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House prices to keep falling for years

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I can't believe the doom and gloom here. Has the world never suffered recession before? Has there never been a crisis of some sort? You hear this sort of talk about property every single time - late 80's, mid 90's and now. Exact same thing back then "housing will collapse", "investors will lose everything", "people will be living in the streets". Heard it all before.

Go back through history and look at some of the speeches of past US presidents regarding housing, banks, etc. Andrew Jackson 1829 - 37, Ab Lincoln 1861 - 65, Woodrow Wilson 1913 - 21. All of them had the same familiar ring about them and they could have easily been talking about what was happening today.
 
So ok..

Let me get this straight because I am confused.

US, UK, NZ and I understand many others countries prices are falling and have been for some time.
In the same period lending rates have been doing the same (many FAR less than we are at the moment UK 3% US 1%).
The world is either heading into a recession or are already there.
Income percentage to housing affordability in Australia is some of the highest in the world!
Perth housing prices are showing signs (3 consecutive quarters I understand) of dropping house prices.

And we are somehow immune to falling house prices in the rest of australia??

What happens when/if all these people buying houses with this "cheap" money and first home buyers grants start losing their jobs......
What happens when/if all the currently leveraged people/property speculators owing LARGE sums of cash in cashed up area's start to lose their jobs/income...

THIS is the major problem as far as I see it..

And this is where the REAL weakness lies IMO.

No rush for me and i'm cashed up and ready - just not convinced that what I would buy now won't be 20-40% cheaper in 6mnths - 1 years time.
It appears I ain't the only one because buyers are standing on the side lines..

Do you go long on shares now and watch your investment drop 25-75% over the next years time - or wait until the/a uptrend?
Same way that I see the property market.
Certainly no uptrend confirmed here in fact I think things are looking quite bearish at the moment.
 
I didn't say things hadn't gone backwards. I don't deny that world economies are in recession. What happens when people lose their jobs? Same as every other recession.

As for housing prices falling another 20% - 40%, who knows but I personally don't believe this will happen. Considering some properties have already fallen this much. Just like shares, it's only a loss when you sell. You said it yourself, buyers are on the sidelines just waiting. Once they start entering the market (and some have started) prices will move again and then the herd will start following.

Mark you diary in 2016 with "Too bad I didn't listen to 2bad". :D
 
lioness said:
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.
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This is my take on things:

Further easing of monetary policy will create significant inflationary pressures because of Australia's reliance on foreign goods and capital. A weakening in the currency will push up the price of imports and energy placing the consumer under more pressure. The erosion of purchasing power and resulting fall in demand would be extremely negative for domestic asset prices, particularly RE. It would not create a new credit boom.

So the RBA is between a rock and a hard place. What they give with one hand will be taken away by the other. They can't cut much further or the dollar gets destroyed and we all suffer a massive decline in living standards through skyrocketing import prices. But keeping rates where they are or pushing them up again will erode the wealth tied up in domestic assets by suppressing demand for credit.

It's naive to believe there ever was a "miracle economy" is was just a debt mirage. So I think this is probably the end of the line for rate cuts, probably.
 
2BAD4U said:
You said it yourself, buyers are on the sidelines just waiting. Once they start entering the market (and some have started) prices will move again and then the herd will start following.
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Correct!! That's the funny thing about these sorts of markets - everybody expects prices to fall, yet everybody is cashed up waiting on the sidelines for when they do! Only a lucky few will actually get anything decent at a low price before a floor is reached, volume dries right up and a recovery slowly begins.

Beej
 
Hi guys, newb here, I'm 23 years old and want to invest in a property as well as the stock market, do you think i should wait for a further six months before doing anything? And will the interest go down further?

Cheers.
 
explod said:
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
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Explod, Are you saying the RBA will start raising rates by March next year?? If so why would they raise just after they have aggressively dropped them. Are you talking here or in Japan??????????:banghead:
 
I cannot see them raising rates for another 1-2 years until the economy has had time to stimulate.

I agree the first sign of inflation will see them rise quickly again.

By the way Explod, I will lock my investment property in by June next year for 5% for 2 or 3 years and it will be cashflow positive. Others if they are smart will do the same and then if start rising, it won't make any difference to me.
 
Beej said:
Correct!! That's the funny thing about these sorts of markets - everybody expects prices to fall, yet everybody is cashed up waiting on the sidelines for when they do! Only a lucky few will actually get anything decent at a low price before a floor is reached, volume dries right up and a recovery slowly begins.

Beej
Click to expand...

Sorry Beej, have to interject....

What's you're definition of "everybody being cashed up?" Is it :-

a) saved a 10% deposit
b) saved a 20% deposit
c) don't need to talk to a bank as they have already saved 100%
d) have been pre-approved by a financial institution
e) already have a house and are looking to upgrade PPOR
f) already have a house and are looking to draw on the equity for IP

or

g) they are 100% guaranteed to remain healthy and in employment for the next "however long..."


