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House prices to keep falling for years

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ubiquitous....I thought your signature sums up our views on property as an investment very well...
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." ”” Benjamin Graham (The Intelligent Investor)

did you know that prop prices in the 'bust boom bust' period of 1986 to 1996 doubled in 10 years,,,but in the 20 years to 2006 the price increased 5 times... it was flat in 06..so by 07 it would have been 6 fold increase...so yes...theres my triple growth over 10 years....
I thought it used to triple in 10 years......as a rule

so yes we do have a good investment with property
 
satanoperca said:
I will agree, that the first quarter results may show postive growth and why shouldn't they - record low IR rates, unemployment still low, government throwing money around, FHBG etc.

Beej, would you like to make any prediction for the end of the year results just for interest?
Click to expand...

OK - I'll have a crack at that.

As stated I think Q1 will show growth in Sydney/Melbourne. Perth and much of SEQ will continue to struggle. National median figure will probably show some over-all growth as a result.

The remainder of my comments pertain to Sydney/Melbourne only, and are not hard predictions, just guesses based on how I see the market. I reserve the right to change my full year outlook as I observe the actual market through the year!

For the rest of the year I think volumes will remain low, FHB activity will drop back to a more normal level of < 20% after June 30 with the boost is removed. Upgraders who sold to FHB numbers will be more active during Q3 and Q4 though, which I think should result in an over-all moderate rise in Sydney/Melbourne median prices for the year (no more than 5% I would think in total though). The national median will probably remain about flat to slightly negative for the year, depending really on how well (or not) Perth/Brisbane etc hold up.

My one hard prediction is I don't think there will be huge (let's define that as more than 10%) price falls across the board (nationally) this year as many others think.

Cheers,

Beej
 
kincella said:
ubiquitous....I thought your signature sums up our views on property as an investment very well...
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." ”” Benjamin Graham (The Intelligent Investor)

did you know that prop prices in the 'bust boom bust' period of 1986 to 1996 doubled in 10 years,,,but in the 20 years to 2006 the price increased 5 times... it was flat in 06..so by 07 it would have been 6 fold increase...so yes...theres my triple growth over 10 years....
I thought it used to triple in 10 years......as a rule

so yes we do have a good investment with property
Click to expand...

Kincella, you do not understand my signature quote nor do you understand value investing. You might think you do, but you don't.
 
really...you sound so sure of yourself with a remark like that.....
astounded...one could say such a thing
 
hello,

check check:

rpdata.com.au

i will be turning off the lights alright when i lay the smackdown like the Undertaker, how many in a row?

thankyou
robots
 
Beej said:
OK - I'll have a crack at that.

As stated I think Q1 will show growth in Sydney/Melbourne. Perth and much of SEQ will continue to struggle. National median figure will probably show some over-all growth as a result.

The remainder of my comments pertain to Sydney/Melbourne only, and are not hard predictions, just guesses based on how I see the market. I reserve the right to change my full year outlook as I observe the actual market through the year!

For the rest of the year I think volumes will remain low, FHB activity will drop back to a more normal level of < 20% after June 30 with the boost is removed. Upgraders who sold to FHB numbers will be more active during Q3 and Q4 though, which I think should result in an over-all moderate rise in Sydney/Melbourne median prices for the year (no more than 5% I would think in total though). The national median will probably remain about flat to slightly negative for the year, depending really on how well (or not) Perth/Brisbane etc hold up.

My one hard prediction is I don't think there will be huge (let's define that as more than 10%) price falls across the board (nationally) this year as many others think.

Cheers,

Beej
Click to expand...

Sorry, but I had the distinct impression I was reading a weather forecast half way through :D

I'll add to this for Brissy.... light to moderate declines for Brisbane through the rest of the year with the medians trending down 5-10% by years end. Moving into next year, expect to see further declines of a similar 5-10% with some high pressure unemployment systems darkening the horizon for the rest of Queensland unless some light relief approaches from the north-west for the mining sector.

Sunrise tomorrow at 6:05am with a high tide of 2.18m at 12:41am.

Back to the studio now for a sports report and rundown of the coming weeks wrestling action with Robots....
 
hello,

top post singlefished, you legend man for keeping the entertainment going for all here at ASF

Vote No 1 for Vince Mc Mahon greatest public speaker the world has seen

thankyou
robots
 
singlefished said:
I'll add to this for Brissy.... light to moderate declines for Brisbane through the rest of the year with the medians trending down 5-10% by years end. Moving into next year, expect to see further declines of a similar 5-10% with some high pressure unemployment systems darkening the horizon for the rest of Queensland unless some light relief approaches from the north-west for the mining sector.
Click to expand...

Probably not such a bad prediction :) Interesting stats in the latest Residex newsletter - Brisbane Houses down -2.12% last year, and -1.89% last quarter.

Perth Houses down -11.21% last year, and -3.95% last quarter :eek:

Unit prices are pretty steady (FHOG range), but if house prices come down any further in QLD or WA, I think the shrinking gap between house and unit prices will probably help push unit prices down.
 
