House prices to keep falling for years

[theasxgorilla]

Knulla helvete!

Yeah it's a classic how it works here. That fee often includes heating, water, and sometimes cable TV and Internet, plus the expected maintenance and upkeep. So it's not all bad.

The real gotcha though is that it can also include paying for the debt that the company which owns the property has on the property. You see, under the typical owner-occupied apartment arrangement here in Sweden, your title doesn't entitle you to ownership of a share of the property as defined by a plan of strata or subdivision. Instead you have a contract which entitles you to a share (and associated voting rights) of the company which owns the property. It's actually a bit like the old Victorian stratum title (no, not strata, stratum) with a service company. I'll be uber impressed if anyone actually knows what that is.

The catch is that the company may (and probably does) have it's own mortgage on the property. Oooh, yes, layers of debt

So basically, in addition to taking out an individual loan with the bank to buy the contract, for which you have an associated repayment, your monthly body corp fee may also be paying a proportion of the mortgage that the company which owns the property has on the property!

The layers obscure the true price that you pay and what you are really paying for, but most people don't delve into such things as the financials of the bostadsrättförening (the company they're buying into). They just look at the asking price for the contract, the monthly fee, and what is included.

It's not uncommon for a single company to be established for the sole purpose of owning a single property. And it's typically the case that newer properties have larger outstanding loans and therefore higher monthly fees. As the company's mortgage is paid down your monthly fee ought to reduce and the value of your contract ought to go up.

It's complicated, but makes sense in a socialistic, communal kind of way. Or as a Swiss guy standing beside me looking at the display window of a real estate office once remarked, "Only in Sweden could I pay all of this money for an apartment that I still don't actually own".

 

[robots]

brty, et al,

The question is not whether to buy now or rent for the next 30 years. The question is when to rent and when to buy depending on your circumstances and how the numbers add up.

10 years ago was a no brainer buy.

for many people right now is a no-brainer rent.

Many renters will buy when the numbers add up.

I've been a property owner since I was 21 and have some IP. But I can tell you that for my PPOR in my situation, I am delighted to rent, because that's what the numbers say to me.

Here in the UK, there are buy opportunities where the numbers are starting to add up, but plenty of time for better deals to appear.

Cheers

hello,

as a renter when most make decision to buy the only numbers you are interested in is repayments,

i bought bang on 10yrs ago, the differential between buying and renting was exactly the same as it is today, even 20yrs ago the differentials where still there (hence Negative Gearing been around for how long?)

now that takes on numerous issues such as deposit, interest rates, location and style of property

rental income and council data (if stats avaivalbe) will be a guiding factor,

all the best and ah let us know when RE statistics HERE in aus have dropped 30% this year,

wow dow J down another 3%

thankyou
robots

 

[Temjin]

This property:

Just sold for £350,000

That's a gross yield of > 11% after transaction costs. Pe ratio of about 11. (Mixed commercial residential mind you)

Deals are getting better all the time.

WayneL, I would place a skeptical mind on the advertised income. It first need to be verified by a valid accountant and then you need to project the future income that could be generated from this restaurant. With global economy worsening and small retail businesses all around the world suffering a revenue slump due to the crappy consumer sentiments, the yield on that business might not be "that" attractive.

While rent on a residential property is more consistent and predictable, business revenue are not.

 

[noirua]

The UK new forecast is for a 12 month fall of 25% in house prices.
Australia is looking fine but a fall of 15%, over a 12 month period, sometime in 2009 now looks increasingly certain. Those apartments in outer Sydney are set to tank.
Anyway, if you don't have to sell, who cares.

 

[wayneL]

WayneL, I would place a skeptical mind on the advertised income. It first need to be verified by a valid accountant and then you need to project the future income that could be generated from this restaurant. With global economy worsening and small retail businesses all around the world suffering a revenue slump due to the crappy consumer sentiments, the yield on that business might not be "that" attractive.

While rent on a residential property is more consistent and predictable, business revenue are not.

110% agree! Personally, I would want ONE HELLUVA LOT more risk premium than that.

But, those numbers would have been a dream for "property investors" (and I use that term advisedly) only six months ago.

 

[pepperoni]

Anyway, if you don't have to sell, who cares.

