House prices to keep falling for years

[Indie]

All commodities Rise and Fall. But not all at the same speed and not all with the same conseqences to investors. Ive not seen more than a halting of price advancment in my area of property investment (Southern beaches).
If it falls 30% will I care. Not really After a 300% rise in the time of owning them a 30% retracement from their highs isnt going to bother me.(Ive sold enough property to be geared 38%)

So, your saying that if a property you hold falls in value by 30%, from say $500k down to $350k, it doesn't bother you because of previous profits earned. So losing $150k doesn't bother you because you are still "in front" overall. Interesting way of looking at things.

How about this: sell at $500k, then buy back in after the 30% fall at $350k. Use the $150k (give or take) on thousand dollar hookers and rack, or whatever else takes your fancy?

 

[explod]

Happen to be out of the property market at present but watch this thread with avid interest.

Well done for the thoughtful input.

 

[tech/a]

Some common sense needs to be thought of here

Sure does.

So do you think it wise to buy in Surfers at the moment?

With interest rates plummeting what other options do you think some home owners will take in these areas of High Supply?

What opportunities does it (Plummeting interest rates) lead to for those who are too highly geared?

My Sister lives in Robina--she enjoyed 13.2% increase last year and has a compounded return of around 10% over the last 8 yrs.
I note Carrara 19.8% last year and 12.5% over the last 10 yrs.

There are options here and "common sence' would dictate to those who are equiped to use it.

As there are pockets which will plummet there will also be pockets which continue to out perform the Property market in general as there will be areas which stay stagnent.

tech/a for those of us who "are 20 with hex and just an opinion" could you please explain how auction clearance rates are no longer a valid metric for you now that they are at say 60% for Sydney where they used to be 80%?

Whatever gave you the idea that this is how I measure market strength.

Frankly I dont give a damned wether the Property market/Stock market or Economy is strong or weak.
I'm interested in one thing only.

DO THE NUMBERS STACK UP.
Yes-----I do it
No------I dont.

I'm not going to Stop a developement because Auction Clearence Rates are zero,if my number stack up. EG I have 70% of the developement pre sold and I'm either at profit or B/E.
I'm really not interested in the overall-----other than giving me the opportunity to alter my NUMBERS.
In trading for instance I'm hardly taking a trade---numbers dont add up.

In business I'm constantly working on efficiencies and productivity,our pricing leads our industry in aggression, My NUMBERS here are that I wish to be pre booked 4 mths in advance and be profitable.
Thats the way its been since the introduction of GST.Thats the way it will remain.

"Ill use common sence".

 

[tech/a]

So, your saying that if a property you hold falls in value by 30%, from say $500k down to $350k, it doesn't bother you because of previous profits earned. So losing $150k doesn't bother you because you are still "in front" overall. Interesting way of looking at things.

I have Esplanade Property which I paid $180,000 for Now worth $580,000
a 30% drop brings it to $406K. They are Holiday rentals which return me $45000/year on each. So do you think Id sell these? There is more than the obvious to consider. Tax and my Own Super are paramount in my property investment.

So I'm more complex than most here---sure---but at one time I too rented.
I also came very close to bankruptcy in 1984!---Doing incidentally what the crowd was doing!

How about this: sell at $500k, then buy back in after the 30% fall at $350k. Use the $150k (give or take) on thousand dollar hookers and rack, or whatever else takes your fancy?

See above there is much more for me than the obvious.
Eg Capital gains tax---why would I want to Crystallize that!

Would you also be kind enough to point out those areas of low supply--- (Common sense) ---which are going to fall 20-30%

 

[Glen48]

20 -30 % fall would be a soft landing. Any one still in property is a modern day Gambler with more money that sense.
Property should only be looked at as a way of producing income eg a workshop, ware house but even then you would be better of leasing it and using your money on more productive things like Drinks with business mates.
Property will go down for years and sadly we have just started.
Why do people cash in an item once is increases in value such as shares but not property? Like I did.

 

[robots]

Sorry to be a smartie robots, but Fitzroy North has had more growth than St kilda, but I won't argue with Mr Burns. He tells me I will lose money staying where I am.

