House prices to keep falling for years

[wayneL]

FYI, from a country with serious shortage of housing and LAND, very high immigration etc etc and a big hand in the commodities till (but no mines):

 

[Shane Baker]

Hi Wayne

A big difference economically between being paid for shares of an asset (financial industry) and for the ore being dug out of the ground (mining industry) wouldn't you think?

Cheers

Shane

 

[wayneL]

Hi Wayne

A big difference economically between being paid for shares of an asset (financial industry) and for the ore being dug out of the ground (mining industry) wouldn't you think?

Cheers

Shane

Sure, but that is only one factor. How many Australians as a percentage of the whole actually are employed digging dirt?

Then understand that UK has it's own allegorical "gold mines" in many different forms that are immune to the finance industry doomage.

 

[Beej]

FYI, from a country with serious shortage of housing and LAND, very high immigration etc etc and a big hand in the commodities till (but no mines):

So? All that graph tells me is prices rocketed up in 2007 and have now given back a proportion of those gains in 2008. Who is to say what might happen from here? My prediction - even the UK will stabalise over the next 12 months and then plateau for while before the next growth cycle begins. Time will tell......

Additionally, the UK property market does this sort of thing regularly, and most of the time the AU market does NOT follow suit (same goes for the US). The markets are completely different.

In the early/mid 90s for example when our market was quite stable and beginning to grow, after the late 80s pull back (which was in turn preceded by an unprecedented boom), the UK market was in yet another periodic massive slump. I remember several people I knew/worked with etc who had moved over here from the UK at that time and they all waited out the UK slump for a few years before finally selling up back home and buying in Sydney.

And I don't buy the global credit crunch theory re it's impact on every housing market in the western world. There is no problem at all for people who want to borrow money in AU for houses at this very instant. The main current issue is confidence in the market (and the future economically etc) as opposed to any massive drying up of housing credit.

PS: Pepporoni - I did look at that house on the W/E quickly- currently quite out dated and set up as 2 seperate flats. Would need some significant $$$ spent to bring it up to the "executive residence" status typical for the area! I think in a soft market there is no doubt places like that are harder to move and have to be discounted more than the good ones. Still, if you have a lazy $1.7M it probably represents a good opportunity, both lifestyle-wise and financially.

Cheers,

Beej

 

[wayneL]

So?

Wanna job as a Nu Labour politician? :casanova:

Ed Balls would be impressed.

 

[wayneL]

BTW Beej

The early 90's weren't so hot in Australia. Anyone who thinks there was merely a "plateau" is deluded, there were real and serious declines, especially in the top end.

One example in Broadbeach right across the road from my folk - Single story canal property bought for $300, big reno job with second story added... eventually sold in high 200's.

And I've got lots of specific examples from the time.

 

[dhukka]

Additionally, the UK property market does this sort of thing regularly, and most of the time the AU market does NOT follow suit (same goes for the US). The markets are completely different.

Would you like to define regularly? According to data from Nationwide going back to 1952, apart from the current home price declines in the UK and the first half of the 1990's, the only other time UK home prices registered quarter over quarter declines on a national basis was in 1954. The 1954 declines being very modest (no more than -1.5%). ON a year over year basis, the current home price declines in the UK already outstrip the biggest year over year decline in 1992 by a considerable margin. To suggest that this is a run of the mill correction in UK home prices is just nonsense.

 

[theasxgorilla]

The early 90's weren't so hot in Australia. Anyone who thinks there was merely a "plateau" is deluded, there were real and serious declines, especially in the top end.

One example in Broadbeach right across the road from my folk - Single story canal property bought for $300, big reno job with second story added... eventually sold in high 200's.

And I've got lots of specific examples from the time.

So do we draw the conclusion that because it has happened that it can happen again, or that it will happen again? If the latter, why now?

 

[wayneL]

So do we draw the conclusion that because it has happened that it can happen again, or that it will happen again? If the latter, why now?

Well that discussion has been going on throughout the whole thread, and the evidence is mounting up that it is starting to happen in Oz.

The only unknowns are how far will it go. Will the commodities bubble insulate Oz from further falls, or will it indeed be responsible for further falls.

Nobody knows.

I do know that means are invariably returned to in real terms - somehow. That is happening right now in all western markets that are coupled with the US/UK financial system, but at differing speeds and at differing stages. I do know that it is nowhere near being "over".

Values in all anglo economies are still historically very stretched, even with falls.

It can happen. It is happenning. And it will happen again so long as there is a capitalist system and fractional reserve banking.

 

[theasxgorilla]

The only unknowns are how far will it go. Will the commodities bubble insulate Oz from further falls, or will it indeed be responsible for further falls.

Indeed it has. I think it's only reasonable to expect soft patches. It's the language of the media and the bear camp that I'm opposed to really. It doesn't take a professional psychoanalyst to detect that there exist those who are itching for a catastrophy to come along and teach the morons that 1 + 1 doesnt equal 3.

