House prices to keep falling for years

[CamKawa]

The thing that I find interesting is the way interest rate changes are reported. When they go up the media talk about them having a 6 - 9 month lag time to work their way in the economy, but when they come down its immediate!!! LOL

"INDUSTRY and consumer groups have welcomed the RBA's 100 point interest rate cut saying it would give the economy a Christmas boost"
source: http://www.news.com.au/heraldsun/story/0,21985,24740274-661,00.html

 

[ROE]

Personally, I think you are mad to not at least aspire to own your own home ASAP before embarking on further aggressive wealth building activities. You get such a solid financial base early in life from which to start! And even if you do choose to do it the other way around, one of the greatest lifestyle factors you can gain from wealth is the area/home you live in for your PPOR, so again you are mad to not own your own! But, to each their own.....

Beej

how do you know I don't own properties? If I have a bear view of properties it mean I don't own properties? If I have a bear view on a stock does it mean I never own it? such naive conclusion

I own stuff at the right price not at any price and if you want to know I own my own PPOR by the time I'm 30 that because stock return pay for it all

 

[robots]

No I didn't factor that in silly me no wonder I sold all my properties last year
oh well I'm price out forever now but I believe in god so hopefully he make house price come down again
so I can buy it again cheaper...

hello,

you told us all ROE,

thankyou
robots

 

[ROE]

hello,

you told us all ROE,

thankyou
robots

That is right because I own stuffed at the right price not at any price
but then again most people beleive property do double ever 7 years so
no need to off load in the bull market

with out that sort of people there is no boom and bust and no stronger for longer

 

[Beej]

how do you know I don't own properties? If I have a bear view of properties it mean I don't own properties? If I have a bear view on a stock does it mean I never own it? such naive conclusion

I own stuff at the right price not at any price and if you want to know I own my own PPOR by the time I'm 30 that because stock return pay for it all

I meant "you" figureatively/generally - not referring to you personally.

Beej

 

[Temjin]

But Temjin at least you are trying to make sensible arguments (even if I don't agree with your premise or outlook), unlike ROE and Numbercruncher who for the last couple of pages have just been complete idiots.

Beej

Well, can't blame them cos I'm sure we all agree this thread has simply too much emotion in it. I'm not denying it on my part either. hehe

And likewise, you are too at least trying to make similar arguments unlike our Mr Robot who I do not think is someone you want to associate with.

It takes a while for the reality to set into the market because the generational credit boom has skewed investors expectations.

You are exactly right. The market has not been allowed to go back to its mean because monetary policy has been manipulated.

It's funny that a few economists are saying the global share market has always been in a bear market since 2001. The reasons why there has been a "bear market" rally was the rapid decrease in the global long term interest rate and the introduction of derivatives securitisation that distorted the perception of risk of the credit market. That is, most banks believed the risk of lending money to those who cannot afford payment is insignificant, and thus they went on a rampage of lending as much as possible to take advantage of the environment.

We all know what happened when the party was over.

You can already see the frustration of cash savers here in other threads who have got used to high cash returns! Soon many in this situation will start to look for somewhere else to invest their money. Saving on rent and the prospect of owning your own home always looks attractive to many, especially with the stock market still looking shakey. Cash flow positive from day 1 property investments are also kind of cool to some (even if many here scoff!).

It is shame isn't it for us cash savers?

But doesn't economic 101 teach us that REAL WEALTH is produced from saving + productive investments? Every economists in the world do not deny that. Be it from the Keynesian school or Austrian school, neoclassic, or whatever.

Unfortunately, this very common sense stuff is not being practised quite often around the world because of personal greed.

Properties are "speculative" investments. They do not generate REAL WEALTH for the economy as a whole, that is, property + land themselves do not generate "new wealth" like factories or mines do (as examples). These kind of speculative investments can only be sustained if there is an ever increasing available of cheap credits and people willing to maintain the debt. In essense, it's a ponzi scheme. The first person who got in wins, the last is the loser.

No not boom, but these lower interest rates are likely to put a floor under the market and allow it to bottom/stabalise from here for 2 main reasons:

Note that is an assumption, just like many of us who made the same assumptions that the global credit crisis (which is turning into a global recession), plus destruction of assets through massive forced liquidations, will eventually cause all assets with speculative prices to fall.

