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House prices to keep falling for years

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Responsible savers may lose a bit of interest, but at least they won't suffer 40% losses, which is what highly leveraged property "investors" are setting themselves up for.
 
dhukka said:
That stats are taken directly from the abs, so unless you think the abs has an axe to grind there is nothing biased in the numbers but point taken that the percentage changes can be misleading. If you read on however you will see that the number of dwellings constructed over the same period has outstripped household formation.
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I should have made that clearer that I wasn't questioning the data sourced.. just potentially the conclusions, ABS and government data generally should be pretty high quality you would hope.

I really dislike the idea that you have people who use the term 'specufestor' as an insult who regularly seem to quote that site, that's my bias! Also I probably switched off when I read such things as 95 years of overproduction of housing, we all feed our views at some level I find and need to struggle against that, perhaps I'm missing something good?

Government data for QLD June quarter 08 (OESR department) state wide has vacancy rates for resi property at 2.8% and 1.9% for Brisbane, so that's just a number you can interpret somehow, to me it seems like there isn't huge oversupply in stock available. Some areas no doubt will have plenty of vacancies and others will be under pressure (inner Brisbane), you don't buy the median or the average you buy a property and that's a way you can add value to your investment by purchasing wisely.

Rental moves for the last 3 years for a property I own that I estimate is a reasonable proxy for the suburb... 250-330 = 32% growth of 9.70% CAGR over 3 years, longer term growth rates are only around 4% so... that's a bubble potentially.

Does someone agree/disagree with the view that asking the market for an opinion about supply via rents is a pretty good idea compared to charts at 20 paces?
 
explod said:
It is near to work places (ie. city centres) where rents have taken off. Outer areas, such as where I live they are static or falling and this trend is very much following the rise in oil (transport).

Having had experience with ABS figures in the past (professionally), they are spot on but as of the day of issue they reflect the past by some degree, not what is happening now. Earlier this year a lot of property was still on the rise which is mixed with figures now on the decline.

As you say, interesting subject
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Agreed, the variance over different areas is not small. Also Brisbane is quite different to Western Sydney and so on.

I like both the RBA and ABS sites and visit regularly to refresh my spreadsheets.

Not all stocks did badly in the 1930's either! :)
 
WaySolid said:
Does someone agree/disagree with the view that asking the market for an opinion about supply via rents is a pretty good idea compared to charts at 20 paces?
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Yes - as amenity has a huge premium made possible by expensive fuel and other costs of living ... renders the numbers nonsensical as relates to general supply.

Brisbane is releasing and selling land hand over fist on the outskirts. People paying $200k for blocks in warner and another $200k to build a 1 story spec home. Tonnes of new properties all around ... far more than necessary.

Gotta say the PPOR build and build to let types are way up the evolutionary chain from the recent buy to let types and speculators.

Now if only we could get kyle sandilands and jamie dury to do "the block 3" where people face reality, sell their loss making properties and rent we could be over this sad chapter by year end.
 
WaySolid said:
I really dislike the idea that you have people who use the term 'specufestor' as an insult who regularly seem to quote that site, that's my bias! Also I probably switched off when I read such things as 95 years of overproduction of housing, we all feed our views at some level I find and need to struggle against that, perhaps I'm missing something good?
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Can't say I've seen that phrase specufestor before, I do like it though. I agree that phrases like the one you quoted above are overly alarmist.

WaySolid said:
Government data for QLD June quarter 08 (OESR department) state wide has vacancy rates for resi property at 2.8% and 1.9% for Brisbane, so that's just a number you can interpret somehow, to me it seems like there isn't huge oversupply in stock available. Some areas no doubt will have plenty of vacancies and others will be under pressure (inner Brisbane), you don't buy the median or the average you buy a property and that's a way you can add value to your investment by purchasing wisely.
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Well as they say all real estate is local, this is one cliche I happen to agree with. A few weeks back I went out to Northlakes to look at the next stage of development. Unbelieveable the amount of land they're developing out there, I wonder if it will go as fast as the first stage did?

