House prices to keep falling for years

[KIWIKARLOS]

Yeah we are different "down here"

We actually have government surpluses and look to be increasing them

But a major factor in the US is that many of these people who have negative equity can mail their keys back to the bank and say to bad so sad cop this loss.

US unemployment rate is actualy around 14% if you count people who have given up looking for work.

Sure some places have taken big drops but that is because they weren't worth it in the first place. What do nyou expectif you buy a massive Mc mansion 50km away from work with no real public transport its not that the house repayments kill you its just that your fundamentally a burden on society. Services such as water, electricty, phone service and public transport are just not as economical on the suburban fringes and they are been subsidised by everyone else.

I work in the electrical industry we have some electrical feeders that service maybe 1000 - 3000 customers and cost 10-20 Million dollars to install. Where as in a inner city suburb a feeder with 10000+ might be 5-10 mill. Thats just an example but urban sprawl doesn't help anyone and it should be discouraged and it is by market fundamentals. We are moving toward a future where we will have very high density housing and business with large open public spaces (and hopefully some good public transport)

The one saving grace for North western sydney house prices is the NW metro link that will turn the area around very quickly. The first stage routes from the city are already gearing up with big development.

 

[xoa]

We actually have government surpluses and look to be increasing them

That's great.. unfortunately it has nothing to do with house prices.

 

[KIWIKARLOS]

Wayne mate i think the change is way more widespread and fundamental.

Its not just housing, housing is just an indicator of the underlying forces. The world is changing rapidy firstly the western world has realise that buying other countries oil and indebting ourselves only serves to move our prosperity off shore. Global warming may or may not be true (i think its BS) and everyone should relise that land clearing, water pollution and habitate destruction pose a much greater risk than Co2. We move away from oil save a lot of money and drastically reduce the incomes of countries such as venezula, russia, saudi arabi etc. All the growth in these countries will quickly move when the oil revenues drop.

We have so much going for us plentiful coal, uranium, iron, gas and reasonable land for crops we just ned new irrigation techniques and new crops. The US is still strong IMHO and they my be going throgh a rough patch but lets remeber these guys ownthe fiat currency if they do go down big time forget your house price and make your way down to king street wharf to join the hungry mile. :

I see this as a rebalancing in the world economy,it does have alot of benefits to the US as well. Every time oil goes up the US taxes the world through oil dollars and inflation. Chinas trade surplus is shrinking by the day as their useless US peso's buy less and less.

 

[KIWIKARLOS]

That's great.. unfortunately it has nothing to do with house prices.

Really so its just a coincidence that the biggest losses so far have been taken by countries with the biggest deficiets?

They may not be directly linked but as an indicator of overall economic health surely you can't say you think massive deficiet can breed good house prices?

 

[Dowdy]

hello,

just taking it all in brother, i wouldnt have a clue what happens in the future

walkin' the streets enjoying life

if you after a home its a great time to be buying

thankyou
robots

You don't buy went prices are still at all time highs.


On another note, i reckon the biggest mistake to the housing market was to introduce the first home buyers grant. All it did was inflate the price and made people broke - people were using the grant as their deposit and had no money to pay off the house anyways.

 

[xoa]

Really so its just a coincidence that the biggest losses so far have been taken by countries with the biggest deficiets?

New Zealand has a budget surplus and many sheep, and its house prices have fallen sharply. Coincidence?

Ergo, budget surpluses and sheep are bad for house prices.

 

[Beej]

To KiwiCarlos - good posts mate! And there are many here who share much of your point of view. Don't let the property perma-bears bother you - I know guys like that who have been saying the same old stuff since the late 90s.... well they missed out big time! People who hold off buying property now may still do Ok as prices may stay flatish for a while, but I think the people expecting sustained big falls in good areas are simply dreaming!

All the arguments have been hashed out various times through this thread already I think, so I won't rehash my already stated point of view and the arguments to back them up

Cheers,

Beej

 

[pepperoni]

Bah ... i made a good chunk of my money in property but its been getting harder for the last 5 years if not impossible. Sold my last property 2 yrs back and have since seen some much better properies go for less money.

Lots of new listings starting today ... spring plus rate cut hope plus maybe backlog from about 3 weak years. Could get interesting this summer.

 

[pepperoni]

You don't buy went prices are still at all time highs.


