House prices to keep falling for years

[Lucky_Country]

Now that the big intrest rate cuts are over and any futher intrest rate cuts will not be passed on in full to the consumer from the banks this should put pressure on the housing market.

Rising unemployment and an increase in defaults will drive house prices down as forced sellers look to recover what they can.

Early 2010 should see low house prices high unemployment and low intrest rates

Easy pickings !!!!

 

[kincella]

Lucky_Country....I would not bet on your chances.... unless you are into the 1 million plus market....but if you are like most, or a FHB then I think there might be a floor on the prices in the 300-500k bracket
you will get a lot of competition from cashed up investors, dyo superfunds and former fhb now upgrading....
some people will never go back to the stockmarket, the term deposit rates are not attractive....bricks and mortar is still the safest...if you are prudent and conservative about it...
the low interest rates make props very attractive
apart from that...there are plenty of affordable props out there now, and I can always find one when I am looking, regardless if the market is high or low

good luck anyway....whether a buyer or renter

 

[Glen48]

Why St. Kilda is worth more than Mayfair London:
From Fat Prophets
Debt, the great leveller

Aristocratic lineage and prestigious titles may afford a certain level of privilege for the so endowed. But such intangibles are no defense for the excessively geared in a deleveraging environment, where all are treated equally. This point is aptly illustrated by the experience of the Duke of Westminster, reported below.

Britain's wealthiest landowner, the Duke of Westminster, is in advanced talks with his bankers to prevent his £2bn property fund business breaching bank covenants. Pressure on the multibillionaire duke has intensified with investors in his funds suggesting that his property managers failed to heed advice to reduce borrowings 18 months ago, ahead of the collapse in property values.

The developments mark a serious threat to the duke's private investment company, Grosvenor, and underline how the property downturn is embroiling the country's wealthiest aristocrats.

The duke inherited one of the most valuable portfolios of property holdings on Earth, centred on Mayfair in London. He has maintained the family tradition of never selling any buildings. But 10 years ago, Grosvenor started borrowing money and invited international institutions and wealthy families to co-invest in shopping centres, London offices and residential assets.

"Will the duke go bust? No," said one property insider. "Is he in trouble? Yes. He has borrowed money and bought badly. Anyone running funds is having a terrible time."

A measure of how Grosvenor is suffering through the downturn is that it was recently outbid in its own backyard, when Qatari money won the race to buy the United States Embassy building on Grosvenor Square.

 

[UBIQUITOUS]

Lucky_Country....I would not bet on your chances.... unless you are into the 1 million plus market....but if you are like most, or a FHB then I think there might be a floor on the prices in the 300-500k bracket
you will get a lot of competition from cashed up investors, dyo superfunds and former fhb now upgrading....
some people will never go back to the stockmarket, the term deposit rates are not attractive....bricks and mortar is still the safest...if you are prudent and conservative about it...
the low interest rates make props very attractive
apart from that...there are plenty of affordable props out there now, and I can always find one when I am looking, regardless if the market is high or low

good luck anyway....whether a buyer or renter

Meanwhile....outside of your dreamworld and in reality, from the front page of 'The Age':


Japan plunges into depression

• Peter Martin
• February 17, 2009

AUSTRALIA'S biggest and most reliable customer, Japan, has plunged into depression, with federal Treasurer Wayne Swan now warning of the worst global downturn "in our lifetimes".

Japan's economy shrank an annualised 12.7 per cent over the December quarter, its worst result since the 1974 oil shock.

Japan is by far Australia's biggest export customer, accounting for one in every five container ships that leave Australia's shores.

The new figures put it among the worst-hit casualties of the global crisis.
The annualised contraction of 12.7 per cent, or 3.3 per cent in quarterly terms, dwarfs those of the United States and Europe and is much worse than anything that happened to Japan during its so-called "lost decade" of recession in the 1990s.

