House prices to keep rising for years

[joeyr46]

Such certainty in your statements! And yet property prices have held up extremely well through every recessionary period since WWII without any problem at all? Did people who held their property through 1974, 1981, 1991 loose it all???

Beej

Only if your overleveraged Did know of some in the 30's that lost it all because of rates going up and not getting tenants Property was on Whickahm Terrace Brisbane were all the specialists have there offices etc
, however regardless of a big fall or not the property is still worth a lot compared to wages or most other measures if we do have a major depression and is it 3 years the money in the bank is guaranteed for. that guarantee was given by the most trustworthy people on earth Politicians!it doesn't work for me

I also think your right atm as we have not seen any top in place only people's thoughts from what is happening overseas but no evidence yet that we are about to follow. I think we are some way off a major recession as commodities are still at good levels even after coming down so far
Copper has a range rom 55c to 120c per lb normally but after going up to 400c lb it has only come down to about 145c it is still quite high. So even if we are in for a major depression (I think we are ) we are still likely to see a rally in house prices for a while while we still have a reasonable economy and GDP. And unemployment rising .1% is nothing like the other economies yet. As the fear subsides and people stop thinking about it as much, we could get a descent rally in house prices for a few months

 

[wayneL]

Such certainty in your statements! And yet property prices have held up extremely well through every recessionary period since WWII without any problem at all? Did people who held their property through 1974, 1981, 1991 loose it all???

Beej

Some did.

You seriously need to study thos e periods in more detail.

This time has the potential to be much worse.

The message I keep trying to get out is: Amateurs hope - professionals hedge.

How will people fare if there is a serious depression and steep decline in house prices? Many (not all) would be utterly destroyed by the same disease that is causing business to fall over all over the world.

 

[robots]

hello,

past performance is no indicator of future performance, who knows

thankyou
robots

 

[wayneL]

hello,

past performance is no indicator of future performance, who knows

thankyou
robots

Holy Crap!!!

The very first sensible comment I've seen you write.

Folks should do if/then analysis and contingency planning.

 

[robots]

hello,

what about the other 1434 posts? masterpieces like that one?

thankyou
robots

 

[wayneL]

hello,

what about the other 1434 posts? masterpieces like that one?

thankyou
robots

Masterpieces, but not sensible.

 

[Glen48]

Latest figure in USA show for every 1 house sold 2 are foreclosed. Malaysia housing prices are starting to crash, looks like OZ will be the only country not to have a RE crash strange because every thing else is going down except un-employment

 

[overlap]

First home owners grant inflates housing prices

http://www.crikey.com.au/Business/20090116-First-home-owners-grant-inflats-housing-prices.html

100% on the money

"The cure for a slump is a slump"

 

[Julia]

How will people fare if there is a serious depression and steep decline in house prices? Many (not all) would be utterly destroyed by the same disease that is causing business to fall over all over the world.

If you're planning to continue living in your existing home for ever, how are you going to be destroyed by falling prices (if you are not at the same time holding IP's)?

 

[wayneL]

If you're planning to continue living in your existing home for ever, how are you going to be destroyed by falling prices (if you are not at the same time holding IP's)?

Using UK figures

• Joe Schmoe buys at the top of the market in 2007
  
• Joe, who works for Lehman Bros. as a junior analyst obtains a 100% liar loan to finance the house.
  
• The mortgage payment is >50% of his wages, but no matter, houses always go up.
  
• Fast forward a few months, house prices have dropped 10% or so, IF you can get a buyer, Joe is in negative equity, but Joe's not selling anyway.
  
• Lehman's goes bust, Joe loses his job
  
• There are no jobs for bankers in Londinium and certainly no jobs paying anywhere near what he was getting.
  
• Joe can't pay his mortgage and is foreclosed.
  
• Bank flogs house off at auction leaving a shortfall.
  
• Joe is homeless, asset-less and still has £30,000 credit card debt on Saville Row Suits and bling, pus the shortfall from the house.
  
• Joe is ####ed and is declared BK.

