numbercruncher
Beware of Dropbears
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Peoples advice tends to nearly always just follow the direction of their bets and screw the evidence ......
House prices to keep falling for years
- Thread starter Pommiegranite
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Im betting on falls but expect stagnation.
We are 12 months into credit crunch ... liquidity improving and cost of funds falling. Becoming a bit of a dead horse and definitely nowhere near crisis now ... 100% past the *bottom* on that one IMO.
Heading for possible recession, but cant see a serious one if any ... not going to crash market.
As for property i speak from 10 years first hand experience ... there are about 2 houses for sale at the bottom end of bellevue hill market now ... it sure as hell wont ever to crash on that volume.
Units and west syd have had their big falls. Dunno about other resi markets in aus though ... maybe have had bigger bubbles.
We are 12 months into credit crunch ... liquidity improving and cost of funds falling. Becoming a bit of a dead horse and definitely nowhere near crisis now ... 100% past the *bottom* on that one IMO.
Heading for possible recession, but cant see a serious one if any ... not going to crash market.
As for property i speak from 10 years first hand experience ... there are about 2 houses for sale at the bottom end of bellevue hill market now ... it sure as hell wont ever to crash on that volume.
Units and west syd have had their big falls. Dunno about other resi markets in aus though ... maybe have had bigger bubbles.
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One other thing ... lots are doing it hard but most bears are not ... if prices fell by a good 10% demand at those prices would double? Triple? All the gen ys that have been sitting on the fence can afford a fair bit by tighteneing their belts and they will jump.
Spain is crashing up to 35% with all its building. I just got back from Dubai and its in oversuppy crash circumstances but the govt is doing with property what they once did with oil to support prices.
But australia has never seen overdevelopment on any scale let alone like those places. Lots of places at the same price as 2002/2003 .... huge savings in real terms .... really cant go wrong buying now.
Spain is crashing up to 35% with all its building. I just got back from Dubai and its in oversuppy crash circumstances but the govt is doing with property what they once did with oil to support prices.
But australia has never seen overdevelopment on any scale let alone like those places. Lots of places at the same price as 2002/2003 .... huge savings in real terms .... really cant go wrong buying now.
numbercruncher
Beware of Dropbears
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I realise it varies from Area to area but I would say my suburb has fallen a good 10pc in price yet demand has gone extreme the other direction to nearly zero demand ..... seems lower the price less the demand .... funny old world it is !
I even just read an Advert here in the Gold Coast bulletin for a block of land , " Motivated vendor, If you Find a comparable block for less vender will beat it by 10pc " - That to me shows a race to the bottom has begun ....
Ah yes but that's on the Gold Coast! The original land of the Queensland "white shoe brigade" and the place where all faithful real estate spruikers hope to end up in the afterlife...
Where-else could former swamp-land have been turned into paradise on earth?? Seriously, In my case I think I have said my comments pertain primarily to the Sydney market, (as has Peperroni I think). Brisbane and surrounds may well have got a little further run-up without the prosperity to back it up long term and through tougher economic times, but time will tell....
Beej
explod
explod
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Appreciate the depth of your reply Pepper.
I see the sub-prime situation in the US (now in UK) as only the first round. The full financial effects on those economies will not hit the bottom lines for 12 months. Not only that, the indications are that the lending authorities in those places are still hiding the big picture. That contagion will continue to supress our situation going forward.
In Gough Whitlam's era I think early 1970's home loan interest rates hit upwards to 16%. Given the economic problems, which will also hit on unemployment, a critical money supply problem will arise whereby rates may again hit these levels. It is to be fair a bit differrent here as there will be plenty well cashed up. However the middle ground, families under stress, is the area of volume that may very adversly effect property for some time.
In isolation agree with you but if the US economy really falls apart would you see another view.?
I see the sub-prime situation in the US (now in UK) as only the first round. The full financial effects on those economies will not hit the bottom lines for 12 months. Not only that, the indications are that the lending authorities in those places are still hiding the big picture. That contagion will continue to supress our situation going forward.
In Gough Whitlam's era I think early 1970's home loan interest rates hit upwards to 16%. Given the economic problems, which will also hit on unemployment, a critical money supply problem will arise whereby rates may again hit these levels. It is to be fair a bit differrent here as there will be plenty well cashed up. However the middle ground, families under stress, is the area of volume that may very adversly effect property for some time.
In isolation agree with you but if the US economy really falls apart would you see another view.?
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We had that here for 3 months or so but people get sick of sitting on the sidelines around then esp when new listings are rare, and sell fairly quickly on less speculative expectations.
