House prices to keep falling for years

[singlefished]

Here's a question....

Why are private sales included in the weekly auction results that APM / Home Price Guide produce and why are they included in their clearance rate calculations?

Surely a property that actually goes through the auction process can only be classed as being cleared at auction?

Using the 177 listed properties for Sydney, only 126 actually went through the auction process yet their stated clearance is based on 128/177 (73%) and not 86/126 which skews the results down to 68% (still not that bad).

Using the 25 listed properties for Brissy, 22 went through the process with only 6 clearing - 26% actual compared to their 38% stated.

Adelaide is the best however. Nothing actually sold at auction yet they state a clearance of 20%.

Didn't do Melb for fear of going permanently cross-eyed but I'm purdy sure it's the same.

Any rationale behind these obvious errors? What am I missing? I know you don't need a degree in rocket science to sell property, but....

 

[kincella]

singlefished...
pretty certain that question has been answered and discussed either this thread or the prices rising thread....and to add one further point...
it may be on the contract...either private sale or auction...but whatever...if its listed for auction...sells prior to the auction date...or is settled within a few days of auction....then it is quoted as being an auction sale....

there is no conspiracy...a lot of sales go to auction...but the contract is not signed on the day....negotiations take place...but it is signed within a couple of days..
in a hot market auctions are the go....in a slow market private treaty...
a sale is a sale...and will show up in reports

now back to the heading....
have a look at the stock market this week....kidding if anyone thinks this is a mature market....its traders....with the same mindset they held for the past 5 years....nothing has changed...GFC means zilch to them....good money to be made..but high risk imo

no wonder the property market has been hot for 5 months now....

 

[Harro7]

Hello.

My family and I are in the market for a new house. Should we buy or hold off and rent for a little while?

 

[So_Cynical]

have a look at the stock market this week....kidding if anyone thinks this is a mature market....its traders....with the same mindset they held for the past 5 years....nothing has changed...GFC means zilch to them....good money to be made..but high risk imo

no wonder the property market has been hot for 5 months now....

Around 20% in 3 weeks is doing just a little better than the real estate market. Property hot :error:

 

[robots]

Around 20% in 3 weeks is doing just a little better than the real estate market. Property hot :error:

hello,

well done so_cynical, top effort man and all the best for the future with your endeavour's

thankyou
robots

 

[SBH]

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.

Its similar. Ninja loans and subprime was the only way the US could get enough buyers to keep the low end of their bubble going. I.e when you reach maximum debt you have to relax your lending standards to those who otherwise couldnt afford it. This is the last stage before collapse.

Australia has done exactly the same but have used FHBs instead. These are the people that wouldnt have bought unless the standards were dropped - or in this case an extra $7k or $14k given to them. They wouldnt have bought without this interference - unless the government invents a NINJA loan scheme in the may budget then the FHBs with no savings will be the last rung on the ladder and the bubble will pop.

 

[Beej]

Its similar. Ninja loans and subprime was the only way the US could get enough buyers to keep the low end of their bubble going. I.e when you reach maximum debt you have to relax your lending standards to those who otherwise couldnt afford it. This is the last stage before collapse.

Australia has done exactly the same but have used FHBs instead. These are the people that wouldnt have bought unless the standards were dropped - or in this case an extra $7k or $14k given to them. They wouldnt have bought without this interference - unless the government invents a NINJA loan scheme in the may budget then the FHBs with no savings will be the last rung on the ladder and the bubble will pop.

It's funny how different people view the same factors! Personally, I think your assumptions are wrong - ie that FHBs entering the market right now are people who otherwise would never buy a house. Your perceived similarities between US sub-prime and the current situation in AU and your corresponding collapse outlook depend on that assumption strongly.

People I know of who are currently taking advantage of the FHB grant are people who have *wanted* to buy for years, but haven't been able to afford to (at least couldn't afford what they wanted anyway). Now, a multitude of factors have spurred them into action: the increased savings they have collected over those years, lower interest rates, the fact that prices (in Sydney where I live) haven't really gone up much over the past 4-5 years (ie affordability has improved quite markedly), plus the FHB grant.