I'm currently one of the individuals "on the sidelines" but to be frank (not my real name :)), you have absolutely no idea about my own personal financial/employment situation nor the majority of folks out there.

Assumptions like these can be quite fatal for a naive investor (especially in this current financial climate) (not that I'm assuming you're naive ~ quite the opposite!) and I'm purely guessing here but you are quite possibly basing this assumption on your own financial situation and possibly the discussions you have within your own circle of friends and acquaintances????

Whatever the definition for cashed up is, the important point to note which you have highlighted several times is that these people are on the sidelines.... and the simple truth is that there are currently more sellers than buyers in the market.

Now, that is a something worth considering (and the following is purely based on the assumption that the majority of potential purchasers out there don't come to this forum and this thread in particular), why are people too scared to enter the market and why are they staying on the sidelines.

I'm purely speculating here but they're probably more concerned with their own personal situation rather than the cheaper environment that the market is currently presenting. Thier own job security in the immediate future could be at the top of their list, closely followed by their current financial situation, followed by a whole host of other concerns.

I'd also be guessing here too, but I'd be quite sure that only a small majority of people out there are actually hanging out for cheaper prices ~ genuine PPOR homebuyers in general don't think like this, the only people who think like this are speculators and bottom pickers... (and property bulls trying to convince themselves that it wasn't a mistake not getting out of the market last year before the bubble burst;))

The RBA certainly didn't see this whole financial crisis / global recession thingmy coming (by virtue of their unwinding of 6 years interest rate hikes in a short 3 month period) and you can be sure that nobody really knows how it's going to play out in the future and what effects it will have in our domestic economy.... and from this I'd be guessing that people will still be on the sidelines until the economy starts to show signs that the bottom has been reached, the worst has been past and the future is looking decidedly brighter.
 
I see China has joined the global house price crash - im so shocked :D ...... wernt they spost to boom forever and take over the world and we would all be mandarin speaking within a generation ? You know kinda like the Japanese story but with that different ending ?

I guess 800m people living on 1.50 a day isnt the perpetual pipedream the permabulls made it out to be !

Another nail in the coffin !


Dec. 2 (Bloomberg) -- House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 percent in October after rising 32.5 percent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the U.S., Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed- asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 percent of global growth Merrill Lynch & Co. forecasts for next year, further slowing the world economy.

“China is now at the heart of the global slowdown,” said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. “It means that global growth is probably going to be dragged down close to zero next year.”
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http://www.bloomberg.com/apps/news?pid=20601109&sid=ay7HZbCLGLEA&refer=home
 
numbercruncher said:
I see China has joined the global house price crash - im so shocked :D ...... wernt they spost to boom forever and take over the world and we would all be mandarin speaking within a generation ? You know kinda like the Japanese story but with that different ending ?

I guess 800m people living on 1.50 a day isnt the perpetual pipedream the permabulls made it out to be !

Another nail in the coffin !
Click to expand...

Hi bonecruncher :)

I particularly like this bit...

"Building is the biggest driver of China's expansion, contributing a quarter of fixed- asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline.
Click to expand...

"Forceful" eh? Time for the West to get nervous? Or do they just mean flogging millions of slaves ... errr ... peasants to build, build, build ... anything? Who cares if it won't sell - JUST BUILD IT!!!

Unfortunately, we know where the build at all costs scenario will lead.... Unca Sam has a clue in that regard.
 
lioness said:
Explod, Are you saying the RBA will start raising rates by March next year?? If so why would they raise just after they have aggressively dropped them. Are you talking here or in Japan??????????:banghead:
Click to expand...


Its a long story but in short the RBA and the Government do not know what day is is from an honest savvy economists view. They are simply following the crap that comes out of the USA. What you need to focus on with money is (1) supply and demand, and (2) the productivity behind it.

Unfortunately my visits to the computer are short at the moment as I have just gone through the hell of having my prostate removed. But to those interested, it was nerve sparing and a total success.
 
explod said:
Unfortunately my visits to the computer are short at the moment as I have just gone through the hell of having my prostate removed. But to those interested, it was nerve sparing and a total success.
Click to expand...
Wishing you a speedy recovery explod.
 
ABC news they claim 1 in 5 Oz business are on the verge of going bankrupt, Holden dealer in Vic has gone under and all the cars to be sold no reserve..whats that going to do to other buyers and yards..our national debt is 658 Billion which I assume is banks and companies borrowings from overseas.
and rates down 1% so Stevens and co are worried.
Cash is king as deflation works your money is worth more
 
explod said:
Unfortunately my visits to the computer are short at the moment as I have just gone through the hell of having my prostate removed. But to those interested, it was nerve sparing and a total success.
Click to expand...


Speedy recovery Explod ! feel better soon :)

You need a lap top and wireless connection to keep you entertained.
 
explod said:
Unfortunately my visits to the computer are short at the moment as I have just gone through the hell of having my prostate removed. But to those interested, it was nerve sparing and a total success.
Click to expand...
Best wishes & a speedy recovery Explod
 
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