pace of appreciation was the ''new normal''.

My emphasis added, but this is less than inflation, on average. So add in debt on top of that and the 'average' buyer since 2008 is well out of pocket. It has been 4 years now also, so it's getting harder and harder to argue that it is just a blip on the radar

 

[Miss Hale]

I'm not generally one for posting sensationalist articles but this one seems reasonably balanced, albeit on the bearish side:
http://theage.domain.com.au/real-es...g-loan-repayment-disaster-20120708-21pkl.html



My emphasis added, but this is less than inflation, on average. So add in debt on top of that and the 'average' buyer since 2008 is well out of pocket. It has been 4 years now also, so it's getting harder and harder to argue that it is just a blip on the radar

Thanks for the link prawn_86.

Another salient point from this article:

Property analyst Mark Armstrong predicted appreciation would be slowest for home owners in outer suburbs, who could see negative to zero growth in values for as many as 20 years.

I think that's where the problem may lie for us, although the drop is not huge, if the growth rate is even nil or very low for the next twenty years then that is not good

 

[prawn_86]

I think that's where the problem may lie for us, although the drop is not huge, if the growth rate is even nil or very low for the next twenty years then that is not good

I have said this all along. We may not see a 'bust' as such, but a slow decline and little to no growth until income:house price ratios come back into 'normal' is a serious possibility, especially with credit dried up

 

[damien275x]

I have said this all along. We may not see a 'bust' as such, but a slow decline and little to no growth until income:house price ratios come back into 'normal' is a serious possibility, especially with credit dried up

I don't think so. People won't want large amounts of capital tied up in something that is bleeding money, especially when it becomes very obvious that it is going to continue bleeding money for most of their life. Once that really sinks in, panic selling will take hold.

 

[Glen48]

Most will walk away , go bankrupt for 5 yrs as house prices will still be sinking and the banks AKA the taxpayers will bail out the banks.
Get a Window sign from a RE agent to show your grand kids who stupid we were and the prices we paid.

 

[sinner]

I have said this all along. We may not see a 'bust' as such, but a slow decline and little to no growth until income:house price ratios come back into 'normal' is a serious possibility, especially with credit dried up

Mortgage lending is 85% in the hands of the big 4.

$1.2 trillion is the total housing debt figure for Australia, so we are talking a cool $1 trillion between the four of them. As a country, we owe the banks our total gross annual production in mortgage debt alone!

My question is, what happens to the big 4 (share price, ability to borrow in overnight markets, ability to roll borrows, credit rating, etc) if house prices go down by 5% in real terms? What about 10%?

Maybe we could use BoQ and median house prices in New Farm over the last twelve months as a guide?


20+% declines there in the BoQ price.

Everything is connected together, I just don't see it playing out the way you've "said all along". Maybe if this was 30 years ago and we were only looking at housing in a bubble (no pun intended), ignoring all other factors.

So what happens to the economy when what happens to the banks, happens?

Welcome to the undecoupled macroeconomy.

Disclaimer: my super is long SLF since Feb.

 

[howmanyru]

I don't think so. People won't want large amounts of capital tied up in something that is bleeding money, especially when it becomes very obvious that it is going to continue bleeding money for most of their life. Once that really sinks in, panic selling will take hold.

My investment property has lost value, at least 10-15% from peak, so what ? I still paid 300% less than what it's worth now. There are heaps of people who were buying investment properties and land when I did and are sitting on heaps of capital growth - they are not in a hurry to sell. Besides, if i sell my house, there is nothing to invest in anyway, stocks - down, cash interest rates - down, so why sell? Sure there are demographics that will be in trouble, but one can't say a crash across the board is inevitable, IMO.

 

[prawn_86]

Everything is connected together, I just don't see it playing out the way you've "said all along". Maybe if this was 30 years ago and we were only looking at housing in a bubble (no pun intended), ignoring all other factors.

We shall see i guess. I could be wrong, but just cant see the panic selling setting in here in Aus. Either way i'm in a good spot with a nice cash reserve and no debt, it's just a matter of not guying too early

 

[damien275x]

My investment property has lost value, at least 10-15% from peak, so what ? I still paid 300% less than what it's worth now. There are heaps of people who were buying investment properties and land when I did and are sitting on heaps of capital growth - they are not in a hurry to sell. Besides, if i sell my house, there is nothing to invest in anyway, stocks - down, cash interest rates - down, so why sell? Sure there are demographics that will be in trouble, but one can't say a crash across the board is inevitable, IMO.

Yes, there are cases like yours, but you were early to the party. Seeing 300% returns is what drove the majority into the market. These people are still very leveraged and make up more of the market than those who own outright. So I see extreme downward pressure on prices.

