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House prices to keep falling for years

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gav said:
Robot, how many houses were sold in St.Kilda this quarter? And is that 14.7% up from last quarter, or 14.7% up from the same quarter last year? Just trying to gauge the statistics involved in those percentages..
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hello,

14.7% from last quarter, less than 30 sales for St Kilda that quarter,

so Jun08 - Sept08,

thankyou
robots
 
nunthewiser said:
as not mentioning at the end of day paying rent for ten years returns you 0 % ..
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You should also mention then.. Only if you piss the difference up against the wall.. Put aside that $200-400 difference and invest it even conservatively and it will also give you good returns equal to property over the long run.

However, if the banks are desperate enough to lend me hundreds of thousands at 6.5% I'll go lock it in for 15 years thanks. No brainer at that point. At 8-9%? not so attractive. 6.5% rates will be great.. if we get there that is.

Reealjrd said:
instead of going for a rented house why not purchase it. Going for a rented house means your money is dead. You cannot do anything of that money if you are in need.
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As above, only dead if you do absolute nothing with the rest.. anybody with half a brain would put into savings, giving them plenty aside for emergencies such as a job loss. I'd rather be tapping into a bank account than asking the bank for a line of credit.
 
Reealjrd said:
instead of going for a rented house why not purchase it. Going for a rented house means your money is dead. You cannot do anything of that money if you are in need.
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Non-deductable bank interest is also dead money, and as a proportion of expense represents a higher proportion of a typical monthly budget.
 
robots said:
hello,

14.7% from last quarter, less than 30 sales for St Kilda that quarter,

so Jun08 - Sept08,

thankyou
robots
Click to expand...

Thank-you for your reply Robots. What have been the figures on St.Kilda for the last few quarters? Also, is the 14.7% increase the median house price or the average house price?

thankyou
 
hello,

you can check REIV and get a graph for the year which will show the results for the previous quarter,

i am not too good at posting those graphs, not sure about average or median

thankyou
robots
 
I think Robots and others have the right idea.

If your house price goes down, who cares? You still own the same amount of land and have a roof over your head.

If your companies go under however in the scam-market, sorry, stock-market you really are in the gutter.

You know why most companies rely on `sophisticated investors'. It's for suckers becasue you're certain to lose! I thought I could trust the gigantic companies however. I was wrong and will never make that mistake again. There are too many Alan Bonds, who are never punished.

I regret buying stocks in the POS Aussie shock market. I am thankful I was lazy enough not to cash out of my RE to do so however!
 
robots said:
hello,

you can check REIV and get a graph for the year which will show the results for the previous quarter,

i am not too good at posting those graphs, not sure about average or median

thankyou
robots
Click to expand...

I just checked the website. Its measured my median, which doesnt exactly give a very accurate description. For example, lets just say St.Kilda had 7 sales this quarter. Those houses sold for:
$200K, 220K, 225K, 400K, 405K, 405K, 420K

Median price would be $400K. Yet the average would be $325K. Thats a big difference!

Also, if the median is up 14.7%, all it merely shows is that for those houses sold it was up 14.7%. And with only 30 houses sold, how can this paint a picture for all of St.Kilda? How many houses are in St.Kilda? Those 30 houses that were sold could have been the best 30 houses in all of St.Kilda, yet it only drove the median up 14.7%? That would not be good news for property owners in that area... But on the flip side, they could have been the worst 30 houses in St.Kilda which would bring alot of confidence to property holders...

I dont know alot about property, but I would be taking those so called "statistics" with a grain of salt... Statistics can be measured in many different ways, and paint a very bleak or very promising outlook. It's funny how people only take notice of the statistics that suit their own blind ambitions...
 
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Interested in what people think might happen to residential prices on the Sunshine Coast - say Caloundra to Noosa

rgds - arco
 


How about that big fat deposit you put down for the house? You get no return on that either. It just sits there as collateral as you pay enormous amounts of rent for the $$ you have borrowed from the bank. All ok if you are getting capital growth or positive rental yield. But what about when prices are falling? I dunno, I can only speak from personal experience. You can't live anywhere for free, so you're either renting a home or renting the money to live there.

