House prices to keep rising for years

[KIWIKARLOS]

Erm ... dunno about that, I see all the 60/70/80s houses that arnt falling down being teared down ....


What do you propose is going to happen to these new homes in 20 years time ? Brick work turns to dust or something ? Nothing wrong with the quality of build now a days, spend an extra few k and get a steel frame to boot.

I would say the main reason they were being torn down is
a: the are fibro construction or are full of aspestos
b: they are on big blocks and are prob getting replaced with a duplex or townhouses.
c: people are building bigger and putting a house that goes from property line to property line.

building on a concrete slab these days may be cheaper than piers but try installing a new power point , telephone line, cable tv you'll be paying a heap of labour. Most townhouses duplexes have windows that go all the way to the roof and ceiling heights have decreased not to mention termites they make short work of structural pine.

I'm not saying that houses should be built to last, in real life they should prob only stay up max 30 years anyway.

I think we would all agree though that in the majority of cases its not the house that increases in value its the land. There in lies the basis of my arguement, increasing density = increasing prices and vice verses

 

[zt3000]

From 1991 to 2007, the real cost of constructing a typical house (in 2007 dollars) rose slightly, from $192k to $211k. Hardly a 10% movement. Compare that to the movement in median prices. Developers have seen their potential profits soar with only a slight increase in costs, and margins will remain healthy after the slump (provided they aren't recklessly geared). The outlook for speculators/flippers doesn't look as rosy though.

From http://www.library.unsw.edu.au/~the...ved/adt-NUN20071210.120652/public/02whole.pdf

lol you crack me up

im a builder/developer in WA

i dont know about the rest of the country but im getting friggen price hikes in everything it feels like on a weekly basis. Land prices are way way overvalued and its taking a lot longer to find profitable land.

 

[explod]

lol you crack me up

im a builder/developer in WA

i dont know about the rest of the country but im getting friggen price hikes in everything it feels like on a weekly basis. Land prices are way way overvalued and its taking a lot longer to find profitable land.

Yep, it depends on who's doing the figures and producing the charts. As has been the case with bodgey figures from general financial analysts from Wall street and now to here in Auz., I am convinced that the Real Estate Promoters and Rampers can no longer be taken too seriously.

Though my own methods may be primitive it is the reason why I have become my own adviser and analyst. I have not looked back since.

May Dad said 50 years ago, where money is concerned trust no one. Funny it took 45 years for it to hit home

 

[tech/a]

Agree with zt3000.
Its now 2008 and the cost of developement for owner occupiers and Developers alike is soaring.

As for housing costs.
The figures quoted are for an Esplanade developement,Not including footings or excavation I'm doing all that.Commercial windows,Lift,Sauna,some 3 meter ceilings not to mention chefs Kitchen and Marble finishes,extensive tiling 200 square meters. 3 story incudes Undercroft garage---need I say more.

Why are houses being pulled down.
The land is now worth far more than the building.
Sub division or re developement is the go.
Minimal land releases means that unless you want what the developing builder is offering in a land release and its where you want to live---then buy a dero,demolish it and build.

As zt says its damned hard to find good priced developement property ---- but its still around over here.The last Esplanade Auction I went to was bought over the phone by a WA buyer.900 square meter block a push over dwelling sold for $890k youd get 2 back to back (Went through to rear street) 2x 200 meter developements at $735K ea fully developed and a return of at max $850k each and its getting skinny!
There are much better.Really unless you get 3-6 on a block its going to be tough if not dangerous.

Finally thanks Tom for your comments.
Temjin What if we get hit by an Asteriod?
What if we die tommorow.

All we can do is handle our own situation as wisely as we can after all we all want to be able to live comfortably and happily.

 

[CamKawa]

50 Victorians a week have homes taken
http://www.news.com.au/heraldsun/story/0,21985,23248714-661,00.html

 

[KIWIKARLOS]

50 Victorians a week have homes taken
http://www.news.com.au/heraldsun/story/0,21985,23248714-661,00.html

hahahahaha propaganda and alarmist

How many Victorians are taking out mortgages each week, I'm just taking a guess but I bet its a fair few more than 50

 

[numbercruncher]

A quote from the article for those who think Australia doesnt have its own version of Subprime.

Unregulated mortgage brokers, who are paid for every loan they organise even if the borrower defaults, organised loans for more than half of the evicted homeowners.

Mortgage industry analyst Denis Orrick said lenders were evicting borrowers faster than ever, especially in new housing estates.

"The lenders don't want to be last in the suburb to sell," Mr Orrick said.

 

[Tom Ronalds]

A quote from the article for those who think Australia doesnt have its own version of Subprime.

Of course we do. Have a look at some of the answers to the FAQ at this mortgage originator:

http://www.reactiv.com.au/faqs.aspx

100% loan & no need to show you have any earnings, if you are "self-employed".

