House prices to keep falling for years

[kincella]

beej..good post as usual....
the NINJA loans with no hope of repayment...people walk away and throw the keys back....but the loans were still bundled and sold to the unsuspecting as if there was still value, that was the problem....so that scheme was a ponzi....

there will always be people out there looking for a quick..big buck..with out any effort

now looking back on innovation and the value of everything for the past 40 years or so...just start with the home..most white goods, the TV, music downloads, dvd's, cameras....hundreds of lovely convenient things around me

our first car was a ford...had heating but I dont recall air....wind down the windows style in those days..the mobile phone...and the laptop and pc's....
wonderful affordable air conditoner for the whole house....(not that little thing that sat in one room and only cooled that room).....medical break throughs and devices....

all those things have a value, save time, save costs, provide entertainment....

bit different to people living in Kenya for eg; no electricity, water, mobile phone etc....pc, tv...or even the basics of life....

so since we are on a house forum.....compare living in Kenya and other 3rd world countries...where none of these things are available....then compare it to living here, middle of a vibrant city......

in Australia, the normal house costs what the market determines....a willing buyer and a seller.....nothing ponzi about that

 

[Dowdy]

in Australia, the normal house costs what the market determines....a willing buyer and a seller.....nothing ponzi about that

Our housing market is artificially inflated by the government grants.
Our version of the NINJA loan is the government grant - how many time do you hear 'use the grant as the deposit'

We also have the problem with speculators taking out 'interest only' loans

I wonder how many people still buy a house with 20% down. I don't think many.

 

[shaunQ]

We also have the problem with speculators taking out 'interest only' loans

I agree this is an area that will be hit hard and could start panic selling. These people have no equity in the house, depend on capital gain and if the price drops they owe more than its worth.

For those interested, I have a theory about when we will start to see some major movements downwards. My in-laws are you typical baby boomer couple, they "bought" an investment property, interest only about 3 years ago in a coastal regional town. They are retiring mid this year and trying to hold off on selling as "now isn't a good time". My theory is they will decide to sell at the same time every other mug does and the collapse will begin.

Regardless of whether a crash does or doesn't happen - I think they just don't understand the actual risk they are taking. They are trying to maximise their profit and don't see it is at all possible to actually come out of this owing more than they sell it for - let alone the opportunity cost.

They just don't see the major benefactor of a negatively geared loan is the bank - not the lender.

 

[CamKawa]

Skilled migrants cutback

"AUSTRALIA'S intake of skilled migrants will be slashed by 18,500 over the next three months ”” 14 per cent of the annual intake ”” in a dramatic move to protect local jobs."

So much for the permabulls immigration theory. Lets throw up the barriers, here comes the protectionism.

 

[gfresh]

Brisbane agents **** scared post June 30th... now who would have thought.

http://www.brisbanetimes.com.au/new...ter-grant-glory/2009/03/16/1237054680952.html

Interesting about the over $500k bracket. Only 5% of total sales in January for this agent! You can't have such a lopsided market going for long without something giving way. Unemployment will be the catalyst.

BRISBANE'S real-estate market is in danger of crashing when the First Home Owner Grant boost ends on June 30, some experts believe.

Real-estate agents are more worried than ever about the future of their industry, which has relied almost solely on first time buyers in the past few months.

Veteran agent Peter Secco, who has sold real estate in Brisbane's inner east for more than 25 years, said business would be "virtually over" if the grant were not extended.

Of 37 sales for his office in January, only two had been above $500,000.

"If that's not enough evidence for you then I don't know what is," he said. "Every buyer we have now is a first-time buyer and I would say 90 per cent of them are doing it because of the government incentive.

"That extra $7000 may not sound like a lot but it's all about sentiment and I can tell you, the whole property market will crash here. It'll be disastrous."

Amazing to hear an agent take off his uber-spin jacket for once!

 

[Beej]

Skilled migrants cutback

"AUSTRALIA'S intake of skilled migrants will be slashed by 18,500 over the next three months ”” 14 per cent of the annual intake ”” in a dramatic move to protect local jobs."

So much for the permabulls immigration theory. Lets throw up the barriers, here comes the protectionism.

Which permabull immigration theory is that exactly??

a) 18,500 reduction out of a planned total immigration intake of 300,000 *yawn*.

b) Long term, the immigration rate will be brought back up again when economic growth returns. Australia is a country with a goal to significantly increase it's population over the long term to drive economic growth.