Hehehe

hello,

wack the rise in your signature brother so we all know where its at

alot of other suburbs also had good rises

you doing well man for your hard work, probably just for rocking up to home and sticking the key in the front door, top effort and have a great day

thankyou
robots

 

[singlefished]

On a side note, David Potts (he's an economist/journo so take this with a grain of salt) has pegged March 09 as the economic low point in the current crisis/cycle. As you'd be re-assessing shortly after this, will be interesting to see if you agree with him as circumstances unfold.

Thanks Mofra, you have reaffirmed my confidence in the English language as a method of communication. After Robots responses last night I was really wondering, well, where the problem of adequate articulation lies....

Yup, I think we'll need to see how the economy travels and how unemployment unfolds over the next 6 months. Plenty of dire predictions by government, economists and the like out there so no need for me to quote on anything. I'm certainly no economic guru so have to try and maintain a balanced view of the more bullish and bearish news we receive and assume the truth will be somewhere in the middle....

Confidence in the future and having a better than average chance of staying in employment and thus enabling you the opportunity to pay off a mortgage are paramount to the stabilisation and future growth of property in the short to medium term. Debt is the preferred method p: where's the tongue in cheek smiley?) of paying off a mortgage and if you are unsure about your employment prospects 6 months down the line you'd be less than likely to take on the burden of a 25~30 year debt at this point in time (I assume).

The finance sector and big banks in particular are facing the prospect of huge job losses and I read this morning the mining industry could also possibly be laying off a few staff too http://au.biz.yahoo.com/081114/31/21o9m.html... retail could be the next biggie after the January sales but I don't know, we'll have to wait until Feb / March to see....

Until confidence returns, property is going nowhere but slowly down I fear. 6 month time we'll have a better understanding on our economic direction and hence a further understanding on what the future holds.

Cheers

 

[tech/a]

Why do people cash in an item once is increases in value such as shares but not property?

They do and like you I did.

Hence gearing at around 38%.Some owned,nothing negatively geared.
Income is passive,but capital gains have been excellent.

You dont have to sell everything particularly if its producing passive income.
Unfortunately the discussion here revolves around 1 dwelling.

The real benifit of property comes with multiple holdings.
Yes Commercial and Industrial is also excellent.
My own company office and warehouse is in my SMSF,the benifits enormous and the way my CPA uses it and profit at the end of year is amazing.

 

[chops_a_must]

You dont have to sell everything particularly if its producing passive income.

In terms of property, I think you have to look at it as an income generating mechanism. Personally, I don't see the rationale behind looking at property for capital gains, unless you are actually a developer. It is a difficult mechanism for producing that.

And if property is producing income, and you have no debt, why on earth would you sell?

I have free carried shares that pay dividends. Why would I care if the SP tanks? So long as it pays divvies. Unless it goes to 0 of course.

 

[lioness]

hello,

wack the rise in your signature brother so we all know where its at

alot of other suburbs also had good rises

you doing well man for your hard work, probably just for rocking up to home and sticking the key in the front door, top effort and have a great day

thankyou
robots

Yes, you are right. All I did was have the balls to put my money where my mouth is and have made 500K in 2.5 years, but Mr Burns and Glen will tell me I will lose everything soon. What a joke.:

 

[lioness]

20 -30 % fall would be a soft landing. Any one still in property is a modern day Gambler with more money that sense.
Property should only be looked at as a way of producing income eg a workshop, ware house but even then you would be better of leasing it and using your money on more productive things like Drinks with business mates.
Property will go down for years and sadly we have just started.
Why do people cash in an item once is increases in value such as shares but not property? Like I did.

30% will be a soft landing you reckon. Well if it falls 30% Glen48, I will be ober the moon with joy. That only means I am up 35% in 2 years on my investment. Gee, I am feeling broke already.

No-one on here is discussing % rates as a key topic either.

 

[lioness]

Fin review today had a good article on rent increases and what may happen if % rates dramatically fall.

