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Exactly, ours may only fall 50%
House prices to keep falling for years
- Thread starter Pommiegranite
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Exactly, ours may only fall 50%
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What about the rental income?
What about depreciation of the house?
What about depreciation of the fittings?
What tax bracket is the investor in?
What if the investor NEVER sells the property?
You can't use such simple numbers when looking at property investment.
On 1) you are dead wrong - that report shows the proportion of FHBs up to 23.5% in Nov (from 19.5% the month before), and that's on the over-all OO increase of 1.4% 2 months in a row. This is close to an all time high in FHB proportion numbers....
On 2), unsurprisingly, property investors are still sitting on the sidelines yes.
In my view the current stats support my view that the market is at/near the bottom in AU, and it certainly isn't falling off any cliffs. Can't wait for the median stats being for Dec 1/4 being released over the next couple of weeks...
Beej
Ahh grasshopper!....
You have to factor in the tax deductibility. If you are in the top, or even the second top tax bracket, then interest of 8% actually only costs you 4.5%to 5% net. So, if you are getting 5% gross rent, you are pretty much at break even from day 1 in terms of the cash flow, and the capital gain is PURE profit generated from ZERO capital put in by you up front - think about it! Now do those sums again at 6% interest rate (say locked in for 5 years) and fast forward a few years to when the rent is now 6%/7%/maybe even 8% of what you originally bought the property for? These are the type of deals I look for and they are around RIGHT NOW because everyone is paralysed by fear and misunderstanding of the market situation and prospects.
Get it?
Cheers,
Beej
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Beej
Go straight to the head of the class, you get top marks.
Some people just fail to see that if you have a property with positive returns, then what does it matter if it goes down in value. As said time and time again, it only matters when (if) you sell.
Go straight to the head of the class, you get top marks.
Some people just fail to see that if you have a property with positive returns, then what does it matter if it goes down in value. As said time and time again, it only matters when (if) you sell.
numbercruncher
Beware of Dropbears
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Hello,
Just discussing the generic Idea " House prices to keep falling for years "
Personal situations of little value.
Thankyou.
Just discussing the generic Idea " House prices to keep falling for years "
Personal situations of little value.
Thankyou.
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What personal situation?
Beej has rightly pointed out that there are properties available now that are positive from day 1. I added that if the property falls in value, it won't matter.
As for what all this means for the generic Idea " House prices to keep falling for years ", evidence FOB's have returned to the market, investors will start returning now so house prices will start to level out and won't keep falling for years.
Glad I could elaborate for you.
Beej has rightly pointed out that there are properties available now that are positive from day 1. I added that if the property falls in value, it won't matter.
As for what all this means for the generic Idea " House prices to keep falling for years ", evidence FOB's have returned to the market, investors will start returning now so house prices will start to level out and won't keep falling for years.
Glad I could elaborate for you.
numbercruncher
Beware of Dropbears
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Economics 101
numbercruncher
Beware of Dropbears
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It is nice to see a few permas actually admit prices have been falling though instead of the old head in the sand its all lies denial we keep getting.
Et tu????
Your tarot cards must be water damaged and your crystal ball cracked I'd say! How long have you been making predictions here that have not yet eventuated???
Nice straw man there!!!!
prawn_86
Mod: Call me Dendrobranchiata
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I have always said positive geared properties are the way to go, never once doubted that
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It is nice to see a few permas actually admit prices have been falling though instead of the old head in the sand its all lies denial we keep getting.
Hey I've never said they didn't, you can't deny the facts. But, some of the bears have to admit that property will start to rise again at some stage, it's just a case of when. And in some ways this whole debate is about the WHEN and the fact that some believe it will be sooner rather than later.
numbercruncher
Beware of Dropbears
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Woo hoo I concede you are 100pc correct with this statement !
Im not so sure about in real terms though
I have this feeling that we will never see median houses at 8/9x median incomes or higher again, ever in our lifes ....
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Sorry prawn, that wasn't a shot at you. It was a statement in general that some people aren't concerned by falling property prices. For the record I am, because it has put a big dent in my future plans. I estimate it has put me back 3 - 5 years.
Just to get this on record - do you mean the national median, or the median of any major capital city?
If national - did it EVER actually reach 8 x average full time earnings? It might have in Sydney, and maybe even Perth, but I'm not so sure about the national median ever getting that high??
