House prices to keep rising for years

[jwbroughton]

Gday - new to the forum - am wanting to buy an appartment in the Melbourne CBD - 2 bed 1 car - is it worth waiting or should we jump in asap - our reason is 1/ for our children to have somewhere to live in 18 years time when they are in Uni - we live in the bush - and 2/investment over this time - and 3/ somewhere for us to experience melbourne when the kids have finished with it.

Any feedback welcome,

Thanks

Jeff

 

[nomore4s]

ok so even Eddie Macguire with all his money cannot buy the house he wants in Portsea.....so stuck with renting for $100,000 a year....The owner has owned the property for over 40 years.....
Moral to the story is....regardless of what the press say about house prices dropping...will drop, should drop, have to drop...whichever way you say it....means nothing at the end of the day....first of all you need a seller....and some houses will never be for sale....handed down through the generations...
Aahh.... Eddy from Broadmeadows, now Toorak, and trying to break into Portsea....
Eddy will be looking for a bargain from a stressed seller, but he might also suffer that other disease..named....'waiting for the price to come down'

http://www.news.com.au/heraldsun/story/0,21985,24935305-2862,00.html

rotflmao, so now you are drawing comparisons to Eddie and very high end properties to normal everyday workers and the property they can afford?

Lets be realistic.

Whether you property bulls want to admit it or not the risks to the downside are alot higher than normal for property atm. The economy is starting to show some serious cracks, overseas economies are continuing to deteriorate at alarming rates and even China the great saviour has slowed dramatically. This recession has the potential to be the worst recession we have seen in our lifetimes.

I see no harm in waiting to see how things play out over the next 12 months or so before jumping in, the upside atm appears very limited, so I doubt very much I'm going to miss the next boom like some of the bulls would have you believe.

In the current environment managing you debt & risk levels would appear the most prudent thing to do. As we have seen in both the US & UK "solid" assets can deflate in price very quickly after the bubble bursts and the thing that worries me is we are still at bubble levels when compared to the rest of the western world - a warning sign at the very least.

In both the US & UK there are plenty of stories coming out about families getting into alot of trouble with debt levels when 12 months ago they were meeting thier obligations with ease. Whether this happens in Oz or not is yet to be seen but being prepared for it seems prudent to me - either way you will be in a strong position when this mess is resolved.

IMO we are in a good position here in Oz as we have had a window into what could happen here, those who are not prepared and who have ignored the warning signs will only have themselves to blame if things do get as bad here as we have seen in the US & UK.

 

[noirua]

Beware my friends. Spain, who's property market has been hit the hardest in Europe, has seen prices fall by as much as 50% to 60% in some areas. Sale board production is the strongest industry in coastal cities and towns.

 

[Beej]

Nomore4s - those are reasonable comments. But what one should do all depends on your current circumstances right? Ie,

* if you are a current PPOR owner should you panic and sell and rent in anticipation of re-entering the market at a lower price? That would be a high risk strategy for sure and possibly a huge mistake! Rents could sky rocket, you could be forced into several expensive moves, you might not be able to buy what you had before when prices are supposedly lower, etc etc.

* If you currently own long term investment properties should you panic and sell them all? I think would depend to a large extent on the individual and their situation? Some might want to take something off the table, others might want to hold on - especially if they have positive cashflow in the current environment from there holdings? A few will lose their jobs/income and might have to sell, but I suspect there won't be as much as that as many expect.

* If you are a FHB looking to enter the market, and say you have a young family and are looking for the stability and security of owning your own home - should you buy now? Well you get generous government grants, little/no stamp duty, interest rates are low, and it is a buyers market, so are the downside risks really that great? What if your mortgage interest payment were going to be about the same as your current rent? Surely there is little downside risk there regardless of what happens to paper values in the short term?

* If you are purely a short term peculator who doesn't need or want to own a house for any other reason, then yes risks are currently to the downside, but there are still good opportunities because of the fear if you do your homework and have an appetite for the risk and possibly great reward in the medium/long term. So again really depends on your individual circumstances doesn't it?

Just trying to show that things are not so black and white.

Cheers,

Beej

 

[kincella]

I know of at least 4 prop bears on another forum...they all sold their props between 2000-2003..each said they had hit the highs of the market....were sitting on cash and would wait for the prices to drop to get back in........
of course they are still waiting for prices to go lower than their sale price......
they were way out on their calls...rental rates gone up, and all the costs of buying and selling are still there.... I call them HERO'S.....and still making excuses

 

[nomore4s]

Beej, I do agree. What action you need to take depends on your individual circumstances, investment timeframes and goals, as is the case with all investments.

Obviously someone with multiple properties with huge amounts of equity and a solid income stream is going to take different action to someone with a large mortgage on say a couple of properties and who is at risk of having thier income reduced during this econmic downturn.

