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House prices to keep falling for years

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Those are poor number in my opinion. This just shows a 10% return year on year which is just an average for any investment as shares for example.
But do not forget, if you bought in 1970, how much money have you spend on maintanance, council rates, insurance and bank mortgage interests?.
Well, if you do not know I'll tell you, you have spent much more that the 454,250 you ended up with.

So, can you sell to enjoy that money if that is your place of residence, I bet no, so you will end up living in a poor place without money after your 35 years investment.

WBII
 
Ruincity said:
It then occurs to me a few days later that isn't this a creation of sub prime?

Doesn't this just lead poor first home buying lambs with very little capital and a world possibly on the brink of a recession/depression to the slaughterhouse!?
Click to expand...
The sub prime mess was caused by a lack of credit standards, not a one-off payment to a minority segment of the property market. Credit standards (for secured loans at least) are infinately higher in Australia than they are in the US.
 
You'd need to calculate your ROI on initial capital, not entire spend as it is very unlikely that you've paid cash for that property, then subtract cumulative interest payments anyway.
Shares are in front IMO because most comparisons I've seen fail to include franking credits into the scenario, which combined with lower overheads make it a much better asset class for accumulation.
The only real advantage of property for investment is the ease & the cost of credit.
 

Not sure how you cam up with spending more than $454,250 over the life of the loan?

(Based on $18,200 borrowed - 100%)
Weekly P&I Repayments @10%: $37
Total Repayments P&I: $58K
Rates (average $500/year): $15K
Insurance (average $500/year): $15K
Maintenance (average $2000/year): $60K

Total Spent: $148K

These figures are averaged very high as well. I would estimate that the average for insurance and rates etc would be much lower.

What did he spend the remaining $306K on? ($10K / year)
Probably holidays, swimming pools, cars
 

The biggest problem that people most have is they are too close to the problem but fail to step back and look at the bigger picture.

If I show you the same price series (based on the same collection method) from 1940 to 1980, the whole picture will be different.

It is known that house prices (and not just Australia along) has historically track inflation rate from 1900 to 1980s. When the credit super cycle got kick started, every single assets then went into a booming mode.

Again, on the same other forum, no one has ever answered my question on why house prices can INDEFINITELY rise above wage growth over the very long term. (30+ years) Wouldn't this one day make an average income earner to pay more than 100% of his/her income to service the mortgage loan on an average priced house. Clearly this is unsustainable. But of course, people think boom will last forever because it has done so before. Recency bias again.

Past performance is no indicator of future return.
 
Temjin: nice questioning over there.

What bothers me is belief disconnect between what is happening, or quite likely to happen in the real economy, and the refusal to accept this will have a marked effect on the housing market. Falling values are happening in major markets overseas quite clearly. It has at all other major periods of economic downturn to some extent, yet apparently it can't happen this time Economists aren't always right, but often they can be close, especially when the big bear is staring them in the face.

This is the worst financial crisis in 80 years, and yet, no effect can be possible other than seen in the last 20 years??

And in other news, exactly what I was suspecting on the Gold Coast property market a few months back. It doesn't make sense (wages vs prices), and we're now starting to see some reality come back in:

http://www.goldcoast.com.au/article/2008/10/17/17573_gold-coast-top-story.html


More facts here, these are property valuers, it is there job to...value property independently, and they are writing down a very real 5% here.

Thanks to lovely news ltd journalism I've got a picture of these property sellers standing around in a daze that there are no buyers.. I'm sure they'll find plenty if they drop the price 20%, there are always buyers at the right price.

One of Bligh's Ministers came out yesterday and let his tongue wag, suggesting Government was stuffed without the stamp duty incoming from house purchases. He was put back in his box, but still, it's been happening in NSW, it is likely here.
 

