House prices to keep falling for years

[MrBurns]

hello,

hahahahahaha,

oh yeah Junior, its 24hr party people for the St kilda Festival, still flying through the sky man

thankyou
robots

Hey robots you'll love this -

http://www.youtube.com/watch?v=067FMmyrXmQ

 

[robots]

hello,

awesome flick MrBurns, you rollin' em like that?

classic, keep them coming bro, ohm ohm ohm ohm ohm ohm

thankyou
robots

 

[Lancelot]

I make my statements from experience.

What experience and for how long was this experience? Care to elaborate?

You insist everyone has links, so you must have them, so put up or shut up.

We need links and proof from people who insist on links and proof.

Demanding links as proof is a typical response from bears on Doom and Gloom forums, put up or shut up, no proof means it didn't happen.

I don't need to supply links, I never made the statement, you did, remember?

 

[robots]

hello,

great act at the St Kilda festival Junior were Koomurri, just on the street keeping the people moving

http://www.koomurri.com

got the latest CD: Koomurri Dreaming, big fan of the aboriginal group Yothu Yindi, with the all time classic Treaty becoming a massive rave/club/dancefloor hit in the UK believe it or not

paradise

thankyou
robots

 

[MrBurns]

Demanding links as proof is a typical response from bears on Doom and Gloom forums, put up or shut up, no proof means it didn't happen.
I don't need to supply links, I never made the statement, you did, remember?

You are the one demanding links from me therefore you are

typical response from bears on Doom and Gloom forums,

Once again you want link to a conversation ? Sorry cant help you.

But if you disagree supply links or proof, put up or shutup.

I've seen booms and busts, sorry cant supply a link to where I was at the time

 

[Lancelot]

But if you disagree supply links or proof, put up or shutup.

Thought as much, you've got nothing



And the first part of my question that you ignored?

Quote:
Originally Posted by MrBurns View Post
I make my statements from experience.

What experience and for how long was this experience? Care to elaborate?

 

[MrBurns]

Thought as much, you've got nothing
And the first part of my question that you ignored?

No. You have nothing, just an ability to bore, stop wasting peoples time.

 

[MrBurns]

hello,

awesome flick MrBurns, you rollin' em like that?

classic, keep them coming bro, ohm ohm ohm ohm ohm ohm

thankyou
robots

A bit smaller in recession times robots, padded out with sawdust too ........ cough hack hack hack !

 

[Nosferatu]

don't expect this to be the case in a few months time ~ shouldn't be too long before Krudd slashes immigration once unemployment starts rising

Immigration will be cut to some degree, but not too much I wouldn't think. Even if our population growth falls from the current 1.7% right back to 1%, that's still higher than the UK (0.3%) USA (0.9%) and Japan (negative).

didn't you say there a baby boom going on? I'm pretty sure the bubs won't be buying houses by themselves and am also pretty sure most bubs are planned for prior to the conception.

Increased family size often causes parents to look for larger accommodation.

where? as far as I know, the vast majority of people in Australia have a roof over their head whether renting or owner occupier. Just have a look at the rental vacancies and for sales on RE dot com

Of course the vast majority have a roof over their heads, but still our caravan parks are overflowing, public housing and crisis shelter have waiting lists a mile long. Heaps of people are choosing to stay with their parents for longer than they would like, and plenty of people are house sharing beyond what is desirable - sleeping on mate's sofas etc.

Why are you comparing apples with oranges????

I compared house prices in Australia with house prices in other countries. I don't see why you have a problem with that?

a demographic shift from renting to owning cannot be good inverstors... less renters = lower prices!

No... less renters = lower rents / higher vacancy rates. It does not mean lower house prices.

Whoops... what will happen if there are no vacancies anywhere in Australia? The doors will close and the economy will stall so I can only see vacancy rates improving in the future. That certainly won't be a factor in driving house prices up.