Be prepared is all I'm saying, we've seen how quickly things can deteriorate once the rot sets in and we are lucky here to be able to set ourselves, just manage your risks. If it doesn't get as bad here great we will all be better off.

 

[gfresh]

Sharemarket is great for teaching you to take small losses, rather than large ones later .. even in property I would say that could be valid if things get much worse. People in WA must be wondering that right about now.

I think the comment about "this could be the worst recession in our lifetimes" is very true, and accurately shows the seriousness of what we are presently facing. This is no walk in the park, no early 2000's, the rate of contraction is already looking worse than the start of the 90's.

What was the outlook like just 6 months ago, compared to what it is like now? It wasn't that long ago that people were completely denying job losses, still believing in the China story, still believing Australia would come out unharmed and all sorts of things that the bears were saying were b.s.

If things are still moving downwards as they seem, 6 months could be many times worse than the situation now, and 12 months could see Australia in quite a different way.

Already what seem to me like begging is coming out of industry groups "please, please help us, this is getting bad, and we've finally worked it out, we can see things getting much, much worse".

http://www.theage.com.au/national/act-to-save-jobs-now-actu-20090120-7l6c.html

It's becoming more obvious, the d&g is spreading, it's not just fringe Keen characters, it's Access Economics, head economists of major banks - the ones who were talking it up 6 months ago. Even Mr Eastlake came out the other day saying "this is Depression like conditions for the US and UK".. and he's usually quite bullish.

 

[sinner]

Negative equity once again bites beyond those in poor credit:

http://www.nytimes.com/2009/01/20/business/economy/20builders.html?pagewanted=2&ref=business

Dave Brown, one of this [Tempe, Az] city’s best-known home builders, had kept his head above water through the housing downturn, not missing a single interest payment on his loans.

Though Dave Brown's home-building firm had not missed a payment during the housing downturn, one of his banks suddenly demanded millions of dollars in additional collateral.

So he was confounded a few months back when one of his banks, spooked by the decline in his company’s revenue, suddenly demanded millions of dollars in additional collateral to continue carrying loans on his projects.

He was unable to come up with the money, and in October, JPMorgan Chase foreclosed on five of his developments. Shortly thereafter, Brown Family Communities, 33 years in the business, decided to shut its doors....

“The reality is, we’re seeing conditions in home construction and home finance that are the worst since the Depression,” said Steve Fritts, associate director of risk management policy at the Federal Deposit Insurance Corporation, the government agency that insures bank deposits...

No hard count exists of precisely how many builders have gone out of business since the downturn began. According to an estimate by the National Association of Home Builders, at least 20,000 builders ”” about a fifth of the total nationwide ”” have closed up shop in the last two years....

With the industry still owing hundreds of billions of dollars in loans made at the market peak, many more face insolvency in the coming months and years. “Probably north of 50 percent will fail,” Ms. Zelman said.

Much of that borrowed money went to finance land deals that now appear to have been catastrophic miscalculations. In cities like Phoenix, where housing starts are near record lows, demand for undeveloped land has plummeted, and prices have followed...

Even builders who are up to date on their interest payments or still managing to sell houses are getting trampled, as in the case of Mr. Brown.

“They’re not distinguishing the track records of one borrower against another,” said John Fioramonti, a real estate consultant in Scottsdale, Ariz. “If you’re a builder, you are a bad risk.”...

More than 15 percent of loans for single-family home construction were in some form of default by September 2008, up from 10 percent in January of that year, according to figures from Foresight Analytics, a housing analysis firm. Still, until recently, banks had largely chosen to keep past-due borrowers afloat, in the hope that a housing recovery might pave the way for them to repay their debts in full.

Only now, with the economic outlook darkening, are lenders stepping up foreclosures of troubled loans. Zelman & Associates, a housing analysis firm, estimates that losses on land and construction loans could eventually reach $165 billion, one reason federal regulators are pushing banks to come to grips with the problem.

“When we talk to regulators now, they say they’ve lost patience,” said Ms. Zelman, who is chief executive of Zelman & Associates.

In this climate, keeping loan payments up to date ”” something many builders are struggling mightily to do ”” is not necessarily any protection.

Many loans in the building industry are of short duration, coming up for renewal at least once a year. This allows banks to take a fresh look at the financial health of a borrower, as well as the assets securing their debt. A steep fall in cash flow or a decline in the value of the collateral ”” usually building lots or half-built houses ”” can mean an automatic default, whether a borrower has missed payments or not.

 

[robots]

Gday - new to the forum - am wanting to buy an appartment in the Melbourne CBD - 2 bed 1 car - is it worth waiting or should we jump in asap - our reason is 1/ for our children to have somewhere to live in 18 years time when they are in Uni - we live in the bush - and 2/investment over this time - and 3/ somewhere for us to experience melbourne when the kids have finished with it.