Keep in mind however that subprime was only the first bit of the housing domino to fall in the US. The price crash that has resulted from this has now seen increasing numbers of Americans holding some seriously negative equity in their homes, which is prompting ever larger numbers of even credit worthy borrowers to resort to what the Yanks call "jingle mail" - i.e. put the keys to you house into an envelope, post to your bank and walk away.

As the numbers of these people increase, banks are faced with having to fire sell ever increasing numbers of properties into an already distressed market, which then precipitates another round of the same thing.

In this article, a respected US property blogger "Calculated Risk" explains the mechanism and the possible outcomes:

http://tinyurl.com/2fw5kb

He estimates that if house prices decline by 10% in 2008, this would see around 10.7 million of households with negative equity, prompting at least some of them to walk away.

The article dates back from December 2007 and the latest data shows that in fact the number of distressed households could now be as high as 12 million and perhaps even higher. Some experts now believe that the overall decline in house prices may be as high as 30%, which would mean over 20 million households in strife!

The fallout from this could destabilise and even bankrupt the entire US financial system. Calculated Risk covers this in this article:

http://tinyurl.com/yvddb8

His conclusion is that an across-the-board average fall in house prices in the order of 15% would result in up to USD 1 trillion of losses; if prices drop by 30%, it could be over USD 2 trillion!

The losses reported up to December 2007 were in the order of $70-80 billion - chickenfeed in comparison. Yet look at the effects already!

Can anyone imagine such a scenario? Such numbers? -- Yet it appears entirely plausible, given the recent trends.

Note that there is no mention of "subprime" in any of this!

Could this happen in Australia?

Perhaps not quite to the same effect; our home loans are not typically structured like a put option, so if the bank can't sell for what it's owed, they are likely to chase the defaulting borrower for the difference. This mean that our own version of "jingle mail" is unlikely; however in case of higher unemployment and subsequent widespread defaults, banks would be looking at losing billions just the same, as many people are forced to declare themselves bankrupt.

It is not a nice scenario and I am personally increasingly worried about the possibility of it happening. The old saying that if the US sneezes, the rest of the world catches the flu is still very much the truth. Just look at the massive write downs at various European banks and the effect on the share price of our own listed financial companies, big 4 banks included, most of whom have not as of yet disclosed any substantial difficulties.

The Chinese sovereign fund that a few months ago injected a very substantial amount into the US bank bailout has reputedly already lost about 30% of that investment. How long will the Chinese and others like them keep throwing good money after bad?

If the US financial system goes into a systemic meltdown, then we will be facing the most serious recession in at least 30 years. If that happens, I would hate to be a highly geared property - or share - owner.

Tom R.

 

[MichaelWhyte]

lol you crack me up

im a builder/developer in WA

i dont know about the rest of the country but im getting friggen price hikes in everything it feels like on a weekly basis. Land prices are way way overvalued and its taking a lot longer to find profitable land.

Tell me about it! I'm also a developer over here on the East Side, and my latest acquisition is a 700m2 block in the heart of Mona Vale on Sydney's Northern Beaches. I paid $690K for it with an old house on it in Sep 2006 during all the doom and gloom. It was originally listed for $770K but I talked it down. I've just secured DA approval for three units with excavated basement parking for seven vehicles. Average internal floor space is 140m2. 3 or 4 double bedrooms with 2.5 baths each.

Spoke to my REA and the scarcity of good sites in this postcode has other developers willing to shell out $1M even for it now only 18 months on. I'm going to develop it myself as the GR is $2.7M today and my total cost including the site is around $2M. I could sell the site and realise $300K or develop it and realise $700K in a growing market. Mona Vale went up 10% in 2007 and is touted to do the same or better in 2008. Its a leveraged play, so every 10% of growth in that segment improves the value of my site by $270K allowing for a constant $$$ profit margin on construction. But I think I'll develop it and lock in some of that uside potential. My yields make it neutral on completion and will probably be CF+ within another 12 months. A $3M odd asset that has $1M equity and is CF neutral. Sounds like a worthwhile prize...

My only question now is when to start. Cost of capital is through the roof and the interest on $1.8M land and construction costs during the 12 month build period will be a big part of that total $2M cost figure quoted.

Ah well, at least it will help offset the locked in $180K loss I realised recently on the XAO. Going back to my main game for a while to rebuild a nice equity base.

Cheers,
Michael.

 

[tech/a]

Michael.


NOW

You answered your own question here.