The other problem with your assumptions is that in the grand scheme the FHB grant money is only a small amount. It's up to the banks to assess risk and be prudent with regards to their lending criteria and so forth wrt to the bulk of the funds being provided, including personal savings history requirements for the borrowers etc etc. And by all accounts the banks are being tighter in these respects right now than in the past. Therefore you have to assume that the bulk of current FHB loans being made will be quite OK in terms of risk and serviceability.

So if a majority if current FHBs are more like the people I assume them to be rather than the people you assume, and if the banks are in fact being prudent and risk averse, then in fact the current activity is building a very solid floor under prices as opposed to setting the scene for any "great collapse" IMO.

Cheers,

Beej

 

[gfresh]

As of today CBA is going only 90% LVR .. 5% genuine savings required over a period of 3 months, this is up from 3% only a month ago. Others will probably play follow the leader, it's just a matter of time.

I think we may even see 85% max LVR by the end of the year... the credit crunch is hitting Australia, it has just taken a bit longer than some expected.

FHB will be shut out pretty quickly at this rate. For a lot of people on the average income, say $30k is a fair amount of savings.

The investors trick of the last 5 years of waiting until your property gained 5% (usually a matter of 6-12 months in the boom days), and then purchasing another, and then another end on end is dead in the water for a while. This will take a lot of the heat out of the market once the FHB are gone.

 

[kincella]

well one minute your side is saying we are heading for ninja type loans and the next minute the kids won't even get a loan.....
well the kids can get a a much cheaper loan to go with a cheaper house...thats what we want them to do....so for 250,000 they can probably get a brand new one,,,or they can head out of town a bit and get an older established one thats half hour to the city on the new freeways....
and only need 25,000 deposit....
thats really all they can afford...unless they are asking mum and dad to top it up for them..
:sheep:

 

[MaverickTrader]

I just bought a unit. Didnt have much of a deposit but with money being so cheap at the moment and the 1st home grant about to disappear (although it prob won't) i felt i had to jump in

 

[satanoperca]

It's up to the banks to assess risk and be prudent with regards to their lending criteria and so forth wrt to the bulk of the funds being provided, including personal savings history requirements for the borrowers etc etc. And by all accounts the banks are being tighter in these respects right now than in the past. Therefore you have to assume that the bulk of current FHB loans being made will be quite OK in terms of risk and serviceability.
Beej

While I agree with the above in a perfect world, as we are seeing it is hardly that, self regulation does not always work. The banks are the ones that have greatly contributed to the GFC due to their quest for risk and profit. Only time will tell if they have been prudent with lending practices in the last few months in regards to FHB.

Whilst on the topic of FHB, I had a conversation with one today. Went along the lines, "I'm taken the government grant and have a small cash deposit of $5000 and have just bought a new house. Why not, if things go pear shape all I have to loose is $5,000. Even if I get into trouble in the next few years, I will only have paid a small amount of principal off the loan and that would not equal the rent that I would have paid otherwise. What do I have to loose."

Had not thought about this way. Why not take the risk if you have no other assets to loose.

Cheers

Benjamin

 

[Julia]

I just bought a unit. Didnt have much of a deposit but with money being so cheap at the moment and the 1st home grant about to disappear (although it prob won't) i felt i had to jump in

How will you go with the mortgage when rates go back up to 9%

 

[So_Cynical]

or they can head out of town a bit and get an older established one thats half hour to the city on the new freeways....

There called tollways and travel time would be closer to 1 hour each way.

-------------

Ive spent the last few days looking at the property trust sector...and came
away thinking the vast majorly of property trusts have some debt issues and
all have had to write down asset values...some will surly fall, all due to debt
and paying to much for property....this simply must flow on to residential.

 

[nomore4s]

Ive spent the last few days looking at the property trust sector...and came
away thinking the vast majorly of property trusts have some debt issues and
all have had to write down asset values...some will surly fall, all due to debt
and paying to much for property....this simply must flow on to residential.

I think it will all depend on how desperate the holders of property become to sell. And that may depend on unemployment and interest rates.

