House prices to keep rising for years

[numbercruncher]

60m pesky Poms fit in an area the size of Victoria and this was the result for 08'

House prices 'fell 15.9% in 2008'

House prices fell by 15.9% last year, according to the latest survey by the Nationwide building society.

It says prices fell by another 2.5% in December taking the average house price down to £153,048 - £29,000 less than a year ago.

The building society says that as prices have now fallen for 14 months in a row they are 18% lower than their peak in October 2007.

http://news.bbc.co.uk/2/hi/business/7812108.stm

I bet its similar here but hidden by the b/s artists .....

 

[kincella]

why not factor in a cheaper property to begin with...I understood the 300.000 was the figure most used as a guide for first home buyers.....interest rates at 4% = 1000.00pm then add say 500 pm capital/loan repayment....

there are houses on the outskirts of Melb for around 250,000, near the big new freeways...1/2 hour to the city, faster travel to where ever they need to go for work.....

and how much are they paying in rent for a year while waiting for prices to come down ???? 300pw is around 15,000 a year...so wait for another 10% drop in house prices from 330.000 to 300,000 saves 30,000.....in the meantime spending 15,000 on rent.....
so saved 15,000 first year....

interest rates are coming down....and you could probably lock in for 5 years

the next 6 months, while govt panicks should be as good a time as any to set yourself with low rates.....

 

[gfresh]

Every city is different in terms of affordability. To me Melbourne is very affordable as you go further out, and has defined levels .. but it's quite different or Brisbane at least where it is very flat pricing wise (very little under $300k).

I have already done these sums, which I've posted here in the past, and there is no real reason to buy short-term with any immediacy, except to get set up for later on. For the moment, 20% deposit in bank earns you interest (even if poor it's a couple of $k). Say rent $300/wk x 52 = $15600. For mortgage you're paying interest on $300k or however much @ 6% = approx $18000... plus add approx $1500 + $1500 for rates & body corp .. so $21k. So I wouldn't be seeing at as you are saving $15k vs renting.. but glass half full/half empty sort of thing I guess.

I will be buying later this year, but it's not because of any short-term saving.

I wish people would stop throwing in these 4% interest rates as if they were for the life of the loan.. it is not the longer term average, and eventually, unless people they go fixed (and they won't get 4% fixed for 5+ years), they'll be back at closer to 7.5% which has been the average for the last 20 years.

 

[Beej]

I bet its similar here but hidden by the b/s artists .....

You wish, but I think your bet is wrong! Can't wait for the final 08 quarterly stats to come out and prove this once and for all.

It's funny how the UK market peaked at exactly the same time as ours (Oct 07), and yet the bears all argue that our "crash" is still coming because we are 12-18 months behind the Poms? Yet our stock market tanked at the exact time as theirs as well?? And the Sydney property boom actually already finished way back in 2004? You can't have it both ways, and in trying to do so they all fail to recognise the resiliency of the residential property market over here.

Every city is different in terms of affordability. To me Melbourne is very affordable as you go further out, and has defined levels .. but it's quite different or Brisbane at least where it is very flat pricing wise (very little under $300k).

Sydney has a very broad market as well.

I will be buying later this year, but it's not because of any short-term saving.

I wish people would stop throwing in these 4% interest rates as if they were for the life of the loan.. it is not the longer term average, and eventually, unless people they go fixed (and they won't get 4% fixed for 5+ years), they'll be back at closer to 7.5% which has been the average for the last 20 years.

I always use 7.5% in calcs/projections and allow for 10%.

As for buying, you probably want/need to buy for lifestyle and/or circumstance reasons, which is fine, but remember most potential buyers will be in the same boat. The current lower buyer numbers (because everyone's scared by reading forums like this one too much!) are sowing the "demand" seeds for the future price increases, given that at the same time supply is falling as well (demonstrated by declining falling new residential building approvals).

Cheers,

Beej

 

[kincella]

gfresh...you wish people would stop using 4%....well there are loans on offer now for 4% fixed for a year, and others at 5.3% fixed for 3 years....add another big rate cut of 1% and you will find a 4% fixed for probably 5 years....
it makes a big difference to a 7.5 rate

the other poster that uses a 7.5% rate is a good idea....and pay off the extra saved (5% instead of 7.5%) into the loan balance.........

nothing is going to change the world crisis in a year, in fact I believe it will get worse....some euphoria for awhile with the new president....he will not be able to change anything....implementing same old print money to bail out mates thingy....and our current govt is still in denial.....

since none of the govts are looking at fixing the problem that created the mess in the beginning....I am confident we could have 7-10 years of low rates,
a window of opportunity this year......probable we will not see the likes of it for another 20 years....

