House prices to keep falling for years

[Mofra]

We have a supplied problem here so price wont drop


"Even as the US bubble reached bursting point, commentators there insisted that there was no problem because there was no evidence of oversupply. As James Smith, chief economist for the Society of Industrial and Office REALTORS, wrote in 2004, "One indicator of a bubble is a rapid increase in the supply of the asset in question. [But] housing inventories have been at very low levels for over five years suggesting there is no excess supply of houses."

I have a few collection of pre-bubble quotes time to use them.

I know you seem to be desperately happy at the notion of a major housing slump, however you seem to have completely missed the massive US construction boom of 2006, which some have estimated to be enough to have housed 50% of the then population.

This quote has been taken from a period before the ridiculous levels of oversupply were even constructed.

 

[Mofra]

Seems that 12pc thing you keep going on about might be one big fat lie - Im sure the people who supplied you that information will call it an error ..... ?


Melbourne is nosediving .....



http://www.theage.com.au/national/premium-suburbs-bear-brunt-as-real-estate-market-reels-20081111-5mjz.html


Wow the inner East is burning equity faster than the average person can earn it !!

So early in the crash to boot ..... oh well everyone had fair warning i guess ...

robots has stated he holds units, so 3 & 4 bedroom house prices aren't the best basis for comparison. Personally bang for buck I'm not a fan of the inner East; wrong side of the Yarra for a start

For the record -0.3% for the quarter in my area; after years of massive gains I can live with one quarter of negative price but hope a small theoretical loss (ie < 30 sales) makes the bears happy nonetheless.


Enjoy the result; after all your research, posting links to articles and the fact that you have never resorted to personal insults you deserve some sort of victory

 

[MrBurns]

Crash coming like it or not, already started, inner city will be one of the worst to suffer. Dont argue with me just wait and see.

 

[ROE]

Jono,

You don't understand demand and supply my friend.

Firsty, no-one wants to live in Hobart and that is why real estate is so cheap.

Every other doomsdayer on here hoping inner city prices will crash 30-50% are dreaming. I live in Fitzroy North and prices here are even better than St Kilda. Shoe boxes with 5 metre frontages that are renovated sell for 1.2 million(one just sold last week for that). Double fronts sell for 1.5 to 2 million renovated.

Prices have not come down here at all. Everyone living here has high disposable incomes and couples here have 2 income on high income as professional couples. Even when one loses their job, the other kicks in to keep paying the mortgage.

So there is no crash, a SLOWING yes of up to 5-10% MAXIMUM.

You guys just don't get it. Inner city blue chip you will never lose over 7 years.

I have 2 cars and fill each car up once every 2 months, people live here for convenience and lifestyle.

UK:
Speculation of a pending housing market crash has no foundation. Interest rates still remain historically low, unemployment remains at a record low and incomes are rising strongly. Meanwhile lenders continue to compete vigorously for new business with exceptionally attractive mortgage offers. All the signs suggest that we are heading for a soft landing after the heavy price rises of recent years."
John Wriglesworth, Hometrack Economist June 2004

"While house prices have certainly risen, as everybody knows, what is also the case is that people's debt servicing payments, mortgage payments as a share of their income are still far lower than they were 10 years ago."
Gordon Brown, Chancellor of the Exchequer June 2004

"The strength of the market this year has been surprising. Indications are the market will retain significant momentum through the first half of 2007 due to solid economic growth and rising employment."
David Stubbs, RICS economist December 2006

"At the rate we're seeing so far this year, I can easily see house price inflation hitting 20% this year - twice the level we saw last year."
Miles Shipside, RightMove April 2004"


the year is now 2008

I use some of this forum quote in 2011 for Australian Housing.. this is a good one ... I put in my book..and remember the moto

"House price double every 7 years"

 

[Beej]

"House price double every 7 years"

Great straw man quote there - who on this thread has ever actually said that???

Here's a quote you can use - "Over the long term, the price of established houses will ALWAYS increase".

Cheers,

Beej

 

[gfresh]

Crash coming like it or not, already started, inner city will be one of the worst to suffer. Dont argue with me just wait and see.

lol.. now there is a solid argument.

I think some area getting ahead of themselves with the full crash scenario.. best to watch and observe. I'm happy to watch and see what is happening rather than make any huge predictions one way or the other.

I think 20%+ across the board is pretty out there. That sort of scenario relies on the large-scale collapse of our economy, fall of our major banks, 10% unemployment, people out in the streets, etc.

 

[ROE]

Great straw man quote there - who on this thread has ever actually said that???

Here's a quote you can use - "Over the long term, the price of established houses will ALWAYS increase".