This is happening all the time and at all levels of society. Even Folks that bought in the 90's have MEWed themselves to the eyeballs and are now in negative equity.

The prudent, the cautious and the savers are paying for these clown's indiscretions.

 

[sinner]

If you're planning to continue living in your existing home for ever, how are you going to be destroyed by falling prices (if you are not at the same time holding IP's)?

Why do people who are supposedly prudent and conservative citizens continuously bring up this question?

One would think that anyone who had put themselves in the hole to the tune of several hundred thousand dollars would do some research before "investing".

The "if" you so unoriginally provide ignores both the social factor of mobility and the financial factor of liquidity but even if you ignore both of those (which pretty much removes your example from the realm of reality) any first year macro-economics student can tell you that negative equity has a ripple effect through the entire economy.

You can see this plainly as the result of the sub-prime crisis. Negative equity in under 6% of the US real estate market caused the terrible mess we are in today. Can you imagine the effects when this negative equity is finally truly marked to market as the banks have been avoiding for 2 years now?

It won't be a ripple, it will be a tsunami.

Restriction of future credit due to mark to market will not only essentially outright halt the growth of the real estate sector (preventing it from returning to 0 equity) in the short to medium term (the damage could be so great as to be long term) but it will have a huge impact on the employment of millions of people.

Almost every company employing more than a few hundred people relies on short term credit to fund their payroll, their day to day operations, their expansion, EVERYTHING. When this credit is gone, where will the paychecks come from?

The answer is: they won't come.

 

[knocker]

I did read a snippet in the AFR a week or so ago that anything north or Noosa was very quiet during this holiday season...could be a sign of things to come.

Sneaking a few weeks...it's not with Break-Fre is it?

As for king tides, spring tides and storm surges...from the 7:30 report

http://mpegmedia.abc.net.au/730report/av/podcast/20090112-730kingtides_video4.wmv

Was in cairns two weeks back place is dead. Shops empty and closing. Place runs on tourism of which there is little right now. Also mining has taken a hit so the fly in fly out workers have dissappeared. Also construction is ebbing.

Also weather sucks this time of year. Aside from that cheap rentals are always in demand up that, most people on the dole etc.

I have a few cheapies I rent up there, when they are empty for a few weeks, a sneak a break. Still a very nice place to be.

 

[knocker]

Using UK figures

• Joe Schmoe buys at the top of the market in 2007
  
• Joe, who works for Lehman Bros. as a junior analyst obtains a 100% liar loan to finance the house.
  
• The mortgage payment is >50% of his wages, but no matter, houses always go up.
  
• Fast forward a few months, house prices have dropped 10% or so, IF you can get a buyer, Joe is in negative equity, but Joe's not selling anyway.
  
• Lehman's goes bust, Joe loses his job
  
• There are no jobs for bankers in Londinium and certainly no jobs paying anywhere near what he was getting.
  
• Joe can't pay his mortgage and is foreclosed.
  
• Bank flogs house off at auction leaving a shortfall.
  
• Joe is homeless, asset-less and still has £30,000 credit card debt on Saville Row Suits and bling, pus the shortfall from the house.
  
• Joe is ####ed and is declared BK.

This is happening all the time and at all levels of society. Even Folks that bought in the 90's have MEWed themselves to the eyeballs and are now in negative equity.

The prudent, the cautious and the savers are paying for these clown's indiscretions.

Right on wayno.

On the upside BOE rates are approaching 0 fast, so anyone with a sensible mortgage employed in a sensible area, ie NHS etc, will be living the good life.

cheers

 

[Dowdy]

First home owners grant inflates housing prices

http://www.crikey.com.au/Business/20090116-First-home-owners-grant-inflats-housing-prices.html

100% on the money

"The cure for a slump is a slump"

Exactly right on the money!

The only thing keeping the housing market up is the grants which create artificial prices. When the grants go, then you'll see house prices return back to normality. Which will most likely mean a 30-50% drop in price.