The collapse in growth fits the profile of a depression ”” a deep recession in which annual GDP falls by 10 per cent or more.

Australia's other big customer, China, has had its growth rate almost halved from 13 to 6.8 per cent.
"These figures reveal just how serious the global recession is becoming," Mr Swan said. "They follow on the heels of the worst contraction in the euro area since records began in 1980.
"The last three months of 2008 are likely to have seen the sharpest synchronised downturn in the global economy in our lifetimes.
"It's is a sobering backdrop for Australia as we seek to do everything we can to cushion the impact the global downturn will have here," Mr Swan said.
A 14 per cent collapse in exports in the December quarter led Japan's plunge.
Toyota, Sony and Hitachi are forecasting losses and have begun firing thousands of workers, heightening the risk that a slump in domestic spending will deepen the downturn.
"At one time, it looked like Japan had escaped the brunt of the financial crisis," said Hideo Kumano, chief economist for the Dai-Ichi Life Research Institute. "This shows how feeble Japan's economic fundamentals were in the first place."
Access Economics director Chris Richardson said Japan's plight showed there was "no place for Australia to hide".
"It is true that Japan's statistics are more dodgy and more volatile than those of other large nations, but this fits what know about the reach of the crisis," Mr Richardson said. "It is very big and very nasty.
"It is impossible for Australia to avoid a recession; perhaps not absolutely impossible, but it is incredibly hard for Australia to hold against the tide, and the tide pulling us down is getting stronger every day.
"This is confirmation of what's facing us," said ANZ chief economist Saul Eslake. "Japan is a more important and more diversified export market than China.
"Australian GDP per person is already running backwards. What happens over the next few months will determine how bad things get."
The impact of the downturn in Asia was felt in Albury yesterday when 400 workers at cars parts company Drivetrain Systems International were stood down without pay.
The business was hit hard by last month's collapse of South Korean vehicle manufacturer SsangYong, a major customer.
Finance figures released on Monday suggest that Australians resumed borrowing in December in the wake of a further interest rate cut and the Government's $8.7 billion fiscal stimulus hand-outs.
New lending commitments climbed 3.5 per cent. All forms of personal lending increased, including a solid 24 per cent lift in loans to buy new cars. But the bulk of the new loans were for refinancing or for debt consolidation. Lending remains 27 per cent down over the year.
.adSpot-textBox {clear:both;background:#fff;margin:0;padding:0;border:none;width:420px;float:right;} .adSpot-textBox h5 {background-color:#ffff;border:1px solid #ffff;color:#A1A1A1;font-size:9px;margin:0;padding:0}[/quote]

 

[kincella]

ubiquitous....Japan has been a basket case since the 90's.....the worst economic performer for the past 2 decades....is anyone surprised Japan is taking a bigger hit now ??? or performing in line with the rest of the world...and starting from a lower base.....

I am not a dreamer...but a realist........lets see in a few years time... then look back on hindsight
ps ....I do not take much notice of the media

 

[investorpaul]

People are jumping into the house market now (mainly FHB) but they risk being burnt and burnt badly.

A few months ago people were saying we had seen the worst of it, then a few months later they were proven wrong but said Now we have really seen the worst of it, then a few months later it was even worse and most of those people have kept their mouths shut this time. The fact of the matter it no one knows how bad the economy will get. Japan has been smashed and that has huge repercussions for Australia given their status as a major trading partner.

How does this affect FHB? Well there is no point getting a a FHB bonus of up to $24k if in12 months time your property is worth $50k less. I believe many FHB are jumping in now because if you look at the figures as they are printed:

Interest rates for borrowing: 5-6%
Unemployment: Under 5%

It looks like an ideal time to borrow and buy. But if the scenario changes and unemployment hits 10%, it doesnt matter how low interest rates are people are going to be in trouble and by then the government will have run out of handouts and they will be left on their own.