Cheers,

Beej

is there anything that doesnt increase over the long term?
cash in the bank, bonds, stock market? hell even coca cola drink increase

but I like

"house price double every 7 years" some increase faster than other
cos you make lot of money that way and you can retire rich too
Plenty of double quote here

http://bubblepedia.net.au/tiki-index.php?page=House Prices Double Every X Years

damn in 25 years I cant afford a house in Darwin with all my saving, my super, my current house combine .. that $8 million median price for a house in Darwin when I retire

 

[MrBurns]

lol.. now there is a solid argument.

I think some area getting ahead of themselves with the full crash scenario.. best to watch and observe. I'm happy to watch and see what is happening rather than make any huge predictions one way or the other.

I think 20-40% across the board is pretty out there. That sort of scenario relies on the large-scale collapse of our economy, fall of our major banks, 10% unemployment, people out in the streets, etc.

10% unemployment is already on the cards J P Morgan and other predict it and the Govt is upping their predictions when they "have" to, just watch the news tonight and see who the latest is to go.

40% easy it was 30% in the late 80's and that was a piece of cake compared to this mess.

Major banks don't need to fall to get this across the line just the poor customers who borrowed what seemed to be a reasonable amount then lost their jobs. Negative equity will be common place so miss a payment and the banks move in, they're a predatory lot and have already factored in foreclosures.

You wont be doing too much lol'ing when this hits the fan ole chum.

Watch the Auction results this week, the REIV haven't even released the residential vacancy rates for October becuase they dont want to spoil the Spring sales any more then they already are.

 

[robots]

I repeat the basics again:

FHOB, entry level $330k unit (Brisbane):

Minus $14k - $30k deposit = $286k loan
$466/wk (7%)+$26 rates+$30 bodycorp = $522/wk

Rental Equiv: $300/wk.

Savings of $222 over mortgage put into bank x 52 weeks = $11,544

Deposit of $30k x lowly 5% interest x 0.70 (mid-bracket) = $1,050 interest

Total at end of year 2009 renter: $12,594

FHOB: 3% x $330k = $9.9k cap gain. Even a small possibility of a 2-3% fall, puts you a few behind, and likely $20k behind the lowly renter. It is quite a risk, never mind a bad case of 10% fall in 2009 were to take place.

To be honest, I doubt most FHOB do these sort of sums purely on dollars, although maybe some are starting to.

I think this, more than ever has stalled price rises this year -- there is no rush. There is no "I better buy now or it will cost me 10% more next year", or "I will never be able to afford my own place". This was the fear last year, this is what kept people buying.

Until that returns, the status quo will remain - low ballers, window shopping, but little buying. Then maybe the herd will take over, and when they see others buy in great numbers, they will buy.

As we saw after the recession in 1991, it was a good few years until that took place again.

hello,

great work Gfresh, its a very interesting situation and relies on the savings being made,

after Yr1 for renter things also slowly change as rent increases, sure not a heap but it does creep,

in both techniques, buying or renting the discipline is crucial and those on the rent should be killing it at the moment with rents so low,

over a 20-30yr period both are on the stash and thats what i look for because its really only around the corner

thankyou
robots

hello,

the above two posts from valued ASF members I believe sum up a lot, Gman articulates the current proposal superbly

the day has been awesome, a few cafe lattes on chapel st, plenty out on the world famous strip enjoying life, bars will be pumping tonite with Mr Efron in town as well

have a great day

thankyou
robots

 

[ROE]

lol.. now there is a solid argument.

I think some area getting ahead of themselves with the full crash scenario.. best to watch and observe. I'm happy to watch and see what is happening rather than make any huge predictions one way or the other.

I think 20%+ across the board is pretty out there. That sort of scenario relies on the large-scale collapse of our economy, fall of our major banks, 10% unemployment, people out in the streets, etc.

Actually if you read in depth into how our bank source funding, how inter-banking lending works, debt to income ratio, and what drive Aussie Dollars

you will come to understand all those scenario need not to happen for housing to start going south.

 

[Indie]

The thing that consistently AMAZES me about this thread is the smugness/ certainty/ "everyone else is an idiot" attitude of many of the bear posters here. The reality is that anyone who had the means and DIDN'T buy into property in that last 10-15 years are the idiot's..... hoping/praying for a massive crash is not going to rectify that mistake!

Those that only now have the means to enter the property market should view the current time and the next year or 2 as a GREAT opportunity with the market at it's most affordable for years. In a decade we will look back at 2008/2009 as we now look back at 1991/1992 in terms of the opportunity.

Even if you subscribe to the "great economic disaster of our times" to come doomsayer view, then you will still need somewhere to live, and property is about the best inflation hedge there is. You may as well park your cash in the best located/fitted out house you can afford, where at least you get a lifestyle benefit out of it (Unlike gold etc), plus a direct financial/cash-flow one (ie, you don't have to pay rent). There is real tangible value in property that short of nuclear war or something similar cannot be destroyed in the way the value of other assets can be.

