House prices to keep falling for years

pepperoni · 21 July 2008

gfresh said:
Maybe works for property sales, but most renters have a fixed term lease, you cannot simply "pick and choose" when you wish to leave during the year. If you lease is up, you have to move within that period, doesn't matter when in the year it is. It's probably much less seasonal.

Personally, I can observe no large rental increases in my area yet, and still plenty of supply. I can see some properties available with what seems a higher rental (num bedrooms, compared to other cheaper properties) but these seem to remain un-tenanted for weeks. Seem to be the flashier ones recently built, but they've picked the wrong area for high-paid tenants.

I hope for them the foregone rent ($900 - $1200 or so + listing costs on a $300/wk property, weekly $23/wk increase) is worth it as a result of setting an unrealistic price. It's an uncertain environment, those that can keep rents low will continue do so to provide certainty to their income. Tenants will choose those properties, not the more expensive ones.

Renters will be fine, they can adjust their habits a lot quicker than home owners, they can move to cheaper areas in 6-12 months at low cost, they can lock a rental price in for 6 or 12 months, they will go where there is more work. They can effectively refuse a rental increase if they see another better property for a cheaper price nearby, etc. In economic terms, I believe it's called Elasticity

I might be moving soon. Closer to work. Everytime my office moves I move ... I think I average 10 min commute, $20 a week petrol and no $150,000 stamp duty bill through 3 office moves the greatest single luxury of renting!!!!!!!!!

Anyway there are tonnes of excellent properties for rent in and around chatswood ... sitting on the market for many weeks. Rents look OK maybe a little more than last year but they arent going.

Frankly the rental market in these areas is still flat many years later. I think some poor owners have been brainwashed by the "rent explosion" stories and are holding out for the extra $20 a week while their properties sit empty. Not good for the increasing "mortgage stress" problem.

Beej · 21 July 2008

gfresh said:
Maybe works for property sales, but most renters have a fixed term lease, you cannot simply "pick and choose" when you wish to leave during the year. If you lease is up, you have to move within that period, doesn't matter when in the year it is. It's probably much less seasonal.

Rubbish - if a fixed term lease ends say in Dec 24th, most people (and the landlords would be more than happy with this) would simply stay and rent month-month for a couple of months until they can find a new place to move to, or simply renew the lease and worry about it in 6 months. Few landlords will be "forcing" a tenant out at that time of year as the know they will have to wait for 1-2 months before finding a new one! Seasonality absolutely DOES exists in the rental space.

Personally, I can observe no large rental increases in my area yet, and still plenty of supply. I can see some properties available with what seems a higher rental (num bedrooms, compared to other cheaper properties) but these seem to remain un-tenanted for weeks. Seem to be the flashier ones recently built, but they've picked the wrong area for high-paid tenants.

Well rents absolutely have gone up somewhere in Sydney haven't they as the stats show a 15% average rent increase in the last 12 months??? I know I have put rent up by about 10% this year, and we are still below the "market" (in order to minimise risk of existing tenants leaving) and the tenants have not moved out as they know they cannot do better elsewhere.

Renters will be fine, they can adjust their habits a lot quicker than home owners, they can move to cheaper areas in 6-12 months at low cost, they can lock a rental price in for 6 or 12 months, they will go where there is more work. They can effectively refuse a rental increase if they see another better property for a cheaper price nearby, etc. In economic terms, I believe it's called Elasticity

If that's what you want sure. Me - I own the house I want to live in the area I want to live in, I walk to work (have done so for 3 different employers over the past 10 years), so I have no desire to move, or be forced to move thanks very much! My "rent" is locked in for ever - $0/week indexed to inflation I think my deal is better than yours! In 10 years time that will be the case even more so

Cheers,

Beej

Mofra · 21 July 2008

Beej said:
My "rent" is locked in for ever - $0/week indexed to inflation I think my deal is better than yours! In 10 years time that will be the case even more so

There are a chorus of perma-bears who would try to convince you to "sell now!" due to short term fluctuations in the value of a long term asset. I doubt you could see the point of that any more than I could.

You sound happy - congratulations, you seem to be doing much better than many here

gfresh · 22 July 2008

Well rents absolutely have gone up somewhere in Sydney haven't they as the stats show a 15% average rent increase in the last 12 months??? I know I have put rent up by about 10% this year, and we are still below the "market" (in order to minimise risk of existing tenants leaving) and the tenants have not moved out as they know they cannot do better elsewhere.

Don't live in Sydney, and would never consider it even if hell froze over. Sydney is not the center of the universe, and I was speaking about my area only, and other areas I am familiar with in South East Queensland (and VIC as I still have connections there).. Some seem to think blanket rental increases across all areas, and shortages in all areas - this is plainly not true

mofra said:
There are a chorus of perma-bears who would try to convince you to "sell now!" due to short term fluctuations in the value of a long term asset.