WaySolid said:
Rental moves for the last 3 years for a property I own that I estimate is a reasonable proxy for the suburb... 250-330 = 32% growth of 9.70% CAGR over 3 years, longer term growth rates are only around 4% so... that's a bubble potentially.

Does someone agree/disagree with the view that asking the market for an opinion about supply via rents is a pretty good idea compared to charts at 20 paces?
Click to expand...

I think it would be tought to disagree with that.
 
pepperoni said:
Yes - as amenity has a huge premium made possible by expensive fuel and other costs of living ... renders the numbers nonsensical as relates to general supply.
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Can you explain this further? I understand you are saying that desirable property renting well will not indicate a general oversupply of property in total? I could have misunderstood that however, I would agree if that's the case. My properties are doing great so I'm happy but I'm sure other people with IP's could have different experiences at the moment. Median rents must be some form of decent feedback however even if they mask lots of individual variability between areas.

pepperoni said:
Brisbane is releasing and selling land hand over fist on the outskirts. People paying $200k for blocks in warner and another $200k to build a 1 story spec home. Tonnes of new properties all around ... far more than necessary.
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I have a bit of experience of the infill development market in my area (12k CBD), it's ridiculously expensive to build houses at the moment compared to sale price, and hence they aren't being built. Multi dwelling might be more viable and I'm seeing a lot of units being built in Chermside at the moment, really don't know much about the subject and would like to see some data about all of these new properties, the only thing I know is that development roadblocks and costs for the development process from council through to the builders are just huge at the moment from what I hear from developers.

pepperoni said:
Gotta say the PPOR build and build to let types are way up the evolutionary chain from the recent buy to let types and speculators.

Now if only we could get kyle sandilands and jamie dury to do "the block 3" where people face reality, sell their loss making properties and rent we could be over this sad chapter by year end.
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Personally disagree with the sentiment about evolutionary development, though am interested in this thread just in market feedback and not what I view as a philosophical and moral debate about some areas of capitalism. Though... it's worthy of some discussion potentially.
 
dhukka said:
Can't say I've seen that phrase specufestor before, I do like it though. I agree that phrases like the one you quoted above are overly alarmist.



Well as they say all real estate is local, this is one cliche I happen to agree with. A few weeks back I went out to Northlakes to look at the next stage of development. Unbelieveable the amount of land they're developing out there, I wonder if it will go as fast as the first stage did?



I think it would be tought to disagree with that.
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Re: Northlakes.. I know that Stocklands and other big developers do have massive land bank supplies, so for all I know on the subject (not much) there might be suburbs of houses with nobody inside out there in Brisbane at the moment, just that I'm wondering why this isn't feeding through to my suburbs? Rents for me are very strong and they are still growing well, though I only track a few suburbs closely and might be missing something.

** edit... Actually all I know is their land banks are massive.. not sure how it relates to demand as that is potentially no small thing from QLD's population either. I do remember viewing a big chunk of land snapped up by one of the big dev companies around Kallangur (20k CBD) in 2005 for 80M or so and being told it was the last such parcel of it's type that close to the CBD by the person showing me it, but it's all about developable at a reasonable cost land as if there's one thing in this country we don't really lack it's open space!
 
WaySolid said:
Rental moves for the last 3 years for a property I own that I estimate is a reasonable proxy for the suburb... 250-330 = 32% growth of 9.70% CAGR over 3 years, longer term growth rates are only around 4% so... that's a bubble potentially.
Click to expand...

GDay Waysolid

I don't agree with the doomsdayers or the property bulls.

For what it is worth, I think quality Brisbane property will do little for 5-10 years (while wages/affordability catches up) and poor Brisbane property will sink a bit until it reaches the quickly falling ability of owners/tenants to pay.

Brisbane property in general did nothing in absolute (fell in real) terms between 1990 and 1998. Why cannot this repeat after an unprecedented bull market?

Anyway, in reference to your quote above which is very valid, I would like to point out that in my context the potential rent on my place (owner occupy on river apartment with city views) has gone up from $450 to $650 in five years - a 45% increase.

However, five years ago a portion of my mortgage was locked in at 6% and has now rolled to 9% - a 50% increase.

