House prices to keep falling for years

[Pommiegranite]

With today's news from Residex, that there have been widespread falls across Australia, I believe this thread is now appropriate. I therefore request that the 'House prices to keep rising for years' thread be closed, due to the fallacy of it's title.

Questions:

• How long will the falls continue?
• What is causing the falls
• What will arrest the falls?
• Due to Australia's real estate boom being even greater than other Western economies, can we assume that the bust will be even greater?
• Are these falls evidence that decoupling theory can be put to bed?

 

[explod]

Great thread idea Pomm.

I like to look at big pictures. The last bad down turn was 1929 (The Crash) However those times began some years before.

To cut a long story short, and probably get into trouble for oversimplification, this is my take.

Germany went to the wall as the US is now doing in 1924. The crash of 29 on the world stock markets contined till about 1933. The collateral damage to life for ordinary citizens played out over 30 years. It is the effect on ordinary people that will have its say on real estate.

There is no doubt that real estate probably had fair value comensurate with living standards in the 1990's. Since then we followed the US with cheap money and it got right out of hand. Of course in correcting down the pendulum will probably go beyond the pale to the rediculous. However if many are put out of work due to food, oil and financial problems the pale could be ok too.

Anyway, just a few cents on a coupla reds, for Sunday celebration time of course with the Papa here and all.

 

[Pommiegranite]

Great thread idea Pomm.

I like to look at big pictures. The last bad down turn was 1929 (The Crash) However those times began some years before.

To cut a long story short, and probably get into trouble for oversimplification, this is my take.

Germany went to the wall as the US is now doing in 1924. The crash of 29 on the world stock markets contined till about 1933. The collateral damage to life for ordinary citizens played out over 30 years. It is the effect on ordinary people that will have its say on real estate.

There is no doubt that real estate probably had fair value comensurate with living standards in the 1990's. Since then we followed the US with cheap money and it got right out of hand. Of course in correcting down the pendulum will probably go beyond the pale to the rediculous. However if many are put out of work due to food, oil and financial problems the pale could be ok too.

Anyway, just a few cents on a coupla reds, for Sunday celebration time of course with the Papa here and all.

Thanks Explod. It just didn't make sense posting on the other thread as house prices are obviously not going to keep rising for years. Maybe the title of the other thread should be changed to simply 'House Prices to keep rising or falling for years'.

You are not oversimplifying, as it is quite simple that assets are priced on the neverending supply of money being printed by the printing presses. The more paper out there, the less the real value of those assets.

We are in judgement year. Its only a matter of time before the masses cotton on and fear becomes widespread.

 

[juw177]

The cities are way too over developed and we need a constant flow of immigrant workers to support it. The question is, will the government put a stop to this short term profiteering and encourage a more sustainable society?

The direction we are going does not look like we are lowering housing demand, it is an increasing of supply.

 

[Pommiegranite]

The cities are way too over developed and we need a constant flow of immigrant workers to support it. The question is, will the government put a stop to this short term profiteering and encourage a more sustainable society?

The direction we are going does not look like we are lowering housing demand, it is an increasing of supply.

Demand will also dry up once jobs dry up. Immigrantion will fall, and those who have arrived will head home with their tales between their legs. It is happening in other countries eg the Polish returning home from the UK.
A housing surplus here is inevitable.

 

[Snakey]

Nice thread pommie
a breath of fresh air
im predicting a minimum three year downturn in prices as tougher times with jobs and higher fuel prices take their toll on peoples back pockets.
I wonder what all those property investment advisers slash money wealth creation tossers are gonna do now???

 

[So_Cynical]

Hello

So im guessing Robots wont be posting here?

 

[pepperoni]

There is no doubt that real estate probably had fair value comensurate with living standards in the 1990's. Since then we followed the US with cheap money and it got right out of hand.

Agree with this ... if there is a correction that level of affordability and growth was sustainable.

Darn cheap money ... the fed seems to have been overcompensating with it ever since the tech crash and 911.

 

[Pommiegranite]

Agree with this ... if there is a correction that level of affordability and growth was sustainable.