Shares have already got killed and might even fall back to the 2001/02 low. Commodities got completely murdered because of hedge funds liquidation of leveraged positions. Properties are slow to react because pricings are not as transparent (compared to the stock market) and there are limited liquidity.

It's now a wait and see.

 

[Mofra]

Properties are "speculative" investments. They do not generate REAL WEALTH for the economy as a whole, that is, property + land themselves do not generate "new wealth" like factories or mines do (as examples). These kind of speculative investments can only be sustained if there is an ever increasing available of cheap credits and people willing to maintain the debt. In essense, it's a ponzi scheme. The first person who got in wins, the last is the loser.

Theoreically, you are absolutely correct.

In practice, property is like most other non-useful forms of investment (think art, wine etc). There is a prestige attached to certain areas as there is with Grange but not Spumante, as Brett Whitely will probably outperform a Rolf Harris. With a growing population, areas close to major employment centres with multiple forms of public transport are likely to outperform outer suburban McMansion areas in the long term.

Of course, most property investers would admit that without a growing population, a rise in property prices in real terms is not sustainable.

 

[robots]

Well, can't blame them cos I'm sure we all agree this thread has simply too much emotion in it. I'm not denying it on my part either. hehe

And likewise, you are too at least trying to make similar arguments unlike our Mr Robot who I do not think is someone you want to associate with.

You are exactly right. The market has not been allowed to go back to its mean because monetary policy has been manipulated.

It's funny that a few economists are saying the global share market has always been in a bear market since 2001. The reasons why there has been a "bear market" rally was the rapid decrease in the global long term interest rate and the introduction of derivatives securitisation that distorted the perception of risk of the credit market. That is, most banks believed the risk of lending money to those who cannot afford payment is insignificant, and thus they went on a rampage of lending as much as possible to take advantage of the environment.

We all know what happened when the party was over.



It is shame isn't it for us cash savers?

But doesn't economic 101 teach us that REAL WEALTH is produced from saving + productive investments? Every economists in the world do not deny that. Be it from the Keynesian school or Austrian school, neoclassic, or whatever.

Unfortunately, this very common sense stuff is not being practised quite often around the world because of personal greed.

Properties are "speculative" investments. They do not generate REAL WEALTH for the economy as a whole, that is, property + land themselves do not generate "new wealth" like factories or mines do (as examples). These kind of speculative investments can only be sustained if there is an ever increasing available of cheap credits and people willing to maintain the debt. In essense, it's a ponzi scheme. The first person who got in wins, the last is the loser.



Note that is an assumption, just like many of us who made the same assumptions that the global credit crisis (which is turning into a global recession), plus destruction of assets through massive forced liquidations, will eventually cause all assets with speculative prices to fall.

Shares have already got killed and might even fall back to the 2001/02 low. Commodities got completely murdered because of hedge funds liquidation of leveraged positions. Properties are slow to react because pricings are not as transparent (compared to the stock market) and there are limited liquidity.

It's now a wait and see.

hello,

surely you can fit some more excuses in there professor?

keep the laughs coming man, gf getting stitch from all the humour tonite

just got letter from CBA, rate to rent money has dropped AGAIN, paradise already here man

MORE WAITING

thankyou
robots

 

[Dowdy]

hello,

surely you can fit some more excuses in there professor?

keep the laughs coming man, gf getting stitch from all the humour tonite

just got letter from CBA, rate to rent money has dropped AGAIN, paradise already here man

MORE WAITING

thankyou
robots

Wow, your not very crash hot on basic economics.

The only thing keeping the housing market afloat is the government with it's cash injections but even that is short term. Sure there are certain areas where rental market is good for the investor but even the speculators are starting to stay away from the market. What do you think will happen to the market when the average joe family tries to sell their home and the speculators stay away? Its already happening

 

[robots]

Wow, your not very crash hot on basic economics.

The only thing keeping the housing market afloat is the government with it's cash injections but even that is short term. Sure there are certain areas where rental market is good for the investor but even the speculators are starting to stay away from the market. What do you think will happen to the market when the average joe family tries to sell their home and the speculators stay away? Its already happening

hello,

i know, i wouldnt have a clue about basic economics and wouldnt have a clue what will happen in the future(for the twentieth time)

just a humble building worker

thankyou
robots

 

[lioness]

hello,

i know, i wouldnt have a clue about basic economics and wouldnt have a clue what will happen in the future(for the twentieth time)

just a humble building worker

thankyou
robots

Can anyone tell me on here what happens when the variable rate hits 4.5% to property??