These government grants are pretty much the definition of INFLATION - if a magic wand gives everyone 1 million dollars, markets will respond by increasing their prices to the new money in the system.

 

[aleckara]

Exactly right on the money!

The only thing keeping the housing market up is the grants which create artificial prices. When the grants go, then you'll see house prices return back to normality. Which will most likely mean a 30-50% drop in price.

These government grants are pretty much the definition of INFLATION - if a magic wand gives everyone 1 million dollars, markets will respond by increasing their prices to the new money in the system.

I actually think it causes a greater effect on housing prices than the grant price itself, because most people leverage to get their first house.

i.e that extra $14000, or $24000 for new properties ends up being part of a deposit that allows the buyer to borrow a lot more. just like margin lending with a big LVR, the amount of credit going into the property market is increased more than the cost of the grant. It is the leverage in bidding up asset values that makes the grant so powerful in driving up inflation per $. It allows people to leverage more (or in the case of FHB's allows more people to join the game).

The grants won't go. Most people are applauding it as a great move. The saddest thing about all this mess is that the whole financial system is tied to one class of asset. It really is that Australia has all its eggs in one basket. The fact that it can't fall; and that the financial system would crumple should it fall should have never had happened. An asset should be able to rise and fall like any asset class without propping up. Don't see first share buyers grants for example.

 

[nomore4s]

Beej...the stats are against SBH to begin with....over 70% of the population are homeowners....and another 20% are also property investors....thats a very compelling 90% prefer property...whether its just a roof over the heads, lifestyle , investment or all of the above....

30% of the population are renters.....govt provides about 10% of rental accommodation...leaving 20% private investors.....
one doubts too many renters would also be property investors

Is it just me or do these figures not add up

70% own
Another 20% are investors (maybe 20% of the 70% are also investors?)
So 90% prefer property

But

30% rent
And

one doubts too many renters would also be property investors

 

[robots]

hello,

people rent, buy, rent and own all sorts no big deal

just a house or flat, but one may have a different colored roof, stone bench top or laminate bench top, tiles or lino, courtyard or acreage

its wonderful what the earth has to offer

go hawks

thankyou
robots

 

[nomore4s]

one doubts too many renters would also be property investors

Also on this, you might be surprised.

We are now renters but also own an investment property in Hervey Bay atm. And I know a few others in similar positions.

There is more then one reason to rent.

In our case it gives us a bit of flexability incase we decide to move interstate at some stage.

Property prices are extremely high up here atm and with the current risks to the Aussie economy and therefore property prices to the downside we are quite happy to rent for awhile and see how things play out.

I have no doubt property is a good investment - I have previously made good money on property but atm I see no reason to jump back in.

If prices do fall it will provide a good opportunity for me as I'm positioned to take advantage of it. If they don't fall I haven't really lost anything as I will still be positioned to take advantage of any opportunities that come along but I just want to see how things play out for the next year or so.

We are on the verge of a global downturn like we have never seen before and I would like to be prepared for the worst even if it doesn't eventuate. The bulls carry on like you can never lose on property but if we do see things continue to deteriorate people will lose on property, I'm just trying to make sure I'm not one of them and am prepared for anything. Smart investing is about managing your risk imo.

 

[lioness]

Can I pose this question. In 6 months time I will be able to get a 5 year % rate fixed loan between 4 and 4.5%(I work in a bank and get discounts).

With my high income(200K plus), I intend to buy 5 properties for approx 600K each in inner city areas in Melbourne within 5km of CBD and sit on them for 5 years. How can I lose?

They all will be cashflow positive from day 1 also(I have already checked the rents and they average around $600 per week), so no need to pay them off although I intend to build up cash reserves for tenancy vacancies anyway.

Why wouldn't I do this given in 1-2 years inflation will be out of control.

PS My principal residence is fully paid off and worth 1.2 million.

Any comments??

 

[Glen48]

All good in theory except rents will come down as the true believers in R E want to hang on to their property until the prices rises again in 2020+ so they rent them out and live with their inlaws or share a larger house with other victims.