Australian (ASX) Stock Market Forum

House prices to keep rising for years

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knobby...correct me if I am wrong...but stock crash Oct 87, the property boom until about Oct 89, then property crash. ... 1992..supposedly and sideways until growth about 2000 from memory thats what people said...but the chart shows from 80,000 to 230,000 in 2000 is almost triple

although the chart below, after adjusting for inflation does not really show a crash
just wondering if they overpaid in the first place....see price in 1986 were about 80,000 and by 1989 were 138600 = 58600 profit in there, price about the same in 1992
http://www.aph.gov.au/library/pubs/RN/2006-07/07rn07.pdf
 
Kincello, Maybe I have the dates slightly wrong, it is from memory.

They did buy at the peak of the market. They sold about 6 months before the market took off again. Looking at your attachment, it suggests they bought in late '89.

They bought a house in Sydney with the proceeds so after that they did really well.

I disagree with the attachment though. Prices definitely fell a bit during that period. Maybe inner city fell more?
 
No offence, SBH, but I think it is a bad idea.

Some people save harder than others and some are dishonest. It will be rorted to the advantage of the dishonest.

What should happen is that banks operate prudently. (I know I'm dreamin):)
 
SBH said:
The article is about the UK introducing a maximum loan amount of 3x annual income. A great idea Im sure youll agree?

What time is it on the property clock if this ever gets introduced into australia?

http://www.telegraph.co.uk/finance/...es/4995778/FSA-to-cap-mortgage-borrowing.html
Click to expand...

SBH, it will not be introduced here for a while.

1)At the moment banks are attempting to protect their balance sheets by talking up the property market.

2)When this fails (and fail it will), and prices plummet, they will have no alterantive but to reduce lending multiples to protect themselves in the long run.

I would say it will be at least another 24months before we see such strict criteria.
 
hello,

hello and good evening fellow friends, another fantastic day on the planet

apologies for lack luster posting the last couple of days as have been out doing my bit for the economy, keeping people employed, giving some a chance in life

amazing how many bankers we have here at ASF

whats happened to Numbercruncher? disappeared like so many others, oh well

the hardcore crew still going

thankyou
robots
 
UBIQUITOUS said:
SBH, it will not be introduced here for a while.

1)At the moment banks are attempting to protect their balance sheets by talking up the property market.

2)When this fails (and fail it will), and prices plummet, they will have no alterantive but to reduce lending multiples to protect themselves in the long run.

I would say it will be at least another 24months before we see such strict criteria.
Click to expand...
Our criteria are already much more stringent than both the US & UK markets were. In any case, it would have to be one of the dumbest moves anyone with a modicum of financial sense could contemplate.

A simple multiple of income method of determining lending capacity is both stupid, and far too shallow to work in practice - it is after tax, post-liability cashflow which is currently measued. Why would a lending institution adopt a less comprehensive lending model? Why would lending capacity be fixed to an income ratio regardless of interest rate movement? Are people not aware of basic facets of our financial system, such as the stepped tax rate?
 
Mofra said:
Our criteria are already much more stringent than both the US & UK markets were. In any case, it would have to be one of the dumbest moves anyone with a modicum of financial sense could contemplate.

A simple multiple of income method of determining lending capacity is both stupid, and far too shallow to work in practice - it is after tax, post-liability cashflow which is currently measued. Why would a lending institution adopt a less comprehensive lending model? Why would lending capacity be fixed to an income ratio regardless of interest rate movement? Are people not aware of basic facets of our financial system, such as the stepped tax rate?
Click to expand...

All of the above applies to the UK aswell.
Interest rate movements are not taken into account because they tend to be short term, as oppoesed to the loan itself which is long term.

"It's different here" just doesn't cut it anymore.
 
Mofra said:
A simple multiple of income method of determining lending capacity is both stupid, and far too shallow to work in practice - it is after tax, post-liability cashflow which is currently measued. Why would a lending institution adopt a less comprehensive lending model? Why would lending capacity be fixed to an income ratio regardless of interest rate movement? Are people not aware of basic facets of our financial system, such as the stepped tax rate?
Click to expand...
Whether banks lend less on a 'multiple' basis as suggested or they lend less some other way, they will be lending less. Securitisation markets are dead and buried and increasing NPLs are threatening already strained capital.

Many emerging market banks have already put their loan portfolios into run off. Banks receiving 'bail outs' are retaining capital rather than lending...

Loans will not be what they were for some time yet.
 
doctorj said:
Whether banks lend less on a 'multiple' basis as suggested or they lend less some other way, they will be lending less. Securitisation markets are dead and buried and increasing NPLs are threatening already strained capital.

