I am not going to argue whether or not property prices will continue to soar. But I do believe that when so much of our equity is tied up in unproductive assets like residential housing stock the nation will face big problems long term. Instead of our meagre savings being put into research and innovation we are speculating on property. Maybe the tax system needs to be looked at to encourage innovation and entrepreneurialism.
House prices to keep rising for years
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wayneL
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I've never seen such a bunch of puke-worthy posts in my life. The suggestion that property speculation is the only path to a worthwhile life truly made me feel nauseous. Furthermore, to suggest that anyone NOT speculating in property is some sort of loser made me rush for the spew bucket.
FFS Get a grip.
If this is typical of property investors, I'm selling my properties immediately before it happens to me.
Un-farking-believable!!
FFS Get a grip.
If this is typical of property investors, I'm selling my properties immediately before it happens to me.
Un-farking-believable!!
tech/a
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Where'd you get that!!
How'd you read those statements into my posts?
Selective reading obviously.
Wayne your one of the biggest "Poppy Knockers".
Doesnt matter what I or others like me write--we or in particular I only have one agenda in your view and thats to pump our own tyres.
Perhaps I can make you puke a little more.
About 2 yrs ago large box appeared at my office from a guy called Andrew.
In it was A heap of goodies Wine,Cheese,Bicuits,Scotch,Chocolate and a book.There were 2 envelopes marked strangely enough (1) and (2).
(1) One had a card in which was written.
"Thanks for your inspiration and work on "Tech Trader' I was inspired to develope my own method around yours last year (2005) and placed my Super into the method I developed. I am delighted to say that I have increased my Super by 62%---so just a little thanks from me---
PS please open (2)."
(2) My starting Super capital was $750,000.
Thats $465,000.
Go puke some more.
Well you're right, a casino has enough conscience to not let you gamble with that much money.
In today's market, when it seems that half of people aged over 40 are "property investors" prowling for acquisitions, I don't think there are many fantastic bargains. If a vendor wants to sell a house for $120k less than the national median, it most likely means there is a deficiency - structural problems, commercial jet flight path, bad neighborhood. Sure, the vendor could be an idiot, but most of them aren't.
Whatever the condition of the house, $325k looks cheap in this bubble, but it's not cheap by international standards. Before the bubble, $325k would have bought you a prime house a stone's throw from parliament, not 30km out in the sticks.
tech/a
No Ordinary Duck
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Opportunity my friend will stare you straight in the face and you wont recognise it!
wayneL
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Tech,
Poppy knocker? Show me one place where I have ever criticized anyone for the mere fact of their success. A very weak and anti-intellectual straw man argument.
The subtlety (or not as the case may be) of my points are obviously completely lost on you. There is a monumental hypocrisy of complaining about accusations of greed (which is fair in itself), while at the same time accusing others of fearfulness.
Pump my own tyres??? Hah! Show one place where I have sought out kudos or told all and sundry about people showering me with their affections. Sorry, that's not my agenda.
Nice try, but no cigar.
Poppy knocker? Show me one place where I have ever criticized anyone for the mere fact of their success. A very weak and anti-intellectual straw man argument.
The subtlety (or not as the case may be) of my points are obviously completely lost on you. There is a monumental hypocrisy of complaining about accusations of greed (which is fair in itself), while at the same time accusing others of fearfulness.
Pump my own tyres??? Hah! Show one place where I have sought out kudos or told all and sundry about people showering me with their affections. Sorry, that's not my agenda.
Nice try, but no cigar.
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OK; I think it's time to butt out of this discussion. Some people seem to be getting rather emotional and that's always bad news.
Before I go, I'd just like to make a few parting comments - I guess to some extent for the benefit of tech/a, who seems to on the whole be a sensible bloke and clearly got pissed off when I said Adelaide was severely unaffordable without any population growth. Facts be damned, eh? -- Perhaps it's worthwhile to confirm again that it was not me who made this bit of information up...
Look, however you read into this, the truth is that prices across the board in this country are now quite ridiculous. To assume that even the property you can now buy for $325,00, as you say, will go up greatly over the next few years is quite unlikely to happen, given the world-wide storm that is gathering within the international financial system, and the inevitable fallout that will come out of that.