Yes yields across the board are low right now, but there are places you can park money where it won't lose value, or won't lose as much as a house that is returning negative -5-10% p/a. Over 5 years we are talking big losses, leverage is a double edged sword and people seem to forget that while it can magnify the gains, it can also magnify the losses.

 

[numbercruncher]

More of the expected .....

THE house building sector is deteriorating at a pace not seen since Australia was in the throes of recession more than two decades ago.


Read more: http://www.news.com.au/money/proper...or/story-e6frfmd0-1226422013676#ixzz20FZOtRSc

The number of homes for sale in Melbourne has soared nearly 28 per cent to record levels in the past year.
Research house SQM Research says the pressure of the extra supply is likely to push the city's house prices down $10,000 by the end of the year.


Read more: http://www.news.com.au/money/proper...or/story-e6frfmd0-1226422013676#ixzz20FZlnyc6

 

[Mr Z]

I think that's where the problem may lie for us, although the drop is not huge, if the growth rate is even nil or very low for the next twenty years then that is not good

Yes, think of all that negative gearing.... a little pointless if no capital growth is available eh? Not to mention what would happen if some government decides to eliminate it again, remember Hawkes effort in that regard... I do.

Political History

In July 1985 the Hawke/Keating government quarantined negative gearing interest expenses (on new transactions), so interest could only be claimed against rental income, not other income. (Any excess could be carried forward for use in later years.)

The result was a considerable dampening of investor enthusiasm; although the new capital gains tax introduced shortly afterwards (September 1985) may have contributed too. After intense lobbying by the property industry, which claimed that the changes to negative gearing had caused investment in rental accommodation to dry up and rents to rise, the government restored the old rules in September 1987, thereby once again permitting the deduction of interest and other rental property costs from other income sources.

With the present tax treatment reinstated, the immediate effect was to further increase house prices as investors returned to the market before new construction could catch up.

The political result of this exercise was to put the subject of negative gearing practically off-limits to both major parties ever since. Neither wishes to be seen as contemplating any change to the system, for fear of what it may do to the rental market and/or the property market or building industry.

... yet there are rumblings.

Changing a status quo can be very damaging in the near term, that is why we are less likely to see this rule go but we seem to be going into "eat the rich" mode so change may be back on the table.

 

[Mr Z]

We shall see i guess. I could be wrong, but just cant see the panic selling setting in here in Aus. Either way i'm in a good spot with a nice cash reserve and no debt, it's just a matter of not guying too early

I don't think that panic selling would be the concern, you only need a relatively small % of distress selling to move a market significantly.

 

[tech/a]

I think that's where the problem may lie for us, although the drop is not huge, if the growth rate is even nil or very low for the next twenty years then that is not good

As a property investor/developer Im in the thick of it--its part of business.

Currently selling Housing which Ive held for many years as I too cannot see capital gain
for the forseeable future.
As an investment if I simply hold it Im fighting against depreciation/maintenence and holding costs.
These chew substantially into my passive income even on those I freehold. I can better
use the money elsewhere. I am holding industrial property as the holding and depreciation costs are
way way lower and the return much higher.

So to sell you have no choice but to meet the market and with most in my area thats 20% off the
property highs of 18 mths ago. Ive sold 1 of 5 with a couple being sniffed at.As this is part of business Im not concerned about the 20% off the highs.

Freeing up the capital has the bank happy with liquidity and cash available for some industrial
building on some land I hold.

As for buying Property the best time for those who buy their PPOR is around nowish.
Sure prices will drop more in some areas but stagnation is likely in the market. Good negotiation skills
will see savings at the front end. Remember though that low interest rates are likely to revert to their mean (8-9%) so factor that in withing 3-5 yrs. If you dont it will be at your own peril.

Property as an investment.

Not General housing or units for my money.
Some small developments pre sold would be fine.
Industrial is also in my area in demand.
Selective and informed property decisions will
have a far better chance of being profitable than
herd following. If you treat it and run it like the
business it should be then youll prosper!

Best of business felloow Property holders!

 

[moXJO]

Yes, think of all that negative gearing.... a little pointless if no capital growth is available eh? Not to mention what would happen if some government decides to eliminate it again, remember Hawkes effort in that regard... I do.



... yet there are rumblings.

Changing a status quo can be very damaging in the near term, that is why we are less likely to see this rule go but we seem to be going into "eat the rich" mode so change may be back on the table.

Govt public housing costs grew and those wanting public housing blew out the waiting list. Rents went very high as well. Yeah I remember.