On another note, i reckon the biggest mistake to the housing market was to introduce the first home buyers grant. All it did was inflate the price and made people broke - people were using the grant as their deposit and had no money to pay off the house anyways.

Was one big mistake for sure but capital gains exemption was worse ... dead head tax avoiders punting on tax free gains with otherwise negative returns.

 

[wayneL]

To KiwiCarlos - good posts mate! And there are many here who share much of your point of view. Don't let the property perma-bears bother you - I know guys like that who have been saying the same old stuff since the late 90s.... well they missed out big time! People who hold off buying property now may still do Ok as prices may stay flatish for a while, but I think the people expecting sustained big falls in good areas are simply dreaming!

All the arguments have been hashed out various times through this thread already I think, so I won't rehash my already stated point of view and the arguments to back them up

Cheers,

Beej

Beej,

What an asinine post. What makes you think property bears are perma-bears?

Read up before turning yourself into a goose.

 

[pepperoni]

hear hear

Im tired of property bull bs ... people who have decided to borrow and buy instead of rent with their imaginary profits ... fudged to look acceptable ... come back and talk to us when you have realised your gains and paid your absurd transaction costs.

ALL property companies are getting hammered for a reason. Im negotiating a $300m deal with mirvac and they are as bearish as us on this thread short term.

Nobody has made any decent NET returns on property for years and thats the fact.

 

[pepperoni]

Oh yeah ... had a meeting with a very senior person from nsw vg this week over valuing a few mil worth of easements ... he says property is sick and his recent valuations are lower to reflect it.

We know all the fairy tale arguments for ever increasing prices ... really we do ... no more bull posts til you have something new and concrete guys.

Right now prices are falling as per most recent figures.

 

[Beej]

Here's a report from the US on their housing market:
http://news.yahoo.com/s/nm/20080825/bs_nm/usa_economy_housing_dc_3

Interesting to note the reported 7.1% decline in median prices in the past 12 months there (ie since August when the sub-prime crisis and credit crunch really got going), plus a bit of an uptick in sales volume in the latest quarter.

My comment: A 7.1% decline with sales volume now upticking? The impression given here and elsewhere from all the alarmist reports focusing on isolated incidents and similar anecdotal stories, was that the situation in the US was FAR worse than that!

And whatever the situation over in the US is, for reasons often stated in this thread, I still see it as being highly unlikely we will see anything near as bad as the US here (economy in better shape, scope for interest rate cuts, high employment, no "walk away" option for mortgage holders, limited supply, high immigration, increasing rental yields etc etc). I still think Sydney prices in good area's are just about done with any price adjustment. Median prices nationally may fall about 5%, (with the possibility of larger falls in Perth and Brisbane), but then that will about it - prices will then remain flat for a couple of years (just like they did during the 1990/91 recession) and then they will start creeping up again. That's still my view anyway (and PS - I have never said prices will keep rising through the current environment, I just don't think they will drop all that much, especially in Sydney from where we are now).

Cheers,

Beej

 

[xoa]

Here's a report from the US on their housing market:
http://news.yahoo.com/s/nm/20080825/bs_nm/usa_economy_housing_dc_3

Interesting to note the reported 7.1% decline in median prices in the past 12 months there (ie since August when the sub-prime crisis and credit crunch really got going), plus a bit of an uptick in sales volume in the latest quarter.

My comment: A 7.1% decline with sales volume now upticking? The impression given here and elsewhere from all the alarmist reports focusing on isolated incidents and similar anecdotal stories, was that the situation in the US was FAR worse than that!

It is far worse than that. You're desperate if you're trying to put a positive spin on the American situation. Across the nation, nominal prices have fallen 19% from their peak 3 years ago. Accounting for inflation, the real fall has been almost 30%. The biggest cities have registered even steeper falls. Most analysts think prices will continue to fall for another year at least.

 

[pepperoni]

Accounting for inflation, the real fall has been almost 30%. The biggest cities have registered even steeper falls.

Then account for the fact that many owners are paying huge interest on a depreciating asset. Then account for holding costs. Then buying and selling costs.

Many would have been better off copping the depreciation on a ferrari and renting.

All property figures are fudged to some degree ... even in a boom, after transaction and holding costs profits are modest.