This type of confident analysis reminds me of stock analysts, who until very recently confidently predicted that on the basis of yield and expected profits, companies like MFS and AFG were a steal at $4.50 and $8.00 respectively.
These fundamentals can change incredibly rapidly. I know that for some reason lots of people here are unwilling to look at the situation in US property, but that does not mean that a similar outcome here is out of the question. I repeat again: Australia has a higher personal debt per capita than the US and it also has a much more severe misalignment of housing prices with incomes than America ever had. This is a toxic mix in the environment that is now starting to unfold world-wide and you may be surprised how quickly the sentiment here may change.
The situation in the listed property sector is a case in point: Many projects in the States are now getting cancelled, as banks demand more security and higher interest rates. As one commercial property analyst from Macquarie Bank I spoke to last week said: "Who wants to build shopping centres in ghost towns?"
The massive downgrades of expected future earnings of most Australian LPTs that have been flowing through already should provide a warning to anyone who is sensible enough to take notice. The Macquarie analyst's advice was that after having knocked on the door of every single Australian-domiciled LPT and talked with management, the only "safe" allocation of my clients' money was either in the SPDR tracker fund, which is unlikely to go broke in case we get another one or two Centros, or, better still, to get out of this sector altogether; Macquarie-run LPTs inclusive.
I have said before that I have absolutely no barrow to push here and I do not intend to change anyone's mind. I manage tens of millions of dollars of clients' money and this is the advice I get from specialists in the field. I am also paid to take note of relevant economic developments, and based on those, I am bearish on property.
Will I be proved correct? -- Who knows?
But one can only work with probabilities; this (predicting future market movements) is a very inexact science.
Many of you here, even those who have lived through past downturns, clearly believe in the classical fallacy that "this time it's different". Sure, astute property investors will always be able to find investments with reasonable fundamentals and with good future prospects. However, the property market works no different than the share market - the majority of investors are not very good at picking good properties, and when a general market crash occurs, prices will decline across the board; your property including.
When I see things like this:
http://tinyurl.com/36cfov
- a "transportable home on 588 square meter block in "scenic" Exmouth (WA) for $450K; or this:
http://tinyurl.com/2mvs9v
- a million-dollar bomb, presented as an "executive residence" in Port Hedland with "sea views"; or this:
http://tinyurl.com/33b5s9
- a nothing special-looking place in Broome for $839,000, which is being described as "an opportunity for you to secure a sensibly priced family home"....then I know something is way out of whack, and any sensible person would admit that.
Yes, I know that these places are in Western Australia, and yes, there is a mining boom on. But hey - what is there in Exmouth, Port Hedland or even Broome that justifies these prices?
What is there in Irvinebank (see my previous post) that justifies a price tag of $365K on a house you can't even live in?
Trades people in WA area can expect to earn on average about $70K p.a:
http://tinyurl.com/2c4pa6
Mining, oil and gas workers in WA can expect an average of $125,000:
http://tinyurl.com/28ok7u
Do these incomes justify calling an almost million-dollar property "a sensibly priced family home"? -- Even assuming a combined family income of $200K gross, this amounts to 4.5 times gross salary. More than one such salary is likely to be required to cover just the interest on a loan of $750,000-$800,000.
Can this property be rented out for $900-$1,000/week, to attain at least a 5% yield? -- What do you reckon?
What happens to these prices if the mining boom slows?
The situation elsewhere is not greatly different. Salaries in SA for trades and services have been trending down in recent months and are now at around $66K:
http://tinyurl.com/26qpvy
Adelaide median house price in the third quarter of 2007 was $320,000; median household income was $49,000. Are properties like this good value?
http://tinyurl.com/2qln2h
Wow, a 3 bedroom home at Christies Beach, 25 km or thereabouts from the CBD, for around $350K (plus costs, which property "investors" tend to forget about including in their acquisition price!)
-- The average Adelaide family will only need about 7 years worth of income to buy it; surely it will just skyrocket in value from here!
What can a place like that realistically rent for? -- Let's have a look:
http://tinyurl.com/2w9uvj
OK; so if we can get around $250, we'll be doing really well here! This translates to a princely net yield, after cost of rates etc, of maybe 3.5%, if we're lucky.