The low vacancy rates have been driving rents up. Eventually as rents move up and interest rates move down, property starts to become cash flow positive, which encourages investors to buy investment properties. This in turn pushes up the price of housing, but also increases the supply of rentals, which keeps a lid on rents. So the market is self balancing to a degree, however government policies such as ramping up immigration while stifling supply (though high taxes and poor land release) can cause price spikes such as we see today across much of Australia.

as far as I know, $1 still only buys $1... apples and oranges again. Foreign investors are not a fulcrum that the market swings on...

No... just one point from the many I put forward. At the end of the day, they all add up. I'm not saying that any one of the points by itself is enough. No singular fulcrums.

could be plausible but with the doom and gloom in the economy I doubt it. Stocks have been going down for over a year now so how can you explain the increasing number of properties on the market and the lack of interest from buyers???

Simple - fear, uncertainty and doubt (making this a great time to buy!).

and 20% deposit also on the way too I believe

Lenders are still doing 97% loans, including the big 4 banks. Perhaps this will change but for now credit is still available (to the right people).

you appear to assume that the stock market is never going to recover... under your outlined scenario, what happens when global economies start recovering and money starts coming out the property market???

I don't think property will suffer when the global economies start to recover. Remember, I'm not expecting any strong growth for another couple of years. I think the next two years represent an excellent buying opportunity. A good time to pick up a bargain (especially at the top-end), lock in low interest rates, and wait for the inevitable boom in a few years time.

Cheers,

Shadow.

 

[Lancelot]

No. You have nothing, just an ability to bore, stop wasting peoples time.

That's the ticket, make a comment, produce nothing to back it up and instead of admitting you are wrong just wriggle wriggle wriggle

And you accuse me of wasting peoples time LOL

 

[singlefished]

Immigration will be cut to some degree, but not too much I wouldn't think. Even if our population growth falls from the current 1.7% right back to 1%, that's still higher than the UK (0.3%) USA (0.9%) and Japan (negative).

Immigration over the last year hasn't stopped prices dropping so with even less immigration and more unemployment what shaky support there currently is will be gone.

Did you see ABC news tonight with Alan Kohler correlating unemployment with current advertised employment vacancies on the back of employment advertising figures falling for the 9th straight month in a row? It paints a nasty picture for the short term future....

Increased family size often causes parents to look for larger accommodation.

re: The trend towards ppl/household.... you have countered this in your response below.... and as you note, families and friends will undoubtedly pull together during these tough times.... and i'm sorry to say but it will undoubtedly stay like this until the global economy starts seriously ticking up again and the debt bubble has somewhat deflated.

Of course the vast majority have a roof over their heads, but still our caravan parks are overflowing, public housing and crisis shelter have waiting lists a mile long. Heaps of people are choosing to stay with their parents for longer than they would like, and plenty of people are house sharing beyond what is desirable - sleeping on mate's sofas etc.

...see above

I compared house prices in Australia with house prices in other countries. I don't see why you have a problem with that?

You cannot really compare paying down a median property in Australia with paying down a median property elsewhere in the world. The median Aussie property is probably 99.9% paid for with Aussie $$$$ generated from the local market.... this is why median Aussie house prices are compared to median Aussie salaries and not median US/UK/Japan salaries... The only way your arguement stands is if every immigrant or overseas investor is FULLY cashed up and ready to buy without having to consider their Aussie $$$$ earning potential within the local workforce.

No... less renters = lower rents / higher vacancy rates. It does not mean lower house prices.

sorry ~ I meant to say "lower returns"

The low vacancy rates have been driving rents up. Eventually as rents move up and interest rates move down, property starts to become cash flow positive, which encourages investors to buy investment properties. This in turn pushes up the price of housing, but also increases the supply of rentals, which keeps a lid on rents. So the market is self balancing to a degree, however government policies such as ramping up immigration while stifling supply (though high taxes and poor land release) can cause price spikes such as we see today across much of Australia.

This analysis works when our commodities dependant economy works well... when our economy is stuffed because nobody wants to buy our coal or our iron ore then the reverse takes effect and your cash flow positive properties will decline in value.