I don't think there are any perma-bears in here, just realists who realise that *now* is not the right time to buying property! and that a correction is due, just like it has done so in the late 80's, early 80's, and 1970's. Property cannot keep rising as it has done, and external factors are going to make it very hard to replicate those gains over the next few years, and in fact anybody that has borrowed over their heads will be in deep strife if in fact property values come down significantly.

Tysonboss1 · 22 July 2008

gfresh said:
Some seem to think blanket rental increases across all areas, and shortages in all areas - this is plainly not true

I would say they same about blanket price falls, and over supply

adamim1 · 22 July 2008

What about rural areas? All the stats talk about Sydney, Melbourne, Perth etc..

I am looking to purchase some land in Newcastle NSW. There are a lot of new estate areas popping up all over the place. I am choosing one thats still relatively close to the CBD (about 20min). This was the fastest growing postcode in 2007 (I think in Newcastle). In the last 3 months it has grown by 4% (I dont know how good the source is).

My question basically is, due to Newcastle being close to Sydney and with Sydney housing becoming too expensive, is Newcastle experiencing housing growth in the outer suburbs? I've heard that Newcastle's population is set to double in 10 years time - so i assume this people all have to live somewhere and intercity Newcastle is chock a block.

pepperoni · 22 July 2008

Property Bull thread is thataway ------->

Back to sensible talk ... I know someone who is in the process of losing 2 houses he bought in the 90s and had revalued borrowed against "equity" many times.

With the clearly changed economic conditions he is in the process of losing both.

One is on the market for low 1ms, the second will be asking $2m as its renovated.

What did he pay for these is in the saner years of the 90s ... 650k and 780k.

Mind you he probably borrowed the firstmentioned figures against them ... banks will take big hits on foreclosures if property prices go anywhere near the 90s prices.

One other property I was looking at for 1.3m ish supposedly had 2.8m lent against it.

Greedy banks should take most of the blame and hit.

adamim1 · 23 July 2008

pepperoni said:
Property Bull thread is thataway ------->

Back to sensible talk ... I know someone who is in the process of losing 2 houses he bought in the 90s and had revalued borrowed against "equity" many times.

With the clearly changed economic conditions he is in the process of losing both.

One is on the market for low 1ms, the second will be asking $2m as its renovated.

What did he pay for these is in the saner years of the 90s ... 650k and 780k.

Mind you he probably borrowed the firstmentioned figures against them ... banks will take big hits on foreclosures if property prices go anywhere near the 90s prices.

One other property I was looking at for 1.3m ish supposedly had 2.8m lent against it.

Greedy banks should take most of the blame and hit.

Mate if property prices went back down to 90's level i'd be in heaven.

Tysonboss1 · 23 July 2008

pepperoni said:
Back to sensible talk ... I know someone who is in the process of losing 2 houses he bought in the 90s and had revalued borrowed against "equity" many times.

.

This is a problem of bad capital management more than a problem with the underlying assets,..... what did he do with the equity he borrowed, did he buy cars and boats, if so then it's the cars and boats that were the problem.

It's peoples atitude to debt that gets them into trouble.

If your mate had kept the original debt on priciple and interest payments, Increased the rent over the years with inflation he would now have a sizable equity base producing a steady positive cashflow each week..... just because he failed to use that equity wisely doesn't mean the underlying asset class is flawed.

wayneL · 23 July 2008

Tysonboss1 said:
This is a problem of bad capital management more than a problem with the underlying assets,..... what did he do with the equity he borrowed, did he buy cars and boats, if so then it's the cars and boats that were the problem.

It's peoples atitude to debt that gets them into trouble.

If your mate had kept the original debt on priciple and interest payments, Increased the rent over the years with inflation he would now have a sizable equity base producing a steady positive cashflow each week..... just because he failed to use that equity wisely doesn't mean the underlying asset class is flawed.

This is very true. But the fact is, there are many "investors" who have exactly this attitude to debt.

So many BTLs got into the market, whether by design or luck, at exactly the perfect time, have heaps of equity in their original purchases, but MEW themselves to the hilt.

It isn't always on BS either, lots MEWed into more and more BTLs at the absurd valuations we saw leading up to the peak of the market. All was OK while the bubble continued.

But today there is carnage for those people, and there are lots of them here, and I believe you will see this more in OZ in the coming time. There are so few with sensible LVRs such as yourself.

Yes they got themselves into a schtuck of their own making, but it was with the full complicity and encouragement of the finance industry and gu'mint. The seminar industry heavily promoted such lunacy. (it's not lunacy sensibly done, but the way it was promoted without reference to historical vectors of value, definitely is)

Most mortgagee sales are BTL here, and there are lots of them.