 

[kincella]

housing for 7000 people required now...or 1800 houses..for those displaced ... lost their homes in the fires...I would be guessing it will take more than a year to find out what the new building requirements will be, securing a builder, and then having it completed....
most are wanting to stay within a close proximity to the old place.....
in the meantime it will put a strain on the rental market....
anyone with a vacant house, or house nearing completion to help out ???

think they were offered army barracks for temp accommodation..but declined

 

[gfresh]

Time for some bad news to even things up a little:

Bad debts not a problem for individuals? even ANZ thinks it's only a matter of time. When does the FHB effect end? mid-year eh...

Bad debts are spreading from companies to ''higher-risk'' individuals, Smith said. In the second half of this year and into 2010, personal customers will begin defaulting as unemployment rises, he added.

http://business.theage.com.au/business/bad-debts-to-spread-anzs-smith-says-20090220-8del.html

What was it? Mining only plays a small part in our economy? Try this..

"The lost export revenue from cutting iron ore prices by a third and coal prices by a half would be equivalent to 3.8 per cent of GDP," said an ABN Amro economist, Kieran Davies.

http://www.brisbanetimes.com.au/articles/2009/02/18/1234632930104.html

but of course house prices and the economy are not connected :

QLD to slip into large deficit.. go QLD! fingers really on the pulse there...

Treasurer Andrew Fraser today announced the Queensland budget would have a $1.6 billion deficit in June 2009 - a $2 billion drop since the last estimate in December 2008, when he predicted the economy would have a slim surplus of $54 million.

http://www.brisbanetimes.com.au/new...-hit-7-per-cent/2009/02/20/1234633031856.html

House prices to boom... anytime now .. sure.

 

[Temjin]

ps ....I do not take much notice of the media

Well, it just happens that the news on Japan on technical depression has been out among the investment communities for weeks. The mainstream media took a while to pass along the message. In fact, they haven't even reported HOW BAD some of the Euro countries are and how close some of them are to national bankruptcy. A few of them are in similar situation, that is, in "technical depression".

 

[numbercruncher]

RUTHLESS property investors are swooping on Victoria fires victims to buy their devastated land.

Disgusted real estate agents are fielding calls from predators seeking cheap "scorched land for sale".

http://www.news.com.au/story/0,27574,25081068-1243,00.html


Just another piece of not surprising news ..... must take a bit to disgust a RE agent hey ?

 

[Aussiejeff]

Well, it just happens that the news on Japan on technical depression has been out among the investment communities for weeks. The mainstream media took a while to pass along the message. In fact, they haven't even reported HOW BAD some of the Euro countries are and how close some of them are to national bankruptcy. A few of them are in similar situation, that is, in "technical depression".

As far as world economics is concerned, I would class the greater % of Oz media as a pig-ignorant bunch of NIMBY's.

IMO we are at a tipping point. The news out of the US, Europe, Japan et all just keeps snowballing down the slippery slope. At the first hint that the euphoria & confidence in BO's Grande Rescue Package has vaporised, just watch the panic REALLY set in to stock and housing markets.

We ain't seen nuttin' yet, ASF'ers.

 

[kincella]

reply to Aussiejeff....just wondering are you a home owner or not ???
I find it unusual for homeowners to look forward to the price of their home going down.....on the other hand..if they are would be investors in an IP, or a fhb then I can understand, wanting the price to go down..
just wondering where you are coming from....I may have wrongly asumed you were a home owner

 

[explod]

reply to Aussiejeff....just wondering are you a home owner or not ???
I find it unusual for homeowners to look forward to the price of their home going down.....on the other hand..if they are would be investors in an IP, or a fhb then I can understand, wanting the price to go down..
just wondering where you are coming from....I may have wrongly asumed you were a home owner

Wanting the price to go up or down will make not an iota of difference. Aussie is just pointing out the facts from his take.
I agree with his stance. One lives in a home for the longer term but on investments one ignores the facts at ones peril. It is indeed time to beware for awhile IMVHO.