Totally predictable anyway - if unemployment rises of course immigration rate will be cut back for a while. The thing is immigration plus population growth in general is a LONG TERM fundamental factor that drives property price growth. It's not like a 20% immigration cut-back this year would have any immediate effect on the macro-level demand for housing. If immigration were to be reduced significantly over the long term, and as a result Australia's adult population (particularly say 25-50 age group) was going to decline rather than grow for a period of a decade or more, then that would impact the macro level property demand for sure and your assertion might hold some water. But that is just not going to happen....

Cheers,

Beej

 

[nomore4s]

Amazing to hear an agent take off his uber-spin jacket for once!

Only because he wants the grant extended and is trying the force the governments hand to keep the property market propped up.

 

[kincella]

my 2 cents worth again....I bought a run down prop, it was going to cost 50,000 or more to fix up over a period of time....
so I took out an interest only loan for 5 years....it was rented out, then between tenants and as cash flow allowed I fixed a bit here and there....
I planned it may take me 5 years before it was ready to return a good rent...
then after the 5 years fixed period was over, it converted to a principal; and interest loan...
the rent doubled after the house was in good order
nothing frivolous about interest only loans in the right hands, it just kept the outoings to a minimum while in a low yield period....matching the income to the expenses...
I could have borrowed the extra for the reno up front...fixed it up from the start and hence a good yield, not worry about interest only loan...
but...builders and tradesman were scarce...wait for 6 months to get them to even start on a job....and I did not want to borrow the extra...

 

[SBH]

Which permabull immigration theory is that exactly??

a) 18,500 reduction out of a planned total immigration intake of 300,000 *yawn*.

b) Long term, the immigration rate will be brought back up again when economic growth returns. Australia is a country with a goal to significantly increase it's population over the long term to drive economic growth.

Totally predictable anyway - if unemployment rises of course immigration rate will be cut back for a while. The thing is immigration plus population growth in general is a LONG TERM fundamental factor that drives property price growth. It's not like a 20% immigration cut-back this year would have any immediate effect on the macro-level demand for housing. If immigration were to be reduced significantly over the long term, and as a result Australia's adult population (particularly say 25-50 age group) was going to decline rather than grow for a period of a decade or more, then that would impact the macro level property demand for sure and your assertion might hold some water. But that is just not going to happen....

Cheers,

Beej

Well I hope this recession and the reduced immigration is just a one year blip for your sake. If it is two or three years what do you think would happen to housing demand? You seen the footage of the hindenburg?

 

[dhukka]

Brisbane agents **** scared post June 30th... now who would have thought.

http://www.brisbanetimes.com.au/new...ter-grant-glory/2009/03/16/1237054680952.html

Interesting about the over $500k bracket. Only 5% of total sales in January for this agent! You can't have such a lopsided market going for long without something giving way. Unemployment will be the catalyst.



Amazing to hear an agent take off his uber-spin jacket for once!

From the same article:

"We have to try to make the Government understand how serious this really is and what dire straits the Queensland property market will be in if this grant is not extended."

Obviously this guy is talking his own book but he actually makes the opposite case for what he is arguing for. If the property market is only being held up by FHB's, then what does that tell you?

 

[UBIQUITOUS]

With an increase in sub $500k sales AND falling prices in above $500k bracket (as seen), we will reach a point where FHBs will question buying a shack for below $500k, just for FHOG reasons, when better value (but still a ripoff) can be had for an unaffordable $100k extra.

The effect will be a stalling in sub $500k purchases despite the FHOG. This will end the government's plan to support house prices by providing an increased FHOG.

The only move for the government will be to either pull the grant, or increase the threshold to $600k. Either way it renders housing unaffordable.

This combined with increasing unemployment means that the housing market pyramid will not crumble, but collapse.

Check and mate

 

[vincent191]

There is a shortage of "bread and butter" housing in Sydney. Anyone looking for a "ordinary Mum & Dad" property in Sydney will tell you that property prices have not drop by any significant amount.

The high end of the market may have dropped (I guess) but in the next year or so the average property price in Sydney for an ordinary residence may in fact go up because of a real shortage and to make it worst the new housing approval rate is falling.

 

[Aussiejeff]

I think the gummint should replace the FHBG with a FCBG.. First Caravan Buyer's Grant.

Say, $5,000?

Cheap, affordable housing. Bypass greedy landlords (oops - sorry robotics)

Problem solvered.

 

[pilots]

I agree this is an area that will be hit hard and could start panic selling. These people have no equity in the house, depend on capital gain and if the price drops they owe more than its worth.

