House prices to keep falling for years

[wayneL]

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

It's similar proportions to Oz

70% OO
30% split between public and private rentals (can't remember the exact proportion)

Every self-respecting champagne socialist has a property portfolio. : Even ones whose political ideology includes state ownership of all property.

It's as common as muck.

 

[robots]

hello,

I would consider the likes of mirvac, central equity, meriton etc as "pseudo" BTL companies,

ie. they build property, gloss it all up and sell to investors (ie. buying rental properties)

my friend bought whole blocks from developer's (making them and bank happy) and then on sold thru newsletter, join our club etc promotion

many developers in aus now just offer "discounts" to the likes of RE agents, promotion companies, FA's, FP's and so on

it is a catch twenty2 though, as with "our" market stalling around 02-03 and building pretty much ceasing (evident with the likes of central equity and Meriton)

we now in the situation with rental demand and rental rise as outlined by CPI today

thankyou
robots

 

[pepperoni]

Mortgages double

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July 23, 2008 - 4:25PM
Advertisement

The amount first home buyers borrowed to make their housing purchase doubled in the 10 years to 2005-06, new statistics show.

The average loan per household rose to $213,000, according to the latest Australian Social Trends.

During the same period, the average value of first-buyer homes rose to $310,000.

But the proportion of first home buyers purchasing new houses fell to 14 per cent, from 23 per cent.

More popular were townhouses and apartments which made up 27 per cent of purchases, up from 15 per cent.

Nearly 30 per cent of households were renting their homes and the biggest renting age group was 35- to 44-year-olds.

The majority of renters were young adults and low-income families.

 

[Tysonboss1]

Mortgages double

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July 23, 2008 - 4:25PM
Advertisement

The amount first home buyers borrowed to make their housing purchase doubled in the 10 years to 2005-06, new statistics show.

The average loan per household rose to $213,000, according to the latest Australian Social Trends.

During the same period, the average value of first-buyer homes rose to $310,000.

But the proportion of first home buyers purchasing new houses fell to 14 per cent, from 23 per cent.

More popular were townhouses and apartments which made up 27 per cent of purchases, up from 15 per cent.

Nearly 30 per cent of households were renting their homes and the biggest renting age group was 35- to 44-year-olds.

The majority of renters were young adults and low-income families.

some one should also mention that a big mac rose from $2.25 to $3.85 over the same period.

also coke rose from $1.80 to $3.80 for a 600ml buddy bottle.

Also I am fore casting a crash in mc donalds since the 30c cone has undergone a sharp increase to 50c,

 

[wayneL]

some one should also mention that a big mac rose from $2.25 to $3.85 over the same period.

also coke rose from $1.80 to $3.80 for a 600ml buddy bottle

Hang on!!! We should be using the same measure of inflation the gu'mint does... flat screen TVs, DVD players and iPods.

 

[Tysonboss1]

Hang on!!! We should be using the same measure of inflation the gu'mint does... flat screen TVs, DVD players and iPods.

what do you mean,..

 

[pepperoni]

some one should also mention that a big mac rose from $2.25 to $3.85 over the same period.

also coke rose from $1.80 to $3.80 for a 600ml buddy bottle.

Also I am fore casting a crash in mc donalds since the 30c cone has undergone a sharp increase to 50c,

Does that make it easier or harder for punters to service these doubled loans?

 

[gfresh]

Well talking Big Macs and bottles of Coke, everybody can still afford a bottle of coke and a Big Mac (you'd hope!) on an average wage, but if the proportion of the cost compared to their weekly wage has doubled in the last 25 years, fewer and fewer people would be buying Big Mac and bottles of Coke.

And if in fact nobody was buying Big Mac's and Coke at the time, maybe the supplier would have to consider dropping the price somewhat

Some good reading: http://www.aph.gov.au/senate/committee/hsaf_ctte/report/index.htm

Presently a house costs 7x yearly earnings, in 1984 it was just over 3x ..Look at that house/income ratio chart - every single market listed there has corrected somewhat ..

(excluding our Candian friends, where the ratio is not as large)

 

[Mofra]

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.

Would be interesting to read some up to date LVR statistics for these suburbs.

Last report I read regarding LVRs was to March Qtr 08 which showed a definate trend in higher LVRs towards "McMansion" suburbs - Cat 1 suburbs that were new developments. Shows that many FHBs were gearing themselves to hilt to buy in outer suburban areas, whilst (as strange as it may seem) LVRs averaged lower in established suburbs.

I doubt there would be a rapid departure from such figures for the June Qtr.