We had a 10% or more fall but really there were just a few sales 10% up. Round here we have more or less been around the peak price of the last boom since it ended in 2003 or whenever.
theasxgorilla
Problem solved... next bubble.
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Well bloody done, someone actually had a think about things. Not being patronising Beej, but one can get bit fed up with all the BS stats we see posted, directly out of the media, no analysis.
I agree that it's as hard now to buy a first home as it ever was, and I suspect many bears have a vested interest in wishing it was easier, but they're wishing for the wrong thing.
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Many people never sell their PPOR. Those that *want* to can simply choose not to if prices dont fit the valuation they have gotten wedded to and emotional about at some time. And they will if falls materialise, even if their step up is cheaper than expected !!!!!
Even in financial hardship people find ways of cutting back $100+ a month on each of fox, broadband, mobiles, eating out, new SUVs.
Heck donald trump held on to most of his properties when $1b underwater!
Ive been happy to buy for months now ... but finding a decent property someone is prepared to sell is MUCh bigger problem than price!
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Oh yeah, and no matter how crap market conditions are syd property always gets a huge kick in spring with decent sales even during the last bust.
Darn our perfect summer weather making buyers all giddy!
Darn our perfect summer weather making buyers all giddy!
I appreciate your detailed post BeeJ, it's all valid and well thought out. I won't argue most of those points as it's all different perspectives. Sydney is different to Brisbane, is different to goldcoast, is different to Melbourne, etc. Nothing is outwardly changing in the price properties are changing hands for, but it's still too early to see whether this will change as economic conditions change.
It's still early days as Explod is eluding at.. Maybe some of the shocks are over, the complete collapse idea losing steam, but property in the US is not recovering, which will continue to affect large lending institutions. This is also now effecting Europe heavily and other parts of the world. While dot com was mainly contained to the US, this is much worse than that in terms of billions lost, and the fear factor going around. Although even a trillion in the scheme of things the world can probably handle, it's not going to take it that easily.
Aggregate lending effects what people can borrow and pay for property, amongst other things - business expansion, consumer spending, and other items flow from this, and demand and supply are established later down the chain. I know these are just general and simplified theories, but they do make sense to me, and this is what has many economists are saying will drive us, as well as many other countries into recession eventually (whenever that may be). This is essential restriction of one of the key sources of growth in the last 10 years.
If we go back to 1988, it wasn't until about 2-3 years after the stockmarket crash that the recession really kicked in globally. If it's anything similar to that period, and the "crash" was the start of this year, we still have a way to go before we can truly judge any effects.
As I posted in the recession thread, what about BHP and the fact that resource prices are dropping rapidly, along with surely demand from Europe and Japan, 1/3 of their exports? Can only guess here, but we need to wait 6-12 months to see any effects from this, but it could be a big change to the whole of Australia's economy (if we add RIO, some of our energy co's, etc). A small handful of countries on their own contributes billions to the GDP of the country, and that could well be shrinking. On the aggregate wealth theory, that's less dollars coming into the country to be distributed to the masses, and also leveraged up for borrowing, spending, and the rest.
Yes, we are all are biased by our own perspective Mine I will admit is sitting on a fair amount of cash until the payoff for property is better than cash as rates come down to meet rising rental costs. If properties don't come down, doesn't worry me, I'll just pay current prices.
Some of those things are very much contract driven though these days, "minimum spend". Over time people can adjust, but shorter term it's not so easy without shelling out to break a contract. At the end of the day though, even those that work for Foxtel, the phone companies, car dealerships have to have enough business to sustain their jobs.
It's still early days as Explod is eluding at.. Maybe some of the shocks are over, the complete collapse idea losing steam, but property in the US is not recovering, which will continue to affect large lending institutions. This is also now effecting Europe heavily and other parts of the world. While dot com was mainly contained to the US, this is much worse than that in terms of billions lost, and the fear factor going around. Although even a trillion in the scheme of things the world can probably handle, it's not going to take it that easily.
Aggregate lending effects what people can borrow and pay for property, amongst other things - business expansion, consumer spending, and other items flow from this, and demand and supply are established later down the chain. I know these are just general and simplified theories, but they do make sense to me, and this is what has many economists are saying will drive us, as well as many other countries into recession eventually (whenever that may be). This is essential restriction of one of the key sources of growth in the last 10 years.
If we go back to 1988, it wasn't until about 2-3 years after the stockmarket crash that the recession really kicked in globally. If it's anything similar to that period, and the "crash" was the start of this year, we still have a way to go before we can truly judge any effects.