The news everyday is flooded with Stimulas packages and re packages just to make us feel ok. What is the peril the scares the bejesus out of them.

Well worth serious contemplation.

 

[Aussiejeff]

reply to Aussiejeff....just wondering are you a home owner or not ???
I find it unusual for homeowners to look forward to the price of their home going down.....on the other hand..if they are would be investors in an IP, or a fhb then I can understand, wanting the price to go down..
just wondering where you are coming from....I may have wrongly asumed you were a home owner

We are renting a small house from my wife's brother. He bought it for us when we moved from another rental house in Sydney in 2004.

We are luckier than most renters in that he has never raised the rent from day one and he has stated he has no intention of doing so in the foreseeable future (my wife helps out in his local business).

We have owned a PPOR house on three occasions since 1979.

Rochedale, Brisbane, 1979-1984
Westfield, Perth 1984-1996
Roleystone, Perth 1996-2004

BTW, I don't look forward to the price falling, either. My son in Perth owns an investment unit he can't sell - at a significantly reduced price - and owes around $400,000 on his PPOR. That said, I can only call it how I see it and based on how my son & mates in Perth, south Sydney and Brisbane are coping with their NO sales at ever reducing prices.

For anyone who is experiencing the exact opposite and is selling easily at higher profits, making a motza - I say well, good luck to ya's (chiz, Robots )!

But my overall impression is that the initial flood of FHB's into the market WILL subside. After all, once they have bought their first home, that's it. They will no longer be FHB'ers. Also, they will likely not be in any hurry at all to sell in 12 months time. So while the OZ housing market is just barely holding on by the fingertips of FHB'ers atm, what is going to happen in 12 mths time when the number of FHB applications will have dropped back to a relative trickle yet the % of homes still on the market for sale will likely be climbing?

How can prices stay up under those conditions?


Chiz,

aj

 

[Beej]

If I worried too much and reacted continually to bad economic news out of Japan I would never have invested in any Aussie properties or shares since the early 90s!!! Gee that would have worked out well wouldn't it??? Same even for the US - imagine if you had dumped all your aussie share-holdings during 2001 when they had their last technical recession? Of course the internet (well the web anyway) was not around in the early 90s so there was no easy vehicle for the common folk to rapidly spread fear and economic voo-doo around and scare each other....

So not ignorant of economic goings on around the world - but I pay far more attention to the local economy that I am actually investing in. Of course the situation in many western economies is very serious right now - but still, how are we fairing here in AU? Whilst we will of course be impacted, it is not a certainty that we have to suffer all the same woes for the same reasons......

Take subprime lending in the US for example - the cause of this whole current mess - we don't have that problem locally in our economy - phew! (And at the end of the day that is why US house prices have crashed - just check out their mortgage default rate - CAUSING there recession, not because of it). Given that even through recession our house prices will hold up OK just as they have in the past IMO. Add to this the fact that our government and central bank are hell bent on cushioning the local economy as much as they possibly can, and they have been able to react here ahead of the curve rather than after it as in the US and UK, this also means there is a good chance that things will not get as bad here as they have in other countries- but we shall see - place your bets!!

But my overall impression is that the initial flood of FHB's into the market WILL subside. After all, once they have bought their first home, that's it. They will no longer be FHB'ers. Also, they will likely not be in any hurry at all to sell in 12 months time. So while the OZ housing market is just barely holding on by the fingertips of FHB'ers atm, what is going to happen in 12 mths time when the number of FHB applications will have dropped back to a relative trickle yet the % of homes still on the market for sale will likely be climbing?

FHBs are always around - it's only a question of numbers. There is so much pent up demand that when things look good (as now) they are flooding into the market. The effects of this runs for YEARS! It's not fleeting - it set's off a whole chain reaction that starts at the FHB end of the market and then flows all the way through. You are kidding yourself if you think the current FHB activity will have no other effects through the entire market.