 

[pepperoni]

news story from today in same vein ... i swear they follow our threads ;-)

http://business.smh.com.au/business/home-price-rises-hit-middle-class-20080724-3k55.html

Home price rises hit middle class


* Chris Zappone
* July 25, 2008 - 9:44AM
*

Middle-class Melburnians are bearing a heavy burden of rising home prices, with housing costs rising at twice the pace of incomes.

Housing costs for the segment grew 62% between 2001 and 2006 while incomes rose only 28%, according to a AMP and National Centre for Social and Economic Modelling (NATSEM) report.

''For many households in Sydney, Melbourne and Adelaide, substantial income increases appear to have been largely offset by rising housing costs and price increases generally, resulting in little improvement in their standard of living,'' the report says.

Across all income groups, Melbourne registered a 27% increase in household income, less than half of the 62% rise in housing costs. Melbourne's income growth trailed that of Canberra which jumped 37%.

Homeowners can expect little relief from rising home prices. Yesterday's inflation data showed prices rising 1.5% in the June quarter, driven by increases in mortgages and banking fees.

Household income in Perth, where the resources boom is in full swing, increased 39%, according to the report. Housing costs in Canberra and Perth grew 64% and 60% respectively.

Nationally, the average increase in housing costs in capital cities was 62%, with Brisbane leading the pack at 68%. Darwin gained the least at 36%.

Adelaide and Sydney, whose economies benefit only marginally from the resources boom, turned in a 28% increase in household incomes. In remote Queensland and Western Australia, the effects of a two-speed economy were stark. Incomes in those regions soared 41% in that period.

Nationally, incomes in ''affluent'' areas increased 36.5% compared with those in ''low income'' areas which registered a 29% rise, the report said. Low income households have endured a 48% rise in housing costs, according to the report.

''The impressive increases in household incomes were largely offset by increased spending on housing and increases in the cost of living - and it's the households in middle income areas who were the least likely to enjoy these prosperous times,'' said AMP Financial Services managing director Craig Meller in a statement.

''This could go some way to explaining the shift in behaviour we have seen in Australian communities in recent times; where high employment, high incomes and strong economic conditions have not necessarily reflected the perceptions of average Australians.''

The 2006 gross household incomes of the upper-class were more than double that of lower-income households, the report said.

Youth Hit Hard

Victoria leads the nation in the percentage of Generation Y members living at home with their parents.

The rising cost of real estate has contributed to 53.6% of Victorians born between 1976-1991 living at home in 2006, according to a report by the Housing Industry Association.

The trend comes as soaring rents, home prices, and the barrier of large deposits on mortgages put home ownership out of reach for Australians graduating from school and entering the job market.

Gen Y members from NSW ranked just behind Victoria with 53.5% living at home.

''If you're in your 20s, on a low to middle income, and looking to buy a home, its becoming virtually impossible,'' said HIA chief economist Harley Dale in a statement.

Nationally, more than 50% of Australians born between 1976-1991 were living at home in 2006, up from 39.4% in 1989.

Almost 18% of 25 to 29 year olds live at home as well, up from 12% in 1989, the report said.

 

[kotim]

everything is a domino, we know that consumer sentiment is down substantially, this flows first of all into discretionary spending, so places that sell provide discretionary spending items lose money and hence put of some staff, meaning that the number of unemployed must increase, whether small or large is another matter depending upon time frame.

Borrowing 350 grand which is not a lot today bearing in mind that theaverage house price in most larger cities is substantially aboe that means that house repayments are with rates etc are between 35 to 40 grand a year allowing for rates and insurances and blah blah blah.

Anyway if we use the average wage then one persons whole wage is easily eaten up by the home ownership cost. So we have one person left, in terms of a dual income family earning money, look at everyone buying new cars and this and that, anyway when all is said and done the average family with two workers with a 350 grand loan will in the current market be barely getting by.

There is simply no room for house price growth in general.

Once the little economic setback we are experiencing bites a little harder and people start losing jobs, then watch the dominos drop.

It is said the average house price drop in a "pullback" is about 25%, not that much in good areas but more than that in worse areas which gives us our average.

What kills the golden goose is the fear and pain and it takes a while to turn it around. Look at the number of people querying about moving their super becasue one year out of 4-5 after good years is a bad year.

When things are good the impact on peoples lives and emotions are nowhere near as good as the damage that is done when people have to suffer. Fear is much more painful than joy is wonderful to the vast majority of people.

Funny that citybank the other day decided to issue a sell on a bank or two after they had allready fallen about 40 odd percent, bit late to be telling people that.

We are better off than yankee land becasue above all we have a huge amount of commodities that despite global slowdown will still produce good profits.