My only question now is when to start. Cost of capital is through the roof and the interest on $1.8M land and construction costs during the 12 month build period will be a big part of that total $2M cost figure quoted

 

[robots]

hello,

great to see Michael posting, a regular at Somersoft,

I hope he can continually run some info on his development if it gets going,

will be interesting next few weeks as i notice SOLD stickers going up on places due to be auctioned in the forthcoming weeks,

so the play's are starting

thankyou

robots

 

[robots]

hello,

report by CommBank & HIA and also backed by the ABS (yes the ABS)

http://www.commbank.com.au/news/daily_news.aspx

great news for property owners, investors, speculators etc with the hard work paying off,

massive drop in building approvals,

thankyou

robots

 

[WaySolid]

lol you crack me up

im a builder/developer in WA

i dont know about the rest of the country but im getting friggen price hikes in everything it feels like on a weekly basis. Land prices are way way overvalued and its taking a lot longer to find profitable land.

A case of 'All theory, no experience' perhaps?

As well as huge cost increases for building there has been similar things happening with development costs imposed by councils, one of the ideas why we aren't seeing over supply at the moment in SEQ.

 

[WaySolid]

Ive come to realise that posting on these sort of threads is a waste of keyboard strokes.

People will defend their view with whatever they can find.
Both for the positive and negative view of the topic.

If your happy doing what your doing just continue to do it.

If your not involved in it I fail to see how hypothesis or theory/Quoting articles can be of benifit to you or anyone else.

Like asking your heart surgoen how many surgeries he's performed and how he handles things when they go off the rails.

His reply would be based on many of the comments here.

"Well Ive read many news articles on the topic and watched RPA,but dont really want to get involved as I might stuff up"

If your involved in property and you make it a business no matter how small,you'll become good at it and do better than you could dream of.

If you dont then you'll also do very well at doing nothing.

"Progress comes from the intelligent use of experience."

Thats experience NOT theory.

Hey well said! I'm of the same line of thinking, but keep getting drawn back into posting, must be something that's feeding my ego with that sort of compulsive behaviour.

 

[pepperoni]

As a property investor from sydneys north shore, I can confirm prices are weak in all my areas except the absolute cream l(eg mosman), although even the best areas are now showing weakness. Another .5 increase in interest rate rises will hit me hard.

Cant comment on other areas but can see there are some pretty fundamental limitations of future increases in value unless there are major changes.

 

[tech/a]

.5 very likely.

I'm finding a lot of interest at Auctions here in SA from WA and Eastern States developers,making our job of finding good property harder and pushing our prices higher.
Still good demand.

 

[wayneL]

Meanwhile, in the UK:

http://business.timesonline.co.uk/t.../construction_and_property/article3406268.ece

From The Times
February 21, 2008
UK housing market close to collapse, analyst says
Robin Pagnamenta

Britain’s housing market is a “house of cards” that is set to implode after years of reckless mortgage lending, chronic oversupply of new flats and widespread fraud, a leading analyst said yesterday.

“We believe it is payback time for years of speculation and sharp practice,” Alastair Stewart, of Dresdner Kleinwort Wasserstein, said in a note to clients issued at the start of British housebuilders’ results season.

The warning came amid rising fears of endemic fraud in the housing market. The Financial Services Authority (FSA) said yesterday that it had banned a further two mortgage brokers for submitting false applications to lenders, in what appears to be a growing trend.

The action – against two partners in a mortgage broking firm in Ilford, Essex – came after a speech last week by Philip Robinson, director of the FSA’s financial crime unit, in which he urged the housing industry to tackle the problem. He said dozens of lenders had contacted the FSA with 200 allegations of mortgage fraud and more were coming in every week.
Related Links

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* Borrowers on 125% loans face repayments rise

* Clouds hover over the housing market

The bans were against Amjad Malik and Tahir Mahmood, of Abbaci Associates. They were charged with submitting, on behalf of clients, applications that contained false information relating to the clients’ incomes and jobs.

Apart from such individual cases of mortgage fraud, Mr Robinson said there was a far greater threat of organised rings attempting property fraud.

Mr Stewart, in his research note, advised shareholders in housebuilding companies to “take advantage of the recent bounce [in share prices] and head for the exit”. He said that housebuilders’ results would show the market was “hitting a wall” as forward orders for new homes collapsed.

Mr Stewart said there was a bubble in the market for new urban flats, which looked “in line for a full-scale crash”. He said: “Overbuilding, overlending and more than a whiff of fraud have in our view led to ‘mini-Floridas’ n cities from Leeds to Leicester.”

 

[robots]

hello,

i find that interesting the comment regarding north shore, when jennings are doing well on pre-sales in new developments which typically helps existing stock

http://www.theaustralian.news.com.au/story/0,25197,23254135-25658,00.html

thankyou

robots

 

[robots]

hello,

here is one for the melbournians:

http://www.seek.com.au/users/apply/index.ascx?Sequence=65&PageNumber=1&JobID=11919493

turn up and off you go

thankyou

robots

 

[tech/a]

Wayne.

Your thetre in the UK.

How then would you handle the situation with regard to identifying opportunity?
Or in your view will there not be opportunity in this sector for years.
If so what in your view would indicate opportunity in years to come?