As I posted in the recession thread, what about BHP and the fact that resource prices are dropping rapidly, along with surely demand from Europe and Japan, 1/3 of their exports? Can only guess here, but we need to wait 6-12 months to see any effects from this, but it could be a big change to the whole of Australia's economy (if we add RIO, some of our energy co's, etc). A small handful of countries on their own contributes billions to the GDP of the country, and that could well be shrinking. On the aggregate wealth theory, that's less dollars coming into the country to be distributed to the masses, and also leveraged up for borrowing, spending, and the rest.
Yes, we are all are biased by our own perspective
Mine I will admit is sitting on a fair amount of cash until the payoff for property is better than cash as rates come down to meet rising rental costs. If properties don't come down, doesn't worry me, I'll just pay current prices. Some of those things are very much contract driven though these days, "minimum spend". Over time people can adjust, but shorter term it's not so easy without shelling out to break a contract. At the end of the day though, even those that work for Foxtel, the phone companies, car dealerships have to have enough business to sustain their jobs.
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Yes, we are all are biased by our own perspective
That is so true here. Trying to convince otherwise is almost impossible given the egos that all human have.
I never trust the economists' view from mainstream media because they are almost never right. History has proved it over and over again and the fact that people usually only hear what they LIKE to hear. We all fall in the same bias.
Just pray that China do not slow down too quickly. Data has already showed their export (for a month period anyway) has went negative for the first time ever since the past few years.
Australia is definitely not immune to a global recession and one should never assume that this time is different and house prices will never fall and at best, stagnates or rise to eternity.
Peoples advice tends to nearly always just follow the direction of their bets and screw the evidence ......
Or rather, they always attempt to validate their "own evidences" and ignore others. It's living in ones' own reality.
tech/a
No Ordinary Duck
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For what its worth this is what I think will happen in the future.
(1) Volatility will stop.
(2) Banks will tighten their lending policies as they did in the 80s
(3) Housing will remain flat after the volatility stops.
(4) Housing will be purchased by the majority for personal use rather than investment.
(5) Incentive will be offered to keep the Building industry "ticking along".
(6) In 10 or so years as the boomers begin to pass on some of their children will become flush with inheritances which will either boost their capital base or supply them with wealth not seen before by them.
(7) This generation are already known for their spending and this new found wealth will be spent on a new round of consumerism.
(8) Wages over the next ten years will increase making affordability less of an issue.
(9) Rents will continue to rise as demand isn't met.
(10) All property will find its level of "Worth" which will be different in each region/suburb and demand area.
And so it will go on.
In the 80s building societies were falling over.
The exact same cries of doom were heard loud and clear then as they are now.
Yet prices have risen over 300% since then.
Wont happen again?
Well that's what they said then!
It will happen again and again---just be ready for those signs which I posted above---this will place you in the position to take advantage of the swing of the pendulum in the OPPOSITE direction to which its in now.
In the 80s I was one of those who believed we would never see a boom like that which we had then and that was around 300%---charts look much steeper now as we have the Exponential/Compounding effect of more $ value.
Its no different!
Back to work.
(1) Volatility will stop.
(2) Banks will tighten their lending policies as they did in the 80s
(3) Housing will remain flat after the volatility stops.
(4) Housing will be purchased by the majority for personal use rather than investment.
(5) Incentive will be offered to keep the Building industry "ticking along".
(6) In 10 or so years as the boomers begin to pass on some of their children will become flush with inheritances which will either boost their capital base or supply them with wealth not seen before by them.
(7) This generation are already known for their spending and this new found wealth will be spent on a new round of consumerism.
(8) Wages over the next ten years will increase making affordability less of an issue.
(9) Rents will continue to rise as demand isn't met.
(10) All property will find its level of "Worth" which will be different in each region/suburb and demand area.
And so it will go on.
In the 80s building societies were falling over.
The exact same cries of doom were heard loud and clear then as they are now.
Yet prices have risen over 300% since then.
Wont happen again?
Well that's what they said then!
It will happen again and again---just be ready for those signs which I posted above---this will place you in the position to take advantage of the swing of the pendulum in the OPPOSITE direction to which its in now.
In the 80s I was one of those who believed we would never see a boom like that which we had then and that was around 300%---charts look much steeper now as we have the Exponential/Compounding effect of more $ value.
Its no different!
Back to work.
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Banks wont tighten much ... inheritances happen every day ... property has and will continue to stagnate.
To gfresh - all fair points, and thanks also for your detailed views. I can see where our outlooks/opinions differ (as can everyone else reading I suppose who am sure all have their own views also!), however I still believe that over the next few years the property market (particularly Sydney) will pan out more or less as I have outlined.