Go and have a look at property graphs(much the same as share charts), usually a boom for 3-4 years, backwards for a year or two, sideways for a bit more and then the cycle repeats.

The real problem we have is that advisors tell us that it is time n the market now timing the market that is important, what a load of crap, they ahve to promote that to keep the commissions rolling in.

Imagine an advisor telling you that we are in a share bear market and that in the last 30 years a bear market has lasted between 1-3 years and generally dropped 20-30%, so waite until the market drops according to that and then wack your money in.

Naturally enough they won't say it becasue they rely on your buyingand selling for commissions etc.

Timing does not matter unless of course you get intowards the top.

Go back to the last really big financial crisis we had in the 87-89 area and have a look at the bank stocks. If you had purchased anz or westpac towards the top of 87 it was many, many years before your bank stock made real money(almost 10 years) Ask those who invested in ANZ/wbc bank back in 1987 whether it was good buy when it basically went nowhere for the next decade.

The same times are upon us agin.

The falls in the banking sector are the biggest since late 80's. The banks control the direction of the stock market, so all those with super or investment funds, watch the banks and don't expect good results until the banks show good prices/gains again.

 

[wayneL]

Today BBC4 ran a bit of an expose' on the UK version of the Henry Kaye style nonsense (Inside Track) If you have half an hour check it out:

http://www.bbc.co.uk/radio4/facethefacts/

It will only be there for the next few days.

 

[explod]

Yep, headline news 3AW, 6.30 instant. Outer suburban home prices hit due to rising fuel prices. Its been a no brainer for some time. Just feel very sorry for those starting out, having the large mortgage and kids to raise.

 

[Sean K]

Just feel very sorry for those starting out, having the large mortgage and kids to raise.

Next thing you know the Federal Government will be handing out more free money so you can afford the deposit and maybe the first years repayments, to get you right in the doo doo.

That first homebuyers grant was a complete farce. The government's actually complicit in contributing to people getting in over their heads at a time of rising interest rates.

 

[Mofra]

Further evidence of our two tier market:

Home sales dip 20km from city

THE property divide between inner and outer Melbourne is expanding as higher petrol prices and steeper interest rates force down house prices on the outskirts of the city, while some suburbs closer to key infrastructure and services maintain or increase value.

Figures released by the Real Estate Institute of Victoria reveal that the price of homes more than 20 kilometres from the CBD dipped an overall 1.7% for the three months to June.

The median house price for these suburbs, which includes Scoresby, Rye and Hoppers Crossing, was $340,250 ”” down from $346,000 for the March quarter of 2008.

This was in stark contrast to the middle band of suburbs ”” 10 to 20 kilometres from the city, which recorded an increase in median house prices of 2% to $437,000. Houses within walking distance of the city also gained for the period, rising 1.9% to $682,900.

The poorer performance of outer suburbs also bucked the city-wide trend; for the entire metropolitan Melbourne, the median house price was $451,000 for the June quarter, a gain of 4.9%. Unit prices were unchanged at $370,000.

Housing Industry Association chief economist Harley Dale said recent home buyers on the outskirts faced much higher costs.

The citywide rebound in prices for the three months to June follows the March quarter when house prices recorded their biggest quarterly fall in value since 1993, a slide of 8.4%, due to a string of interest rate rises and fears of a slowing economy.

Rising petrol prices and the higher cost of living is being blamed for the easing of prices further out from the centre of Melbourne.

REIV chief executive Enzo Raimondo said median house prices in the quarter showed overall "moderate growth".

"Each week around 1500 people move to Melbourne, ensuring strong demand for property to buy and rent right across the city," he said.

But agents were quick to report that the bounce in the June quarter didn't mean a return to the pre-2007 boom times when property prices posted 20% annual gains

Eric Cohen, of Eric Cohen Real Estate in McKinnon, south-east of Melbourne, said parts of the area were flooded with properties, with some vendors selling due to mortgage stress.

"A lot of people are playing, what I would call, musical chairs with their properties, swapping from agent to agent, there are properties in the area, which have been through three agents already and some looking at a fourth ”” pretty much because the owner is still holding on to their price target.

"Some owners that had to sell have reduced, so it actually eventually sold within the range the agent gave."

Chris O'Shaughnessy, a director at Biggin & Scott, said select inner-city suburbs such as South Yarra, Abbotsford and Richmond eased slightly, but that was off large gains in 2007. "Some buyers are holding back, but I think it's a 'fair' market currently with both and buyers and vendors in an equitable position."

http://www.theage.com.au/national/home-sales-dip-20km-from-city-20080725-3l3h.html

 

[Tysonboss1]

That first homebuyers grant was a complete farce.

