House prices to keep falling for years

[pepperoni]

Mirvac copping a small kicking today after earlier ones ... down over 50% in 12 months like stockland etc ...

"Mirvac’s statutory net profit after tax of $171.8 million was impacted by the previously announced asset impairments totalling $400.1 million. Due to the sustained deterioration in market conditions Mirvac prudently reassessed the value of its residential and non-residential developments ..."

Very prudent of them.

 

[wayneL]

UK not stabilising either..

There are signs here of the beginnings of a freefall. Asking prices are noticeably down and most vendors are now accepting that they will have to be open to "cheeky" offers to get a sale. Stay tuned.

On the economic front, it is much worse than gu'mint figures say (no surprises there). My town is much more prosperous than average, yet businesses are falling over left, right and center.

The High Street looks like it's in the midst of a full blown recession already, with whitewashed windows all over the place.

 

[YChromozome]

Due to the sustained deterioration in market conditions Mirvac prudently reassessed the value of its residential and non-residential developments ..."

Very prudent of them.

LOL. I put this together last year
http://www.whocrashedtheeconomy.com/RhodesWaterside/

I need to update it - Adina on corner of Mary St & Rider Blvd is finished with some apartments occupied. The commercial space (5 River Blv) is finished, but no tenants - Now leasing if anyone is interested.

"And Rush in, but don't panic. We are building more." When I was down there a couple weeks ago, they are building 'Tandara' (Cnr Shoreline Dr & Sevier Av) and digging the foundations for Amarco (other Cnr of Shoreline Dr & Sevier Av)

I showed my brother the photos last year, but when he was in Sydney a few weeks back, took him on a tour. He said you really have to walk up and down the streets to grasp the scale of it.

And they are still building. . . Hopefully it will keep the food on the table for some tradies for a while yet.

 

[pepperoni]

LOL. I put this together last year
http://www.whocrashedtheeconomy.com/RhodesWaterside/

I need to update it - Adina on corner of Mary St & Rider Blvd is finished with some apartments occupied. The commercial space (5 River Blv) is finished, but no tenants - Now leasing if anyone is interested.

"And Rush in, but don't panic. We are building more." When I was down there a couple weeks ago, they are building 'Tandara' (Cnr Shoreline Dr & Sevier Av) and digging the foundations for Amarco (other Cnr of Shoreline Dr & Sevier Av)

I showed my brother the photos last year, but when he was in Sydney a few weeks back, took him on a tour. He said you really have to walk up and down the streets to grasp the scale of it.

And they are still building. . . Hopefully it will keep the food on the table for some tradies for a while yet.

Classic page - nice pics too.

Nobody beleives the undersupply of housing BS .. what IS lacking is affordable housing. One 4 unit reno in cremorne had to pay 60k to council for the loss of affordable housing.

There is tonnes of crap property in syd that should be affordable but cheap money and no tax leads to ridiculous prices.

Yet we keep cutting rates when there is any threat to the credit bubble and silly property prices.

 

[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.

hello,

people have been calling decreases, highs, lows, crashs, all sorts

its all still going fine i believe otherwise plenty of graphs would be appearing, nothing has been presented,

all the best man

thankyou
robots

 

[gfresh]

ABS Charts.. for June quarter.. 1) Weighted average of eight capital cities – Quarterly % change
2) Established House Prices, Quarterly % change – June quarter 2008

Hardly rising in Perth, Melbourne, Canberra?

APM Report: http://www.homepriceguide.com.au/media_release/APM_HousePriceSeries_JuneQ08.pdf

Residex reports also showing percentage falls in certain segments, in certain states. I am sure you have access to them robots.

These are your former bullish property reporters the property 'moguls' were using as a guide to see how much money they had made.

Not yet a "crashing" property market, but one were falls are definitely occurring in some areas, and certainly scope for them falling further.