Beej
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We will. Each generation thinks they won't make the same mistakes as the last and when we're old and grey and it happens again we will be listening to the youngins saying, well the same things that are being said now.
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Of course we will get another credit boom later down in the track. That is when the current generations that remembered this crisis almost completely dies off.
There is a reason why our grand parents are so paranoid with borrowing and always love to stash cash under their beds. At least I always thought so with their ultra conservative thinking anyway.
Beej said:
But aren't you making the same predictions too? That properties will not face a crash and at best, stagnate or decline a few % and expect it to bottom in the short term? (or whatever less "serious" scenario that others believe) It hasn't eventuated yet and you can't guarantee with 100% certainly that it will. Of course, neither could others with their own predictions.
Property discussions has long since become more of a religious talk with emotions just about everywhere.
Not to mention every time I post something more "philosophical" and concentrate on referring to human psychological biases, I get completely ignored by the perma-bulls. (back many many threads ago)
Like I said again and for the...third time I think, we will never expect to change your "believes" with mere words alone. It's not like anyone would expect you to completely side with a different "opinion" and start liquidating all your properties.
Only something physical has to happen to give it away. And it's fine to just ignore me again.
Yes but I temper most of my comments with words like "probably", "indicating", and provide historical situations data that back up my view. The worst of the bears (not all of them but I won't name names!) just come in here with smarty-pants one liners and make predictions of doom and gloom with absolute certainty! And they have been doing it for YEARS, and have been proven wrong so far, but they keep doing it. My response above was just a retort to one such post showing how silly it was.
From where I sit, since I have been posting opinions here my outlook has so far aligned pretty closely with all the data that is actually coming out about the market.
Property discussions has long since become more of a religious talk with emotions just about everywhere.
Not to mention every time I post something more "philosophical" and concentrate on referring to human psychological biases, I get completely ignored by the perma-bulls. (back many many threads ago)
Like I said again and for the...third time I think, we will never expect to change your "believes" with mere words alone. It's not like anyone would expect you to completely side with a different "opinion" and start liquidating all your properties.
And it's fine to just ignore me again.
I'll respond to these points so you don't feel ignored
You are correct that there is a lot of emotion in these discussions - I suppose if there wasn't then facts alone should cause us all to converge on the same opinion and there would be no argument! Your points re psychological bias etc are well taken, and I would not deny that there are elements of that in everyones, including my own, views on this matter. Ie - I admit that I "want" the property market to do reasonably well - because that benefits most people I know, myself, my family, my friends. It benefits those with the financial discipline to have saved up a deposit, to have taken the risk to enter the market, and who have then worked hard to pay down their mortgage debt, pursue opportunity etc etc.
It's the opposite for many other people who "want" prices to fall, as they don't own property, but might like to, so that would be a plus to them. Unfortunately the reality is that if a real property crash were to eventuate the economic situation would be so dire that most of those people probably would still not be able to afford to buy a house, due to lack of available credit, savings/investments being wiped out, income reduced or gone, no job, prospects nil due to economic stagnation etc etc - so in my view no one will win in that dire situation, and so of course I don't want that to happen. But even then, you would be better off if you owned property than if you didn't IMO!
To get back on topic - I still think, objectively, that all the current data is pointing to a stagnation rather than a crash in AU property market right now while the economy works through the impact of this global slowdown. If the world economy grows again in a year or so, AU property will do just fine. Additionally, as always if you buy well, even in a dead market you can still do well
Cheers,
Beej
Glen48
Money can't buy Poverty
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From the SMH.
New buyers provide hope
Jessica Irvine
January 15, 2009
FIRST-home buyers are storming back into the property market, lured by aggressive interest rate cuts and generous government grants, but official job figures out today hold the key to whether the recovery is shortlived.
The jobless rate is tipped to have reached a two-year high of 4.5 per cent and most economists expect it to hit 6 per cent or more by the end of the year. Job losses could lead to an increase in forced property sales while weakening demand for new loans.
But official home loan figures for November show a tentative recovery following a series of rate cuts by the Reserve Bank totalling 2 percentage points and the Rudd Government's decision to double the first-home buyers' grant on established homes to $14,000 and triple it on new homes to $21,000.
The number of new home loans rose 1.3 per cent, while the number of first-home buyers jumped 18 per cent, pushing their share of new loans to 23 per cent - the highest since January 2002.
The federal Housing Minister, Tanya Plibersek, said the figures showed the grant increase, designed to stimulate activity in the housing sector, was working.