Have you ever heard about compounding interest? and the word inflation?. I will explain that to you so you can find the rest of your money, I am sure there are more people like you out there that make that kind of calculations and believe that are 306K ahead.
Get each of those values per year and bring them to the present value using an inflation number. check this example:
With your weekly payment in year 0 of $37 do the next calculation with an average inflation number of 5%:
37*(1.05)^33 = $185

Now, do the math for all those numbers and come back.

WBII
 
ABC news today told of WA house prices going down some loosing 45K and WA is the best place to make a living.
BHP is at $26 a few weeks ago they were $46 I am betting next week or so $15.. and then keep going down
Would you buy at $15.00 is it a good buy or could they keep going down that is what we are facing.
China is starting to take a dive yet 3 weeks ago they were there to save us.
Why can't this keep going down until the bottom is buy 1 at 10c get 1 free????
Just like 9/11 no one would ever think it could happen now that it has it is
acceptable.
 

Ouch!!! No need for the attack!! It might be nicer if you could illustrate to myself (and all the others you placed into the same category) where all the money has gone. It is much nicer to share wisdom and help others as opposed to public ridicule.

Anyhow, true, I was being lazy in my calculations. I took what I perceived was a generous average mean for the rates, insurance etc (being too lazy to work on the inflation adjusted figures).

Does the amount paid on the interest for the loan not change with inflation, as the final amount left is the same as the original amount, ie $18,200.

As I see it, the interest payments become less over time due to inflation. I would appreciate your help into the missing $$$$

Cheers
 
MrDamage said:
Please do. I have been trying to find this data.
Click to expand...

Here you go.

http://www.library.unsw.edu.au/~thesis/adt-NUN/public/adt-NUN20071210.120652/index.html

Remember there is no "reliable" housing data that goes back before 1970s. However, Nigel basically used the data series made by BIS Scrapnel from 1965 to onwards. And thus, he applied the same method for data before using other sources.

Robert Shiller in his Irrational Exuberance book also constructed a similar series based on the same data collection method.

Most would found it surprising that the real price of house has barely moved beyond above inflation from 1900 to 1970s and has pretty much exploded since the credit super structure began 25 years ago.

For the latest information on this "credit super structure cycle", refer to the following report from Merryll Lynch.

http://cfcr.ml.com/GetDoc.aspx?e=5Q%2fVo0o9XsED%2f8F4M6l%2fyyL4hHiMTF4vtdtjObk2HN7rX25MG5ZD06uznwQl5QNOdWancTQ%2bDVxdjB7oLHoA1Q%3d%3d&ctbDocIDs=10772136&v=1&m=%2b4K0MqQy8Zjr%2frmZ33Uci7rsXXU%3d
 
talking to my RE agent who handles my Commercial lease yesterday.

I asked him what prices of residential RE had done in the local area he handles in the last 12 months. (SE coastal Newcastle area)

He told me prices had fallen 20-30%.

i mentioned I believed at least another 10-20% or more to fall.

I was out at a very nice new lakeside residential development last weekend, heaps of brand new places on the market in the $600k+ bracket.

Why would you even think of paying that at the moment?

You would have to be completely mad
 
I'll be in at 6.5%, as long as prices seem steady enough

I thought I heard you on the radio today actually: "Great news for first home buyers, with property prices on the Goldcoast down 5%".

(note, I am not being sarcastic, this was the lead story on commercial radio)
 
Did anyone read Steve Keen's "Housing’s day of reckoning delayed" on tonights Eureka Report? He believes our property bubble burst will be worse than that of the US, and our houses are heading for a 40% fall!
 
gav said:
Did anyone read Steve Keen's "Housing’s day of reckoning delayed" on tonights Eureka Report? He believes our property bubble burst will be worse than that of the US, and our houses are heading for a 40% fall!
Click to expand...

There's no doubt that he's right, except I beieve it will be more like 50%
 
Annual immigration is 240,000 and with an annual shortage of 50,000 houses yearly.
Rent is pretty tight at between 1 and 3 percent depending on where you are

Prices wont continue accelerating at the previous ratres which i accept.

can someone show me the math for a 40% or 50% drop in prices?
 
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