I have sold and now rent a house in Middle Park. I'm pretty sure the house I live in is worth at least double the city median price. I make more than enough investing the proceeds from the sale to pay the rental. Much more in fact. And I don't pay rates, land tax, maintenance, etc. I'd pay the bank more in interest if I borrowed even a third of the money for home I live in. In other words, it would cost me over 3x as much to live here if I borrowed the money. If I go for a smaller loan and put in my cash as a deposit, then I lose any return I would get from putting it somewhere else - even a lowly term deposit.

The way I look at it, if I come back to the market in a few years after the inevitable pullback in prices, I can borrow less, make more money now, and take advantage of better buying conditions.

All assuming prices keep heading south. We're only in the 1st inning, but so far so good....


goodluck
Indie
 

hello,

thats fine, the drops are all irrelevant and inaccurate as well

http://www.anz.com/aus/promo/homeessentials008/property1.asp

a different view about mean and median here to Gav, with view that median is quite a good indicator

i think the disadvantages are quite irrelevant

thankyou
robots
 

hello,

yes goodluck to you brother, I will persist with being a money renter and you can rent the property, no big deal

its a free country here in Aus, you can walk the street, talk to the neighbour, get a latte, ride the trains or just plod along in utopia

thankyou
robots
 
Thank-you for that link Robots, very informative. It will be interesting to see the yearly median of house prices, as this will give a much more accurate outcome.

Meanwhile I'll get a good view of St.Kilda properties, I just accepted a job in St.Kilda
 
hello,

good stuff gav, i have been here for 13yrs now and girlfriend for 20yrs,

goodluck and stack as much away as you can,

thankyou
robots
 

You have to look past the short term and into the longer term - Ie to the time when you don't have the mortgage anymore, AND don't have to pay rent. At that point you get way way ahead every year owning property. So you pay MORE than renting initially yes (that's why the rental yield is usually less than the interest rate), but if you own, over time your interest payments get less and less in both absolute (as you pay the loan off), and in real terms (due to the fact rent and property prices increase over the long term). Ie if you own, the MOST EXPENSIVE time is the first year of ownership, and it only get's cheaper after that. With renting, the first (or current) year will always be the CHEAPEST over the rest of your life (all other factors being equal). Look at the amount of before tax earnings needed in each case and this becomes even more the case. It's real ants vs grasshopper stuff IMO (if you know that fable)

Sure you can *try* and time the market for a short term benefit, but good luck being successful with that, especially when you factor in the buying/selling costs. And I wouldn't be too certain about those "inevitable price falls" either. Over the long term, property capital appreciation will AT LEAST equal inflation and a small amount, and that return on your invested capital is of course tax free, so it is a true inflation hedge.

PS: If you reckon that the cost of servicing the mortgage on the place you rent is 3 times the rental cost, then you are either over-estimating the value of the property, or you pay VERY low rent. Based on a 4% gross rental return (which is typical for most of Sydney and Melbourne), and an interest rate of say 7.5% (should be current rate by end of this week!), the rental cost multiple to own should be somewhere around 1.9x to 2x tops, including other ownership costs like rates etc. Then it's all downhill from there over time.....

PPS: I believe the trick is to never over-extend, only borrow (and thus buy!) what you can EASILY pay off in a 5-ish year timeframe, and live rent free for a few years after that mortgage has been paid off, save the spare cash, and then upgrade applying the same princible. Repeat as required to achieve desired lifestyle and location etc.

Cheers,

Beej
 
Most people who buy share sell them when they go up and collect the profit, Home owners pay off some thing they are Brainwashed into believing they appreciate for ever and hold on to them when they go down, Why not sell on a high collect the Tax free Loot and buy back in when they go down like they are doing now?.
 
Beej said:
PPS: I believe the trick is to never over-extend, only borrow (and thus buy!) what you can EASILY pay off in a 5-ish year timeframe,

Cheers,

Beej
Click to expand...
But that's just it though isn't it?

How many people could do that? And if not many can, you can't get capital appreciation.