Cheers,

Beej

 

[kincella]

its not just fhb...imo...unless they can really afford 600,000 in Sydney....

I am sorry but I doubt it....thought 300,000 was about the average or limit....

I believe its the other people upgrading in the 600.000 range and selling their old fhb houses (other people being....formerly fhb's..10 years ago...now kids entering teen years and need their own bedrooms)

Aussiejeff....ok so I can see where you are coming from...but didnt the kids buy the property to hold for at least 10 years...in order to ride the cycles??
why are they trying to sell now.....its the worst possible time to sell...unless its within fhb range....perth will come back and recover...give it a year or so

 

[singlefished]

its not just fhb...imo...unless they can really afford 600,000 in Sydney....

I am sorry but I doubt it....thought 300,000 was about the average or limit....

I believe its the other people upgrading in the 600.000 range and selling their old fhb houses (other people being....formerly fhb's..10 years ago...now kids entering teen years and need their own bedrooms)

Aussiejeff....ok so I can see where you are coming from...but didnt the kids buy the property to hold for at least 10 years...in order to ride the cycles??
why are they trying to sell now.....its the worst possible time to sell...unless its within fhb range....perth will come back and recover...give it a year or so

FHBs are always around - it's only a question of numbers. There is so much pent up demand that when things look good (as now) they are flooding into the market. The effects of this runs for YEARS! It's not fleeting - it set's off a whole chain reaction that starts at the FHB end of the market and then flows all the way through. You are kidding yourself if you think the current FHB activity will have no other effects through the entire market.

Hmmm...

Perth property prices continue to fall

Property prices in Perth have fallen for the fourth consecutive quarter, for the first time in more than 15 years.

The Real Estate Institute of Western Australia says figures show Perth's median house price is down 12% to about $412,000.

They also show house sales are down almost 30% compared to 2007.

REIWA's Rob Druitt says it is the slump WA had to have after the boom of 2006 and 2007.

Mr Druitt says the market should stabilise this year due to lower interest rates and an increase in consumer confidence.

He says the market will also be buoyed by the return of property investors.

http://au.biz.yahoo.com/090221/31/24r7m.html

What a lot of people are blind to on this forum are that prices are and still dropping and the it's the impact on "current" property owners having to deal with the lower than anticipated valuations that will ripple through from the busier FHB end of the market up through the middle and upper price brackets. This ripple will obviously be felt more more accutely in the higher price brackets where for obvious reasons there is a lot less market activity.

People feeling the pressure now may well be financially screwed for years and if they are required to sell for whatever reason then they have to note that the majority of transactions are currently taking place in the lower and lower-middle sectors of the market.... and prices are dropping to meet the market.

Any drops in valuations on property above the median price will not reflect in the city wide median prices that the REI's like to quote (ie: $900K dropped to $800K will not effect the median price... and if more of these sellers drop their prices to meet the market then the median will actually rise as a consequence of increased activity at that higher end of the spectrum ~ this is why you really need to read between the lines, even bad news can be made to look like good!!!)

FHB's have not been sitting watching their prized asset drop in value and to be honest probably wont worry about it too much unless the downturn continues, the only noticable consequence they have felt so far from this GFC is the halving of the interest the bank provides on their FHB deposit (and still no end in sight to the financial issues plagueing the market.... state budget surplaces are turning massively negative and will continue to be revised downwards over the coming months IMO).

For every buyer there has to be a seller who is selling under the pressure of the current downturn ~ not easy to upgrade in these circumstances or draw on equity for IP purchase. Some will be selling at a loss, some will be breaking even and some will be coming out on top depending on the circumstances of the specific transaction.

 

[Beej]

Hmmm...

And how much did Perth prices go up by during 2006/2007??? Perth (and SEQ) markets are currently where Sydney was in 2005 - have a look at Sydney prices 2004 - present if you want a good indication of what will happen in Perth.