For those interested, I have a theory about when we will start to see some major movements downwards. My in-laws are you typical baby boomer couple, they "bought" an investment property, interest only about 3 years ago in a coastal regional town. They are retiring mid this year and trying to hold off on selling as "now isn't a good time". My theory is they will decide to sell at the same time every other mug does and the collapse will begin.

Regardless of whether a crash does or doesn't happen - I think they just don't understand the actual risk they are taking. They are trying to maximise their profit and don't see it is at all possible to actually come out of this owing more than they sell it for - let alone the opportunity cost.

They just don't see the major benefactor of a negatively geared loan is the bank - not the lender.

Shaunq, a house in Lancein just sold for $940,000. it was on the market for $1.7Mil, we are going to see some good buys in the next few years to come.

 

[Mofra]

Our version of the NINJA loan is the government grant - how many time do you hear 'use the grant as the deposit'

ROFL

I've heard some strange claims from both sides of the fence, but this is certainly up there with the best of them.

A $7k payment from the government (which is treated as 'non-genuine savings' by every major lender in Australia) does not preclude the normal lending standards a borrower must satisfy.

NINJA loans were a US-only phenomenon (remember, the land of the non-recourse loans as well): No Income, No Job, No Assets.

To link the two as a similar practice is hitting the rock bottom of logic & starting to dig.

 

[nunthewiser]

Shaunq, a house in Lancein just sold for $940,000. it was on the market for $1.7Mil, we are going to see some good buys in the next few years to come.

ahha maybe but just a side note ..... them same places in lancelin were around the 150- 250 mark before the boom . ocean farms included . 14 acres block WITH ocean views 65k at one point


blessem

PS you seen the prices in guilderton/moore river these days !!!... m8 used to have a 100 acre farm with moore river frontage and overlooking the mouth and township sold it for around 600k and he thought he made a packet at the time......

 

[pilots]

I think you will find that Mandurah and all coastal towns will crash this year.

 

[Glen48]

Robots maybe you can turn this upside down?
Money Morning

 

[kingbrown]

Re my patch !
in a Nth west tree change area of Melb

I have noticed more and more stale property listings in this normally tight held high end area than i have seen for many years

It apppears virtually no high end country propertys are selling here ?
Cheapies on the fringes are moving slowly
PPL are still hanging out for the old boom prices
I have made a few low offers most are willing to drop a significant amount
Even the banks are holding out on the repo's
one near by town had a price rise of over 20% in 2007
Still i look at the value of the market and its just still so overpriced its crazy

Greed is now being replaced by shock
A seller that does hold a auction that was such a popular event only 12 months ago
is lucky to even get 1 bid let alone sell the place
also with the recent fires its a bit pointless trying to sell at the moment

With the immigration factor i see ppl talking about
it would be an idea to look into what the real fall was in the last recession ?

I have heard talk on radio of upto a 80% immigration reduction in the last recession ??
if someone has the time or the contacts ?
it would be good if this was checked it out
then we could have some constructive comments on this big issue

 

[kotim]

The further you go away fromt he major areas, the greater the desperation is becoming. I know places in North Qld where ocean front properties(land) are now being offered in the 300 to 400 grand mark and no one is making offers. These very same block were selling for 500 or so a year ago etc.

Fact is that a lot of the smaller places that got bid up big time by spruikers are starting to suffer a lot.

I was talking to a real estate agent the other day where he is and he has an old cement shack (read dump) on a block of land that is one street back from the oceanfront. The owner paid 275 grand near the peak and now needs to sell for his business sake, yet you can buy an oceanfront block for less than 350 grand in the same neighbourhood.

Problem is the agent knows that a good price for the current owner would be 200 grand, but of course the owner paid 275 grand wants the money for the business, but now can't afford to sell at the going rate, or if he does, his business enterprise will suffer badly.

There are huge numbers of areas where this is happening.

I went to the Bundaberg area in Qld for a weekend just recently and stayed at Bargara Beach. Reasonably nice area but extrememly crappy ocean front except for a couple of very sparce areas. Very little sandy beach, most beach areas are actually just volcanic rocks all the way down to the ocean, yet Bargaras prices were greater than the Sunshine Coast in Qld. Naturally enough prices have now started to plummet.

Lets face it, during a boom the outer areas grow the most(percentage wise) but also fall the most as they are the ones that start from lower bases after most drops, so all the more important to buy low and sell high during the boom otherwise lots of pain.

Anyway thats my 2cents worth.