Can you honestly see our economy shifting away from it's reliance on commodities anytime in the near future??? What's going to drive the Australian economy of the future ~ if you can work it out then that's where you should really be investing your hard earned $$$$ and forget about property as a safe haven investment in the short term.

No... just one point from the many I put forward. At the end of the day, they all add up. I'm not saying that any one of the points by itself is enough. No singular fulcrums.

Fair enough, but you don't seem to hold much stock in the downside risks. How will property hold up if this downturn last for several years or even a decade? In 10 years time I'm sure you wont be patting yourself on the back like the property investors of old who, many of which, made hay while the sun shone during the years of economic expansion and cheap easy debt for the masses...

Simple - fear, uncertainty and doubt (making this a great time to buy!).

Not such a smart move however if you lose your job and your primary source of income in 6 months time...

I don't think property will suffer when the global economies start to recover. Remember, I'm not expecting any strong growth for another couple of years. I think the next two years represent an excellent buying opportunity. A good time to pick up a bargain (especially at the top-end), lock in low interest rates, and wait for the inevitable boom in a few years time.

The boom may not quite be as large as you believe it will be....

For the boom times of the past to return, you will need to see a substantial decrease in current property prices relative to income down to a ratio of say 4.5:1 over the medium term and then a subsequent increase in values in the long term back up to our current almost unservicable 7:1 ratio ~ that's the boat you're trying to buy a ticket for but this vessel is currently sinking and I don't think our government can bail fast enough to keep it afloat...

 

[MrBurns]

That's the ticket, make a comment, produce nothing to back it up and instead of admitting you are wrong just wriggle wriggle wriggle
And you accuse me of wasting peoples time LOL

I've made no comments that required links or any particular proof, but you just drone on ad nauseum.

You're living under an illusion that you're right but you're not so stop trying to engage me in pointless discussion about what you falsely believe to be correct.

You are wrong , you really are making a fool of yourself LOL

 

[Nosferatu]

Immigration over the last year hasn't stopped prices dropping so with even less immigration and more unemployment what shaky support there currently is will be gone.

I think the high immigration levels over the past few years have increased demand for property, meaning that prices grew more strongly than would be the case without high immigration.

Did you see ABC news tonight with Alan Kohler correlating unemployment with current advertised employment vacancies on the back of employment advertising figures falling for the 9th straight month in a row? It paints a nasty picture for the short term future....

This is why I'm not expecting much growth in the short term. I expect it will be around 2011 before we see strong growth again. In the meantime I expect moderate growth in Sydney (where prices are already down 20% from the peak) however I expect those cities that grew by 20%+ in 2007 will continue to slide, probably down 15-20% in real terms over a few years. And Perth will fall of course.

re: The trend towards ppl/household.... you have countered this in your response below.... and as you note, families and friends will undoubtedly pull together during these tough times.... and i'm sorry to say but it will undoubtedly stay like this until the global economy starts seriously ticking up again and the debt bubble has somewhat deflated.

I don't think we can say 'undoubtedly' about anything in this climate. I do know that a lot of FHBs are actually doing the reverse right now, and lowering their density due to the FHOG and low interest rates. FHBs are very active at the lower end of the market. How long before this filters through to the wider property market? As I say, probably around 2011.

You cannot really compare paying down a median property in Australia with paying down a median property elsewhere in the world.

Median house price to median income is a very blunt tool. This is how the Demographia survey works, and this survey has been thoroughly debunked by many people on many occasions. There are massive flaws in the Demographia survey. It fails to consider the following factors:

- Disposable/discretionary income
- Employment rate
- General cost of living
- Interest rates
- Rental yield
- Marginal tax rates
- Tax incentives such as negative gearing and FHOG
- Land/Block size
- Dwelling size and quality
- Proximity to transport and infrastructure
- Currency exchange rates
- Economic and political stability
- Home ownership rates
- Urbanisation
- Demographics (quite amusing that the Demographia survey ignores demographics!)

