House prices to keep falling for years

[gfresh]

So let me ask the property bears this - if the supply/demand argument is bogus, why HAVEN'T Oz prices fallen in line long ago with the UK and US??

Simple - economic conditions are not as bad presently as the UK or US, in terms of unemployment, lending criteria and other factors driving businesses, and home owners to the wall.

In fact, these things are starting to happen in smaller numbers, and the signs are not too encouraging for next year.

Whether the rest of the world pulls through in late 2009, and helps Australia come out of this before the worst of it hits is the million dollar question. Maybe we will.

More signs of the times... increased holiday vacancies, reduced rates to attract wealthier holidaymakers.

http://www.news.com.au/business/money/story/0,28323,24807152-5017313,00.html

 

[Aussiejeff]

I thought prices here had fallen by about 20%

hello,

man, you have never heard of St Kilda, nirvana on earth? up 140% in Sep Quarter 08

ask Robots for advice

thankyou
ozziebots

 

[Beej]

It really didn't hey.

You got a broad based commodities chart there champ?

Oh so house prices fell in the US and UK due to falling commodity prices did they? I mean we keep getting told that we are the same here as the US and UK and our market should be driven by the exact same globalised fundamentals right??

PS: Got any historical correlation between commodity price falls and AU house price falls?? Commodities have come up and gone down massively at least a dozen times since I have been following such things

I thought prices here had fallen by about 20%

Ummm - I think NOT! You have been listening to guys on here too much! National and regional median prices haven't fallen much in oz at all! Maybe about 3-5% over the past 2 quarters depending on the city, and still UP year/over year for most cities. I think it may "feel" like more if you read stuff like this thread because people have been going ON about "predicted" falls for so looooooooooong now and not much has happened....

Cheers,

Beej

 

[Beej]

Simple - economic conditions are not as bad presently as the UK or US, in terms of unemployment, lending criteria and other factors driving businesses, and home owners to the wall.

In fact, these things are starting to happen in smaller numbers, and the signs are not too encouraging for next year.

Whether the rest of the world pulls through in late 2009, and helps Australia come out of this before the worst of it hits is the million dollar question. Maybe we will.

Ah so in fact you at least agree that there is something a little different about AU after all? I agree that ultimately what happens here will hinge dramatically on 2009 and whether the rest of the world can pull itself out of the hole before we have fallen all the way in...... Nothing here is certain! It may well turn out that now and the next 6-12 months will prove to be THE time to buy (at least a PPOR if you don't already own one). The problem is no-one will know for certain until the opportunity has passed.....

I still think on the balance of probabilities that we are currently in a very similar situation in the housing market (and the economy) to early/mid 1990 - which means perhaps 12 months before it has bottomed and starts to slowly turn up again.

Cheers,

Beej

 

[chops_a_must]

Oh so house prices fell in the US and UK due to falling commodity prices did they? I mean we keep getting told that we are the same here as the US and UK and our market should be driven by the exact same globalised fundamentals right??

PS: Got any historical correlation between commodity price falls and AU house price falls?? Commodities have come up and gone down massively at least a dozen times since I have been following such things

Right... So I'm arguing for a difference in our economies based on commodities, yet you are trying to re-correlate commodities with the US and UK.

Seriously, your comprehension is pathetic.

Think you will find WA and other states, particularly QLD and SA, have a housing correlation with commodities.

 

[awg]

Ah so in fact you at least agree that there is something a little different about AU after all? I agree that ultimately what happens here will hinge dramatically on 2009 and whether the rest of the world can pull itself out of the hole before we have fallen all the way in...... Nothing here is certain! It may well turn out that now and the next 6-12 months will prove to be THE time to buy (at least a PPOR if you don't already own one). The problem is no-one will know for certain until the opportunity has passed.....

I still think on the balance of probabilities that we are currently in a very similar situation in the housing market (and the economy) to early/mid 1990 - which means perhaps 12 months before it has bottomed and starts to slowly turn up again.

Cheers,

Beej

sorry I cant quote the stats, but IMO the cheapest time to buy housing is when the Unemployment stats are highest.

which is a way off yet.

would be interesting to see the correlation

 

[singlefished]

sorry I cant quote the stats, but IMO the cheapest time to buy housing is when the Unemployment stats are highest.

which is a way off yet.

would be interesting to see the correlation

I think you've raised a valid point and would also like to see the correlation.