I'm about to sign a lucrative employment contract with one of the largest and richest organisations in the world, so what do I care what it does? My only vested interest is that it doesn't go up faster than I can accumulate savings toward my next piece of it (in Aust or Sweden...or maybe, Spain?)...and the bears would have to be the wrong-est for that to happen.

So I'm only hoping that it's soft enough for long enough for me to buy in again at my desired level. And when that time arrives hopefully the ECB have managed to keep rates low enough so I have a nice delta between financing in EUR and holding in Aust.

If it stays really soft for really long then I'll be the next Robert Kiyosaki and you can all read about it in my book. :

 

[dhukka]

If it stays really soft for really long then I'll be the next Robert Kiyosaki and you can all read about it in my book. :

But with one key difference, your accomplishments will have been real as opposed to Kiyosaki's which are largely imaginary.

 

[wayneL]

But with one key difference, your accomplishments will have been real as opposed to Kiyosaki's which are largely imaginary.

 

[theasxgorilla]

But with one key difference, your accomplishments will have been real as opposed to Kiyosaki's which are largely imaginary.

Hehe, except the part about selling a lot of books!

 

[Sean K]

Still no value in the UK Wayne?

I'm looking forward to picking up something on the Mornigton Peninsula overlooking the Bay, in the low $200s....

Go halves in a holiday shack Gorilla? Somewhere between Portsea and the Koonunga Pub will do...

 

[wayneL]

Still no value in the UK Wayne?

Check out these two identical properties.

That's ~$500k AUD for a 3 bed terrace (Cheltenham is pricey though)

At £825 PCM, that's 4.4% gross yield.

No value there.

At repo auctions you can "nearly" get value, but only on mixed commercial/residential (Read dingy shop with a crappy flat on top... no thanks)

 

[theasxgorilla]

Still no value in the UK Wayne?

I'm looking forward to picking up something on the Mornigton Peninsula overlooking the Bay, in the low $200s....

Go halves in a holiday shack Gorilla? Somewhere between Portsea and the Koonunga Pub will do...

Anytime!

It's either that or an art deco apartment in Elwood for me. So long as I can sit in the sand with some flake, calamari, chips, a chilled rheisling and watch the sun set over the bay I'm really not fussy on exactly where. Hey, be sure to bring your guitar

You an get views of the bay in McCrae for low $300s last time I checked...but for low $200s to happen I think I'll defer to WayneL to arrange real four-horsemen treatment for the Melb housing market. :

 

[Shane Baker]

Hi Wayne

Interested in your definition of value ?

Cheers

Shane

 

[pepperoni]

PS: Pepporoni - I did look at that house on the W/E quickly- currently quite out dated and set up as 2 seperate flats. Would need some significant $$$ spent to bring it up to the "executive residence" status typical for the area! I think in a soft market there is no doubt places like that are harder to move and have to be discounted more than the good ones. Still, if you have a lazy $1.7M it probably represents a good opportunity, both lifestyle-wise and financially.

Cheers,

Beej

Cool ... wish I had of known I would have got off my bum and looked at it. Doesnt seem to have much of a view .. even though someone poisoned the trees accross the road resulting in those metal "tree poisoning" signs!

As for the next growth cycle ... its eons off ... unless rates go back to 5% and credit availiability (eg no deposit loans) come back soon. Debt fanboys are already up to their necks in debt (if not over their heads) and thats where 90% of recent growth has come from. Ill guarantee no REAL growth til early-mid next decade.

Its all been .. "the great thing about property is I can borrow at 5% and make 10% .. Im so clever ... Ill borrow as much as possible (at the time about double what you will get now)". Now they are paying 10% and making 5% or less ... not so clever after all.

Ask yourself how many time you have heard that mantra. Now ask yourself how many times you have heard it in the last 2 years.

Its not as complicated as people try to make it ... growth will only come with the ability to pay higher prices arises (ie wages/decent investment returns/lower rates).

Just a question of whether we stagnate or fall.

 

[pepperoni]

And enough with the commodity BS ... yes the UK and US dont have them but they dont get 9.5% rates that go with it either.

And with all building over the last 10 years we have better supply than most markets other than spain and dubai! **** I remember years when I never saw a crane and we went from no chinese to 10000000s ... and prices were flat the whole time.

 

[dhukka]

Maybe someone can offer an informed opinion on this because I am certainly in no position to make one. I keep hearing in the media and from property bulls that there is a shortage of housing in Australia. I came across this page that looks at census data from the abs. The period from 2000 - 2006 shows;

Aust Population growth 5.8%
Growth in Total dwellings 8.2%
Growth in Occupied dwellings 7.4%
Growth in Unoccupied dwellings 15.67%

The rest of the page is well worth reading. Another interesting read here at Contrarian Investors Journal.