Basically, it states they expect rents to increase 50% in the next few years.

Also if % rates fall to say 3-4% for the variable rate, expect another minor boom to hit us, as unemployment rising to 5-6% won't be enough to stop the next property wave which will take up rising again.

That is the key - job losses. Yes we will have some, but nothing like USA at 11%. Expect another boom when rates come down as the government will pull out all stops to keep the bubble going.

My key statement is this: this country is built upon property ownership and the old money won't let it collapse the way so called blue chips have.

 

[YChromozome]

Anyone here know where or has a rough chart/statistics/info on the japanese property market ?

The graph's a bit old - it was published in 2005 and naturally the housing bubble has got much bigger since then.

 

[cutz]

Fin review today had a good article on rent increases and what may happen if % rates dramatically fall.

Basically, it states they expect rents to increase 50% in the next few years.

Also if % rates fall to say 3-4% for the variable rate, expect another minor boom to hit us, as unemployment rising to 5-6% won't be enough to stop the next property wave which will take up rising again.

That is the key - job losses. Yes we will have some, but nothing like USA at 11%. Expect another boom when rates come down as the government will pull out all stops to keep the bubble going.

My key statement is this: this country is built upon property ownership and the old money won't let it collapse the way so called blue chips have.

Yeah, I don’t know about that.

I think the intent of the article is to show that property yields are increasing due to the reduction of investment property values, just as yields are increasing on stocks due to the market getting smashed, the article also states that the current yields offered by property are not enough to entice investors out of cash and into property. Yet.

 

[lioness]

Yeah, I don’t know about that.

I think the intent of the article is to show that property yields are increasing due to the reduction of investment property values, just as yields are increasing on stocks due to the market getting smashed, the article also states that the current yields offered by property are not enough to entice investors out of cash and into property. Yet.

Cutz,

Spot on here. Plus doesnt Mr Burns and Glen48 types realise that cash will go into a perceived stable investment after joe blow has been burnt with shares.

There will be a fundamental shift away from shares and into property due to blue chips making the average retiree work another 7 years.

 

[Sunder]

Cutz,

Spot on here. Plus doesnt Mr Burns and Glen48 types realise that cash will go into a perceived stable investment after joe blow has been burnt with shares.

There will be a fundamental shift away from shares and into property due to blue chips making the average retiree work another 7 years.

Will property be seen as stable though? Interest rates have been cut monstrously, and new grants have been given, yet clearance rates kept falling, and unsold inventory is still rising.

I don't see a mass exodus into property until the yield is so high that it out performs cash by a substantial enough amount to take the risk. Yields of 4% and risk of 0-30% capital loss, or yields of 6% govt gaurantee? I know which I'd be taking. Fast forward 12 months, and say IR has dropped, and so have house prices, causing yields to go to 6% and cash to go to 4%, would you take the risk of bad tenants, damage, insurance, rates, headaches, and possible further capital losses, against 4% guaranteed?

No Lioness, I see a big and long shakeout here. I don't think property will be seen as a "Stable" investment for some years to come yet.

 

[cutz]

Hi,

Just for the record I do consider that stocks are and always will be the best long term investment, but saying that I do own my own home which I don’t consider an investment but a lifestyle choice.

 

[Indie]

See above there is much more for me than the obvious.
Eg Capital gains tax---why would I want to Crystallize that!

Would you also be kind enough to point out those areas of low supply--- (Common sense) ---which are going to fall 20-30%

Fair enough, my only point is that if your capital base is shrinking, it's well....shrinking. There's no doubt you bought at the right time. Your numbers look very impressive.

Buffet is down 30% for the year, I read somewhere. The only people who have made money this year have either been short or in cash.

I think the importance of the supply issue is overblown. The major factor is always availability of credit. Potential buyers can only pay with available funds no matter how much they would like to borrow. If I see banks moving back to zero deposit/equity loans then I'll believe the property market is going to move up again. Only because that is where we've just been, so it stands to reason that for property to even stay at par level, credit availability has to stay at or above that peak. P/e's ratios may be good for you given your buy-in point, but for new investors they don't look very attractive. I live in one of the most tightly held areas in Melbourne (Middle Park) and I've never seen so many properties passed in. This time last year everything that went up was sold, everything.