It means realistically on that formula that people on a slightly above average wage, would really only be able to afford something in the low 200k range. And that's if they put probably everything into it.

And then of course, the likelihood that over a 10, 15, 20 year time period you are going to be unemployed for a chunk of that time regardless of training and education.

That's the particular risk that I think is waaaayyyy under priced in the current market. There hasn't been threat of skilled people losing jobs until recently, so over the long term, that income insecurity has been completely removed from pricing.
 
I reckon this seems to be a balanced article from Business Speculator.

10:18 AM, 27 Oct 2008

Robert Gottliebsen
Unreal real estate

What is a 'ridiculous price' for a house? Leaving aside local factors, we are seeing a series of major selling and buying forces developing in the Australian housing market.

The biggest force pushing the market down is the much tighter rules for bank credit. Accordingly we have seen lots of buyer interest at lower priced housing sales given the prospect of lower interest rates and, (at the bottom end of the market), the increased home buyer's grant. But vendors and real estate salespeople do not always understand that while the buyers are interested, they do not have as much money in their pocket.

I found Business Spectator's Isabelle Oderberg interview with the CEO of the Real Estate Institute of Victoria Enzo Raimondo fascinating (What goes up must come down, October 24).

That interview was on the eve of Melbourne’s 1,100 house auction sale weekend. Raimondo was hoping for a 60 per cent-plus clearance. The market gave only a 53 per cent clearance so there is now a big overhang. Melbourne prices are already down and they will fall further because, like most other Australian housing markets, the banks have restricted their lending and the non banks are out of the market.

Nevertheless, the good news is that there are buyers out there – albeit at a price. The bad news is that there is a group of sellers who need to get out. And, especially at the expensive end, their numbers will increase.

Among the sellers about to multiply are executives who no longer have job security because of their overinflated salaries and who have been punting the share market and lost. They are now selling investment properties and holiday houses. Soon they will be selling their expensive homes.

Let me illustrate what is to come in the near future with an incident that took place in the last three weeks.

A friend of one of my colleagues is shifting from Sydney to Melbourne and he attended a Melbourne auction for an expensive well-located house. There were no bids at the auction and the agent, knowing the Sydneysider was a genuine buyer, asked him why he did not bid.

The Melbournian-to-be said he thought the asking price was too high. The agent asked him what he would pay for it and the Sydneysider quoted what he thought was a ridiculous price. The agent also thought it was ridiculous and laughed uproariously at him. Two days later the agent was on the phone saying that the vendor would not sell at that “ridiculous” price. The trouble is that the Sydneysider must now sell his harbour suburb house and may be forced to take a “ridiculous” price himself, given that parts of Sydney are falling at some of the fastest rates in the country.

In 1990, expensive houses, including expensive holiday houses, fell 50 per cent. Hopefully that won’t happen this time, but it might.

At the low end of the market there are large numbers of unfortunate people who were told by advisors or friends to mortgage (sometimes second mortgage) their homes and punt investment properties which are now falling in value.

Many of these people now have lower incomes and will be forced sell their investment properties and lick their wounds as they pay off their homes all over again. It’s a horrible experience, but you must be able to hang on during these times.

Source: http://www.businessspectator.com.au/bs.nsf/Article/Real-estate-ridicule-KSUCB?OpenDocument&src=mp
​
 

Well for a start, there will always be winners and losers in life - if you are on an average wage your whole life then you can't expect to end up at the top of the real estate heap now can you??

Having said that, there are plenty of starter places that can be had in Sydney for $200k-ish - eg decent 2 bed units in various western suburbs and so forth. Buy one, pay it off, live rent free for a few years, and then do it again and voila you are buying a median $400-$500k property (in today's money) as your 2nd purchase, on an average wage, and 5 years later again you own it outright and live rent free until and of course after you retire.

Now if you aspire to more, well then, you better figure out how to earn more than the average hadn't you?? Then you can start out higher up the ladder.

As for periods of potential unemployment, well it would be better to experience that at a point where you are living rent free in a property you own wouldn't it than at a time where you have to pay ever-increasing rent??

PS: CamKawa - interesting article!

Cheers,

Beej
 
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