Of course, no survey covers all these points, so all surveys are in some respects comparing apples with oranges. This is why it is a good idea to examine as many surveys as possible, since they all tackle the issue from a different angle.

The main issue with the Demographia survey, is that it only compares Australia with five other countries, yet the media proceeds to claim that Australia is the most expensive in the world. The survey conveniently ignores all the cities in the world with much higher house prices than Australia. For example Moscow, Tokyo, Oslo, Seoul, Hong Kong, Geneva, Zurich, Milan, Paris, Singapore, Monaco...

Here are some alternative studies...

GlobalProperty Most Expensive Cities 2008 (apartment price per sqm):
http://www.globalpropertyguide.com/investm...-cities-in-2008
Sydney - Number 13: US$7,085 per sqm

Mercer Most Expensive Cities (cost of living, including housing)
http://www.mercer.com/costofliving
Sydney - Number 21

CityMayors Expensive Cities
http://www.citymayors.com/economics/expensive_cities2.html
Sydney - Number 24

Knight Frank Survey (prime residential property)
http://www.finfacts.com/irelandbusinessnew..._10010019.shtml
Sydney - Number 8: EU$13,100 per sqm

Overseas Property Mall Survey
http://www.overseaspropertymall.com/proper...tional-markets/
Average home values for select 2,200 square foot single-family dwellings with four bedrooms...
Tokyo - $785,818
Sydney - $683,109

Aneki (most expensive countries to live in)
http://www.aneki.com/expensive.html
Australia - Not shown in the top 20

Most expensive countries in the world
http://www.associatedcontent.com/article/1...the.html?page=2
Australia - Not in the list

Most expensive rental markets
http://www.forbes.com/2008/02/11/properties-world-rent-forbeslife-cx_mw_0212realestate.html
Australia - Not in the list

Can you honestly see our economy shifting away from it's reliance on commodities anytime in the near future??? What's going to drive the Australian economy of the future ~ if you can work it out then that's where you should really be investing your hard earned $$$$ and forget about property as a safe haven investment in the short term.

There will always be demand for commodities, however I think the future for Australia may lie in alternative energy. I think this is where we will see the next global 'bubble' with Australia leading the way.

Fair enough, but you don't seem to hold much stock in the downside risks. How will property hold up if this downturn last for several years or even a decade? In 10 years time I'm sure you wont be patting yourself on the back like the property investors of old who, many of which, made hay while the sun shone during the years of economic expansion and cheap easy debt for the masses...

I guess I'm just not that pessimistic. If we all approached investing with the mindset that the worst possible outcome is also the most likely one, then we'd never invest. If this downturn really does last 10 years, then we're all equally screwed!

Not such a smart move however if you lose your job and your primary source of income in 6 months time...

I'll try not to.

The boom may not quite be as large as you believe it will be....

For the boom times of the past to return, you will need to see a substantial decrease in current property prices relative to income down to a ratio of say 4.5:1 over the medium term and then a subsequent increase in values in the long term back up to our current almost unservicable 7:1 ratio ~ that's the boat you're trying to buy a ticket for but this vessel is currently sinking and I don't think our government can bail fast enough to keep it afloat...

The current ratio is not 'almost unservicable'. Most Australians are well ahead on loan repayments. Default rates are extremely low. As interest rates continue to fall, servicibility will improve even more. The RBA has some research that shows people today have more disposable income after loan repayments than at any time in the past! If debt really was so unservicable today we wouldn't see so many iPods, Plasmas and other discretionary consumables in every house. The vast majority are not struggling at all with a 7:1 ratio.

Cheers,

Shadow.

 

[numbercruncher]

There will always be demand for commodities, however I think the future for Australia may lie in alternative energy. I think this is where we will see the next global 'bubble' with Australia leading the way.

Seriously .....


Australia leading the way


This thread is getting more and more bizarre ....


And where did all you new permabulls come from, recruiting each other from somersoft ?

" House prices to keep falling for years " - yup seems unavoidable to me .....

