House prices to keep rising for years

[Glen48]

Why is when shares are high people sell yet don't with R.E.?
If you don't want to sell that's your business to me living in a home that you could of sold for say twice the price doesn't make sense.
You also have to look at buyers freezing because they don't know where the bottom is and as prices come down you will have an over shoot.
I saw some bloke complaining he has lost his job and just purchased an " investment" property there could be 2 houses on the market just there.

 

[ROE]

Why is when shares are high people sell yet don't with R.E.?
If you don't want to sell that's your business to me living in a home that you could of sold for say twice the price doesn't make sense.
You also have to look at buyers freezing because they don't know where the bottom is and as prices come down you will have an over shoot.
I saw some bloke complaining he has lost his job and just purchased an " investment" property there could be 2 houses on the market just there.

Uncle Warren taught me, only borrow when you are 100% sure you will win..with Negative Gearing doesn't sound like a 100% win to me.

but then again Uncle Warren theory on the helper, helping themselves is too true in the real world.

 

[2BAD4U]

Why is when shares are high people sell yet don't with R.E.?

Simple. To some people their house is their castle and they wouldn't sell at any cost. They are not in it for the money. Don't underestimate the human emotion and how attached some people are to their homes.

Secondly, when you sell shares you only have brokerage. When you sell a house there are agents fees, stamp duty, settlement fees, etc and these can add up to tens of thousands. So if a home falls 20% you may actually be better of staying, because if you sell that could turn into a 40%+ loss.

 

[wayneL]

Simple. To some people their house is their castle and they wouldn't sell at any cost. They are not in it for the money. Don't underestimate the human emotion and how attached some people are to their homes.

Secondly, when you sell shares you only have brokerage. When you sell a house there are agents fees, stamp duty, settlement fees, etc and these can add up to tens of thousands. So if a home falls 20% you may actually be better of staying, because if you sell that could turn into a 40%+ loss.

Can someone please explain to me why RE is down 20% or more in the US and UK then?

Can someone explain to me why houses went down > 50% in the '30's?

Oh yeah! Excess leverage, overvaluation, unemployment and FORCED SALES!

Prices are set at the margins.

 

[kincella]

I know of at least 4 current posters on another forum...sold their props/homes between 2000 - 2003...each called it the high of the market and they were pretty happy, cashed up and would buy back much lower later...well the median price did go lower for 04 and 05...but bounced back in 06 and 07....the index is back to zero for 08...but it has not dropped below zero like the US and UK
oh and the sellers are still renting and waiting for the lows...to get back in....I suspect they were singles....who would drag families through that situation ?

 

[kincella]

former RBA economist and property developer expects prices and rents to rise significantly by the end of this year.... that window of opportunity might start to close sooner than you think
http://www.yourmortgage.com.au/news/2797/default.aspx

 

[wayneL]

former RBA economist, property developer and vested interest expects prices and rents to rise significantly by the end of this year.... that window of opportunity might start to close sooner than you think
http://www.yourmortgage.com.au/news/2797/default.aspx

corrected for accuracy

 

[nomore4s]

lol Wayne, I was thinking the same thing when I saw the property developer bit, what's the bet he has a few developments under way atm

 

[Beej]

Also bank valuations on property will continue to be lower as the banks become more conservative in thier estimates. This will mean you will have to have a larger deposit.
Eg - You want to buy @ $300,000 but bank values it @ $250,000 and will therefore only lend you 95% of $250,000 ($237,500) so instead of needing a $15,000 deposit you now need a $62,500 deposit.
This will also have an effect on the market imo.

But you are right about the fact we are yet to see this play out in Oz and we may get extremely lucky and not see it happen here but as more and more info comes out I feel that we will see things deteriorate badly in Oz.

On the valuation ratio point, there is some validity there for sure, but it is primarily an issue for FHBs, representing only about 15-25% of sales. People buying investment properties or 2nd/3rd step up the ladder homes usually have wads of equity and are always WELL above the banks requirements for deposit etc. Now, as we know, FHB numbers are currently INCREASING, as is the total amount of OO lending (ABS stats for Dec 08 quarter) - so they must be getting the money from somewhere, ie the banks must be lending to them happily at current values. QED, there is no evidence of the effect you are describing happening (yet?) here in Oz (as you acknowledge). Additionally, in Nov/Dec last year I had direct experience with bank valuations on 2 properties - one I was selling (needed valuation due to bridging finance requirements), where the valuation came in prior to sale at exactly the amount I ended up selling it for, plus one I purchased, where the banks valuation was HIGHER than what we paid.

So I'm not convinced at all it will become a big issue here.

I wonder how many share holders sold to make the stock market crash 50%?..i reckon
u only need 10 or 15% of any market to sell, to drive the price of anything lower.

This is the typical bull quote when things start to fall.

Look at almost any stock thread 18 months ago and you will see people saying things like, "I dont understand why someone is selling now when the fundamentals suggest the share is worth $X". It doesnt stop people selling just because the price has fallen, thats the beauty of a free market

On both the above points, I've said it before and I'll say it again - Please repeat after me.... "The property market IS NOT the same as the sharemarket!" Others have already pointed out the emotional, non financially driven connection many people have to their homes, plus the higher buying/selling costs. Additionally, if you sell your shares, you don't then HAVE to go and rent them back at a SLIGHTLY lower cost than owning them! Further, shares are very "global" - huge holdings in our market were dumped by overseas institutions, funds etc etc that needed liquidity desperately because they are in deep doo doo. Most property is owned by people operating purely within our local economic context, so you don't get the o/s driven sell pressure that can spark the type of stock market decline we have just experienced.