Just one point re BHP/RIO etc - long term I can't see anything but growth there - Iron Ore and Coal have locked in huge price increases now, with the falling Aussie dollar only going to help those even more. The China juggernaut will not stop in the next 10+ years I reckon - that's not to say that Chinese growth might not slow (say from 10+% down to 5-9%), however, as long as they are growing they will consuming our resources as fast as we can dig them up. US/Europe - even in recession, still consume those exports as well. In fact often the first response to recession of governments is to crank up infrastructure programs in order to add fiscal stimulus to a stalled economy. The effects of the US housing slowdown (if any) on our exports would already be in the current picture.
Anyway, not a bad time to keep cash and wait the property market out, so good luck with that! Just don't wait too long and miss the good opportunities that will be coming along in the next year or so
Cheers,
Beej
Just one point re BHP/RIO etc - long term I can't see anything but growth there - Iron Ore and Coal have locked in huge price increases now, with the falling Aussie dollar only going to help those even more. The China juggernaut will not stop in the next 10+ years I reckon - that's not to say that Chinese growth might not slow (say from 10+% down to 5-9%), however, as long as they are growing they will consuming our resources as fast as we can dig them up. US/Europe - even in recession, still consume those exports as well. In fact often the first response to recession of governments is to crank up infrastructure programs in order to add fiscal stimulus to a stalled economy. The effects of the US housing slowdown (if any) on our exports would already be in the current picture.
Anyway, not a bad time to keep cash and wait the property market out, so good luck with that! Just don't wait too long and miss the good opportunities that will be coming along in the next year or so
Cheers,
Beej
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Here's one for you Wayne.
U.K. House Prices Decline Most Since at Least 2002
Aug. 18 (Bloomberg) -- U.K. house prices posted the biggest annual decline since at least 2002 as banks choked off mortgage lending, deepening London's property slump, Rightmove Plc said.
The average asking price for a home fell 4.8 percent in August from a year earlier to 229,816 pounds ($426,929), Britain's most-used property Web site said in a statement today. On the month, home values dropped 2.3 percent, the most since December, led by London.
``The lack of mortgage finance is central to the problem,'' Miles Shipside, commercial director of Rightmove, said in the statement. ``London, in particular, appears to be having its own special summer sale, with over 21,000 pounds off in a month.''
U.K. House Prices Decline Most Since at Least 2002
Aug. 18 (Bloomberg) -- U.K. house prices posted the biggest annual decline since at least 2002 as banks choked off mortgage lending, deepening London's property slump, Rightmove Plc said.
The average asking price for a home fell 4.8 percent in August from a year earlier to 229,816 pounds ($426,929), Britain's most-used property Web site said in a statement today. On the month, home values dropped 2.3 percent, the most since December, led by London.
``The lack of mortgage finance is central to the problem,'' Miles Shipside, commercial director of Rightmove, said in the statement. ``London, in particular, appears to be having its own special summer sale, with over 21,000 pounds off in a month.''
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Hard to disagree tech, like any commodity valued by an open market property moves in boom/bust cycles -strage that people expect booms or busts to remain in perpetuity depending on the current state of the market/cycle.
Short memories?
The median house price was not $180k in 1992. It was closer to half that level. My dad bought a waterfront house for $129k in that year.
Median *Sydney* house price in 1992 WAS around $180k (I am talking Sydney median house price, not Australia wide) - 100% certain of this! I bought my first house then and made sure I was well aware of the market (which I had been watching closely for years).
Edit: Can't find an HTML link but check out page 2 on this PDF doc for Sydney median house prices since 1975: http://www.propellvaluers.com/media/docs/pdf_docs/sydney_december.pdf
Perhaps you are thinking of the Australia-wide median?
PS: I don't know where you could by a waterfront house for $129k back then - but certainly no where in Sydney!! I even know of a divorce driven forced sale of a Balmoral slopes federation mansion with pool, harbour views etc etc that sold for $900k the year before (1991). Was a bargain, but $900k was still a LOT of money back then and I was nowhere near able to afford that. That house would be worth $4M++ today.
Again, as I discussed in another post, I think part of what has happened around the country with house price in the last 5-10 years reflects what I think happened already in Sydney a decade or two earlier.
Cheers,
Beej
theasxgorilla
Problem solved... next bubble.
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My thoughts exactly. Hence why on the large part Sydney has stood still compared with the rest of the country.
It seems the Danes have a similar situation with Copenhagen leading the boom and now experiencing falls. The country in official recession (as of last quarter if I remember correctly) and house prices in other regions of the country still going up.
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