And to back this up, here is a quote from the same article that you quoted:

"REIWA's Rob Druitt says it is the slump WA had to have after the boom of 2006 and 2007.

Mr Druitt says the market should stabilise this year due to lower interest rates and an increase in consumer confidence.

He says the market will also be buoyed by the return of property investors."

What a lot of people are blind to on this forum are that prices are and still dropping and the it's the impact on "current" property owners having to deal with the lower than anticipated valuations that will ripple through from the busier FHB end of the market up through the middle and upper price brackets. This ripple will obviously be felt more more accutely in the higher price brackets where for obvious reasons there is a lot less market activity.

Prices are not falling across much of Sydney at the moment - last quarter they actually rose in many lower priced area's, and even year/year the median is down only a tiny amount, most of which occurred in the early part of 2007 when interest rates were still high and rising. The FHB activity is by all accounts very high in Sydney, and this is starting to flow through the rest of the market here.

Just for one first hand example, I was just at my parents house for lunch and the house across the road from theirs just sold this week for a street record price after only 2 weeks on the market..... This a northern suburb where median prices are around the $550k mark.

For every buyer there has to be a seller who is selling under the pressure of the current downturn ~ not easy to upgrade in these circumstances or draw on equity for IP purchase.

Why do you presume all sellers are under pressure? I sold 2 places late last year without any financial pressure forcing me to do so at all? Upgrading a PPOR was easy by the way as well, and I have significant cash available via equity manager type facilities with the flick of a pen over my cheque book or the push of a button on the banks web site. So if I found a good investment opportunity there is nothing stopping me from moving on it at all using equity redraw if I so choose. I am sure I am not completely alone!

So really I don't know where you get some of these idea's from?

Cheers,

Beej

 

[kincella]

beej..good reply as usual...just spent another hour looking at one of my suburbs....am very pleased with what I have seen..think one of my props might have grown 10% or more compared to whats out there....there are the more expensive houses on the market now....I have not seen them for over a year, and anything under 300k is snapped up very quickly....this is a regional area....the very cheap ones have all sold....that cheapie period ended in Nov...
and re singlefished and the 30% number.....of course there are less houses on the market......compared to last year...aka Dec 07..that was boom times,
the lower number of houses on the market is in contradiction of what you are saying,,,about everyone selling etc....
I have set aside sufficient cash to cover my all my costs for at least 4 years, or 5 years if I cut some costs.....imagine most people like me are in at least a similar or better situation....so there is no forced selling.....in fact I will be a buyer if I can find a bargain...believe I missed those in Oct 08...
so plenty of time for the market to recover...and then I may sell one at or near the top...to top up my cash account....but expecting to buy a cheapie in the meantime to replace it
just to remind you I am a baby boomer...its like we live on another planet

 

[singlefished]

Why do you presume all sellers are under pressure? I sold 2 places late last year without any financial pressure forcing me to do so at all? Upgrading a PPOR was easy by the way as well, and I have significant cash available via equity manager type facilities with the flick of a pen over my cheque book or the push of a button on the banks web site. So if I found a good investment opportunity there is nothing stopping me from moving on it at all using equity redraw if I so choose. I am sure I am not completely alone!

So really I don't know where you get some of these idea's from?

Cheers,

Beej

Maybe I worded it wrong or maybe you just read it wrong, but I certainly didn't state that ALL sellers are under financial pressure....

Lets try re-wording for clarity since your knee jerk reaction to ALL negative viewpoints consistantly leads you to believe that all "bears" are getting their facts wrong.

For every buyer there has to be a seller who is trying to sell into a contracting market brought on by the economic downturn....

Didn't you mention somewhere previously that you had to accept 5% off your reserve (or something along thoese lines) for your sale last year? Certainly a profit at the end of the day for yourself but a lot of sellers are not in your financial position and will definately feel the pinch selling at a discount to what they personally believe is fair market value....