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House prices to keep falling for years

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I say there are plenty of affordable houses out there now...always has been, but they are not within 10 klms of the city centre.....and plenty around Melb that are now close to the new freeways, or where new freeways will be contructed...half hour to the city centre....around 240,000...they were the neglected suburbs during all the hype ...but can hold their own now....obviously the fhb's can see the sense...cheaper houses and govt assistance ......
I take the 40% drops people, in the same vein as the 200 barrel of oil predictions.....blue sky and out of this world....

people dreaming of 40% drops or more are dreamers.....yet there will be places that look like a huge drop....will you really want to live there ?
alice springs has a 2 bdr for 75,000...other less remote places will get you a 1bdr for 100,000.....compared to 400,000 in the city....
 
Beej said:
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
Click to expand...

There is always emotion when it comes to property. Property is a home, not just an investment. The fact that it is an investment as well has caused some issues with affordability and such but that's another topic. People that missed out on the boom of course feel like they will have to work harder, save harder just to get the same thing. That's the inequality of debt and how it puts the burdens of profit further in time to the next generation of future payers.

I believe property in terms of price-income is the least affordable that it has ever been in the last few years. Wages haven't nearly kept up with property inflation especially since the micro-reforms on wages done over the years. Offsetting this is low interest rates, but I don't think that people should ever take interest rates into account, rather how long it would take to pay off the average loan or pay it off to a level where people can live in comfort (i.e not watching every penny just to pay the mortgage). Interest rates are a penalty, they aren't the principal people have to pay off. i.e if the principal is higher compared to wage the payback period is greater meaning a saving for a deposit is much harder than it used to be.

The fact that interest rates are progressively getting lower and lower over the years globally to fund housing shows that there is a serious problem. It makes it harder to save for a deposit (where can you get a return to save up?). The fact that houses have beat a bank account which has been beating inflation in recent years shows that wages have no hope.

Property prices rising Beej only causes damage in the long run. Property ideally inflation adjusted should be worth the same yesterday as today (i.e an inflation hedged saving mechanism). Any more and someone is getting something at the expense of someone else. It's causing social issues with the young who many are staying at home and not becoming 'adults'.

The old adage that property is owned by the hardworker non-bludger is a bit outdated nowdays. We are catching up to other nations where the majority rent and have no hope of every owning a property. If we have one more boom after this one the kids will have no hope at all.

I really don't understand how Governments want housing to go up. What's worse the whole financial industry is tied to housing. Housing is a social good, it shouldn't be a financial one.
 
aleckara said:
Property prices rising Beej only causes damage in the long run. Property ideally inflation adjusted should be worth the same yesterday as today (i.e an inflation hedged saving mechanism). Any more and someone is getting something at the expense of someone else. It's causing social issues with the young who many are staying at home and not becoming 'adults'.
Click to expand...

I would be quite happy if MEDIAN house price only ever rose in line with inflation! But potential home buyers have to understand that there are many ways that can happen, and generational opportunity for specific property will always change over time - that cannot be stopped if you have a growing population..... That's also the reaosn why you can make good money from property without "ruining" it for coming generations - but the key is government policy, new development etc that keeps that median price in line.

Cheers,

Beej
 
Beej said:
I would be quite happy if MEDIAN house price only ever rose in line with inflation! But potential home buyers have to understand that there are many ways that can happen, and generational opportunity for specific property will always change over time - that cannot be stopped if you have a growing population..... That's also the reaosn why you can make good money from property without "ruining" it for coming generations - but the key is government policy, new development etc that keeps that median price in line.

Cheers,

Beej
Click to expand...

You have highlighted a few issues.

One of them is overpopulation. Property values really do depend on population growth in order to rise. How much more population can our capital cities sustain? Sydney particularly is reaching its limits in terms of infrastructure. Immigration helps keep property prices high as well.

I would be happy going to a median house if my job is local. How about if it wasn't? Here in Sydney if you live on the outskirts (Western Sydney areas for example) to travel into the city is an hour by train, and then to get to the train a bus which is probably another half an hour. So each week 15 hours is spent travelling - that's probably about 7 hours more than the previous generation did not have to spent. Some people are lucky to work locally, good for them. Most aren't with the way these cities have been planned.

In fact prices should be lower in these areas anyway not for your reasons of MEDIAN price but because a lot more people are settling for less. Less time with their families (i.e more broken families), working harder to get the same thing as other people enjoyed. At the moment these outskirts have kept up with the growth (more so in the boom). It's no wonder that in the outskirts suburbs single mothers/stay at home mothers on government assistance represent a lot more families than the average.

Median prices are lower on the outskirts. But the payback is still higher there than it was for the previous generation who got a better property utility wise. That's the difference - property has overshot inflation. Your argument is that the longer you wait the less you should settle for. I argue patience and saving should be rewarded by society.

I think if property goes down so that it reaches the inflation long term trend initially we would be stuffed sure in the short term - the system would reset itself - and more people would be able to take up housing in the future.
 
Beej said:
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.
Click to expand...