 

[robots]

hello,

what do you care for?

now if you want to look at investment performance maybe all classes should be included in your review

all the best man, i wont be disappearing like other perma-bear compatriates that have come and gone form ASF (numbercruncher, kimosabi, realist) because things dont go a certain way

even the ghpc crew are retiring, its tuff out there

i'm down for the long run with the crew

thankyou
robots

 

[dhukka]

Robot's, the source of your optimism seems to be that because it hasn't happened yet it won't happen. I can't predict the future better than anyone else but I llike to weigh the evidence and have a go anyway. The graph below comes from the same abs data gfresh referred to. It may look good to you but just out of interests sake I'll tell you what I see.

Perth, Hobart and Canberra have rolled over. Sydney and Melbourne have flatlined. Brisbane, Adelaide and Darwin all pointing slightly upwards. Now given what we have seen play out in the US, what is currently happening in Europe coupled with tightening lending standards, the sharp contaction in housing finance, record low affordability and declining auction clearance rates domestically, what is the likely course of these prices over the next 12 - 18 months?

 

[CamKawa]

Robot's, the source of your optimism seems to be that because it hasn't happened yet it won't happen.

Or the source of his optimism is that he works in the construction industry and is ramping.

 

[Lucky_Country]

Housing shortage and strong employment should somewhat insulate AUS from a big housing downturn.
That being said if joblosses come quickly and interest rates stay at these highs it could get messy.

 

[kotim]

History says at the very least we can expect a 25% fall accross the board on average, like at least most other downturns, now of course some will suffer 40% downfals and others only a few percent, which ultimately will make up the average.

Why do people expect any different than what has happened continually in the past. What happens is people go out and invest in a 400 grand property with very little thought, Ask those same people to go and buy a business for 400 grand and watch the difference, yet in reality there is no difference. People get conned that property is the way to go, and like all things if your in early in the right place then no worries, however if you come along a little late in the game then bang, suddenly you realise your in a property market pyramid scheme.

What happens is very few people will really put in the work required to make a go of something that costs a lot of money.

History shows that renting and investing the left over money that one would normally pay in house loans into the share market will give greater returns, yet despite this knowledge hardly anyone does it, they get attracted to the need to OWN the property.

Those very same people are the ones who get their buts burnt when the downtimes come.

We are facing a real humdinger of a recession. We have ful employment as far as generally one accepts, husband and wives are both working to full time in most cases to pay the mortgage, not for the "better" life.

In 1998 on the sunshine coast I paid 150 grand for a house that in the mid 2000s had gone up to 450 grand give or take a bit. My repayments were a grand a month. on the same 430 grand loan repayments are about 3500 a month. my wages were 55 grand a year in early 2000's and now are at 75 grand gross. in other words my net pay has gone up 15 odd grand give or take yet the same new loan of 430 grand requries an extra 15-20 grand net.

I am an optimist at heart, yet I know we are in the beginning stages of a late 80's early 90s type recession whereby we went down and sideways for many years.

In the current house prices for the last couple of years my wife would have had to work full time to afford the 450 grand house., for what, nothing in reality other than inflated ego of some belief that I have to be financially succesful by doing what most others are doing.

How we have been sucked into the latest mcmansions these days. I grew up in a butter box type house in the 70's yet you tell a builder you want something like that these days and they laugh at you.

 

[robots]

History says at the very least we can expect a 25% fall accross the board on average, like at least most other downturns, now of course some will suffer 40% downfals and others only a few percent, which ultimately will make up the average.

History shows that renting and investing the left over money that one would normally pay in house loans into the share market will give greater returns, yet despite this knowledge hardly anyone does it, they get attracted to the need to OWN the property.

Those very same people are the ones who get their buts burnt when the downtimes come.

We are facing a real humdinger of a recession. We have ful employment as far as generally one accepts, husband and wives are both working to full time in most cases to pay the mortgage, not for the "better" life.