So the crummy gross yield is still lucky to be 5% - but the holding cost has gone up 50% - new buyers at these levels would have to be rare and I think my place is over priced.

Borrowing at 6% is marginal with rental yields at 5% (gross - setting aside the silly rates and body corp) but stupid with rates at 9%.

This is why I believe property goes nowhere in my patch until wages catch up and why I locked in a valuation with my banker and got pre-approval to the MAX while I could.

Plenty of other CHEAP assets to buy with the expanded credit line
 
WaySolid said:
Can you explain this further? I understand you are saying that desirable property renting well will not indicate a general oversupply of property in total?
Click to expand...

Amenity is worth money - I pay $150 a week in fuel, parking and tolls ... If I could move somewhere I could walk to work Id happily put that towards rent. Amenity is worth money. For social people spending $100 a week in cabs going out they can put that towards renting centrally. Cost of getting around has gone through the roof so the premium people pay to rent amenity properties is growing healthily ... they actually end up saving money even with the 10%+ rent increase (modest and a bargain IMO) vs the poor sod chained to a property for 30 years while his workplace and lifestyle changes.

As for the oversupply, building around brisbane (eg warner) has to a large degree been locked in by off the plan type purchases BEFORE SUBDIVISION. Subdivision is done, settlement has occured, and those properties are getting approved and built. There is a pipeline of this stuff coming through from the heady days of ... blah Im sick of typing this stuff but hopefully you get the picture.
 
BSD said:
GDay Waysolid

I don't agree with the doomsdayers or the property bulls.

For what it is worth, I think quality Brisbane property will do little for 5-10 years (while wages/affordability catches up) and poor Brisbane property will sink a bit until it reaches the quickly falling ability of owners/tenants to pay.

Brisbane property in general did nothing in absolute (fell in real) terms between 1990 and 1998. Why cannot this repeat after an unprecedented bull market?
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I like reading what capital is doing and where it's going, it's easy to mouth bet well but harder to do it with real money.

Your guess about the future is similar to the prediction I have had for over a year regarding Brisbane, my guess has been a 1990's repeat potentially. With this opinion in mind I sold a property late 07 to reduce debt and place some capital elsewhere (PPOR sale so tax free), I'm longingly looking at property in my areas at the moment still as I like it's long term prospects but the prices don't make any sense to me just right now..... so at some point in the future perhaps.

BSD said:
Anyway, in reference to your quote above which is very valid, I would like to point out that in my context the potential rent on my place (owner occupy on river apartment with city views) has gone up from $450 to $650 in five years - a 45% increase.

However, five years ago a portion of my mortgage was locked in at 6% and has now rolled to 9% - a 50% increase.

So the crummy gross yield is still lucky to be 5% - but the holding cost has gone up 50% - new buyers at these levels would have to be rare and I think my place is over priced.

Borrowing at 6% is marginal with rental yields at 5% (gross - setting aside the silly rates and body corp) but stupid with rates at 9%.

This is why I believe property goes nowhere in my patch until wages catch up and why I locked in a valuation with my banker and got pre-approval to the MAX while I could.

Plenty of other CHEAP assets to buy with the expanded credit line
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Agreed about buying resi property now, just in my areas I'm in pause mode for an indefinite time.. Buying might make little sense but selling and hoping to overcome transaction costs via timing is also not clear to me, my yields are still increasing and very healthy compared to purchase price, and my basic investing philosophy is to be bullish long term Australia .... so... hold! not accumulate or sell or incur brokerage costs :)

Having said that I have no value add skills with property apart from purchasing cheaply and simple cosmetic reno's, I believe property is still this fantastic vehicle to create wealth pretty much at all times, just with buy n hold you have to be aware that capital gains never comes in smoothly served portions.
 
Not exactly fertile grounds for property prices to increase ...


Record mortgage stress ahead of rate cut

By Stuart Fagg, ninemsn Money
September 1, 2008

Homeowners in NSW and Queensland are spending more than 40 percent of their income to meet mortgage repayments as housing affordability hits record lows.