Many emerging market banks have already put their loan portfolios into run off. Banks receiving 'bail outs' are retaining capital rather than lending...

Loans will not be what they were for some time yet.
Click to expand...

And despite all this going on in some other countries - in Australia lending for housing finance is on a clear uptrend after appearing to bottom out late last year:

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5671.0?OpenDocument

PS: I agree with Mofra's comments - such a simplistic regulation as allowing lending of no more than 3 times income is just silly, and I am amazed that it is seriously being considered in the UK. What they should be doing is looking at the criteria used by most "sensible" institutions, and build some regulation framework around that if they must (and that would at least stop the cowboy practices from gaining prevalence again).

Cheers,

Beej
 
I wouldn't be blowing the trumpet for the lending finance rises until post June 30th .. with such artificial stimulus being applied.

Lets remove it right now if lending is so healthy eh? ;)
 
on the contrary....they are very busy writing loans.....I am the eternal optimist....so I dont expect a crash in house prices....well not in my houses...they are in the lower range..not million dollar props

I am intending to buy more (missed a couple of little beauties so far) and also another shop or two...
figure since I will have to continue supporting myself for another 30 odd years,,,and prefer a stable income, something I can have almost complete control of..(except for interest rates and tax)...and need xxxx amount to support my lifestyle....it may as well be in property.....its worked very well for me so far....so why change it
I receive added benefits from the resi props,,,,I can renovate, refurbish, and plan the landscaping etc....I like interior design too.....brings out the creativity gene for me
cheers
 
They have to lend thats their business but I bet they're careful about valuations and who they lend to.

I'll be buying too, but not just yet, would really like a unit in Port Douglas, rented out but can use it a couple of weeks a year. It complies with Super rules because it's an investment:D

Not yet going to wait a bit longer - have a look at this from the Age today -

First-home buyers in the eye of a storm Danny John
March 18, 2009

THE Australian housing market is facing the prospect of a "perfect storm" of financial pressures - including high mortgage debt, overvalued homes and rising unemployment - in which prices could eventually fall by as much as 30 per cent, investors have been warned.

Research compiled by international analysts has indicated that while domestic house prices held up well amid the breaking global financial crisis, in the impact of the worsening local downturn they have come off their peak.

Prices are beginning to slide in line with declines in the US and Britain, the report suggests.

There, the fall in housing values has exacerbated recessions and prices have started dropping below or sharply back to what is described as "fair value" levels after nearly 10 years of soaring property costs.

The special report was compiled by BCA Research in Canada. It shows that the residential market fell 25 per cent in the US and 18 per cent in Britain last year.

By contrast, Australian prices slipped a "mere" 4 per cent from the all-time highs recorded in the first quarter of last year.

The authors of the report say the "ferocity of the price collapses" in the US and Britain was made worse by the meltdown in the financial services industry - a factor that is affecting Australia's two financial centres, Sydney and Melbourne.

"The housing market is looking particularly vulnerable, with overinflated prices, deteriorating affordability and slowing household income growth," the report says. "There is an increasing possibility of a major housing bust in Australia."

The authors of last month's report, which is now circulating among local investors, accept that a variety of positive factors could help cushion any fall.

These include past budget surpluses, the Federal Government's two stimulus packages, the strength of the Australian banks, which have avoided a "disastrous lending binge", falling interest rates and the drop in the value of the Australian dollar.

The report's conclusions are set against a background of tentative signs that the housing market is shrugging off the immediate effects of the downturn, helped in part by the Government's $14,000 first-home buyer's grant and an extra $7000 for people who purchase new homes.

Latest figures showed that $8 billion of new home loans were taken out at the end of January of which a quarter were advanced to first-time buyers who are driving a mini-revival in sales at the lower end of the market.

That has prompted the Sydney Chamber of Commerce to press the Federal Government to extend the level of cash support to first-time buyers beyond the current June 30 cut-off point.

Warning t the grant's removal could send the housing market into a tailspin, the chamber's executive director, Patricia Forsythe, said: "Next to the massive reduction in interest rates, the first-home buyer boost has been the most successful stimulatory measure for the economy."

Mr Norris also said the global financial crisis was moving to the next wave with highly leveraged infrastructure projects in Europe coming unstuck.

While no plans were in place for job cuts, Mr Norris said he could not guarantee staff numbers would not be cut given the unpredictable environment. CBA has left the door open for a possible dividend cut at its full-year results.
Click to expand...
 
One of the arguments why it may not be so stupid to get an affordable PPOR if haven't already done so.. it's becoming increasingly obvious banks/government/media will be doing everything to keep people in their homes, as the environment deteriorates. Whereas renters, nobody gives a **** about them.
 