Now.... bear with me, you'll have to use your imagination with this

Found these 2 links, one with house prices, one with unemployment rates

www.appliedeconomics.com.au/pubs/pdf/06_AER_house_prices_australia.pdf

http://www.aph.gov.au/budget%20dummy/budget%202007-08%20mirror/2007-08/bp1/html/bp1_bst4-01.htm

Figure 1 in the house price pdf indices price movements between 1970 & 2003

Chart 12 in the labour force link indices unemployment between 1979 & 2007

Now, my "graphics skills" are not as good as my "beer skulling skills" so I cannot overlay/stretch/etc the 2 graphs to provide a direct correlation. Besides, I don't think MSPaint would be up to the task....

But, you can flick between the 2 pages and note the highs on either do somewhat correlate to the lows on the other.

House Prices clearly rise a lot more than they fall and unemployment (unless on a massive scale) will not likely be the driver of prices falling another 20% as some analysts are predicting.

You can see where these 20% to 40% drop predictions come from though if you were to project the long term average prices. I can't see it being that bad though....

 

[agathos]

Hi everyone,

It's agathos here.
Seems like in this thread, most of us are expecting prices to soften at least a bit, but there are a few amongst posters in this forum who does seem to believe otherwise.

It does offer a different perspective and adds flavor to this ONGOING discussion.But I do remember something about mortality studies in biology.
Mortality has to do with the number of dead bodies over a long period of time. For example, how many people, over , say a 30 year period, will die from Coronary Heart Disease.

The point I am making is this - house prices has to be viewed in the longitudinal perspective.

We cannot simply IGNORE the fact that while in the short term, burst of irrationale market uptrends can occur, in the longer term , adjustments, fluctuations and stuff that do happen in between do average out home prices.

At the end of the day, like biology & clinical research, you and I - OUR aim NOT to be that coronary heart disease victim. We aim to emerge a VICTOR, rather than a VICTIM.

Ideology, opinions, thinking, statistics, research, etc are all good and well.
But at the end of the day, don't we all aim to emerge the WINNER in this real estate game.

And I am fully persuaded that what guides me to WAIT for 20 months (and consciosly deciding to squat at some rental property first) HAS BEEN and WILL be the right decision.

I am dreaming of a home,
Most of us here would probably be dreaming of one (or more) too!
And that dream will be a reality for me, and for 1000s of other OZs who have been waiting patiently!

Here's a toast to a win-win situation.
A situation where in the short term, those who aspire to enter the first home buying market will get a GOOD deal
And in the longer term, brick and mortar will continue her sterling growth to the benefit of all!

Now. that's what I call AUTHENTIC wealth growth.
Not some Maddock or Storm cheater with their PONZI scheme!

Cheers, mates.
We SHALL get our homes soon. Be patient.

AgATHOS.

 

[noirua]

"US House Building Slump continues":
The construction of new US homes fell at its fastest rate for almost 25 years in November as the housing downturn showed no sign of easing.

New home starts fell to a seasonally adjusted rate of 625,000 from October's revised figure of 771,000.

New home building in both October and November has been at its lowest levels since records began in 1959.

The monthly fall in new house building, a drop of 18.9%, was much bigger than had been expected by most economists.

 

[xoa]

Yes - just as it is pretty funny that those who believe we are in big falls gloss over the fact that the GLOBAL credit crisis occurred and effected everywhere at the same time, and yet strangely house prices in Australia have fallen hardly at all over the 12-18 month period during which the UK and US are off 15% and 20% respectively (in terms of average falls anyway).

So let me ask the property bears this - if the supply/demand argument is bogus, why HAVEN'T Oz prices fallen in line long ago with the UK and US??

Beej

The deflation of housing bubbles caused the credit crisis, not vice versa.

The US bubble peaked about 30 months ago, the UK's 12 months ago, and ours about 6 months ago. China's and Dubai's bubble peaked about 3 months ago. The global property bubble didn't inflate in unison, and it isn't deflating in unison.

 

[Beej]

The deflation of housing bubbles caused the credit crisis, not vice versa.

The US bubble peaked about 30 months ago, the UK's 12 months ago, and ours about 6 months ago. China's and Dubai's bubble peaked about 3 months ago. The global property bubble didn't inflate in unison, and it isn't deflating in unison.

That's not correct - the US house prices ran up AFTER ours did in AU. If you take the mining state cities out (Perth/SEQ), AU house prices stopped increasing in real terms all the way back in 2004 - 4 years ago! This is clearly seen if you look at the Sydney prices (which is about 1/4 of the entire national housing market after all!).

