House prices to keep falling for years

[CamKawa]

That graph above that has been posted so many times on this thread I believe simply demonstrates the current major supply problem we have in Oz for new housing - especially affordable housing.

lol

Wow, don't know where to start here.

The property boom has been caused by 2 major factors.

1. Psychology - the willingness to speculate.
Some property buyers over previous years have been quite open about the fact that they paid too much for the property, but it doesn't matter because they believe that it will probably go up by even more next year. This attitude I believe has changed. As you can see from the chart the number of people applying for home loans has fallen off a cliff. The only supply problem the property market has is a shortage of speculators.

Here's a chart of latest housing finance figures. Looks to me to be falling off a cliff.

Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0


2. Finance - the ability to speculate.
Speculators can want to buy houses all they want but if they can't get the finance for it how can they pay more for the property than the vendor did and push the price up? Finance though still freely available in Australia but lending standards may tighten as the credit crunch takes hold.

As that happens over time, the average house prices will adjust back closer to the norm, but that doesn't mean your house in Sydney 10km's from the CBD is going to see any real drop in value.

These so called blue chip areas that rocketed up in price may fall just as fast and are the most risky.

Capisce?

No.

House prices are falling here in Australia. Here's a chart of investor emotions. Does the denial stage ring any bells with you Beej?

 

[tech/a]

Kennas is 100% correct in his take.

I also agree with Beej.
The focus in the thread generally is on the specific issue of falling prices which are supported by the demand view point---prices fall hardest in areas of lowest demand.

Grouping all property as falling "off a cliff" is just as stupid as saying all property is going to return a short term and in some cases longterm gain.

New house approvals have fallen off a cliff.
Terrific I can negotiate building contracts and find trades---something I havent been able to do for years.I can even negotiate with trades!!

On with the builders hat.
My forward order book is still growing---why?
Here's why.
My market share in my field is around (We estimate) 8% of total market.
(Retention of land.Wet land developement and erosion control).
The market in general has "Fallen off a cliff" in the domestic field.Dropping 20% ish.
But by increasing my market share 2% I keep growing.The infrastructure and Company culture is built around exactly this---increasing market share to ensure growth. Wont go into how we do it.

But for those who are toying,with property you MUST investigate demand.
No point in investing in areas of high supply.Be that land,housing,units developement or refurbish.
You must place yourself in a position to take advantage of opportunity and while the market is the way it is---its a great time to get YOUR infrastructure in order.

Finance
Contacts
Builders
Approvals
Education
Research.

Treat it like the business it is.

 

[KIWIKARLOS]

If that's what you meant then that's an even dumber statement than the original.

Well your words of wisdom sure proved me wrong

Don't reply to my posts if your just going to be juvenile about it, you ego is oozing self righteousness atm and its not credible or constructive.

 

[wayneL]

UK publicly listed builders have written down hundreds of millions of pounds off their balance sheets because of the decline in the value of their landbanks over the last six months.

Sorry fellas, although that argument has merit, it is not absolute.

Land is getting cheap again here in this crowded island with high immigration.

('cept farm land, but that's another set of dynamics)

 

[Beej]

CamKawa - a drop off in housing finance approvals is a regular and likely event - and off course you expect that in a soft market with lower over-all sales volumes of established houses right now. Given that not enough new houses are being built for all sorts of reasons, that also all adds up. Doesn't mean s*&t for the long term future of property prices though as the fundamental factors I outlined are still well and truly in play. You can tell this is happening, because at the same time as falling new loan approvals, rents are rocketing up - capisce?

You also seem to believe that the primary driver of property demand is speculation - I think on that you are dead wrong, and that's why your analysis is flawed.

You completely miss the point of my arguments and try to debunk them with stock market based anaylsis, theories and graphs. I'm betting you don't own and have never owned property?? You probably never will then - fine your choice. I personally am currently setting up for my next step up the ladder in Sydney, as I think right now (and probably the next 12 months) could be the best opportunity for a decade to do so. And I don't think the stock market based investments will be doing much over that time, plus with a growing family, the spare cash has to go somewhere productive for me!

Cheers,

Beej

 

[KIWIKARLOS]

Everyones throwing figures around like they are the word of god. Facts and figures mean nothing without taking them in context of an overall picture and they can also be manipulated to show many different arguements.

Interested to hear some real stories, anyone here actually in morgage stress right now or sitting in a house thats dropped 20% and had to sell ?

I think we have to remember that in many cases if you bought over 4 years ago a 20% drop wouldn't make your investment negative overall. The biggest problem is for people who bought in the last 2 - 3 years and you cant afford the repayments. Anyone getting a loan and not calcualting still been able to pay it off if rates ar 2-3% higher onlyhas them selves to blame.

You only loose if you sell and many people still need a roof oveer their heads, can afford the repayments (even if they are struggling) and will ride out this cycle.

Biggest loosers property investors who are short term, interest only loans etc who were assuming capital gains would race away for ever.

Which home owner out there with a 300K loan say would sell their house with repayments of 600 a week to move into non existant rental market where comparable rent for the house may be 400 - 450 anyway ? The cost of selling the house alone makes up the difference between reayments and rent for at least a year or two.