Actually its better than that - if its your HOME and you dont have to sell its great as the next step up will become that much easier!

High house prices are only good for speculators ... and it seems that meddling in house prices doesnt cut it for them now as they have moved on to create oil and food bubbles

 

[CamKawa]

Sounds like credit is drying up. Can't see how that is going to be good for property prices.

Low-doc loans dead

 

[Mofra]

The UK new forecast is for a 12 month fall of 25% in house prices.
Australia is looking fine but a fall of 15%, over a 12 month period, sometime in 2009 now looks increasingly certain. Those apartments in outer Sydney are set to tank.
Anyway, if you don't have to sell, who cares.

I'd be surprised if we haven't seen that in some areas already, espcially in the outer-suburban mortgage belt areas.

Looks like the median houses in close to CBD areas will fare better than most again - not listed on REIV data, but 85(!) properties are due to be offered for sale in Brighton* Vic (not all publically) and most are clients (witrh some directors/partners) of private wealth firms who have been caught out with high market exposure due to double-gearing.

* Brighton for anyone who doesn't know is a particularly dark-blue shade of blue chip suburb in Melbourne.

I'd hate to be seriously negatively-geared right now, considering CBs worldwide are opening the floodgates and the market is at historical PER lows. LT positioning looks set to get a whole lot easier soon

 

[MrBurns]

House prices will tumble over the next 18 months, it takes a while and happens slowly so you hardly notice until you try to sell something.

Just rang a friend of mine who I haven't spoken to for a long time, I repect his views as he's a great store of economic knowledge, he says the bail out is nothing , this is just the start and he's been expecting it for more than 5 years, closer to 10 if I remember our conversations from way back.

I reckon he's right.

 

[Glen48]

The best rumour I heard was houses to pick up 2022 in USA people are back to crash pads like the 70's living in Caravans in some ones back yard or moving in with the Parents and renting out their own homes because they can't sell them so we have a rent glut.
The next problem is the 180 TRILLION of CDS floating around.

 

[subaru69]

I'm not sure if it was meantioned on this thread 13 days ago but the Sunday Mail's (Brisbane) front page article was 'BUY, BUY, BUY' (or words to that effect). Funnily enough when you read the acticle in a few pages, please don't think less of me because I did, all of this propaganda was from the chairperson of the REIQ.

'You'll miss the boat' ' Everything is on the way up' etc

I want to cry when my friends proudly tell me they've bought property, and 'bargains' at that. As they're explaining to me that the repayments are the same as renting and then I probe a little deeper against this fallacy it almost always turns out that as that their parents have fronted a few $100K!!

Good for the kid, but more borrowing none the less.

So the borrowing bubble continues...

As you can see below I like slow motion footage, problem is the market is doing the opposite.

 

[pepperoni]

Yeah it's a classic how it works here. That fee often includes heating, water, and sometimes cable TV and Internet, plus the expected maintenance and upkeep. So it's not all bad.

The real gotcha though is that it can also include paying for the debt that the company which owns the property has on the property. You see, under the typical owner-occupied apartment arrangement here in Sweden, your title doesn't entitle you to ownership of a share of the property as defined by a plan of strata or subdivision. Instead you have a contract which entitles you to a share (and associated voting rights) of the company which owns the property. It's actually a bit like the old Victorian stratum title (no, not strata, stratum) with a service company. I'll be uber impressed if anyone actually knows what that is.

The catch is that the company may (and probably does) have it's own mortgage on the property. Oooh, yes, layers of debt

So basically, in addition to taking out an individual loan with the bank to buy the contract, for which you have an associated repayment, your monthly body corp fee may also be paying a proportion of the mortgage that the company which owns the property has on the property!

The layers obscure the true price that you pay and what you are really paying for, but most people don't delve into such things as the financials of the bostadsrättförening (the company they're buying into). They just look at the asking price for the contract, the monthly fee, and what is included.

It's not uncommon for a single company to be established for the sole purpose of owning a single property. And it's typically the case that newer properties have larger outstanding loans and therefore higher monthly fees. As the company's mortgage is paid down your monthly fee ought to reduce and the value of your contract ought to go up.