 

[nomore4s]

nothing is going to change the world crisis in a year, in fact I believe it will get worse....some euphoria for awhile with the new president....he will not be able to change anything....implementing same old print money to bail out mates thingy....and our current govt is still in denial.....

But this won't have an affect on house prices in Aust?

 

[gfresh]

If rates go to 5.5% fixed for 5 years I will be quite surprised, but also happy to take up the offer .. however if they do offer these rates surely it indicates the banks think we have at least 5 years of rates below this, they won't want to shoot themselves in the foot.

Lower rates are of course great for making a good dent in the principal for the first few years.

Surely you know the two go hand in hand though? soon as there is any form of housing recovery, rates will be raised accordingly. If rates are kept low, it means there will be a continued malaise in the housing market (and probably economy in general), and house prices are likely to stay flat.

The reason I said that is that just read it a lot (on other forums too), the general impression that these rates are forever, and seem to be basing some sums such as cash flow neutral only on the now.. if so could be a few overstretched borrowers when rates go back up to 7/8/9%, of which could happen quickly as all the fresh cash printed to fix the global economy has to be sucked out again quickly to halt massive inflation. Not coincidentally I think that may be when most of the lowest of the fixed rates will end.

If some borrowers found it difficult jumping from say 4.5% to 7%, it would be funny in a way, as that is the period we just came out of - how memories are short.

 

[kincella]

high interest rates means lower house prices.....hence the damage when rates rose from 7-10% in the past year.........

low rates keep house prices on an even keel....the affordability factor....

the banks give you a clue when they offer 5.3% for 3 years fixed.....but no longer at the moment....I think the 10 year rate is 7.2

if banks had 5.3 Fixed for 10 years now..and they the banks had it right,,,means they expect property to go nowhere for 10 years...

there is a hyperthetical applied for first home buyers.....a 200,000 loan at 10% = cost 20,000 pa...so that is all they are prepared to pay (2 incomes)

....rates go down, they can spend more so it becomes 300,000 at 7% = 21,000....
it all comes down to a figure they are prepared to spend on housing...low rates can buy more, high rates the prices drop
cheers

 

[numbercruncher]

THE decline in the number of job advertisements in Australia accelerated in December and is now at recessionary levels.

http://www.theaustralian.news.com.au/business/story/0,28124,24900904-5018001,00.html


No use denying it prices and tanking and jobs vanishing .....

 

[SBH]

Time to change subjects...

Reasons.

a) limited supply and increasing demand (immigration)

b) increasing building costs of new homes ripples through to all housing

c) increasing minimum expectations (McMansions)

d) increasing wealth trickling down from mining boom

e) increasing cost of capital (interest rates)

f) increasing wage pressure


The increased building costs are due to:-

1) skilled labour shortages (tradies)
2) increasing OHS requirements
3) increasing environmental standards
4) inflation based increases in building materials
5) increasing compliance requirements on builders

From the start of this thread in february!
Heres how these points look now.

a) limited supply and increasing demand (immigration)

Building approvals off the cliff. If there is limited supply we should be seeing a rental price surge right now. Its not happening. Immigration tap keeps pouring as a big unsustainable method our government uses to artificially increase consumption in our economy.. might not be able to last when jobs get lost.

b) increasing building costs of new homes ripples through to all housing

Building costs slashed. See NSW government reductions and FHB grants for new construction. Cost of materials through the floor, same with labour. Tradies must be desperate for jobs right now with building approvals so low.

c) increasing minimum expectations (McMansions)

Probably no longer as big when you are worried about unemployment and defaulting on your mortgage. Just one bathroom will be fine.

d) increasing wealth trickling down from mining boom

Mining boom over. Underemployed miners to offload properties?

e) increasing cost of capital (interest rates)

Yes capital costs have increased! Isnt this a negative for house prices? Interest rates are down in the RBAs panic... but banks cant keep them down forever

f) increasing wage pressure

non existent

So why havent we crashed?? I think there needs to be another point....
g) public sentiment that property is always a good investment
Yep this is one of the very few things left holding property up. Our media being more biased than any country to RE spruiking is a big factor here.