Man, on such metrics, this is a bargain! I can see the same place going up by 25% over the next 3 years...not!
Does this mean good value properties can't be found in Adelaide or elsewhere? -- Of course not; but most people will not be looking - they will instead fall for the "prices will keep going up" sales spiel of real estate agents and similar gurus.
Is my assessment above faulty, because I use "generalised" data? -- I don't think so; I am not aware of any other useful approaches to do this type of analysis. If you know of any, I'd be grateful if you share them.
I think I'll rest my case here and restate that my intention here has not been to offend anyone. All I ever wanted to do was to present the facts the way I see them. To many, this clearly is not a palatable option.
Cheers,
Tom R.
Before I go, I'd just like to make a few parting comments - I guess to some extent for the benefit of tech/a, who seems to on the whole be a sensible bloke and clearly got pissed off when I said Adelaide was severely unaffordable without any population growth. Facts be damned, eh? -- Perhaps it's worthwhile to confirm again that it was not me who made this bit of information up...
Look, however you read into this, the truth is that prices across the board in this country are now quite ridiculous. To assume that even the property you can now buy for $325,00, as you say, will go up greatly over the next few years is quite unlikely to happen, given the world-wide storm that is gathering within the international financial system, and the inevitable fallout that will come out of that.
This type of confident analysis reminds me of stock analysts, who until very recently confidently predicted that on the basis of yield and expected profits, companies like MFS and AFG were a steal at $4.50 and $8.00 respectively.
These fundamentals can change incredibly rapidly. I know that for some reason lots of people here are unwilling to look at the situation in US property, but that does not mean that a similar outcome here is out of the question. I repeat again: Australia has a higher personal debt per capita than the US and it also has a much more severe misalignment of housing prices with incomes than America ever had. This is a toxic mix in the environment that is now starting to unfold world-wide and you may be surprised how quickly the sentiment here may change.
The situation in the listed property sector is a case in point: Many projects in the States are now getting cancelled, as banks demand more security and higher interest rates. As one commercial property analyst from Macquarie Bank I spoke to last week said: "Who wants to build shopping centres in ghost towns?"
The massive downgrades of expected future earnings of most Australian LPTs that have been flowing through already should provide a warning to anyone who is sensible enough to take notice. The Macquarie analyst's advice was that after having knocked on the door of every single Australian-domiciled LPT and talked with management, the only "safe" allocation of my clients' money was either in the SPDR tracker fund, which is unlikely to go broke in case we get another one or two Centros, or, better still, to get out of this sector altogether; Macquarie-run LPTs inclusive.
I have said before that I have absolutely no barrow to push here and I do not intend to change anyone's mind. I manage tens of millions of dollars of clients' money and this is the advice I get from specialists in the field. I am also paid to take note of relevant economic developments, and based on those, I am bearish on property.
Will I be proved correct? -- Who knows?
But one can only work with probabilities; this (predicting future market movements) is a very inexact science.
Many of you here, even those who have lived through past downturns, clearly believe in the classical fallacy that "this time it's different". Sure, astute property investors will always be able to find investments with reasonable fundamentals and with good future prospects. However, the property market works no different than the share market - the majority of investors are not very good at picking good properties, and when a general market crash occurs, prices will decline across the board; your property including.
When I see things like this:
http://tinyurl.com/36cfov
- a "transportable home on 588 square meter block in "scenic" Exmouth (WA) for $450K; or this:
http://tinyurl.com/2mvs9v
- a million-dollar bomb, presented as an "executive residence" in Port Hedland with "sea views"; or this:
http://tinyurl.com/33b5s9
- a nothing special-looking place in Broome for $839,000, which is being described as "an opportunity for you to secure a sensibly priced family home"....then I know something is way out of whack, and any sensible person would admit that.
Yes, I know that these places are in Western Australia, and yes, there is a mining boom on. But hey - what is there in Exmouth, Port Hedland or even Broome that justifies these prices?
What is there in Irvinebank (see my previous post) that justifies a price tag of $365K on a house you can't even live in?