 

[Lancelot]

You are wrong , you really are making a fool of yourself LOL

Wrong? I've said nothing to be wrong about.

I'm not the one who said I have a friend in the know who said the US has imploded and the world is ending and holding that up as some sort of statement of fact.

That was you



Your comment (made up, who knows?) shows who the real fool is.

Thats it, No more from me

 

[nomore4s]

There will always be demand for commodities, however I think the future for Australia may lie in alternative energy. I think this is where we will see the next global 'bubble' with Australia leading the way.

lol, the current bubble hasn't finished bursting yet and we are yet to feel the full effects or even fully understand the consequences and you are already talking about the next bubble

I guess I'm just not that pessimistic. If we all approached investing with the mindset that the worst possible outcome is also the most likely one, then we'd never invest. If this downturn really does last 10 years, then we're all equally screwed!

No people who ingore the risks will be screwed, people who prepared for the worst will be making money. Good investing is about managing risk and in the current environment the risks are higher than they have been in decades.

Not such a smart move however if you lose your job and your primary source of income in 6 months time...

I'll try not to.

So will everyone else but unfortunately for many people they will lose thier jobs.

 

[MrBurns]

Wrong? I've said nothing to be wrong about.
I'm not the one who said I have a friend in the know who said the US has imploded and the world is ending and holding that up as some sort of statement of fact.
That was you

Your comment (made up, who knows?) shows who the real fool is.
Thats it, No more from me

I didnt say that at all, so who's the fool ???

You said I should back up a conversation I had with links and proof ............ROFL

I said .............oh go back and read it or get someone to explain it to you.

 

[gfresh]

This is why I'm not expecting much growth in the short term. I expect it will be around 2011 before we see strong growth again. In the meantime I expect moderate growth in Sydney (where prices are already down 20% from the peak) however I expect those cities that grew by 20%+ in 2007 will continue to slide, probably down 15-20% in real terms over a few years. And Perth will fall of course.

So that includes Melbourne, Brisbane, Perth, Darwin.. which leaves Sydney which is nice for you Look, there is always going to be a difference of opinion rooted in the area in which you live. It seems those in Sydney are more positive as they have had several years (in general terms, acknowledging some areas have still done well), of flat prices. This has probably given wages time to adjust to the large changes in prices they experienced at the start of the decade. It also has a large migrant population which is always growing. But to be honest, it's hard to know the feel of the place presently, not having lived there.

I'm on the Goldcoast, and I can't see any signs of a turnaround at the moment, and it's taking a big hit from interstate investors pulling out optional investments and the locals not having enough earnings to take their place. That'll take a while to sort out, but yes, eventually it will.

FHBs are very active at the lower end of the market. How long before this filters through to the wider property market? As I say, probably around 2011.

Hard to say definitively.. Doesn't seem to be much activity at the top of the market, and it may be several years, maybe a decade before that wealth is replaced by real corporate growth, expansion, and investment which that market feeds off to truly boom and make big bucks.

What the uber-bulls maybe don't realise is there has been a monumental deleveraging of wealth that was generated on funny money built up over a decade (credit derivatives). But that sort of credit market has changed forever.. The way in which large credit is generated by financial institutions to fund such massive excesses out simply isn't there until the next invention is concocted, and dare I say it, we pay off the last one properly.

We haven't even reached the true bottom of the economic cycle, and you're talking about the top of the market booming in 2011... and they're the ones that rely most on the economy booming, big bonuses, big company profits, and plenty of investment opportunities that are paying big returns. That's a way off IMO.

Here are some alternative studies...

Most of these seem to be talking about adjusted dollars in different countries, and cost per sq.m. Whereas the other studies go on wealth of people that live in the cities, and what they earn (in local currency) vs what places cost to buy or rent. I am not sure which is the best, but the later seems like the more sensible measure to me.

There will always be demand for commodities, however I think the future for Australia may lie in alternative energy. I think this is where we will see the next global 'bubble' with Australia leading the way.