Life goes on, people are still buying/selling/living in and enjoying property every day as this endless, and mostly irrelevant debate rages on here.

Cheers,

Beej

I bought and sold a few times over the last 15 years. As a hedge against inflation property was pretty good. The key was negative real interest rates, i.e interest rates being lower than real inflation. It's hard to lose in that environment when you borrow for assets. But where is the inflation now that money supply is being choked in the credit markets? Most real estate bugs don't understand what the main drivers of the boom were so they can't see the crash coming. This is the first time I have exited the property and stock markets entirely in all my adult life.

What you should be looking for is a hedge against DEFLATION. Like USD or YEN. I have no regrets about getting out of property and investing in these assets. Their performance relative to the Australian property and stock market this year is one warning sign. They have both smashed the Australian property market.

What AMAZES me is the blinkered approach to investing taken by most of the property bugs on this thread. It's just the sheep mentality, follow the trends blindly. By the time the market turns against you, you've already lost your left nut on the chopping block. But you're right about one thing, it all remains to be seen, so we shall see. It's funny, the stock market bugs told me I was crazy for selling near the top of the market too. You know, "stocks always bounce back" "there's too much demand coming from China" ...etc.

We're just warning you guys. Don't take your hard earned gains for granted. There are people all over the world trying to work out ways of separating you from your money every day.

 

[ROE]

I bought and sold a few times over the last 15 years. As a hedge against inflation property was pretty good. The key was negative real interest rates, i.e interest rates being lower than real inflation. It's hard to lose in that environment when you borrow for assets. But where is the inflation now that money supply is being choked in the credit markets? Most real estate bugs don't understand what the main drivers of the boom were so they can't see the crash coming. This is the first time I have exited the property and stock markets entirely in all my adult life.

What you should be looking for is a hedge against DEFLATION. Like USD or YEN. I have no regrets about getting out of property and investing in these assets. Their performance relative to the Australian property and stock market this year is one warning sign. They have both smashed the Australian property market.

What AMAZES me is the blinkered approach to investing taken by most of the property bugs on this thread. It's just the sheep mentality, follow the trends blindly. By the time the market turns against you, you've already lost your left nut on the chopping block. But you're right about one thing, it all remains to be seen, so we shall see. It's funny, the stock market bugs told me I was crazy for selling near the top of the market too. You know, "stocks always bounce back" "there's too much demand coming from China" ...etc.

We're just warning you guys. Don't take your hard earned gains for granted. There are people all over the world trying to work out ways of separating you from your money every day.

Nice .. I do have properties too but I know when there is a bubble
same with stock market I know when there is a bubble ..

property investor yet to experience debt deflation dont worry they learn soon enough mean while I tell people

"property double every 7 years" to keep the moto going because they been using it for last couple years...I got to keep it up and carry on for the next generation

 

[ROE]

What AMAZES me is the blinkered approach to investing taken by most of the property bugs on this thread. It's just the sheep mentality, follow the trends blindly. By the time the market turns against you, you've already lost your left nut on the chopping block. But you're right about one thing, it all remains to be seen, so we shall see. It's funny, the stock market bugs told me I was crazy for selling near the top of the market too. You know, "stocks always bounce back" "there's too much demand coming from China" ...etc.

I believe the moto for that is "Stronger for Longer" hahahaha

 

[gfresh]

Actually if you read in depth into how our bank source funding, how inter-banking lending works, debt to income ratio, and what drive Aussie Dollars

you will come to understand all those scenario need not to happen for housing to start going south.

Indeed, I'm quite familiar on on many of those things also, probably even posted them up here in the past, read a lot. However, what has surprised me so far, is that banks have still been able to pass on these large RBA rate cuts, nearly in full - when according to these readings, lending should already be failing completely here in Oz. This has been even as banks have collapsed o/s, nobody trusts anybody, and overseas funding has been difficult to source.

I've always thought, the only true crash would happen if rates went back up, or we are at the limit of how low rates can go.. The RBA goes to 3.5% or whatever, and banks stay at 7-8%. When this happens I may think differently, but it hasn't happened yet.

Now under the near virtual dry-up of lending scenario, which is what has happened in the UK, everybody needs a 20% deposit, nobody will be able to get a loan, banks stop lending and nobody can even buy a property. Then prices truly crash.

This is not happening in Australia (yet), and needs to happen for prices to really sink to hell.