Yep, it is certainly more sensible to use "probably" in this prediction business. Just look at some of the predictions made by high profile commentators and investors at the end of 2007 for the year 2008. It's very curious how they moved up in that kind of position in the first place. Nothing is ever certain in life. So I would not suggest the "perma-bears" have been "proven wrong" so far because no one has ever given an exact timeframe on when the "predictions" will happen. Nourine has already been a doom and gloomer since years ago and have been proven wrong again and again every year until 2008.

Unfortunately, I do feel there have been a reduction of "quality" bear remarks in recent posts. That's including myself because I have already said what I want to say. I don't think you were here when the thread first started right? (or the rising thread which started even eariler) It can be valuable if you go back and read some of the more "quality" comments, but I know it's not fun to go through so much stuff again...

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.
Click to expand...

Likewise, for where I site and since I followed this thread from the start, my outlook has also so far aligned pretty closely with what has happened so far. Stuff like credit bust, bank failures, increase in unemployment, stagnating or drop in national house prices, massive drop in sales, etc. (and certain things I did not expect like the speed of the commodity crash, quick cut in interest rates, etc)

Of course, the future trend is unpredictable. But my current knowledge and interpretation of current data points to a further downturn. Details have already been provided in this thread (and the other rising thread) by myself and many others a long time ago.


Beej said:
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.
Click to expand...

It's good that you acknowledge your own biases. :) Unlike certain "individual" who never acknowledge it and his presence and posts tend to provoke us in using smart-ass one liners as an attempt to emulate his own total denial. In fact, I think this is exactly why we have made these nonsense comments because I am a guilty of it too and felt I was influenced by that very individual.

It's like some of us have given up on logical reasoning because the other side does not seem to accept it.

Beej said:
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!
Click to expand...

I cannot speak for others, but I highly doubt everyone here want to see our economy to crash down so hard that it would affect their loved ones and their family miserably. Of course, while it would mean I can buy a property at a lower price in the future, my family members would suffer from the economic downturn and consequently, I suffer too.

But what should one do here? "Hope" for the best and ignore all contradicting information? Reality can be a cruel thing and it takes a huge effort for someone to realise they may have made a mistake and change their opinion on something they have invested so much into it. (both in monetary and emotional term)

When is a time when we need to accept reality and stop being in denial? Until it's all too late? I see this happens again too often to many other individuals, and when the game is over, they would blame other for their own mistakes.

And I'm definitely not going into the topic of "having an owned property is better if I didn't". :D

Beej said:
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 ;)
Click to expand...

Yes, back on topic.

Likewise, I still think, objectively, that all current date point to a potential crash in AU property market and do not think Australia will come out with just a mild recession (or even with no recession). The reverse of a 30-40 years long credit boom, the end of investment banking era, the end of securitisation, the end of no-payment down loan, the possible end of US dollar as a world reserve currency (yes, related!), the sudden collapse of global trade, etc, etc. These are all big picture stuff and I place more value on them than local supply and demand data.

A lot of people still think this recession is only a typical one and we will recover soon again and everything will be back to normal with ever growing asset prices. However, they don't appreciate how serious the whole crisis is and how much things would have changed when the economy is back on its feet. Things that supported the boom in property prices (as well as other assets) over the last 3 decades will disappear. A lot of people will be in shock because they couldn't visualise the changes and are certainly not prepared to handle it.

Too gloom and doom? Maybe, but we would call it being a realist.

Thanks for not ignoring me this time too. :)

Cheers,

Temjin
 
I like this quote by Jack Miller......
*** The best way to become a millionaire is to borrow a million dollars and have your renters pay it off.
cheapest loans in a long time coming our way soon
 
Temjin said:
Unfortunately, I do feel there have been a reduction of "quality" bear remarks in recent posts. That's including myself because I have already said what I want to say. I don't think you were here when the thread first started right? (or the rising thread which started even eariler) It can be valuable if you go back and read some of the more "quality" comments, but I know it's not fun to go through so much stuff again...

Likewise, for where I site and since I followed this thread from the start, my outlook has also so far aligned pretty closely with what has happened so far. Stuff like credit bust, bank failures, increase in unemployment, stagnating or drop in national house prices, massive drop in sales, etc. (and certain things I did not expect like the speed of the commodity crash, quick cut in interest rates, St Kilda up 14.8% for Sept08 Quarter etc)

It's good that you acknowledge your own biases. :) Unlike certain "individual" who never acknowledge it and his presence and posts tend to provoke us in using smart-ass one liners as an attempt to emulate his own total denial. In fact, I think this is exactly why we have made these nonsense comments because I am a guilty of it too and felt I was influenced by that very individual.

It's like some of us have given up on logical reasoning because the other side does not seem to accept it.

I cannot speak for others, but I highly doubt everyone here want to see our economy to crash down so hard that it would affect their loved ones and their family miserably. Of course, while it would mean I can buy a property at a lower price in the future, my family members would suffer from the economic downturn and consequently, I suffer too.