Darn cheap money ... the fed seems to have been overcompensating with it ever since the tech crash and 911.

I'm afraid that it's been going on for longer than that, which is why the suffering will also continue for a long time. I remember my visit to NY in the 90's and seeing this:

The NYC National Debt Clock

The history of the NYC national debt clock:

Invented and bankrolled by New York real estate developer Seymour Durst, the 11-by-26 foot National Debt Clock was erected in 1989. When it first was plugged in, the odometer-style clock whirred furiously as the national debt rose by $13,000 a second. Often the last few digits increased so fast they were just a blur. And at one point in the mid-1990s, the debt was rising so fast the clock’s computer crashed.
Under the presidency of Bill Clinton and a push for a balanced budget, though, the clock started ticking in the opposite direction, shaving off roughly $30 a second towards the turn of the century. Durst’s son felt that was “sending the wrong message at [that] point” and the clock was shut down untiul 2002 when the fiscal conservative administration (tongue planted firmly in cheek) of George W. Bush reversed course and brought meaning back to the ticker.
​

 

[Pommiegranite]

..and here's the latest on the debt clock:frown::

National Debt Clock To Add Digits

Jump to Comments

New York, New York (HOS) - The National Debt Clock, a unique electronic green sign that has chronicled the second-to-second growth in the U.S. debt since 1989, has announced it will overhaul the digital number system to account for America’s record fiscal irresponsibility.
The clock is located in Midtown Manhattan and runs by a computer which takes the exact figure of the national debt at the same time every week and then calculates the rate of change. In the mid-90’s, the debt was increasing so fast that it temporarily crashed the computer. This week the clock shuts down for a similar reason; excessive spending and borrowing. “No one ever thought it could get this bad” said Douglas Durst, son of the real estate tycoon who developed, erected, and maintained the clock to graphically warn the public of the rapidly growing debt.
Mr. Durst is scheduled to meet with officials from the Chinese Government in Zurich, Switzerland next month to discuss subsidizing the project. Many economists blame China’s policies on perpetuating the negative cycle of debt. Durst insists China bears some of the responsibility and should pay for a portion of the renovations. In a phone interview he reiterated “our objective with this project is to add enough digits to last the length of a potential McCain Presidency”

 

[theasxgorilla]

With today's news from Residex, that there have been widespread falls across Australia, I believe this thread is now appropriate. I therefore request that the 'House prices to keep rising for years' thread be closed, due to the fallacy of it's title.

The thread you refer to was opened on 14th-February-2008, not even six months ago. Are you making a prediction?

 

[Pommiegranite]

The thread you refer to was opened on 14th-February-2008, not even six months ago. Are you making a prediction?

So we should give it a few years to see if house prices have been going up for years, before closing the thread? With each piece of news, the title of that thread becomes more an more ridiculous.

If we waited for trends to be established, as in when viewing stocks, we would be waiting until 2010 to say that the trend is down. Real Estate is different to stocks in that when the worm starts turning, it stays turned for a while.

 

[Pommiegranite]

So here it is in black and white. It's just a matter of time before the chickens come home to roost:

http://www.theage.com.au/national/f...-ride-credit-storm-20080713-3eiz.html?page=-1


Future Fund billions help banks ride credit storm

• Tim Colebatch, Canberra
• July 14, 2008
• Page 1 of 2 | Single Page View

THE Federal Government's Future Fund and the Reserve Bank have quietly propped up the banks through the global financial turmoil of the past year, ABN-Amro economists have revealed.
They say the two institutions provided a quarter of the massive growth in bank funding to fight off the global credit crunch.