Trades people in WA area can expect to earn on average about $70K p.a:
http://tinyurl.com/2c4pa6
Mining, oil and gas workers in WA can expect an average of $125,000:
http://tinyurl.com/28ok7u
Do these incomes justify calling an almost million-dollar property "a sensibly priced family home"? -- Even assuming a combined family income of $200K gross, this amounts to 4.5 times gross salary. More than one such salary is likely to be required to cover just the interest on a loan of $750,000-$800,000.
Can this property be rented out for $900-$1,000/week, to attain at least a 5% yield? -- What do you reckon?
What happens to these prices if the mining boom slows?
The situation elsewhere is not greatly different. Salaries in SA for trades and services have been trending down in recent months and are now at around $66K:
http://tinyurl.com/26qpvy
Adelaide median house price in the third quarter of 2007 was $320,000; median household income was $49,000. Are properties like this good value?
http://tinyurl.com/2qln2h
Wow, a 3 bedroom home at Christies Beach, 25 km or thereabouts from the CBD, for around $350K (plus costs, which property "investors" tend to forget about including in their acquisition price!)
-- The average Adelaide family will only need about 7 years worth of income to buy it; surely it will just skyrocket in value from here!
What can a place like that realistically rent for? -- Let's have a look:
http://tinyurl.com/2w9uvj
OK; so if we can get around $250, we'll be doing really well here! This translates to a princely net yield, after cost of rates etc, of maybe 3.5%, if we're lucky.
Man, on such metrics, this is a bargain! I can see the same place going up by 25% over the next 3 years...not!
Does this mean good value properties can't be found in Adelaide or elsewhere? -- Of course not; but most people will not be looking - they will instead fall for the "prices will keep going up" sales spiel of real estate agents and similar gurus.
Is my assessment above faulty, because I use "generalised" data? -- I don't think so; I am not aware of any other useful approaches to do this type of analysis. If you know of any, I'd be grateful if you share them.
I think I'll rest my case here and restate that my intention here has not been to offend anyone. All I ever wanted to do was to present the facts the way I see them. To many, this clearly is not a palatable option.
Cheers,
Tom R.
tech/a
No Ordinary Duck
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My apologies I obviously mis read this
Lost me there.Carrying on business is seen as greed--strange I think.
Fear---a common trait of those who dont understand business---any business.
You wrent the subject
Hate cigars.
wayneL
VIVA LA LIBERTAD, CARAJO!
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Tech,
You have completely miscomprehended what I said and have the wrong end of the stick altogether, do you have a problem with English comprehension?
Persisting with straw man argument after the exposure of such, I last saw in grade five. First time I've seen an adult try that one. LOL
As to the English language itself... wrent? WTF is that?
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Well you see to maintain a decent quality of life there needs to be a steady rate of investment into housing,... so I can't see how it is an unproductive asset,.. If you took away the private developers and Investors I would hate to see the state of the housing market.
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Agree with you Tech, I certainly think Adelaide is worth a look. Population looks to be increasing and they are making a concerted effort to boost it, advertising etc.
http://au.news.yahoo.com/080204/21/15q99.html
http://news.ninemsn.com.au/article.aspx?id=380926
http://www.theaustralian.news.com.au/story/0,25197,23152877-12377,00.html
http://au.news.yahoo.com/080204/21/15q99.html
http://news.ninemsn.com.au/article.aspx?id=380926
http://www.theaustralian.news.com.au/story/0,25197,23152877-12377,00.html
While I'd like to believe "house prices to keep rising for years" (owning part of a property myself) I just can't see it with bank variable interest rates at 11%. I think this is very likely in 2009 - seeing as we will receive at least two more this year.
RBA believes inflationary pressures may continue into 2010, which means who knows - 12.xx% rates by then? These are the sorts of rates we haven't seen in nearly 20 years! and we are staring at least 2 more years of this.
http://www.rba.gov.au/Statistics/cashrate_target.html
But how can the property bulls say this will not effect the demand equation of property at all. By all logic - how can it possibly not? Even the most bullish of property investors would have to be getting 15% capital returns to just about break even I would say. That's way above the average return even at the best of times.