For those who think Australia won't have double digit unemployment and huge government deficits, followed by rising taxes, you're kidding yourselves. Last time I checked over 2/3 of our economy was in the services sector. This will be hit very hard by a reduction in consumer spending. Just wait for the dark news that's going to follow this coming xmas period, even with the one-off Rudd hand outs to pensioners etc, which is the only thing that will stop a quarter of negative growth anyway. Add to that a depressed commodities sector, problems in the agri sector and it's not looking like a soft landing. I mean, why on earth would anyone think Australia is well placed to survive this global downturn? The government reviews it's outlook every month. Massive rate cuts, stimulus packages? These are emergency measures, not something an economy that is "well placed" needs to do. Being as we are, a satellite to China's economy, I'm even more concerned. They're doing so well they have just unveiled a $500bn+ stimulus package. Tell me that isn't the writing on the wall.

The problem for housing is that peak credit for the baby boomers has been reached. The next driver for credit growth is where? The subsequent smaller generations of Australians who are going to have to pay higher taxes to support retiring baby boomers?

 

[robots]

Fair enough, my only point is that if your capital base is shrinking, it's well....shrinking. There's no doubt you bought at the right time. Your numbers look very impressive.

Buffet is down 30% for the year, I read somewhere. The only people who have made money this year have either been short or in cash.

I think the importance of the supply issue is overblown. The major factor is always availability of credit. Potential buyers can only pay with available funds no matter how much they would like to borrow. If I see banks moving back to zero deposit/equity loans then I'll believe the property market is going to move up again. Only because that is where we've just been, so it stands to reason that for property to even stay at par level, credit availability has to stay at or above that peak. P/e's ratios may be good for you given your buy-in point, but for new investors they don't look very attractive. I live in one of the most tightly held areas in Melbourne (Middle Park) and I've never seen so many properties passed in. This time last year everything that went up was sold, everything.

For those who think Australia won't have double digit unemployment and huge government deficits, followed by rising taxes, you're kidding yourselves. Last time I checked over 2/3 of our economy was in the services sector. This will be hit very hard by a reduction in consumer spending. Just wait for the dark news that's going to follow this coming xmas period, even with the one-off Rudd hand outs to pensioners etc, which is the only thing that will stop a quarter of negative growth anyway. Add to that a depressed commodities sector, problems in the agri sector and it's not looking like a soft landing. I mean, why on earth would anyone think Australia is well placed to survive this global downturn? The government reviews it's outlook every month. Massive rate cuts, stimulus packages? These are emergency measures, not something an economy that is "well placed" needs to do. Being as we are, a satellite to China's economy, I'm even more concerned. They're doing so well they have just unveiled a $500bn+ stimulus package. Tell me that isn't the writing on the wall.

The problem for housing is that peak credit for the baby boomers has been reached. The next driver for credit growth is where? The subsequent smaller generations of Australians who are going to have to pay higher taxes to support retiring baby boomers?

hello,

you forgetting st Kilda +14.75% for 3 months, nth fitzroy killing it, melton up

ah yes here we go, peak debt

has gphc closed down or something cause they all here spreading the word

i welcome them all, everyone gets a fair go at ASF

thankyou
robots

 

[Sunder]

you forgetting st Kilda +14.75% for 3 months, nth fitzroy killing it, melton up

ah yes here we go, peak debt

has gphc closed down or something cause they all here spreading the word

And I'm sure there are people who are up on the long side of shares as well, but by and large property investors will be down, and cherry picking particularly good suburbs on 3 month old data before the slow down, probably doesn't do your credibility any good.

As for the GHPC comment, it indicates you think of it as a marginalised view, who are coming to proseletyze here. Perhaps the reality is, that they simply could see what was happening earlier than anyone else, and the views are becoming mainstream, as people stop denying reality.

For the disclosure laws, I am a member of GHPC as well (as well as some very bullish property investment forums).