I ask again anyone actually sold at a loss here? please share the story.

 

[dhukka]

Well your words of wisdom sure proved me wrong

Don't reply to my posts if your just going to be juvenile about it, you ego is oozing self righteousness atm and its not credible or constructive.

Don't post nonsense if you don't want to hear juvenile responses. Here is your original quote:

We have had 17 years of economic growth and those downturns of the graph occured in periods where growth was still overall positive.

So your point is that over the last 17 years economic growth has been overall postive. Wow! What a revelation! It must have taken years of research to come up with that nugget.

We have recessions on average about every 8-10 years and those recessions (that usually involve some quarters of negative growth) usually last a little less than 12 months. You could pick any period of 17 years and say exactly the same thing. It is quite simply a dumb comment.

How about those OECD countries that have had 2 consecutive quarters of negative growth?

 

[KIWIKARLOS]

UK publicly listed builders have written down hundreds of millions of pounds off their balance sheets because of the decline in the value of their landbanks over the last six months.

Sorry fellas, although that argument has merit, it is not absolute.

Land is getting cheap again here in this crowded island with high immigration.

('cept farm land, but that's another set of dynamics)

The price of land isn't just indicative of the amount available, its the cost of servicing the land that makes a huge poportion of its value. Areas where transport public or private is expensive due to location should be cheaper and those are the areas we have seen hardest hit so far. People rushed out for huge blocks in whoop whoop (50ks from work) to find that the time and cost is just rediculous.

In new developments the developers pay for the cost of services eg. water, gas and electricity up front then tack it onto the sale prices thats why the new developments these days out west are still not really affordable. In the next couple years you will see more urban consolidation with a result in some slightly more affordable housing although you wont have a quarter acre. We just need to get over our obsession with individually owning big blocks and relise that a smaller homee (less cost and maintainance) with big public areas is not only more economical but would improve our society and envirnoment.

 

[KIWIKARLOS]

Don't post nonsense if you don't want to hear juvenile responses. Here is your original quote:

So your point is that over the last 17 years economic growth has been overall postive. Wow! What a revelation! It must have taken years of research to come up with that nugget.

We have recessions on average about every 8-10 years and those recessions (that usually involve some quarters of negative growth) usually last a little less than 12 months. You could pick any period of 17 years and say exactly the same thing. It is quite simply a dumb comment.

How about those OECD countries that have had 2 consecutive quarters of negative growth?

Get over yourself, in comparison with many other countries a recession every 8 years isn't that bad, US had a recession about 6 ago then another with the dot come bubble before that. How many major economic problems has australia created and bore the brunt of in the last 15 years?
and its not recessions every 8 yearsits called an economic cycle and it refers to periods of below averge growth not neccessarily negative

one quarter of negative growth is not a recession officially we have had 17 years of growth if you think you can a) prove otherwise or b) think that you have the qualifications to decide what constitutes a recession then go get a job in treasury and rewrite history.

 

[KIWIKARLOS]

http://www.oecd.org/dataoecd/6/55/41156371.pdf

latest oecd gdp growth figures. Most were negative in current quarter and just wait for september quarter figures they will be just as low if not lower. many have been flirting with negative growth for many quarters and only just had their head above water. US and UK still show growth but really their measures are calcualted in some pretty dodgy ways (buts thats a whole other arguement)

At annualised rate as of this week of 2.7% australian growth is leagues ahead of all other oecd countires

 

[Macquack]

On with the builders hat.
My market share in my field is around (We estimate) 8% of total market.
(Retention of land.Wet land developement and erosion control).

So your one of those developers that sell land below the high tide mark?

 

[CamKawa]

Given that not enough new houses are being built for all sorts of reasons, that also all adds up.

One reason good is not enough demand.

Doesn't mean s*&t for the long term future of property prices though as the fundamental factors I outlined are still well and truly in play.

The so called "fundamentals" have been long left behind. Property maybe in a speculative bubble.

You also seem to believe that the primary driver of property demand is speculation - I think on that you are dead wrong, and that's why your analysis is flawed.

As you have stated you are builder and I believe you may be suffering from a case of confirmation bias.

You completely miss the point of my arguments and try to debunk them with stock market based anaylsis, theories and graphs.

They are facts. Do they make you uncomfortable?

I'm betting you don't own and have never owned property?? You probably never will then - fine your choice.

You know nothing about me.

I personally am currently setting up for my next step up the ladder in Sydney, as I think right now (and probably the next 12 months) could be the best opportunity for a decade to do so. And I don't think the stock market based investments will be doing much over that time, plus with a growing family, the spare cash has to go somewhere productive for me!

Good luck with all, but should it all go belly up please don't go to the government cap in hand asking for a bail out.

 

[tech/a]

So your one of those developers that sell land below the high tide mark?

No but work on many that are.
Technology is such that these days if you had a swamp in the middle of an area which you wanted to populate then it can be done.
A long way from Vienna---Dubai is!!