This is a severe credit crisis going, and the lines of Centro, Allco, and more are failing on over-leverage, and this is starting to spill over into consumer credit. Just as an example (thankfully there isn't much to go), but my personal loan is now up to 14.2% with the CBA - that's massive... how can all of this not effect the consumer at some point? Especially property investors, who are relying on low interest rates (no), high rental prices (yes, this may stay), and high capital growth (questionable if people can't afford).
Yup, house prices may continue to go up, but unless it's more than 10%, these interest rates are just going to kill the whole idea that property is a great investment until things improve. The key variable, COST in the equation is ballooning larger and larger.
RBA believes inflationary pressures may continue into 2010, which means who knows - 12.xx% rates by then? These are the sorts of rates we haven't seen in nearly 20 years! and we are staring at least 2 more years of this.
http://www.rba.gov.au/Statistics/cashrate_target.html
But how can the property bulls say this will not effect the demand equation of property at all. By all logic - how can it possibly not? Even the most bullish of property investors would have to be getting 15% capital returns to just about break even I would say. That's way above the average return even at the best of times.
This is a severe credit crisis going, and the lines of Centro, Allco, and more are failing on over-leverage, and this is starting to spill over into consumer credit. Just as an example (thankfully there isn't much to go), but my personal loan is now up to 14.2% with the CBA - that's massive... how can all of this not effect the consumer at some point? Especially property investors, who are relying on low interest rates (no), high rental prices (yes, this may stay), and high capital growth (questionable if people can't afford).
Yup, house prices may continue to go up, but unless it's more than 10%, these interest rates are just going to kill the whole idea that property is a great investment until things improve. The key variable, COST in the equation is ballooning larger and larger.
tech/a
No Ordinary Duck
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Tom.
Firstly I know it wasnt you on the Adelaide statement Id read it elsewhere myself.
I dont disagree with you on many points your presenting.
But interested in your view of how better off do you or those you follow believe home buyers will in x? years time.
Will they ever be better off?
Will there ever be a time which is right to buy?
If so what in your view will be the signs.
Do you expect prices and wages to eventually return to say 4x ratio?
There will be crashing of prices I agree in the rediculous situations you mention.
Not so in those that are more "Realistic".
Will inflation be bought under control.
Back in the 80s housing dipped but didnt crash.
In the years to follow prices just took off again albeit years later.
Not all builders will go broke.
Not all investors or home owners will lose their shirts.
Firstly I know it wasnt you on the Adelaide statement Id read it elsewhere myself.
I dont disagree with you on many points your presenting.
But interested in your view of how better off do you or those you follow believe home buyers will in x? years time.
Will they ever be better off?
Will there ever be a time which is right to buy?
If so what in your view will be the signs.
Do you expect prices and wages to eventually return to say 4x ratio?
There will be crashing of prices I agree in the rediculous situations you mention.
Not so in those that are more "Realistic".
Will inflation be bought under control.
Back in the 80s housing dipped but didnt crash.
In the years to follow prices just took off again albeit years later.
Not all builders will go broke.
Not all investors or home owners will lose their shirts.
I am not talking about owner occupiers. Sure we need investment in property but there is far too much capital wasting in this sector, it won't add to our future earnings capacity as a nation, innovation will. I can't blame investors for chasing the best returns, just saying the system is a little skewiff at the moment.
numbercruncher
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no no no.
Keep it coming! I think your scaring the permabulls, probably why they are on your case a bit
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It's not all wasted capital and property investment does inprove the productivity of our country. The biggest drain on productivity are these MC mansions at Kellyville, Rouse hill etc where the infrastructure required to service these places puts an unfair burden on everyone who subsidises the buggers. Right now massive property investments are going on in inner metro centres near major public transport infrastructure. North shore councils plan tens of thousands of dwellings along the northern rail line. Homebush has multiple multi multi million dollar developments, rhodes, south Sydney etc the list goes on.
As these places get built and populated the cost for services for everyone goes down because of sheer economies of scale. The rail network will get a massive boost in capital when more and more people start using the infrastructure. The main reason its so screwed now is because you simply can't make enough money transporting a few thousand people 50 kms by rails when with urban consolidation you can transport tens of thousands over 10 km.
Undoubtedly average dwelling prices in these outer serive intensive and expensive areas will likely go down, prices in inner city area only upward. It's common sense the dense areas are becoming denser and the sparsley populated areas will continue to struggle to increase the pop as quick.