I still believe prices are falling at the moment in many areas, heck, I know things are very bad out there... but as to how much, depends on lending, and there isn't enough information yet to show how this will pan out. That is why I'm saying calls for the doomsday scenarios are too early. When we get to 10% falls in pricing across the board, unemployment is 6%, etc and there is no signs of recovery, sure, look for the next point.

10% unemployment is already on the cards J P Morgan and other predict it and the Govt is upping their predictions when they "have" to, just watch the news tonight and see who the latest is to go.

I read these with interest, but I can't help but be a little skeptical at the same time. After all, JP Morgan, Morgan Stanley, Goldman Sachs, Merrill Lynch have all completely failed to prepare for this crisis - now we expect to believe their downward forecasts as well? They're simply running with the rest of the sheep down the hill now. No doubt suddenly they'll turn all bullish soon as everybody else is.

 

[MrBurns]

I read these with interest, but I can't help but be a little skeptical at the same time. After all, JP Morgan, Morgan Stanley, Goldman Sachs, Merrill Lynch have all completely failed to prepare for this crisis - now we expect to believe their downward forecasts as well? They're simply running with the rest of the sheep down the hill now. No doubt suddenly they'll turn all bullish soon as everybody else is.

I make a guess (that's all you can do) based on where the info comes from and what I see on the street. JP Morgan and others predict this, those who dont are in the main charged with the reponsibility of not spooking the market so I put less weight on their predictions.

On balance and seeing what is happening I think the odds are for a very large unemployment figure.

You have to reassess these things constantly of course but the news is all bad lately and increasing in intensity.

 

[Pommiegranite]

The difference being, the story I related has actually happened.



Beej

Yes Beej. Unfortunately for them, the buyers were also real. I wonder what kind of losses they are looking at?

 

[cuttlefish]

There was supposed to be a shipment of new land being delivered to my suburb sometime this year but apparently they've stopped making it.

 

[robots]

hello,

i hope that happens Gman, no one can get money except for those who can afford it,

i ask again, who held property during recession? girlfriend had unit in elsternwick and it went through unscathed

who else has example?

before you know it, 10, 15, 20yrs have pasted and those in for the ride reaped the benefits, nirvana

great discussion, looking forward to another rate cut in a few weeks and we still havent reached "neutral" monetary policy from the colonel at the RBA

we must be on the way to 0.3% ir's, thats what Japan has, dont we follow everything else in the world? dont see kids getting around with 9mm's on the pushie in st kilda

thankyou
robots

 

[Beej]

Yes Beej. Unfortunately for them, the buyers were also real. I wonder what kind of losses they are looking at?

Hmm let's see - they have had that house for about 5 years now. It's in a great area on the lower north shore of Sydney - close to the city, great restaurants etc - so they probably don't drive much, and would only own a car because they want to, not because they had to. Must have saved a motsa on fuel bills! Their house is awesome - so they have been living in luxury all that time - you name it this house probably has it (thanks to the maga-renovation done by my friends). In the area even in the past month there have been 2 sales of similar class renovated property - one at $1.49M and one at $1.7M (that one was on a busy street too!). I expect if they did decide to sell (but not sure why they would) they would still be looking at a nice capital gain/profit - at least inflation plus a bit, tax free, in addition to all the lifestyle benefits they have gained over the years of ownership.

So yes - looks they will be doing it real tough.... NOT!

Cheers,

Beej

 

[Indie]

hello,

i hope that happens Gman, no one can get money except for those who can afford it,

i ask again, who held property during recession? girlfriend had unit in elsternwick and it went through unscathed

who else has example?

before you know it, 10, 15, 20yrs have pasted and those in for the ride reaped the benefits, nirvana

great discussion, looking forward to another rate cut in a few weeks and we still havent reached "neutral" monetary policy from the colonel at the RBA

we must be on the way to 0.3% ir's, thats what Japan has, dont we follow everything else in the world? dont see kids getting around with 9mm's on the pushie in st kilda

thankyou
robots

No commodities boom to prop up the economy this time around. Also, this will be a global recession. Japan and USA are adopting a ZIP interest rate policy but it doesn't seem to be working because even at zero they will not be negative real interest rates.

Deflation sucks. In 10, 15, 20 years we can have hyper inflation and real estate will bounce back. Of course you'll be paying 10 times more for a loaf of bread too. But you'll feel rich seeing all those zeros on your balance sheet. And the sun will be shining more brightly than ever due to global warming. And nirvana will be playing on Classic Hits FM. And Australia will still be the greatest place on God's green earth because....well, you can't afford to go anywhere else anyway. And you'll remember a time, long, long ago, when you really were wealthy.

This is not the garden variety recession folks, stop comparing it to others in recent memory. Opportunity is there for those who can be flexible and prepare for the future. Think outside the square. Don't miss your chance, you only live once.


goodluck and watch the debt
Indie