Any feedback welcome,

Thanks

Jeff

hello,

i would not go for a tower, look for low rise (5 or less levels) around south yarra, prahran, st kilda, nth melb, fitzroy etc

avoid lifts, some in southbank dont have lifts and dont buy of the plan, go for top floor if you can as body corp looks after you a lot better (less hassles)

if you have the cash then do as you please,

yes, lioness great area Fitzroy have been venturing there more often on the ironhorse recently, hope you killing it brother

thankyou
robots

 

[Trevor_S]

http://www.brisbanetimes.com.au/articles/2009/01/20/1232213610723.html

LJ Hooker New Farm real-estate agent Julie Sowter said that at any given inspection, she is swamped with 30 to 40 people desperate to secure a long-term lease agreement.

...

Property analyst Michael Matusik said rents rose an average 14 per cent in 2008 and will increase by at least another 7 per cent in the year ahead.

...

Brisbane's one per cent vacancy rate means any available property is quickly snapped up

I thought this interesting,

However, a recent survey found the majority of prospective tenants consider price the least important criteria for the perfect home, with location and quality topping the list.

personally, for me price would be at the top of my list eg it would have to be $X or below for me to consider it, then take the best of the bunch I could get at the price I could afford. I guess I don't understand how price is not the most important factor.

 

[So_Cynical]

Property market in free fall....from realestate.com.au

http://www.realestate.com.au/doc/Resources/News/wa-property-freefall.htm

The West Australian property market is being decimated following the evaporation of the
resources boom, with values of $1 million-plus properties plummeting 20 per cent and
the equivalent of more than two years' supply of homes flooding real estate agencies.

In Geraldton, rents have slumped 8 per cent and in the state's northwest fibro shacks
that had been fetching rents of $1000 a week are sitting vacant as formerly high-paid
mining executives face widespread retrenchment.

 

[gfresh]

Rubbish.. nobody I know actually has had any trouble in Brisbane in the last 12 months finding rentals.. People wanting to live in the "name" suburbs such as New Farm, Paddington, etc on a budget deserve what they get.

Bet you the people queing are looking for places under $300/wk

 

[Beej]

Property market in free fall....from realestate.com.au

http://www.realestate.com.au/doc/Resources/News/wa-property-freefall.htm

Already posted and discussed on the previous page dude!

Beej

 

[lioness]

hello,

i would not go for a tower, look for low rise (5 or less levels) around south yarra, prahran, st kilda, nth melb, fitzroy etc

avoid lifts, some in southbank dont have lifts and dont buy of the plan, go for top floor if you can as body corp looks after you a lot better (less hassles)

if you have the cash then do as you please,

yes, lioness great area Fitzroy have been venturing there more often on the ironhorse recently, hope you killing it brother

thankyou
robots

Cheers Robot, yes so far made a killing here and ready to snap another 4 up by end of 2010. With fixed rates coming down to 4% you CANNOT lose.

 

[nomore4s]

With fixed rates coming down to 4% you CANNOT lose.

That's what people & corporations in the US & UK thought but they were obviously wrong.

That is a stupid comment imo, there is no such thing as a sure thing, when ever you use leverage there is always a risk.
The position you are in gives you an advantage but failing to acknowledge the risks and thinking you can't lose is asking for trouble in any market imo.

If this is the sort of risk management the banks have in place - and lets be honest this is the type of risk management banks worldwide have had in place for the last few years - none, then we are all screwed

 

[doctorj]

CANNOT[/B] lose.

Really? That's a huge call.

What happened to Japanese property prices while they were at basically 0% interest? How does suppy of land in Aus differ to Japan?

No such thing as a sure thing, least of all in this market.

 

[juddy]

quote from a poster on a different forum.

"AUS is the leader in the property market...and in fact both the UK and the US follow our leads....
I have seen charts to prove this...."

:bonk:

 

[dodgers]

juddy can you post the charts?

whilst this may be true for the last 15 years as china has become a superpower it will be less relevant in the short/medium term as china tanks

 

[juddy]

juddy can you post the charts?

whilst this may be true for the last 15 years as china has become a superpower it will be less relevant in the short/medium term as china tanks

no, that is a quote from that poster. He lurks somewhere here as well, maybe he can enlighten us.

 

[2BAD4U]

With fixed rates coming down to 4% you CANNOT lose.

Heck why stop at 4%, people seem to think we're heading for 2%. But it wasn't that long ago we were being told double digit rates were on the way and people went and locked in their rates at 8%, and now they're crying because of the fees to break the contract (suffer in your jocks I say).

People will move on property when it is right for them. Lioness, if time, money and circumstances suit you then good luck.