Look at the hoohar from NW sydney residents that have to pay $17 a Day ! in tolls just to get to the city and thats not even taking into account car costs. That would realistically equate to a $150-200 saving a week for someone who uses public transport in the inner burbs. I for one would rather put that $200 a week toward a closer place to the city and save myself probably two hours a day commuting as well.
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I agree. Property by itself is not a value producing asset. The building itself is a depreciating asset and the land itself is just a pile of dirt for the non-value producing "asset" to be sat on.
Capital (i.e. CREDIT) should be better spent elsewhere and not on speculating land prices. Just imagine how our economy will do well if all these excess credit are spent on infrastructure, research and development, innovation and business growing. Of course, I do not mean that no one should invest in real estate properties, but it's way excessive right now.
Of course, this is all a simplistic, naive and principle centered view. This is a captalist society and greed is the only way to "get ahead". As a Gen Y, I do have a vested interest in seeing the property values to go down in real term. It is clearly unaffordable to me right now and I have no interest in borrowing to become "financially impotent for a significant amoung of time" just to get on the property ladder and serve the "captialist" baby boomers at the same time.
As for getting with the "programme" in a captialist society and to get ahead, I am definitely working my way in through other ventures. There is no need for me to play the property ponzi scheme.
It is perfectly understandable to see those who own properties have a personal agenda to see the values of these assets continue to rise, regardless of the expenses to others or to the economy. Ride the trend as long as possible, but never assume it will last forever.
P.S: Told everyone this thread will get too emotional.
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In the US and UK not all prices are dropping there are pockets of severely effected areas and others where values are still rising or stagnate. Most of the places in the US that are taking the hits are Cali, Florida, Chicargo etc. In each of these places the local economies haven't been doing well lately and part of the drop can be directly attributed to worsening job prospects and pays in these area's. Metro New York city prices haven't drop much if anything at all.
The aussie dream days of sparsley populated burbs driving 50 kms to work or more are built on days of cheap oil and energy which are loooong gone. For instance transport costs of goods would dramatically reduce if we were to consolidate our populations as would the stess and destruction of our precious little environment.
The aussie dream days of sparsley populated burbs driving 50 kms to work or more are built on days of cheap oil and energy which are loooong gone. For instance transport costs of goods would dramatically reduce if we were to consolidate our populations as would the stess and destruction of our precious little environment.
tech/a
No Ordinary Duck
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I'm interested in what people actually believe will happen---the end result.
From what I can gather the scenario looks a little like this.
(1) A severe correction in housing prices say 30% in median values which in realterms could well mean very little in some areas and massive (over 50%) in others.
(2) A continuation in interest rate rises.10 even 12% not out of the question,making the affordability issue even worse.
(3) Severe downturn in housing demand due to spiralling costs.
(4) Increasing Un employment further exaserbating the situation.
(5) Stagnation as demand is met by supply as some investors sell properties no longer giving better returns than other investments.(Which will be??)
(6) Rent continues to increase as affordability remains the issue.
Pretty well all this occured in the 80s
Those that bought then and still hold now (Mainly single dwelling owners) wish they had 10
So in 2030 will the scene be any different to those who get through this?
From what I can gather the scenario looks a little like this.
(1) A severe correction in housing prices say 30% in median values which in realterms could well mean very little in some areas and massive (over 50%) in others.
(2) A continuation in interest rate rises.10 even 12% not out of the question,making the affordability issue even worse.
(3) Severe downturn in housing demand due to spiralling costs.
(4) Increasing Un employment further exaserbating the situation.
(5) Stagnation as demand is met by supply as some investors sell properties no longer giving better returns than other investments.(Which will be??)
(6) Rent continues to increase as affordability remains the issue.
Pretty well all this occured in the 80s
Those that bought then and still hold now (Mainly single dwelling owners) wish they had 10
So in 2030 will the scene be any different to those who get through this?
It true that the bubble in the USA was confined to the rapidly growing cities of the sunbelt. Property prices in the north and midwest hardly increased at all during the bubble years, so there's no reason for them to drop. But our bubble effects almost every Australian suburb.
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