MrBurns said:
They have to lend thats their business but I bet they're careful about valuations and who they lend to.

I'll be buying too, but not just yet, would really like a unit in Port Douglas, rented out but can use it a couple of weeks a year. It complies with Super rules because it's an investment:D

Not yet going to wait a bit longer - have a look at this from the Age today -
Click to expand...

It's not just in the Age. The article is in all of the country's papers. Reality is hitting home.
 
MrBurns said:
They must be expecting a huge crash.
Click to expand...

Yeah .... of the non-bank lenders, who will be pulling their last few remaining hairs out after this one.

Talk about strangle the competition out of the banking sector.

Lemme see ... the remaining "BIG 3" will follow suit, followed by a chorus of "Not fair - they're underwritten by the gummint!" cries from the non-bank lenders.

LOL

Game, set & match....
 
MrBurns said:
have a look at this from the Age today -
Click to expand...

That article is very inconsistent in it's arguments - and therefore I think lacks credibility. Firstly, it starts with an alarmist headline, but then if you read it goes on to state all the reasons why AU property is actually doing relatively well:

The authors of last month's report, which is now circulating among local investors, accept that a variety of positive factors could help cushion any fall.

These include past budget surpluses, the Federal Government's two stimulus packages, the strength of the Australian banks, which have avoided a "disastrous lending binge", falling interest rates and the drop in the value of the Australian dollar.

The report's conclusions are set against a background of tentative signs that the housing market is shrugging off the immediate effects of the downturn, helped in part by the Government's $14,000 first-home buyer's grant and an extra $7000 for people who purchase new homes.

Latest figures showed that $8 billion of new home loans were taken out at the end of January of which a quarter were advanced to first-time buyers who are driving a mini-revival in sales at the lower end of the market.
Click to expand...

Secondly, the article states that:
There [in the US and UK], the fall in housing values has exacerbated recessions and prices have started dropping below or sharply back to what is described as "fair value" levels after nearly 10 years of soaring property costs.
Click to expand...

That statement simply not correct! House prices have fallen in the US due to massive mortgage default rates driven by the sub-prime mess, and massive over-building. The recessions in the US and the UK were STARTED by the housing collapse, triggered by that sudden increase in mortgage defaults and jingle mail etc as honeymoon interest rates switched off for huge numbers of sub-prime borrowers. This then uncovered the weaknesses created through the sub-prime lending debacle/mortgage securitisation markets etc, which led to the credit crunch/crisis, the collapse of many large financial institutions etc, and then a stalled economy due to lack of flow of credit to business and a sharp contraction in consumer spending.

In Australia, our recession/slow down (whatever it officially turns out to be) has been caused by a drop off in demand for exports from our trading partners caused by the US issues, the collapse of several highly leveraged businesses exposed to the effects of the international credit freeze, plus dampened consumer confidence (and thus demand) due to the share market crash, and concerns about the international situation. Any house price impacts are an EFFECT not a CAUSE. And so far the effect has been typical of past recessions where prices have come under pressure, and in response the volumes of available property for sale has declined dramatically, which acts as a sort of automatic stabliser stopping any precipitous price falls. This effect is made all the more effective when coupled with strong fundamentals like a lack of macro level supply (ie we are NOT over-built like the US), high level of urbanisation and population growth, ability to significantly reduce borrowing cost through lowered interest rates, etc etc.

That's why our situation is very different here and I think it is very naive to just expect house prices to magically fall here by large amounts just because they did in the US (and to a lesser extent the UK). Bet on this occurring at your own financial peril I still say!

Cheers,

Beej
 
beej, it must be the journo's bias....I often find that...the headline exaggerates a tiny piece...blows it out of proportion...but if you actually read the articles you find our prices dropped a tiny .08% not even 1%...or the article in fact is the opposite to the headline used

another forum...over the years I have found so many people just read the header...and base their investment decisions on the headline...never bother to read the article...they dont have time...saw it all the time with day traders, and when we went in depth..after the shares crashed back to earth...a lot of them admitted the heading was all they knew and bought in on that basis.....
I found similar posters on the property threads....they only read the headlines...that is all the research they did....fancy calling that research...

when you show them the facts...they choose not to read it....
like Jan Sommers saying about property...it can be applied to most asset classes....the ten most popular excuses...why people dont buy a house, or change their minds and sell a house etc...

that article applies to this quote

Quote:
"I don't read economic forecasts. I don't read the funny papers."
- Warren Buffett
and this one is appropriate for property

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
- Warren Buffett
 
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