 

[robots]

hello,

yes SBH, i think Bill M might have raised that issue many many months ago

another fantastic day in this country, sunshine, fresh air in all its glory

any questions fire away there are plenty here to help

thankyou
robots

 

[lioness]

high interest rates means lower house prices.....hence the damage when rates rose from 7-10% in the past year.........

low rates keep house prices on an even keel....the affordability factor....

the banks give you a clue when they offer 5.3% for 3 years fixed.....but no longer at the moment....I think the 10 year rate is 7.2

if banks had 5.3 Fixed for 10 years now..and they the banks had it right,,,means they expect property to go nowhere for 10 years...

there is a hyperthetical applied for first home buyers.....a 200,000 loan at 10% = cost 20,000 pa...so that is all they are prepared to pay (2 incomes)

....rates go down, they can spend more so it becomes 300,000 at 7% = 21,000....
it all comes down to a figure they are prepared to spend on housing...low rates can buy more, high rates the prices drop
cheers

Get up with the program fellas, you can now get a 3 year fixed rate from Westpac for 4.99%.

Now after the RBA cuts rates another 1-2% by June 09, you will easily get 4.5% for 5 years and I will take it.

 

[Glen48]

Rent or BUY?

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ref=patrick.net

 

[Lancelot]

Get up with the program fellas, you can now get a 3 year fixed rate from Westpac for 4.99%.

Now after the RBA cuts rates another 1-2% by June 09, you will easily get 4.5% for 5 years and I will take it.

Linky please

I thought that had run out a month ago, have they started it up again?

I'll get me some more if they have

 

[2BAD4U]

Get up with the program fellas, you can now get a 3 year fixed rate from Westpac for 4.99%.

Now after the RBA cuts rates another 1-2% by June 09, you will easily get 4.5% for 5 years and I will take it.

That's a bit ambitious. Current rate for 3 years is 5.69% with a potential 0.20% discount on their Premier Advantage package making the rate 5.49%. I think you are looking at the 0.7% discount on the Premier Advantage package but this only applies to variable rate loans.

And, don't forget the annual and monthly fees making the comparison rate 6.69%.

 

[Lancelot]

Get up with the program fellas, you can now get a 3 year fixed rate from Westpac for 4.99%.

Now after the RBA cuts rates another 1-2% by June 09, you will easily get 4.5% for 5 years and I will take it.

That's a bit ambitious. Current rate for 3 years is 5.69% with a potential 0.20% discount on their Premier Advantage package making the rate 5.49%. I think you are looking at the 0.7% discount on the Premier Advantage package but this only applies to variable rate loans.

And, don't forget the annual and monthly fees making the comparison rate 6.69%.

No, they did run the 4.99%, I got some locked on it, but as of last time I looked a few days back they have stopped doing it

 

[robots]

Rent or BUY?

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ref=patrick.net

hello,

great question Glen48 and thanks for the fantastic contributions over the past months, superb effort man

either scenario is very very good as long as the discipline in both paths is adhered too,

the suitcase crew will no doubt enjoy the rent technique and others will enjoy the buy technique, a lot of it comes down to being a saver

as Schiffie says we have to save, save and save, isnt that right Number?

thankyou
robots

 

[Glen48]

Saving is the word Robots, think how much you can save by not buying a house until the recession ends?

 

[robots]

Saving is the word Robots, think how much you can save by not buying a house until the recession ends?

hello,

heaps Glen48 if you have a job, hahahaha

isnt that how it goes? great stuff

oh, st kilda up 14.8% for the Sept08 Quarter in the recession, crikey whats going to happen to St Kilda when the recession ends if its pulling those results during the recession

thankyou
robots

 

[Beej]

Rent or BUY?

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ref=patrick.net

Just be careful to "tune" the advanced settings on that correctly for our situation in Oz as it has a lot of US defaults in it like very high property taxes and capital gains tax on the sale of the family home.... Also default is VERY high selling costs, maintenance and renovation, insurance costs high etc etc.....

EDIT: PS, I crunched the numbers on my current PPOR using correct/actual parameters, and even with only 1% long term capital growth I am in front after 6 years by owning rather than renting. If the long term capital appreciation is 5% (which is not much more than inflation) it's a no brainer and owning puts me ahead pretty much from day 1. Even 3% appreciation put's me ahead after 3 years.

Cheers,

Beej