In 1998 on the sunshine coast I paid 150 grand for a house that in the mid 2000s had gone up to 450 grand give or take a bit. My repayments were a grand a month. on the same 430 grand loan repayments are about 3500 a month. my wages were 55 grand a year in early 2000's and now are at 75 grand gross. in other words my net pay has gone up 15 odd grand give or take yet the same new loan of 430 grand requries an extra 15-20 grand net.

I am an optimist at heart, yet I know we are in the beginning stages of a late 80's early 90s type recession whereby we went down and sideways for many years.

In the current house prices for the last couple of years my wife would have had to work full time to afford the 450 grand house., for what, nothing in reality other than inflated ego of some belief that I have to be financially succesful by doing what most others are doing.

How we have been sucked into the latest mcmansions these days. I grew up in a butter box type house in the 70's yet you tell a builder you want something like that these days and they laugh at you.

hello,

spot on kotim,

and one thing for sure, plenty of pensioners would love to be living in their own home at the moment,

paid it down, out of the asset test, thankyou very much

it has so many "features" as an investment just owning your home,

everybody has an interest in RE and mine is just as valid as any others CamKawa,

thankyou

robots

 

[Beej]

History shows that renting and investing the left over money that one would normally pay in house loans into the share market will give greater returns, yet despite this knowledge hardly anyone does it, they get attracted to the need to OWN the property.

Great in theory - but not so great practically. When you are raising a family, have kids in school etc etc, you don't want to have to be moving all the time whenever your landlord decides that your house is not for rent anymore. Also, many places don't allow pets, and you can't even redecorate or hang a few pictures on the wall. There is a certain intangible value in owning your own home that is not reflected in a spreadsheet.... That's why everyone wants their own home.

Also, *most* people (maybe not here!) would lack the financial discipline to invest the rent/mortgage difference consistently over 20-30 years into the stock market, and so would end up worse off. Add to this the fact that your family home is tax free, and the majority of people end up far better off financially as they go into retirement for having bought and paid off their own house.

In 1998 on the sunshine coast I paid 150 grand for a house that in the mid 2000s had gone up to 450 grand give or take a bit. My repayments were a grand a month. on the same 430 grand loan repayments are about 3500 a month. my wages were 55 grand a year in early 2000's and now are at 75 grand gross. in other words my net pay has gone up 15 odd grand give or take yet the same new loan of 430 grand requries an extra 15-20 grand net.

There's the problem - a 3x increase in less than 10 years in an area without the socio-economic "back bone" to really sustain that rate of increase. That's what happened in Sydney in the late 80s, and so prices pulled back about 25% after that late 80s boom yes. The rest of the country has in the last 10 years gone through the property cycle Sydney already did 10 years earlier.

In Sydney in the last 10 years on average prices have "only" roughly doubled, which represents roughly 7% pa growth - which is IMO much more sustainable. So while areas like SE Queensland and Perth could well see declines like you suggest, I don't think Sydney will. The west of SYdney is about done with it's declines now, and the better located area's have been essentially flat since 2004, plus there is little "mortgage stress" in those areas to boot, so they will pretty much stay where they are.

I am an optimist at heart, yet I know we are in the beginning stages of a late 80's early 90s type recession whereby we went down and sideways for many years.

Like I said, I think maybe some parts of Australia will see that cycle. I think Sydney won't see much more decline, but is likely to go sideways for a while yet. A lot hinges on the "the recession we haven't got yet but have convinced ourselves we have to have" panning out....

Cheers,

Beej

 

[robots]

Great in theory - but not so great practically. When you are raising a family, have kids in school etc etc, you don't want to have to be moving all the time whenever your landlord decides that your house is not for rent anymore. Also, many places don't allow pets, and you can't even redecorate or hang a few pictures on the wall. There is a certain intangible value in owning your own home that is not reflected in a spreadsheet.... That's why everyone wants their own home.

Also, *most* people (maybe not here!) would lack the financial discipline to invest the rent/mortgage difference consistently over 20-30 years into the stock market, and so would end up worse off. Add to this the fact that your family home is tax free, and the majority of people end up far better off financially as they go into retirement for having bought and paid off their own house.