 

[kincella]

tollways...ok..am just old fashioned..used the term freeways...to denote difference between roads and big 4 lane fast roads....
takes me 30 minutes from Toorak to above Craigieburn.... where the Hume freeway commences....or about 20 mins non peak hour...on my trips to Albury

 

[Windza]

Its similar. Ninja loans and subprime was the only way the US could get enough buyers to keep the low end of their bubble going. I.e when you reach maximum debt you have to relax your lending standards to those who otherwise couldnt afford it. This is the last stage before collapse.

Australia has done exactly the same but have used FHBs instead. These are the people that wouldnt have bought unless the standards were dropped.

I'm inclined to agree on some levels...
I really can't see how there's any argument to contest that the FBH's grant increase is simply a 'bandaid' over a fairly nasty infection.
The fact that it was implemented in the midst of the GFC attests to this.
There are also a great deal of ppl hoping for an extension - why? Because it's currently 'propping' the market up and to lose that incentive is almost certain to result in a decrease of FBH's and currently that'd mean the housing market in general.
My feeling is that the grant is only softening the 'pop' (read: delaying the inevitable).

I have no evidence to back this up - but I believe it's a fair assumption that FBH's are generally younger and on the scale of it - less educated/experienced than the older generation in considering financial risks. Deductive reasoning would suggest that there are a greater proportion of FBH's that will 'throw caution to the wind' at the prospect of a $14-21K 'handout' from the Gov. and find themselves in deep water when they can't finance their debt (especially if unemployment continues to rise).
Sorry 'Julia' - but your post fits the stereotype perfectly... get in quick or you'll miss out - simply standard marketing ploy!

I'm not saying FBH's can't think for themselves, but it certainly begs the question - how feasible is the current grant and what are the true implications?

I realise this is highly opinionated and assuming, but as someone eligible for the FBH grant I found myself initially drawn to the prospect of the increased grant but then reluctant when considering the current instability in the economy.
I know a lot of FHB's that won't have the same reluctance and that's what keeps me away from housing ATM... I'm happy to wait for some 'true' positive indicators before stepping in - irrespective of the grant.
Hopefully it'll be win-win... wait and pick up the pieces, or wait and step into a returning market.

 

[MrBurns]

I just bought a unit. Didnt have much of a deposit but with money being so cheap at the moment and the 1st home grant about to disappear (although it prob won't) i felt i had to jump in

There's your reason in a nutshell why housing has held up to some extent.

Intervention by SS KruddTanic, and the reason for his popularity rating along with cheques in the mail, this man is not stupid just crafty like a rat.

 

[Beej]

Intervention by SS KruddTanic, and the reason for his popularity rating along with cheques in the mail, this man is not stupid just crafty like a rat.

Reminds me greatly of his predecessor in this respect as well..... He was the "master" of vote buying politics! Maybe it's because they are both politicians at the end of the day???

Beej

 

[nomore4s]

Whilst on the topic of FHB, I had a conversation with one today. Went along the lines, "I'm taken the government grant and have a small cash deposit of $5000 and have just bought a new house. Why not, if things go pear shape all I have to loose is $5,000. Even if I get into trouble in the next few years, I will only have paid a small amount of principal off the loan and that would not equal the rent that I would have paid otherwise. What do I have to loose."

Had not thought about this way. Why not take the risk if you have no other assets to loose.

Cheers

Benjamin

This is a very naive imo. There is plenty to lose. For starters there is the emotional strain this scenario places on your life, if they think otherwise they are kidding themselves, it could be months of struggling to meet repayments and bills before they are foreclosed. Also if they can't sell the house for what they paid for it they could end up owing thousands to the banks as well as being declared bankrupt which will have an affect on thier lives for a number of years. This isn't America where you can just walk away without a care.

It is this sort of thinking and lack of responsibility that could eventually cause our property market to collapse. The fact the banks are still lending money to people like this with such small deposits and clear lack of responsibility is somewhat concerning imo.

 

[kincella]

the poster's nic tells you a lot about him...the maverick...and he could be pulling your legs...
all the emphasis on fhb and comparison to ninja loans....then a poster comes out and tells you all, confirms what you were believing......that which you feared would happen....omg (oh my goodness)

who knows....even I am considering increasing a loan to renovate a prop...and may even extend it to a new car....
now the economists saying when people start buying new cars again is the sign of recovery...
....little by little bit by bit...things will change again