As the standard mortgage rates charged by the banks approach 10%, their analysis implies that, without that support from Government, the banks would have been forced to lift mortgage rates even higher to attract money in the markets, or else cut their lending. The National Australia Bank and Westpac are tipped to raise their mortgage rates this week in line with those just announced by St George, the Commonwealth and the ANZ.
Rates charged by the Commonwealth and the ANZ will rise by 14 basis points today, to 9.58% and 9.62% respectively.
Banks raise the money they lend us essentially from a mixture of deposits, borrowing on financial markets, and selling off mortgage loans to other investors as securities.
But the subprime crisis has virtually shut down the market for securities, and steeply lifted the price at which banks can attract loans. And with investors nervous, even big companies have become unable to issue their own bonds and are being forced to borrow from the banks.
In a startling revelation, ABN-Amro economists Kieran Davies and Felicity Emmett say the Future Fund — set up to invest in the sharemarket — held $35 billion in bank deposits and other forms of cash in April.
Mr Davies and Ms Emmett say the fund's holdings accounted for 4% of all bank deposits in Australia, and one-third of all the rapid growth in deposits over the past year, when banks have been forced to attract deposit growth to reduce their dependence on global markets. The Future Fund could not be contacted last night to explain why it had left its money in the bank.
It would appear to be nervous about investing tens of billions of dollars in a falling market.
At the same time, Mr Davies and Ms Emmett said the Reserve Bank has provided $21 billion of extra funding to the banks through repurchase agreements by which it has temporarily swapped its rolled-gold assets for their slightly riskier ones, thus making the banks' more attractive to lenders.
"Adding the Reserve Bank funding to the cash held by the Future Fund, this equates to about one-quarter of the 20% annualised growth in (bank) liabilities so far during the credit crunch," they said.
But both kinds of funding, they warned, could only be temporary. The Future Fund will eventually put its money into shares, while the Reserve's swaps are only temporary.
As sharemarket analyst Marcus Padley pointed out in The Age on Saturday, Westpac already has had to offer a 10.1% yield to attract lenders in a glutted market. With the dollar at a 25-year high, foreign markets are wary of the risk of those yields being wiped out by a currency plunge.
Senator Steve Fielding, of Family First, yesterday called on the Government to require banks to seek the approval of the Reserve Bank before raising rates independently.
But the Reserve's governor, Glenn Stevens, has consistently defended the banks' actions in raising margins.
The past week has seen a series of shocks for the economy. Westpac and the Melbourne Institute reported that consumer confidence has sunk to its lowest since 1992. The NAB reported that business confidence has plunged to its lowest level since 1991.

 

[theasxgorilla]

If we waited for trends to be established, as in when viewing stocks, we would be waiting until 2010 to say that the trend is down. Real Estate is different to stocks in that when the worm starts turning, it stays turned for a while.

Hold that thought, because the thread that spawned the thread you are talking about was called "House prices to stagnate for 'years'"...it's create date was 19th-September-2005 and the initial post was a cut-and-paste of a piece of news.

 

[dhukka]

Though only indirectly related to housing I thought this article from the courier mail would be at home in this thread. A sign of the times we are living in.

Private school students to flood state system: trend

A WAVE of private-school students is expected to flood the public education system in Queensland as families face increasing financial pressure.
Fee-paying schools are already advertising heavily for enrolments while offering concessions and payment plans for struggling families.

One north Queensland boarding school has lost 10 per cent of its pupil base in a year.

The trend could reverse a five-year move in Queensland toward private school education, which has seen enrolments rise nearly 30 per cent since 2001. About 219,000 students – or 32.4 per cent of the market – are enrolled in private schools, which charge $3000 to $20,000 a year.

It comes as we reveal the State Government is considering single-sex schooling and variable hours for state schools.

Lutheran and Anglican schools confirmed they had already lost families for financial reasons and were expecting an exodus of many more in the next two years.

Brisbane Catholic Education said it was also dealing with increasing numbers of parents unable to pay fees as mortgage, fuel and living costs hit home.

State Education Minister Rod Welford said he was aware that many were struggling in the private system and the State Government was preparing for a boost in student numbers.

He said: "We would need to ensure our facilities and teaching staff are well equipped for any surge in numbers."

More than 455,000 students are enrolled in state schools, compared with about 440,000 five years ago. The growth has been put down to interstate migration and improved standards in the public system.

Mr Welford ruled out extra funding for private schools facing a revenue shortfall.