There's the problem - a 3x increase in less than 10 years in an area without the socio-economic "back bone" to really sustain that rate of increase. That's what happened in Sydney in the late 80s, and so prices pulled back about 25% after that late 80s boom yes. The rest of the country has in the last 10 years gone through the property cycle Sydney already did 10 years earlier.

In Sydney in the last 10 years on average prices have "only" roughly doubled, which represents roughly 7% pa growth - which is IMO much more sustainable. So while areas like SE Queensland and Perth could well see declines like you suggest, I don't think Sydney will. The west of SYdney is about done with it's declines now, and the better located area's have been essentially flat since 2004, plus there is little "mortgage stress" in those areas to boot, so they will pretty much stay where they are.

Like I said, I think maybe some parts of Australia will see that cycle. I think Sydney won't see much more decline, but is likely to go sideways for a while yet. A lot hinges on the "the recession we haven't got yet but have convinced ourselves we have to have" panning out....

Cheers,

Beej

hello,

spot on Beej, you're a legend homes

lets all go and walk with hands in pockets, head down, the world is going to end the first words coming from our mouths,

life has never been better for all of us and why many would wish upon us a nasty situation is a surprise, is it really? tall poppy syndrome

thankyou

robots

 

[nioka]

History says at the very least we can expect a 25% fall accross the board on average, like at least most other downturns, now of course some will suffer 40% downfals and others only a few percent, which ultimately will make up the average.

Why do people expect any different than what has happened continually in the past. What happens is people go out and invest in a 400 grand property with very little thought, Ask those same people to go and buy a business for 400 grand and watch the difference, yet in reality there is no difference. People get conned that property is the way to go, and like all things if your in early in the right place then no worries, however if you come along a little late in the game then bang, suddenly you realise your in a property market pyramid scheme.

What happens is very few people will really put in the work required to make a go of something that costs a lot of money.

History shows that renting and investing the left over money that one would normally pay in house loans into the share market will give greater returns, yet despite this knowledge hardly anyone does it, they get attracted to the need to OWN the property. .

What you also have to take into account is the fact that share prices are falling/have fallen just as fast as house prices. There has been a lot of margin calls on shares but only a few margin calls/ mortgage sales on homes. As many people are being "kicked out" of their shareholding as are being "kicked out" of their homes.

 

[dhukka]

UK home prices in August recorded their biggest year over year declines since 1990 according to Nationwide. Home prices are off -11.5% from their peak in October 2007.

 

[numbercruncher]

So minus 11.5pc combined with purchase costs such as Stampduty, holding costs such as Interest, and selling costs such as RE fees , would have the average flipper down about 30pc in under a year ? Impressive ........

 

[Temjin]

So minus 11.5pc combined with purchase costs such as Stampduty, holding costs such as Interest, and selling costs such as RE fees , would have the average flipper down about 30pc in under a year ? Impressive ........

No, it wouldn't and never will happen in Australia. We are unique because we have China and lots of resources. House prices will double every 10 years with the 7.2% p.a. rule. Even if wage growth is only 4% per year, the average person will find some way to afford an average property that will eventually cost more than 100% of their income. They will find better jobs, a second job, cut expenses, and keep up the housing boom forever and ever.

 

[Temjin]

An interesting article on China.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/26/ccchina126.xml