It's complicated, but makes sense in a socialistic, communal kind of way. Or as a Swiss guy standing beside me looking at the display window of a real estate office once remarked, "Only in Sweden could I pay all of this money for an apartment that I still don't actually own".

Not a property lawyer but sounds like "company title" in NSW.

Basically you buy shares in a company that are tied to a particular unit. You can block people buying and selling such units in syd and they are to be avoided at all costs.


On the auction front ... the only decent 1m - 2.5m property to go to auction round here was passed in. Its vacant and the agent sounds desperate even though he claims to have a keen buyer and the place is new with views and DA for pool.

And to be honest I dont know what the place is worth any more ... kind of like MQG or BNB shares. Seems like there are few to no buyers around. Freefall is a word that springs to mind.

 

[theasxgorilla]

Not a property lawyer but sounds like "company title" in NSW.

Basically you buy shares in a company that are tied to a particular unit. You can block people buying and selling such units in syd and they are to be avoided at all costs.

Yes, that's exactly what it is. I was told that it was invented by Jewish people so they could control who was allowed to buy into to joint-ownership properties. Don't shoot the messenger...consider this, maybe it's true!

In Sweden you can't avoid them as until this year they've been the ONLY way to own an apartment. You're not allowed to rent the property out without permission from the company either. So there are massive rental apartment shortages here, and lots of people doing dodgies ie. "if you meet the neighbours at all while I'm in the US, tell them you're my cousin, ok???".

 

[pepperoni]

sound like the middle east ... no statutory concept of strata titles so they come up with these makeshift apartment ownership models.

Steer clear IMO!

 

[Glen48]

Some time Monday 22/09 I hope to be homeless having sold my home and using the profit to play the share market with LNC up 640% things are looking good.
As more people are staying at home with nothing to do cleaning items are the next items to jump.
Having brought and sold 8 houses over 30 yrs I can tell you this is the only boom albeit false and driven by greed that I have made money.
Most home owners can't do maths and think houses are a good buy. Good bye for me.
Keep checking Patrick.net

 

[Pommiegranite]

Was dining last night and met a guy who a project manager/architect for a major residential/commericial developer.

His first hand experience is that projects are getting canned due to cost factors. Simple as that.

There is an ever increasing amount of anecdotal evidence out there pointing to a major slowdown in the real estate market. It's everywhere!

 

[pepperoni]

Some time Monday 22/09 I hope to be homeless having sold my home and using the profit to play the share market with LNC up 640% things are looking good.
As more people are staying at home with nothing to do cleaning items are the next items to jump.
Having brought and sold 8 houses over 30 yrs I can tell you this is the only boom albeit false and driven by greed that I have made money.
Most home owners can't do maths and think houses are a good buy. Good bye for me.
Keep checking Patrick.net

Congrats ... did you get what you hoped for? Was the price below previous years sales?

 

[wayneL]

For no other reason than !!!

I was in Knightsbridge in London today (where Harrods is) and had a look in a estate agent's window across the road from Harrods. Took this picture.

Check out the price... remember that's pounds!

 

[MrBurns]

Tell 'm they're dreamin' , offer them $500K AU Pesos and they're lucky to get it.
Not even a garage

 

[Beej]

On the auction front ... the only decent 1m - 2.5m property to go to auction round here was passed in. Its vacant and the agent sounds desperate even though he claims to have a keen buyer and the place is new with views and DA for pool.

And to be honest I dont know what the place is worth any more ... kind of like MQG or BNB shares. Seems like there are few to no buyers around. Freefall is a word that springs to mind.

Here's 2 properties around your way that were up for auction on the weekend that sold PRIOR for good prices well above the expectation set in the adverts:

This one sold for $1.575M: http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007333701

This one sold for $1.55M: http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007326956

Perhaps they help you value the one you are looking at that passed in??

A lot of the good places that are priced correctly are being sold prior to auction at the moment, with the others being left to languish come auction day. That's just the way the market is right now - but to give the impression that NOTHING is selling - even in a particular area like say Mosman and surrounds, is just plain wrong.

The rest of the Sydney auction results for the weekend (53% clearance rate, 119 sold) can be found here: http://www.homepriceguide.com.au/saturday_auction_results/sydney_domain.pdf. Plenty of other good results in many areas there as well.

Cheers,

Beej