robots · 23 July 2008

hello,

yes BTL has wound up big time in UK, my friend who had business in Mayfair with BTL packed up and left about 6mths ago and now in Sydney (originally being from Melbourne),

the "property markets" are interesting world wide,

as at the time in 02-03 when things were changing in Aus (things settled after run) he ventured over to the UK "market", set up BTL and done very nicely

sure, you can argue people were suckered

similar to Henry Kaye many who want "everything" done, pay for everything being done,

is that different to buying a 600ml coke for $3.50 from 7-eleven? instead of getting a 1.25lt from Woolies for $2.00, i dont think so

thankyou
robots

wayneL · 23 July 2008

robots said:
hello,

yes BTL has wound up big time in UK, my friend who had business in Mayfair with BTL packed up and left about 6mths ago and now in Sydney (originally being from Melbourne),

the "property markets" are interesting world wide,

as at the time in 02-03 when things were changing in Aus (things settled after run) he ventured over to the UK "market", set up BTL and done very nicely

sure, you can argue people were suckered

similar to Henry Kaye many who want "everything" done, pay for everything being done,

is that different to buying a 600ml coke for $3.50 from 7-eleven? instead of getting a 1.25lt from Woolies for $2.00, i dont think so

thankyou
robots

BTL has most certainly not wound up in this country. It has however transmogrified into a vultures caper. The smarties have been building up war chests full of cash and are picking off distress sales all over the place.

It has spawned a new industry with a new anagram, BMV. (below market value) These companies are now all over the place.

The basic idea is to buy up distress sales at a substantial discount to "market value" (LOL) and lease back to the vendor, ostensibly on a permanent lease... BUT with onerous conditions that usually see the ex-owners eventually evicted. The satisfying feature is that some these clowns are now in a loss situation as well. Without realizing it, they have set the new market value for the immediate area. :

The really smart BTLs are keeping in touch with the agents and waiting for the numbers to stack up again. In some instances it's happening now, but it won't happen en masse for a couple more years.

I've looked at a couple of deals already, (Not BMV deals as per above) but straight out purchases, but the numbers still don't quite add up.

The amazing thing is that banks are now very old fashioned about deposits, earnings/mortgage ratios, and valuation... back to how it used to be before the bubble. LOL

Tysonboss1 · 23 July 2008

wayneL said:
BTL has most certainly not wound up in this country.

Forgive me,... But what is BTL.

wayneL · 23 July 2008

Tysonboss1 said:
Forgive me,... But what is BTL.

Sorry, its a Brit term.

Buy To Let

Same as IP there.

robots · 23 July 2008

hello,

are the "glossy brochure BTL businesses" still around?

thankyou

robots

pepperoni · 23 July 2008

robots said:
hello,

yes BTL has wound up big time in UK, my friend who had business in Mayfair with BTL packed up and left about 6mths ago and now in Sydney (originally being from Melbourne),

the "property markets" are interesting world wide,

as at the time in 02-03 when things were changing in Aus (things settled after run) he ventured over to the UK "market", set up BTL and done very nicely

sure, you can argue people were suckered

similar to Henry Kaye many who want "everything" done, pay for everything being done,

is that different to buying a 600ml coke for $3.50 from 7-eleven? instead of getting a 1.25lt from Woolies for $2.00, i dont think so

thankyou
robots

Am I reading this wrong or is this an interesting balanced post by robots.

Maybe his account has been hacked (joking ;-P)

robots · 23 July 2008

hello,

just trying to keep the "eat, drink be merry" have a great day theme going strong homes

thankyou
robots

gfresh · 23 July 2008

The selling up and renting it back to the owner, already seems to be taking place a few situations, have come across a couple on the realestate sites.

"Owner wishes to lease back for 18 months at a starting rent of $310 a week; this is in line with the resident manager's rental estimate"
^^^
Arundel (above), QLD was listed in a w/e article as one of QLD's strongest areas for mortgage repossessions...

If you look on realestate, Incredible amount of listings in a strong McMansion suburb, and everybody seems to be moving elsewhere.. It's not actually a large area (have lived nearby), but some 150 properties listed for sale of maybe 2000-3000 homes is massive.

No, it is not the entire property market, but it is a snapshot of a mortgage-belt suburb out there.

wayneL · 23 July 2008

robots said:
hello,

are the "glossy brochure BTL businesses" still around?

thankyou

robots

That would be the "glossy brochure BTL seminar businesses" you're probably refering to.

Oh yes they died a miserable death.

But like I said in the previous post the "glossy brochure BTL businesses" have metamorphosed into "glossy brochure BMV businesses".

EG http://www.ahuja.co.uk/

Tysonboss1 · 23 July 2008

wayneL said:
That would be the "glossy brochure BTL seminar businesses" you're probably refering to.

Oh yes they died a miserable death.

But like I said in the previous post the "glossy brochure BTL businesses" have metamorphosed into "glossy brochure BMV businesses".

EG http://www.ahuja.co.uk/

what are buy to lease businesses,.... is buying rental properties not common over there,

House prices to keep falling for years

pepperoni

Beej

Mofra

gfresh

Tysonboss1

adamim1

pepperoni

adamim1

Tysonboss1

wayneL

VIVA LA LIBERTAD, CARAJO!

robots

hello

wayneL

VIVA LA LIBERTAD, CARAJO!

Tysonboss1

wayneL

VIVA LA LIBERTAD, CARAJO!

robots

hello

pepperoni

robots

hello

gfresh

wayneL

VIVA LA LIBERTAD, CARAJO!

Tysonboss1

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