Beijing swells dollar reserves through stealth



Last Updated: 3:24pm BST 26/08/2008

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Rule changes for commercial banks are acting as cover for exchange rate intervention, writes Ambrose Evans-Pritchard
China has resorted to stealth intervention in the currency markets to amass US dollars, using indirect means to hold down the yuan and ease the pain for its struggling exporters as the global slowdown engulfs the economy.
A study by HSBC's currency team in Asia has concluded that China's central bank is in effect forcing commercial banks to build up large dollar reserves, using them as arms-length proxies in a renewed campaign of exchange rate intervention.
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Beijing has raised the reserve requirement for banks five times since March, quickening the pace with two half-point rises in late June.
This is having major spill-over effects into the currency markets because banks in China have been required over the last year to hold extra reserves in dollars rather than yuan. The latest moves have lifted the mandatory deposit from 15pc to 17.5pc of total lending since March.
"China has used the pretext of reserve requirement hikes to help slow yuan appreciation. We estimate that the PBOC [central bank] intervened by about $49.6bn in June," said Daniel Hui, the bank's Asia strategist.
Beijing has also slashed the amount of foreign debt banks operating in China can hold. The effect is to oblige the banks to become net buyers of dollars, halting the flow of foreign "hot money".
Nobel economists warn we are not out of the woods
Dollar surge is not all good news for America Given the sheer scale of China's foreign reserves - now $1,800bn (£970bn) - any shift in its exchange policy now ripples around the globe. The covert buying may help to explain at least part of the explosive dollar rebound over recent weeks.
There is little doubt that the key driver behind the wild currency ructions this summer has been the blizzard of dire data from Britain, Europe, Japan and Australasia. The mounting danger of a full-fledged recession across the club of rich OECD nations appears to have caught the markets off guard.
The closely watched Dollar Index reached an all-time low in March. It crept up gradually in the early summer before smashing through resistance in July.
The world's currency system is swivelling on its axis. Central banks in Asia and Europe have stopped raising rates, and some have begun to cut aggressively. The Federal Reserve is no longer nakedly exposed. Indeed, investors are already starting to look ahead to the next round of Fed tightening.
The 18pc slide in oil prices from a peak of $147 a barrel in July has added juice to the dollar rally. Russia and the Middle East petro-powers tend to recycle a high proportion of their vast earnings from oil into the eurozone, either by purchasing European bonds or expensive imports.
A Bundesbank study found 40 cents of every dollar spent by eurozone countries on oil imports comes back again one way or another. The figure for the US is just 10 cents. This trade bias has given oil a new character as a sort of anti-dollar driving the currency markets.
Even so, the China effect is a key ingredient in the dollar comeback. Beijing's Politburo is clearly disturbed by the sudden downward turn in the economy as export markets freeze, and surging wage inflation in the country's manufacturing hubs eats away at profit margins.
More Ambrose Evans-Pritchard
More economics "They are now more worried about growth than overheating, and you are seeing that play out in the currency markets. There has been a remarkable change of view," said Simon Derrick, exchange rate chief at the Bank of New York Mellon.
China's PMI purchasing managers index fell below 50 for the first time in July, signalling an outright contraction in manufacturing output. Hong Kong's economy contracted 1.4pc in the second quarter. The Politburo has rushed through special rebates for textile producers now caught in a ferocious downturn.
Much of the clothing, footwear and furniture industry has been hit, leading to mass plant closures in the Pearl River Delta.
"During the first half of this year, about 67,000 small and medium-sized companies went bankrupt throughout China, leaving more than 20m people out of work," said the National Development and Reform Commission. "Bankruptcies of textile and spinning companies have numbered more than 10,000. Two thirds are on the brink of bankruptcy."
Last week's rebound on the Shanghai stock market stalled on fading hopes of a fiscal stimulus package. "It is unrealistic to expect the government to rescue the market," said Li Ka-shing, chairman of Hutchison. "Speculators should be very cautious now. The worst is not over in the global credit crisis."
Lehman Brothers warns of a risk that a housing slump and the 55pc equity crash since October could combine with a global downturn to set off a "vicious cycle". House prices have already fallen 18pc in Guangzhou and 9pc in Beijing. Prices are now falling in cities that make up over half China's population.

Now I wonder how we should be immune from all this?

 

[xoa]

UK home prices in August recorded their biggest year over year declines since 1990 according to Nationwide. Home prices are off -11.5% from their peak in October 2007.

If you factor in inflation, the real fall has been 15%. There's probably another 2 or so years of falls to come.

I wonder whatever happened to the UK's "housing shortage" and formerly low rental vacancy rates.