Agreed.. in 5 years time everybody will be going nuts over every two-bob company that says they have some miracle cure for the world's problems

I guess I'm just not that pessimistic. If we all approached investing with the mindset that the worst possible outcome is also the most likely one, then we'd never invest. If this downturn really does last 10 years, then we're all equally screwed!

I think it will simply be like the same as the any of the other major downturns throughout the decades. Worst is last year, this year, and possibly the start of next. Greatest risk for property investors. Beyond that it will simply be fairly flat growth in housing, possibly rises for those that pick the right segments, and some going backwards in real-terms for some 2-5 years. Then in 2015 we'll get the next big boom, house prices rising 10% a year or however much.. followed by 2020 the next big collapse, etc!

 

[Beej]

So will everyone else but unfortunately for many people they will lose thier jobs.

But the vast majority of people will not!

Long term, structural unemployment, which is really the issue that would cause people to default on a mortgage and lose their house, is a problem (when it arises) that usually effects the young (lower and unskilled school leavers etc), and those close to retirement, in far greater proportions than the rest. The young don't tend to own houses at all, and the older workers are more likely to be in the 1/3 of households that are owned outright.

Look at what happened in 90/91/92 when unemployment rose quickly and peaked at over 10% - during that period house prices actually stabalised and started to rise again - especially in Sydney. Default rates were not that high (they were higher I believe during 89/90 when interest rates peaked at 17%).

Bottom line, IMO you are significantly over-estimating the potential impact of rising unemployment on the property market. It has an impact, yes, but nowhere near as great as many here are suggesting.

What the uber-bulls maybe don't realise is there has been a monumental deleveraging of wealth that was generated on funny money built up over a decade (credit derivatives). But that sort of credit market has changed forever.. The way in which large credit is generated by financial institutions to fund such massive excesses out simply isn't there until the next invention is concocted, and dare I say it, we pay off the last one properly.

This really sounds a bit out there! I remember a few weeks ago someone at a BBQ I was at said exactly the same thing - when I asked them to explain further they didn't even actualyl know what a credit derivative product was or one worked, let alone how this was actually effecting the australian financial system. To me a lot of these theories sound like internet generated urban myths akin with the stuff going around about Y2K that motivated some folks to stock-pile baked beans and shotgun ammo......

However, to give you the benefit of the doubt (as the rest of your post is fairly sensible), can you explain exactly how you see that the "funny money based credit derivatives market" drove profits, jobs, bonuses etc directly of players (individuals, corporations) based in say Sydney and Melbourne?

My view: The de-leveraging you speak off is I believe more of an issue in the US and the UK, and less of an issue here in Australia - hence the reason we don't have the same credit market/banking issues here that they have right now, just the impacts of them with respect to *some* aspects of our finance markets which in the past have relied on foreign sources. Eg, companies now having trouble rolling over debt that was based on a lot of internationally sourced funding, plus higher cost of funding from such o/s sources. IMO This combined with the broader economic impact of slowing demand for our exports from trading partners are the root causes of the direct impact we are experiencing of the GFC here in Oz.

Cheers,

Beej

 

[Beej]

I'm on the Goldcoast, and I can't see any signs of a turnaround at the moment, and it's taking a big hit from interstate investors pulling out optional investments and the locals not having enough earnings to take their place. That'll take a while to sort out, but yes, eventually it will.

At the risk of undermining my "perma-bull" status here on the thread, I would add that it does seem to be the case that the Gold Coast market is under particular pressure. A guy I know is currently trying to sell a canal-side apartment up there, it's been on the market for months and really has had hardly anyone look at it, no offers etc, and he has reduced the price significantly and still no real action.

This is a huge contrast to and the complete opposite to my experience selling 2 properties in Sydney in Nov/Dec last year. I would also add that based on the rent he is getting for the place vs the asking price, the rental return (at somewhere around 3/3.5%) is also way below typical rental returns in Sydney right now (which are more lile 4-5 and even up to 6%).

Cheers,

Beej