Here's a tip from the Crikey website (they have a tips and rumors section)

I have been involved in the real estate industry for 25 years. I have operated in blue chip suburbs in the last 10 years ... a TSUNAMI IS APPROACHING ... at the top end values will decrease by 50% and unfortunately a lot of wealth has been destroyed. Let's face the facts; we all borrowed too much money. I am really frightened that people like myself in the short to medium time frame will conclude that our assets may not be worth as much as our liabilities.
Click to expand...
 
From today's DR newsletter. This sums up the status of the RE market:eek::

--The trouble is, there is still a lot of liquidating to do. And we are not just talking about labour markets where, after all, Qantas expansion was the result of low fuel prices and globalisation for many years. No. We're talking commercial and residential real estate.

--That's where Australia's banks have the most exposure on their loan books. And that's where you'll see write downs and losses on commercial property portfolios. We suspect that's why the banks are getting tight. They are preparing for much tougher times. Are you?

--Well you wouldn't be if you were just listening to the good folks at the Reserve Bank of Australia. Luci Ellis, the head of the RBA's financial stability department, said that lending standards never delved too low into subprime territory in Australia to lead to a mortgage lending bubble.

--In comments she delivered in Melbourne, she added that the inability of Australians to deduct the interest on their mortgage from taxes gave them a financial buffer against falling prices. She said that Aussies tended to pay off their mortgages more quickly because of this, whereas in America, the interest deduction presumably encourages people to maintain high balances on their mortgage.

--And what defence of bubblicious Aussie house prices would be complete without trotting out that old canard, the housing supply gap! "Unlike in the United States," Ms. Ellis said, "housing supply [in Australia] had not boomed in the same way for the past five years. There simply has not been an overhang of supply built up that would subsequently weigh on prices."

--We'll get to the supply bogey in a moment. But we're certain Ms. Ellis knows that the supply of homes is just one part of the pricing equation. The other part is, of course, demand. And the demand for housing is clearly influenced by the price of money (mortgage rates plus the first home buyer grants). Everywhere else in the world, plunging interest rates led to a huge mortgage lending boom that inflated house prices at historic multiples of household income.

--Nowhere else in the world, in fact, has housing become as expensive as it is today in Australia, when measured against household income. Two things make this possible. First is the availability of mortgage financing to lever up and get on the property ladder. Second, and more importantly, is the deep seated belief-encouraged and repeated by those in government and banking and real estate-that property prices always go up.

--The Great Australian Property Price Crash is coming people. You can't have a depression in credit and expect inflated housing values to magically levitate. The latest figures on housing and commercial finance show a few things. They show that first-home buyers are propping up the market while investors flee (as was the case in the U.S. in 2006). And they show that bank-lending to the private sector (both fixed loans and revolving credit) is retrenching.

--But what about the great supply deficit? Ms. Ellis cites a report by the National Housing Supply Council. This "State of Supply" report is prepared by a committee of insiders from the building, banking, and real estate industries. You'd naturally expect them to conclude that the supply gap is large and growing.

--Yet this is not exactly what they've done. They've confessed that their estimates of housing demand are based on statistical models. To quote directly, "The Council estimates that a minimum of around 85,000 dwellings is the gap (unmet need) in the supply of housing in 2008. This is based on the incidence of homelessness and the low level of vacancy rates in the private rental market."

--And you thought we were joking about the homeless. We've always said if there was really a supply problem, you'd see more homeless people. The estimate the Council comes up with for the gap assumes, we assume, that the homeless are homeless because there aren't enough houses. This is nonsense. Studies show that a fair portion of the homeless choose to be homeless, or would be homeless regardless of historically low mortgage rates.

--But that point aside, low rental vacancy rates are also cited as evidence of a gap. This is nonsense too. Couldn't this also be the fact that so many Australians live in capital cities? And so many of them want to live in the same place? It's not that there aren't places to live. It's that everyone wants to live in the same place, which violates the laws of physics, of social propriety, and also drives up rents).

--In other words, maybe the two factors the Council cites in fabricating a housing gap have other, better explanations that a fictional shortage of housing. But maybe that narrative doesn't suit the needs of people who make money selling houses.

--Ah! A caveat arrives on cue!

--"The Council acknowledges the crudeness of this [housing supply gap] estimate and also points out that there were some 830,000 vacant dwellings in Australia at the time of the 2006 Census. The Council has assumed that most of these were probably second homes, homes in the process of sale or homes awaiting redevelopment and that there is likely to be limited capacity for absorbing growth in underlying demand within the present level of housing supply."

--Baffling. Or just deliberate chicanery?

--There are 830,000 vacant dwellings. But that, according to the Council, is not enough to meet the housing supply gap of just 85,000 dwellings? Math was never our strong suit. But this smells fishy.