Of course you need to buy and sell and be standing there with your small but actual profit IN YOUR HAND to be in a position to understand the real returns.

 

[kingbrown]

I found this article from an American columnist on Australia
all sounds a bit depressing ?

A massive wave of debt-induced economic problems is about to break on Australian shores.
And Australia is about to pay the consequences of years of too much “easy money.”
As investment bank bnp Paribas currency chief Hans Redeker says, referring to Australia’s currency:
“The Aussie is going down, big time.”

“The escalation in leverage over the past 20 years is completely off the scale.
It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we’ve ever seen, and I think we’ve reached the limit of how far these trends can go.
The unraveling will be extremely painful.”
Why are financial conditions tightening? Just as in America, Australians have spent too much, and their debt is backed by grossly inflated assets. The difference is that the Aussie crisis could be much worse.

Australians may be the most indebted people in the world.

Australians have been compounding their debt at an average rate of 15 percent for the past 20 years.
In 1988, the average household had debts totaling 32 percent of its income. Now the average is a massive 160 percent of household income. As a percent of gross domestic product, household debt has reached 177 percent, almost a world record. Meanwhile, wages have grown at less than a third that rate.

The resource boom won’t save the economy either.
As a percentage of gdp, the mining and related resource industries originate approximately 8 percent of the total economy. Consumer and government spending account for 74.6 percent of Australia’s economic activity (as of 2006) and absolutely dwarf the real wealth-producing parts of the economy.

Sydney research company Fujitsu Consulting estimates that 923,000 households will face “mortgage stress” by September. That is up from last year’s survey that found only 171,000 that were having trouble repaying loans.
Since there are 6.9 million Australian households with mortgages, an astounding 13 percent of the total market could be in serious trouble.
Any guesses what those kinds of default rates could do to Australia’s leading banks? They could quickly resemble the Bear Stearns and Northern Rocks of America and Britain. The share prices of Australia’s biggest banks are already plummeting.

“I panicked” upon seeing the data, said John Edwards, chief executive of Residex Ltd., a company that tracks property prices. “We’ve been doing this for 20 years and have data that goes as far back as 1865, and it’s really abnormal.”
“Australia is headed for a once-in-100-year real-estate slump,” he says. “I have never seen the convergence of so many negatives.”

http://www.thetrumpet.com/index.php?q=5404.3710.0.0

 

[pepperoni]

Good post.

Australians have been compounding their debt at an average rate of 15 percent for the past 20 years.

This is the only thing sustaining property prices.

 

[dhukka]

Here's a report from the US on their housing market:
http://news.yahoo.com/s/nm/20080825/bs_nm/usa_economy_housing_dc_3

Interesting to note the reported 7.1% decline in median prices in the past 12 months there (ie since August when the sub-prime crisis and credit crunch really got going), plus a bit of an uptick in sales volume in the latest quarter.

My comment: A 7.1% decline with sales volume now upticking? The impression given here and elsewhere from all the alarmist reports focusing on isolated incidents and similar anecdotal stories, was that the situation in the US was FAR worse than that!

It should be added that at least one third of US existing home sales are actually distressed sales (banks selling foreclosed properties) and also the months of supply of existing homes on the market hit an all time high. (chart courtesy of calculatedrisk.blogspot.com

The Case-Shiller home price index released tonight will show that US home prices are off close to 20% from their peak with most expecting at least another 10%+ to go.

 

[CamKawa]

The difference is that the Aussie crisis could be much worse.

That's what I've been saying. Don't think many people believe me though.

 

[gfresh]

Nice article.. It is I think silly to be too optimistic right now. Even if things don't get as bad as the d&g'ers believe, it's better to be cautious for a while longer than over-optimistic.

3rd quarter US financials due in a couple of weeks will show this is nowhere near over, with losses as large, if not larger than ever before. They'll be scrabbling for capital, and the capital tap is running very dry. The result if they can't manage to is frightening, and that point may well be reached within the next 12 months. Some areas in the US are stabilising, this is true, however prices in many key areas still are falling.

UK not stabilising either.. and the full results of that haven't been fully factored in either. Took up to 18 months of falls in the US market before they really started effecting the big banks bottom line. Wait until the European banks get whacked via their own shores.. they've already copped enough from their US exposure. This icon is appropriate