UK publicly listed builders have written down hundreds of millions of pounds off their balance sheets because of the decline in the value of their landbanks over the last six months.

Sorry fellas, although that argument has merit, it is not absolute.

Land is getting cheap again here in this crowded island with high immigration.

Wayne this is true.
BUT
Is this a written down value from purchase price or valued pricing after purchase. I know of property held here by developers for 20 yrs and still not released---some still to come into the Housing Zoning.

I'll bet demand and price still remains firm in certain areas,its not blanket.

Correct me if I'm wrong but is it customary for UK builders like many in the US of A to build complete sub divisions--50/100 or more homes before release to the public for sale?

 

[xoa]

Good luck with all, but should it all go belly up please don't go to the government cap in hand asking for a bail out.

Exactly...

When the bubble bursts, these speculators will be crying foul and demand a government bailout. They'll want us all to pay the price for their stupid choices.

 

[Beej]

As you have stated you are builder and I believe you may be suffering from a case of confirmation bias.

I have no idea where you got the idea I was a bulder! LOL - I've never stated that nor is it even close to being true.

Seems that it is also the case that you know nothing about me PS - I never presumed to know anything about you - I merely speculated (seemingly correctly) that you have not been a property owner in the past. Maybe you considered it even and missed the boat, and therefore suffer from your own "confirmation bias" syndrome!

Good luck with all, but should it all go belly up please don't go to the government cap in hand asking for a bail out.

Whatever hapens, why would I ever have to go to the government cap in hand to bail me out? I'm not a farmer or an automotive industry executive Bail me out from what exactly anyway? Being "unlucky" enough to own a luxury home with plenty of room for my family in one the best suburbs in one of the best cities in the world?? LOL.

Cheers,

Beej

 

[CamKawa]

I have no idea where you got the idea I was a bulder! LOL - I've never stated that nor is it even close to being true.

Sorry my mistake, I got you confused with another permabull - tech/a.

I merely speculated (seemingly correctly) that you have not been a property owner in the past. Maybe you considered it even and missed the boat, and therefore suffer from your own "confirmation bias" syndrome!

Very interesting Beej. What evidence do you have to support this?

 

[Beej]

Sorry my mistake, I got you confused with another permabull - tech/a.

Fair enough I figured that might have been the case

Very interesting Beej. What evidence do you have to support this?

No evidence - pure speculation as I stated. Totally up to you if you want to prove my guess to be right or wrong!

Cheers,

Beej

 

[CamKawa]

No evidence - pure speculation as I stated. Totally up to you if you want to prove my guess to be right or wrong!

Cheers,

Beej

I am a bored single mother, living in government housing commission.

 

[dhukka]

Get over yourself, in comparison with many other countries a recession every 8 years isn't that bad, US had a recession about 6 ago then another with the dot come bubble before that. How many major economic problems has australia created and bore the brunt of in the last 15 years?
and its not recessions every 8 yearsits called an economic cycle and it refers to periods of below averge growth not neccessarily negative

one quarter of negative growth is not a recession officially we have had 17 years of growth if you think you can a) prove otherwise or b) think that you have the qualifications to decide what constitutes a recession then go get a job in treasury and rewrite history.

What are you on dribbling on about? Overall the Australian economy has been growing for the past 17 years? Absolutely brilliant, any moron who can read the headlines in the newspaper knows that. And who claimed one quarter of negative growth was a recession? You are arguing against a shadow.

Unlike the U.S.A, Australia does not have an official body such as the NBER to date recessions. However, using a set of coincident indicies and an algorithm based on the NBER's rules for identifying peaks and troughs in the business cycle, 3 recessions have been clearly defined since 1974 and they all clearly show negative growth in a wide range of indicators, including GDP, not just a slowdown. The Melbourne Institute however identifies another recession in 1976-77 (which also shows negative growth in GDP terms) and thus they have 4 recessions over the same period. See The Australian Business Cycle: A Coincident Indicator Approach

So depending on who you want to believe there has been a recession every 8 or 11 years since 1974. If you use the peaks and troughs of GDP there have been 6 recessions since 1965. But there are good reasons not to use the GDP measure as outlined in the paper cited above.

So

 

[dhukka]

http://www.oecd.org/dataoecd/6/55/41156371.pdf

latest oecd gdp growth figures. Most were negative in current quarter and just wait for september quarter figures they will be just as low if not lower. many have been flirting with negative growth for many quarters and only just had their head above water. US and UK still show growth but really their measures are calcualted in some pretty dodgy ways (buts thats a whole other arguement)

At annualised rate as of this week of 2.7% australian growth is leagues ahead of all other oecd countires

You just really need to check your facts Kiwi. There are 30 OECD countries. GDP estimates for 8 of those countries are not available yet. Of the 22 that have supplied estimates, 4 have recorded negative growth rates for the 2Q08. Even if the remaining 8 reported negative numbers it still wouldn't be a majority.

But that is beside the point because your intial claim was that:

most of the OECD has been negative for at least 2 quarters.

So if we examine that claim, not one country out of the 22 that have reported has shown negative growth for 2 consecutive quarters. OECD stats.