Hello,
Hows the realestate "boom" going ?

Well Mr Numbercruncher, I posted some numbers for you to crunch a couple of pages back. Many suburbs in Sydney have actually experienced solid median price growth over the second half of 2008 - especially units in prestige and well located suburbs, and houses in some lower priced and mid range area's. Additionally rents have risen by 10-20% over the past year, while interest costs have fallen by ~40%, meaning many investment properties turned cash flow positive as well. So if you bought well, even last year there was good money to made from residential property, and if you sold in one of those area's hoping for falls (and have been paying rising rent in the meantime) and are now looking to buy back in you might be in for a bit of a shock!! Of course it all depends on the area/region being discussed though - I think you live in Perth right? Completely different situation there by the sounds, but then it did rocket up massively in the 2-3 years prior to 08 - did you get a piece of that action??

Cheers,

Beej

 

[numbercruncher]

/cough

Additionally rents have risen by 10-20% over the past year

linklinklinklink ?


I live in Qld - all bad news here for permabulls - glad to hear your $2M mcmansion is mcboomin , how much would it rent out for matey ?

 

[kincella]

I think most of the angst is coming from WA and then QLD...both went 100.000 higher than Syd or Melb....even Hobart is higher.....
So where do you bears reside ?

 

[Beej]

/cough

linklinklinklink ?

http://www.smh.com.au/news/national/rents-up-65-a-week/2009/01/21/1232471395360.html

WEEKLY rental prices for Sydney houses rose by almost $65 over the past 12 months, says a report from Australian Property Monitors. The median asking rent for houses in the city has climbed 16.9 per cent to $450 a week since December 2007

On my own PPOR, a conservative rental value estimate I got would place the potential rental yield at 4.5% of what I purchased the property for at the end of last year.

Beej

 

[Beej]

I live in Qld - all bad news here for permabulls -

Oh PS: Is it? I don't know the QLD market as well as I know Sydney, but I just checked a Brisvegas suburb where some friends of mine live up there (Holland Park) and the median house price there has gone up 3% ($518k -> $532k) from the 1st to the 2nd 6 months of 2008.

Cheers,

Beej

 

[gfresh]

QLD is starting to go down in the outer suburbs, even on the bottom end. Places that would have easily gone for $330k and got that quickly, are now listed at $300k for many weeks. Places that would have been listed for $400 6 months ago are creeping down to $375. Townhouses a-plenty, and I get the suspicion there aren't enough FHB to buy them all and keep the market afloat.

What is also noticeable is houses that simply weren't available (at all!) in certain suburbs are coming onto the market in the $350-$400k mark.. Makes you wonder about those townhouses for $300k, with the extra body corporate costs associated.

 

[gfresh]

former RBA economist and property developer expects prices and rents to rise significantly by the end of this year.... that window of opportunity might start to close sooner than you think

Well the fact he's a "property developer" of course means he has a reason to hope this would be the case. Here is a chart showing CPI vs rent index for several cities.

What is interesting is the early 90's recession, where rent prices flattened right off after heavy rises in the previous years, as landlords were just happy to keep tenants, not squeeze them.

Also shown is Brisbane's "lost decade" of stagnation.. where rent was way below the rest of the country, but eventually ramped up to catch up. 10 years to hold a nonperforming asset is a long time!

Keep an eye on the CPI, even if the rent index is a component of this it's an interesting relationship.. if you're a bull you want to it to keep rising I would say. If it drops off, forget rent rises.

An article tucked away in the major newspaper also supports this view, but of course, we wouldn't that getting too much exposure on the front page would we

http://www.theage.com.au/national/rent-rises-halted-20090121-7mrj.html

LANDLORDS may have responded to the slowing economy by avoiding rent rises — taking pressure off tenants hit by double-digit percentage rises last financial year.

An Australian Property Monitors report said Melbourne house rents were stable in the six months to December 31, with the median asking price for houses unchanged at $350 a week. Units rose 1.6 per cent to a median of $315.

It suggests a stark change from the rent hikes and cutthroat competition of the year before, when reports of illegal rent "auctions" were rife and median house rents rose by about $50 a week, or 15 per cent.

 

[MR.]

I've got one......

When interest rates drop property prices rise!

That's why both "commercial and residencial" property is now tanking in the UK! While interest rates in the past 6 months, have gone from 5% down to 1.5%.

 

[numbercruncher]

On my own PPOR, a conservative rental value estimate I got would place the potential rental yield at 4.5% of what I purchased the property for at the end of last year.

Beej

Awesome stuff.

 

[Beej]

Awesome stuff.

Hmmm - don't forget that for a PPOR the rental return is effectively after tax, as you have to pay rent with after tax dollars. So 4.5% = 7.5%-8%pa gross for a medium/high income earner. And that effective return grows with inflation as the charts posted by gfresh show quite clearly. Plus any long term capital gains are icing on the cake and tax free as well!

Beej.

 

[robots]

hello,

great news there Gman, +1.6% for Melb units

this is awesome brothers, rents rise, money renting rates down how come this happens? I wouldnt have a clue

now, yes a Shonk market blue chip (WES) kindly announced a cut in dividend today, many others also cut how come this happens?

but the plain old vanilla real estate with no smoke and mirrors is just rolling on man

thankyou
robots

 

[numbercruncher]

Hmmm - don't forget that for a PPOR the rental return is effectively after tax, as you have to pay rent with after tax dollars. So 4.5% = 7.5%-8%pa gross for a medium/high income earner.
Beej.

That sounds like some sort of salesman spiel ....


"House prices too boom for ever!!" no longer getting them signing on the dotted line ?