"It seems that first-home buyers are taking advantage of historically low interest rates and the first-home owners' boost to enter the market," she said.
Ms Plibersek was speaking after announcing that Edmondson Park in south-western Sydney was one of 33 projects that would share $112 million from the $512 million housing affordability fund. The fund provides grants for sewerage and other infrastructure to lower the cost of building homes.
NSW will receive only 14 per cent of the initial funding pool, while Western Australia benefits the most with 23 per cent.
Economists said first-home buyers were likely to continue buying this year as stagnating house prices and spiralling rents made purchasing a house more attractive.
"With strong population growth driving rents higher, low interest rates and the doubled home-buyer grant should see pent-up demand from first-home buyers unleashed over the course of 2009," an economist at Commonwealth Bank, James MacIntyre, said.
However, the prospect of job losses continues to hang over the economy. "The extent to which labour market conditions deteriorate will be key to the outlook for households, and the economy generally," he said.
But even as first-home buyers advance, investors are beating a retreat. The value of loans to investors fell 6.1 per cent in November, bringing the annual decline to 27.3 per cent.
An ANZ economist, Alex Joiner, said the lack of finance for investors was a worrying sign for new home building, a key employer and driver of the economy.
"Confidence in the property market is still shaky and economic uncertainty is high. The prospect of a climbing unemployment rate throughout 2009 … poses a real risk to any significant recovery in the sector."
The retreat by investors is expected to compound the rental shortage and put more upward pressure on rents.
Further interest rate cuts are also expected to improve affordability. Financial markets are tipping the Reserve Bank will cut official rates by another 0.75 percentage points at its first meeting of the year on February 3 to help stave off recession, following a string of bad news on building approvals, retail sales and job ads.
New buyers provide hope
Jessica Irvine
January 15, 2009
FIRST-home buyers are storming back into the property market, lured by aggressive interest rate cuts and generous government grants, but official job figures out today hold the key to whether the recovery is shortlived.
The jobless rate is tipped to have reached a two-year high of 4.5 per cent and most economists expect it to hit 6 per cent or more by the end of the year. Job losses could lead to an increase in forced property sales while weakening demand for new loans.
But official home loan figures for November show a tentative recovery following a series of rate cuts by the Reserve Bank totalling 2 percentage points and the Rudd Government's decision to double the first-home buyers' grant on established homes to $14,000 and triple it on new homes to $21,000.
The number of new home loans rose 1.3 per cent, while the number of first-home buyers jumped 18 per cent, pushing their share of new loans to 23 per cent - the highest since January 2002.
The federal Housing Minister, Tanya Plibersek, said the figures showed the grant increase, designed to stimulate activity in the housing sector, was working.
"It seems that first-home buyers are taking advantage of historically low interest rates and the first-home owners' boost to enter the market," she said.
Ms Plibersek was speaking after announcing that Edmondson Park in south-western Sydney was one of 33 projects that would share $112 million from the $512 million housing affordability fund. The fund provides grants for sewerage and other infrastructure to lower the cost of building homes.
NSW will receive only 14 per cent of the initial funding pool, while Western Australia benefits the most with 23 per cent.
Economists said first-home buyers were likely to continue buying this year as stagnating house prices and spiralling rents made purchasing a house more attractive.
"With strong population growth driving rents higher, low interest rates and the doubled home-buyer grant should see pent-up demand from first-home buyers unleashed over the course of 2009," an economist at Commonwealth Bank, James MacIntyre, said.
However, the prospect of job losses continues to hang over the economy. "The extent to which labour market conditions deteriorate will be key to the outlook for households, and the economy generally," he said.
But even as first-home buyers advance, investors are beating a retreat. The value of loans to investors fell 6.1 per cent in November, bringing the annual decline to 27.3 per cent.
An ANZ economist, Alex Joiner, said the lack of finance for investors was a worrying sign for new home building, a key employer and driver of the economy.
"Confidence in the property market is still shaky and economic uncertainty is high. The prospect of a climbing unemployment rate throughout 2009 … poses a real risk to any significant recovery in the sector."
The retreat by investors is expected to compound the rental shortage and put more upward pressure on rents.
Further interest rate cuts are also expected to improve affordability. Financial markets are tipping the Reserve Bank will cut official rates by another 0.75 percentage points at its first meeting of the year on February 3 to help stave off recession, following a string of bad news on building approvals, retail sales and job ads.
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