--Could it be that property investors, let's say boomers sitting on property as a retirement income, are not prepared to sell those investments at these prices? There's no urgency, after all. Do they expect to sell these properties to pay for their retirement? Or are they just taking advantage of the tax benefits of negative gearing?

--Who knows, dear reader? But we'd humbly suggest there is no housing supply gap at all. You could bring some of those 830,000 vacant dwellings on the market by changing the negative gearing laws. And the elimination of the first home buyers grant would prevent so much future demand from being "brought forward" merely to prop up values for existing homeowners who want to sell now to the sucker first home buyers.

--But we reckon none of that is going to happen. While the stock market wades through earnings information and employers batten the hatches and throw men overboard, Australia's property market is headed towards an epic fall. More on the fall tomorrow.
 
I agree with UBIQUITOUS

First home buyers thrown to the wolves.
The media are just waking up to it now.

Kevin Rudd just isn't incompetent he's a nasty four letter word.:mad:

Added - sorry he was quoting, not his words but still agree strongly.
 
Trembling Hand said:
UBIQUITOUS can you please provide proper links to the stuff you are coping & posting?

Who is DR?
Click to expand...

Trembling, it is from an emailed newsletter from Daily Reckoning. The article provides information as to where the data is coming from eg ABS, National Housing Supply Council etc

You would just need to delve further yourself.
 
That 830,000 vacant houses stats is rubbish. It's from the 2006 census and all it means is that when the census person came knocking no-one was home - it does not mean the house was empty/vacant. In fact the census has no practical way to measure this properly. So the basis of half of Ubiquitous' article is totally debunked.... and the first half actually presents some pretty solid arguments why prices will in fact hold up (all the quotes from the RBA etc).

As for the argument that there is plenty of space in AU, well tell that to all the people that won't buy a perfectly decent 3 bedroom house in Cambeltown S/W of Sydney for $250k but instead pay $500k+ to be closer to the centre of the city. It's called demand and limited non-renewable supply of what people actually want which = higher prices for such property. The market in AU actually covers a very wide range from the very affordable to the very expensive, and anything in between - you just have to open your eyes and look at the whole market. Soon you will figure out that affordability is actually not the issue with R/E prices in AU. Demand for a limited supply of desirable locations is the issue.

So keep trying - we've waiting for the crash predicted here on ASF for many years now, still hasn't happened. The US started crashing 2 years ago now......Still isn't happening here.

In fact auction clearance rates and prices are rising in our major capital cities it seems (http://www.rpdata.com/news/rp/20081231_media.html), interest/lending rates at all time lows, large numbers of FHBs active and upgraders now coming into play. Rental returns are at historically high levels (average 5% for houses and 6% for units across Sydney right now), however investors won't return in large numbers until the economy improves - and when they do the bears are going to be taken by surprise. Banks are well capitalised and lending happily - lending for residential housing seems to have bottomed late last year and has been rising steadily since (http://www.abs.gov.au/ausstats/abs@.nsf/mf/5671.0?OpenDocument).

No rush to buy though - some time yet before we enter any significant new growth phase, and right now it's pretty hard to find decent property available in good area's anyway as they are all snapped up quite quickly in Sydney and Melbourne. But just don't wait for a great crash - you will be waiting for a long time....

Cheers,

Beej
 
hello,

top post Beej,

its still amazing the number of people so dark on property owners but then on the other hand tell many how poor an investment class it is,

like Glen48 and Case-Shiller (a couple of great minds) continually inform us of the 0.5% pa return for resi-property over 100yrs, hahahaha

hope everyone had a great day

thankyou
robots
 
Beej said:
So keep trying - we've waiting for the crash predicted here on ASF for many years now, still hasn't happened. The US started crashing 2 years ago now......Still isn't happening here.
Click to expand...

At first there was denial prices were falling at all (anywhere!), and as most recent stats show, yes they have been. Okay, maybe this has been Brisbane and Perth based, but it has also been amongst the middle to high end in other areas. So now we have gone from a state of "prices will never fall", to at least some acceptance "yes maybe they can". That was half the damn battle with the whole idea that "house prices to rise for years"! If these continue 1-2% a quarter falls in Bris/Perth eventually comes to 4-15% by the end of 2010. It sounds minor, and nowhere near crash territory, but when you're talking about hundreds of thousands of dollars it is not quite so.

"Underlying demand and supply" is equally open to interpretation as the number of vacant properties out there. Realestate related organisations, and now the RBA has come up with wonderful measures to say there is "underlying demand", but as we have seen, the RBA can get it wrong. Remember "China will save us from recession" early last year :rolleyes: I'm also wondering why the hell the RBA is banging on about this heavily right now anyhow (two announcements in the last 2 weeks), is their role now to put the general publics mind at rest on their house price? :rolleyes: If so, why? Seems pretty bizarre behavior to me compared to their usual mandate, almost to the extent of trying to stave off panic. i.e. there is no need to tell a room full of people "don't worry about the snake!" unless the room is already ****-scared of a snake somehow being in the room.
 
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