According to Real Estate Institute of Australia (REIA) figures released today, higher interest rates and economic uncertainty have pushed housing affordability to its lowest level in the 22 years the REIA has been collecting data on the issue.

On average, families across Australia are paying 38.9 percent of their income in mortgage repayments. Those paying more than 30 percent of their income are considered to be in mortgage stress. However, according to Noel Dyett, REIA president, the situation is at its worst in NSW and Queensland.

"The situation is most severe in New South Wales and Queensland, where the proportion of income required to meet loan repayments increased to 42.6 percent and 41.0 percent respectively," he said. The average monthly home loan repayment in NSW hit $2301 in the June quarter.

What you will save from the rate cut:

Rate cut of 0.25 percent:

* $200,000: $35 per month
* $350,000: $61 per month
* $500,000: $87 per month
* $750,000 :$131 per month
 
WaySolid said:
I really dislike the idea that you have people who use the term 'specufestor' as an insult who regularly seem to quote that site, that's my bias!
Click to expand...
The term is actually specuvestor. A combination of speculator and investor.

* I don't use the term, but it does describe many in the property market (and indeed many "traders"). I wouldn't have thought it derogatory unless spat out with invective.

* You might just have to wear it, because as a group, "specuvestors" have had the most atrocious things to say to those who have chosen not to participate in property; very much more hurtful than specuvestor (which I repeat is not really derogatory if accurate).

* What's wrong with being a specuvestor anyway? It's not my bag with property, but if you can make some dough, why not.

* The villains in this bubble are the banks and government... and nasty Rachman type landlords.
 
wayne solid said:
I know that Stocklands and other big developers do have massive land bank supplies, so for all I know on the subject (not much) there might be suburbs of houses with nobody inside out there in Brisbane at the moment, just that I'm wondering why this isn't feeding through to my suburbs?
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Not sure about Brisbane at the moment, however on the goldcoast bucket loads of freshly built properties, and empty ones around Upper Coomera for sale.. 100's in fact. Areas such as Arundel and Parkwood many also. Nearly all are $400k+ - quite out of reach from the average first home buyer, or average wage here. Going to take a while to clear the supply, or for affordability to catch up. I think these areas are very vulnerable right now.

Plenty of supply here on the goldcoast for those who wish to live in those areas...or can afford it.
 
Just a thought to throw out there because I haven't seen it mentioned before.

I see the US and England and to a lesser extent Ireland mentioned frequently on the bulletin boards I frequent, and as they have gone indeed we might go as well, I just don't know.

My question is why isn't anyone interested in what the Canadian real estate market is doing? I have been watching that market with a lot more interest than I have property in England.

Having spent several hours on this thread, time for me to go and do some work! Thanks for the civil discussion on the subject and keep it going :)
 
WaySolid said:
Just a thought to throw out there because I haven't seen it mentioned before.

I see the US and England and to a lesser extent Ireland mentioned frequently on the bulletin boards I frequent, and as they have gone indeed we might go as well, I just don't know.

My question is why isn't anyone interested in what the Canadian real estate market is doing? I have been watching that market with a lot more interest than I have property in England.

Having spent several hours on this thread, time for me to go and do some work! Thanks for the civil discussion on the subject and keep it going :)
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I am!! Its uncanny that you posted this, as I have just come online to post the same!!

I've just had cousins over from Toronto and we have been discussing the relative AUS and CAD property markets.

Canada seem to be in a very similar position to us here i.e a resoruce rich country with high immigration, 1 province being very resource rich and the rest hanging onto it's coattails etc etc.

Yet (besides Vancouver) Canadian cities have some of the most affordable real estate in the western world. Ontario is the most populous province, yet has some of the most affordable real estate (even within 25ks of Toronto CBD) in any developed Canadian city.

Its almost as though they had only a small RE boom and are therefore sheltered from a major bust. I expect that the relatively open border with the US (which on the whole always has had cheaper housing than Canada) has had a major influence on their RE market.

Canada has tradionallly had low interest rates, but even this didn't lead to an outright buying frenzy which we have had in Australia.:confused:
 
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