Aggreed, it just contributed to higher prices.

 

[Spanning Tree]

Here's a recent article Debunking Housing Myths from the Herald Sun. I found the following interesting:

The optimists argue that underlying annual demand for Australian housing is 180,000 units and new starts are only 150,000. They conclude that house prices are likely to rise.

However, underlying demand is a theoretical concept using long-run trends in population growth and household formation. In practice, high house prices mean kids stay home longer, rather than buy new housing and students rent houses together rather than separately.

This is precisely what I'm seeing. About 60 per cent of 20-25 year olds live with their parents. It's quite easy and most parents I'm sure won't mind if their children pay them rent. Even if each kid pays $200 per month that will likely cover the costs (e.g. food, bills, etc) while also giving the parents extra cash flow to handle higher mortgage repayments or higher fuel costs.

Many of those bullish on property claim demand will always be high because "everyone needs houses." But Aussies can always live at home and use family networks for access to cheap accommodation.

Immigration is another story. Usually an immigrant who comes to Australia will have to buy or rent on the market. However, as property prices and interest rates go up and up in Australia, why would any rational immigrant come here? They will instead move to another country where property is cheaper. Thus demand will adjust to prices. That is, as prices go up demand will fall, which pushes down prices again.

 

[Garpal Gumnut]

Here's a recent article Debunking Housing Myths from the Herald Sun. I found the following interesting:



This is precisely what I'm seeing. About 60 per cent of 20-25 year olds live with their parents. It's quite easy and most parents I'm sure won't mind if their children pay them rent. Even if each kid pays $200 per month that will likely cover the costs (e.g. food, bills, etc) while also giving the parents extra cash flow to handle higher mortgage repayments or higher fuel costs.

Many of those bullish on property claim demand will always be high because "everyone needs houses." But Aussies can always live at home and use family networks for access to cheap accommodation.

Immigration is another story. Usually an immigrant who comes to Australia will have to buy or rent on the market. However, as property prices and interest rates go up and up in Australia, why would any rational immigrant come here? They will instead move to another country where property is cheaper. Thus demand will adjust to prices. That is, as prices go up demand will fall, which pushes down prices again.

Most immigrants in my experience buy a house as soon as they can afford the deposit. I take your point though about the 20-25 yo.

gg

 

[pepperoni]

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.

Hate to say I told you so but ...

http://www.theaustralian.news.com.au/story/0,25197,24079562-2702,00.html

http://www.abc.net.au/news/stories/2008/07/26/2315275.htm

My agent is saying he will have a hard time re letting my balmoral slopes abode at the $750 I pay, and I got it down from $800 in the middle of the crisis.

The only rent crisis is that they are so shockingly low considering holding costs????? Any cheaper and they would be paying you to move in.

Also bad news for sorely needed rate falls ...

http://www.skynews.com.au/business/article.aspx?id=252997

Oh yeah ... nothing selling in sydneys north. Many properties have been taken off the market ... as many as are still on the market ... there is clearly an ENORMOUS backlog of $1m plus homes in syds north that people are unable to move.

Unless there is some major change in markets falls of 5-10% will become crystal clear in most better areas within 6-12 months. And seeing as though my market watch has been so spot on Il guaran damn tee it.

*notes post for later I told you so post* ;-)

 

[gfresh]

Ha, beat me to the punch pepperoni.. Exactly what I've been saying a few times, unsold properties will become rental properties, increasing supply in many areas.

Managing director Louis Christopher says many developers have dumped their unsold stock onto the rental market and there are now nearly twice as many available properties as there were last year.

He says many owners are asking for exorbitant rents.

"A lot of the vendors have basically heard all the rental hype that's out there, the rental crisis hype that's occurring and they've lifted their rents way too high," he said.

"They've gone way over above.

Here is another, Canberra starting to ease:

http://www.abc.net.au/news/stories/2008/07/26/2315210.htm?section=business

The SQM data may be useful for some, can search by postcode: http://www.sqmresearch.com.au/graphs/vacancy.php?t=1


Misleading figures put forward by the REIA ? never..

Conflicts of interest?

Mr Christopher is critical of the REIA’s data and said there are potential conflicts of interest in the way the information is collected.

“There are some serious questions that need to be answered surrounding the method used by the various industry bodies in calculating the vacancy rate, their sample sizes and how they compile their vacancy rate data,” he said.

A spokesman for the Real Estate Institute said the vacancy data released by the institute was based on data sent in from its members – real estate agents from around the country . He acknowledged there were flaws in the system and said the institute would welcome independent research on the subject.