The "we peaked after the US" argument is one of the many false and/or misleading stats often repeated in these and similar threads/forums.

In other words, it wasn't the final burst of cheap/easy credit of the 2004-2007 period that drove AU house prices up between 1996 and 2004 - it was something more fundamental, and sustainable than that:

1) Significant real wage growth (in the order of 50% over that period),
2) Trend to 2 dual family incomes,
3) Lower taxation = high disposal income before housing costs,
4) Low inflation/low interest rate environment locked in vs previous 70s/80s high inflation/high interest rate period.

Cheers,

Beej

 

[chops_a_must]

Melbourne wants a word...

 

[gfresh]

Found this a while ago, but forgot where I had read it Interesting chart of unemployment vs house prices. Seems to be a quite direct correlation.

Few other things in there for those interested, although many aren't fans of Shane Oliver: http://www.ampcapital.com.au/K2DOCS...stralia's-Achilles-heel_12-11-2008.pdf?DIRECT

 

[sinner]

That chart is pretty scary to me (thanks gfresh), it highlights how far we have diverged from the trend and my guess is that is where we are heading again so the fall will be a hard one.

 

[agathos]

Thanks GFRESH!
Nice article by Shane Oliver.
I am newbie here - why do people don't like about Shane Oliver?

Any mate care to ellaborate?
Cheers............David Kam.

 

[aleckara]

1) Significant real wage growth (in the order of 50% over that period),
2) Trend to 2 dual family incomes,
3) Lower taxation = high disposal income before housing costs,
4) Low inflation/low interest rate environment locked in vs previous 70s/80s high inflation/high interest rate period.

Cheers,

Beej

1) I'm not so sure about wage growth in the last 10 years of the housing boom. Wages aren't growing nearly as much as they used to 30 years ago when unions were predominant. I agree that certain sectors wages have been growing well but they make up a small percentage of the economy. Need to check the data.
2) This just means more work for the same house. Work = hours worked of course. To get the same thing two people need to work instead of one. The social effects that this housing boom will have on future families is just starting to be seen in younger people (starting families later).
3) Lower taxation - ok. But that drives up inflation since we have had a constrained economy for so long. So people weren't really benefiting from the money. This house price inflation did drive up house prices, but with no net benefit to society.
4) I don't really agree with the inflation measure they use. They don't take into account asset price inflation and commodity inflation, and use subsititute goods when the normal goods become too expensive. Interest rates were unbearably low causing us to take on more debt for the same thing (as house prices went up). This is a one off increase in prices that takes a few years to finish. I think this factor is done.

 

[explod]

I am newbie here - why do people don't like about Shane Oliver?

Any mate care to ellaborate?
Cheers............David Kam.

Because he is always wrong. If you go back to all his predictions he only calls dead certainties after the event. And to pump up banking business he has been upbeat on all forcasts of the last couple of years and has been wrong.

Could it be that working for the money industry they want you to keep moving it in and out so they can keep picking up their fees.

One of his great mantra's "its going to pick up in the next quarter" and in 18 months I think he only got two right.

And it is Doctor Shane Oliver Phd., if you please.

 

[numbercruncher]

Confirmation of widespread price falls in sunny Qld ....

A DECISION to drop annual land valuations in southeast Queensland has descended into a bitter dispute between the property industry and the Government.

The property industry claimed the decision to shelve the annual October 1 valuations would deny owners a reduced land tax bill and leave them out of pocket.

The industry has accused the Government of a "tricky" attempt to inflate its bare coffers by using valuations taken in 2007, before the market started to fall.

However, the Government believes the decision has actually cost Treasury money because the new valuations would have been based on 2007-08 market movements during which prices predominantly climbed.

Property Council of Australia's Steve Greenwood yesterday said the Government's "immoral" actions would artificially swell land tax bills.

"During the recent boom years valuations were a frequent occurrence," he said.

"However, as soon as land prices start falling, the Government conveniently finds an excuse not to undertake revaluations."

http://www.news.com.au/couriermail/story/0,23739,24788592-5011140,00.html

 

[Mofra]

I thought prices here had fallen by about 20%

Given the bears comments so far, you'd think it's 80%. Surprised there are so many people still living above ground.

 

[robots]

hello,

well howdy, how's it going

get down to sunny St Kilda man. 14.7% increase for Sept08 Quarter Numbercruncher, let them know in Queensland man

what a day, people out everywhere celebrating the good times

thankyou
robots