No-one on here is discussing the key which is loose monetary policy. Once banks begin lending again and they will(this is their bread and butter), inflation will explode and property will boom again short term only.

Long term it's stuffed.

 

[Dowdy]

Then why would you laugh at Temjin post when you admit that you dont know anything he's talking about.

Or you just like to contradict yourself

 

[Mofra]

Can anyone tell me on here what happens when the variable rate hits 4.5% to property??

No-one on here is discussing the key which is loose monetary policy. Once banks begin lending again and they will(this is their bread and butter), inflation will explode and property will boom again short term only.

Possibly. That will benefit who? Ah yes, those already holding

4.5% = positively geared property at purchase for those looking. I might revisit my decision to hold & not buy more at such attractive rates.

 

[numbercruncher]

Its having very little effect so far - just check the market like treble the amount of houses for sale, rentals coming out people ears ..... oversupply galore ....

except the odd expectation crisis were folks want to live beachfront for 150 bucks a week, its all massive oversupply

Banks tightening lending standards cant be helping either, Gen-Y couldnt care less about the ponzi/pyramid scheme with only 5pc entering into home ownership ......

And many of those wanting in on the pyramid cant meet the deposit reqirement, Gov savings scheme will have them there in a few years I guess.

everyones cruising !

 

[explod]

hello,

i know, i wouldnt have a clue about basic economics and wouldnt have a clue what will happen in the future(for the twentieth time)

just a humble building worker

thankyou
robots

Then why do take everyone on. Many of us are not pleased with the way economics is being played out and some on this forum do know about economics.

In the last few months on a global scale we have had unprecedented deflation. That word means that shares, bonds, trust, businesses and property have droped by half and in some cases by 3 times. These falls are growing by the day. Wall Street just in one night (last night) by 10% (one tenth

Interest rates are being dropped just to try and save basic business (and of course home owners etc) from total collapse. It has not worked overseas and it will not work here. Japan for the first time in perhaps 10 years have just seen the economic light in the last few days and might start to raise rates. The underlying rates are going up because no one wants to lend money. When these last few rate cuts play out by about March next year they will rise again just as fast as they have fallen.

Now the way I have put this is an oversimplification but should help you Robots. Wish I had had someone to explain these things to me when I was a builders labourer in 1961. They paid us 17pound ($34) a week tax paid back then and a brand new car cost $1,000

And the more savvy smart a...ss leave robots and I alone

 

[2BAD4U]

Its having very little effect so far - just check the market like treble the amount of houses for sale, rentals coming out people ears ..... oversupply galore ....

Can we have your supporting data.

1/3 of dwellings - no mortgage - so no effect on them
1/3 of dwellings - with mortgage - how many of these would be forced to sell at current rates?
The remaining 1/3 either rent, government provided or other. With rents going up what choice do they have other than to pay the higher rents.

And, as more private rentals come on the market from all this oversupply this takes the pressure off the government to provide public housing. Property investors are doing tax payers a favour.

Forget real returns, inflation, blah, blah, blah, simple fact - if you get more in rent than you pay in interest then you make money. What does it matter what the property is worth if it is producing an income?

But houses WILL go up in value :burn:

 

[numbercruncher]

You dont need me to show you oversupply, your favorite RE site can do that !!

 

[2BAD4U]

No it doesn't. With a vacancy rate of 2.6%, which is an increase of 0.1% over the last 12 months, I would hardly call this oversupply. Most investors would work on a vacancy rate of 4.0%.

 

[Dowdy]

But houses WILL go up in value :burn:

"WILL go up in value" or you WANT them to go up

Nominal value or real value?

 

[explod]

No it doesn't. With a vacancy rate of 2.6%, which is an increase of 0.1% over the last 12 months, I would hardly call this oversupply. Most investors would work on a vacancy rate of 4.0%.

"Most investors", may work on different figures before long. Relying on official figures at a time of GREAT change may be folly. And always relying of figures alone is folly. Estate agents and salespeople are part of my family circle and I can assure you that figures on property that will not come due till after or the end of the 1st quarter next year may be dire.

Those with their heads to the ground know. The pure numbercrunches (no pun here Number) will never listen