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.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 quotestime to use them.
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 startSeems 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 ...
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.
"House price double every 7 years"
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.
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
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.
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
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.
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.
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.
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.
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.
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?
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
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