When is a time when we need to accept reality and stop being in denial? Until it's all too late? I see this happens again too often to many other individuals, and when the game is over, they would blame other for their own mistakes.

Likewise, I still think, objectively, that all current date point to a potential crash in AU property market and do not think Australia will come out with just a mild recession (or even with no recession). The reverse of a 30-40 years long credit boom, the end of investment banking era, the end of securitisation, the end of no-payment down loan, the possible end of US dollar as a world reserve currency (yes, related!), the sudden collapse of global trade, etc, etc. These are all big picture stuff and I place more value on them than local supply and demand data.

A lot of people still think this recession is only a typical one and we will recover soon again and everything will be back to normal with ever growing asset prices. However, they don't appreciate how serious the whole crisis is and how much things would have changed when the economy is back on its feet. Things that supported the boom in property prices (as well as other assets) over the last 3 decades will disappear. A lot of people will be in shock because they couldn't visualise the changes and are certainly not prepared to handle it.

Too gloom and doom? Maybe, but we would call it being a realist.

Thanks for not ignoring me this time too. :)

Cheers,

Temjin
Click to expand...

hello,

great stuff Temjin, I just wacked an extra piece of info in there you missed

what another fine day

thankyou
robots
 
robots said:
hello,

great stuff Temjin, I just wacked an extra piece of info in there you missed

what another fine day

thankyou
robots
Click to expand...

Thanks robot, I appreciated it. ;)

I see a certain "individual" is enjoying his fine day to the fullest. :rolleyes:
 
numbercruncher said:
Got to be good for house prices ? ....





http://business.theage.com.au/business/massive-drop-in-fulltime-jobs-20090115-7hdk.html?page=-1


Better stop that immigration if ya'll want to keep your jobs eh ??
Click to expand...

Yes that's right - biggest drop in full time jobs since 2003 - house prices really crashed back then didn't they???? ;)

Quiet seriously - although not a great situation for the economy, the unemployment rate is still only 4.5% - which by historical standards is incredibly low. I'm not saying things aren't going to get worse (although of course I hope they don't get too much worse for everyones sake), but you would need to see unemployment at 10% plus before the housing market would really be starting to shake on it's foundations due to unemployment. So don't get too excited just yet.......

Beej
 
Ch 7 tonight had a story on reno's buy a house slap some paint around and sell it for a mozza.
 
aleckara said:
I really don't understand how Governments want housing to go up. What's worse the whole financial industry is tied to housing. Housing is a social good, it shouldn't be a financial one.
Click to expand...

+1 doesn't make sense to me. I get the feeling that a crash in housing prices would be like the end of the world - far worse than any market crash.

When the boomers and GenXers die out, won't there be an oversupply of housing?
 
Beej said:
Yes that's right - biggest drop in full time jobs since 2003 - house prices really crashed back then didn't they???? ;)

Quiet seriously - although not a great situation for the economy, the unemployment rate is still only 4.5% - which by historical standards is incredibly low. I'm not saying things aren't going to get worse (although of course I hope they don't get too much worse for everyones sake), but you would need to see unemployment at 10% plus before the housing market would really be starting to shake on it's foundations due to unemployment. So don't get too excited just yet.......

Beej
Click to expand...

Unfortunately, they keep changing the way "unemployed" is calculated. We were never at these low rates. You can't compare to the past. It was calculated in a different way then. Not comparing apples with apples as I understand it.

I say the unemployment rate is much higher than what is reported if wanting to compare historically. Isn't 2 hours per week termed as employed these days? Please correct me if I'm wrong. We also have a lot more subbies that came with the mining boom. There drop in workload not reflected in unemployment figures either.

Sorry, I kind of reread your post, talking about full-time jobs. Nonetheless, the way unemployed is calculated has changed significantly over the years.
 
grace said:
Unfortunately, they keep changing the way "unemployed" is calculated. We were never at these low rates. You can't compare to the past. It was calculated in a different way then. Not comparing apples with apples as I understand it.

I say the unemployment rate is much higher than what is reported if wanting to compare historically. Isn't 2 hours per week termed as employed these days? Please correct me if I'm wrong. We also have a lot more subbies that came with the mining boom. There drop in workload not reflected in unemployment figures either.

Sorry, I kind of reread your post, talking about full-time jobs. Nonetheless, the way unemployed is calculated has changed significantly over the years.
Click to expand...


Hi grace. See my post #83 here for some enlightening ABS details.

https://www.aussiestockforums.com/forums/showthread.php?t=13405&page=5
 
I heard from a VERY good source today that the word is house prices wont bottom for 1 or 2 years so there's no rush to buy, knowing the source as I do I'll be taking that advice.
 
hello,

sensational Mr Burns, more quarters of 14.8% rises for St Kilda by the sounds of it Mr Burns

will be walking tall down Chapel St to get a cafe latte, might even do as Numbercruncher suggested and flip a street urchin 50 cents instead of the usual 20

paradise

thankyou
robots
 
USA house prices started going down in 2006 in 2009 the figures are now worse , You are correct Mr. Burns.
 
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