"Private schools are already heavily funded by the State and Federal Governments," he said. "They provide an alternative option for some parents but they have to make up their own minds whether the alternative school they use is worth the additional costs.

"We are ready, willing and able to take any students who need to be accounted for in the state school system."

Lutheran Education Queensland business manager Graeme Drapper said the situation was a double whammy as the cost of running schools was also rising and he called on the Government to boost funding.

Last year all Lutheran school fees rose by 5 to 10 per cent to cover rising operational costs.

Catholic Education spokesman John Phelan said some parents from their 286 schools across Queensland and 133 in Brisbane were under severe financial pressure but there is a policy of not letting students go for financial reasons only.

"Increasing costs of mortgages, rent and the general cost of living are having a severe impact on some families," he said. "Families are coming to us because they really don't want to take their kids out of Catholic education but they feel they have no choice. We don't let that happen."

 

[gfresh]

And the floodgates have started on this thread already..

I'm crying crocodile tears...

http://www.theage.com.au/national/bear-market-to-sink-its-claws-into-agents-jobs-20080713-3ej9.html

One agency director, who asked to have his name withheld, told The Age that agents who were not regularly making sales — and paying back their retainer — could expect to find themselves out of a job within months.

Can imagine this is going to have an impact on bringing sale price expectations down as well in slower areas. If your job is under threat and sales are low for the month, agents aren't going to be pressing buyers for high prices.

 

[Pommiegranite]

And the floodgates have started on this thread already..

I'm crying crocodile tears...

http://www.theage.com.au/national/bear-market-to-sink-its-claws-into-agents-jobs-20080713-3ej9.html



Can imagine this is going to have an impact on bringing sale price expectations down as well in slower areas. If your job is under threat and sales are low for the month, agents aren't going to be pressing buyers for high prices.

The agent who sold my house is around 21 years old. He bought a brand new BMW a month ago. I do feel sorry for him as he is a really nice guy and did a sterling job when selling my house, but alas for him, has no experience of property downturns.

 

[numbercruncher]

I guess its too late for the money renters who bought last year, they are toast and will probably never recoup their investement in their entire lives .......

The Chindia will save us theory seems to be running awfully thin .......

I notice the amount of RE forsale in Queensland is treble of what it was this time last year and the flood gates are only beginning to open ......

Ive noticed desperation in the sales adverts, as an example Stockland in the weekend bulletin preaching how those who hesitate lose money, those who boughht (land) in 1996 are now 300k better off (haha) , buy now buy now, it almost reads like begging, lala .....

Anyways, any of the regulars here at ASF would of known well in advance of what was coming and why it was coming and positioned accordingly so I imagine its happy days for most asfers .....


Credit is the ultimate fundamental baby ....


Enjoy the negative feedback loop folks ...

 

[Mofra]

Ive noticed desperation in the sales adverts, as an example Stockland in the weekend bulletin preaching how those who hesitate lose money,

Interesting they use the word hesitate... given they themselves are one of the biggest land-bankers in the country

 

[pepperoni]

I guess its too late for the money renters who bought last year, they are toast and will probably never recoup their investement in their entire lives .......

The Chindia will save us theory seems to be running awfully thin .......

I notice the amount of RE forsale in Queensland is treble of what it was this time last year and the flood gates are only beginning to open ......

Ive noticed desperation in the sales adverts, as an example Stockland in the weekend bulletin preaching how those who hesitate lose money, those who boughht (land) in 1996 are now 300k better off (haha) , buy now buy now, it almost reads like begging, lala .....

Anyways, any of the regulars here at ASF would of known well in advance of what was coming and why it was coming and positioned accordingly so I imagine its happy days for most asfers .....


Credit is the ultimate fundamental baby ....


Enjoy the negative feedback loop folks ...

What about the decoupling theory ... anyone making policy or investing on this basis deserves what they get.

Love this story ...

http://business.smh.com.au/lending-finance-plummets-20080714-3erj.html

Surprise surprise .... there is only so much debt you can pile on money renters, and there was always going to be a finite supply of them.