House prices to keep rising for years

[Beej]

Wow, I find it hard to believe that even the more optomistic on this threat cannot even concede that there are valid points raised by my post which are of no real concern... given the 42,000 recent FHB purchases (possibly up to 84,000 individuals clearly stated by yourselves as the most likely sector to be affected by unemployment) and realistically a fair percentage of individuals who have entered the market over the last couple of years who have been servicing high interest rate mortgages with no chance to get ahead on their payments.

I can acknowledge it's a simplistic scenario based on hypothetical figures that is bound to contain flaws, posted to provoke amicable discussion due to it's relevance, but to be completely written off, well....

Well done!!!!

What exactly is the point you are trying to make then? What sort of impact do you envisage rising unemployment to have on house prices? Please quantify your view.

All I am saying while pointing out the flaws in your admittedly simplistic example, is that rising unemployment will not IMO have a dramatic impact on prices. It does create downward pressure yes, and if a defaults also rise to levels significantly above current levels (like 3/4/5% or higher like in the US) then that downward pressure would be very significant. However, I don't think, for the reasons I and others have stated, that defaults will rise to anywhere those levels as unemployment rises from 5% -> 7/8%. If we get to 12%+ in the short term then I'd be pretty interested. In the meantime the upwards forces are winning and starting to push prices in many area's up again.

Cheers,

Beej

 

[robots]

hello,

good evening and best wishes to all, another great day by the looks of it:

http://www.reiv.com.au/home/inside.asp?ID=162&nav1=652&nav2=162

to effort Enzo for getting the results up and its definitely a surprise to many the resilience of bricks and mortar, bricks and mortar, bricks and mortar

a MaSsIvE 78% clearance rate on this fine day here in Melbourne

great to be alive, walking tall around this fine country

well done

thankyou
robots

 

[singlefished]

What exactly is the point you are trying to make then? What sort of impact do you envisage rising unemployment to have on house prices? Please quantify your view.

All I am saying while pointing out the flaws in your admittedly simplistic example, is that rising unemployment will not IMO have a dramatic impact on prices. It does create downward pressure yes, and if a defaults also rise to levels significantly above current levels (like 3/4/5% or higher like in the US) then that downward pressure would be very significant. However, I don't think, for the reasons I and others have stated, that defaults will rise to anywhere those levels as unemployment rises from 5% -> 7/8%. If we get to 12%+ in the short term then I'd be pretty interested. In the meantime the upwards forces are winning and starting to push prices in many area's up again.

Cheers,

Beej

What requires quantification? I have provided an opinion and supported that with a simple example. And where did I state anything about the effect it was going to have on house prices????

All commentary was initially referenced to "YAWN" unemployment rate and it's potential effect on individuals "currently" servicing a mortgage.

My initial hypothetical figures were whittled down to 2 in 100 "possibly" have a chance of defaulting and it was then agreed with tech that the argument was flawed and the impact of unemployment was hugely over-estimated.

The above quoted post subsequently outlines a scenario whereby possibly as low as 3 in 100 "actually" defaulting could be significant yet the previously quoted feasibly realistic figure of 2 in 100 "possible" defaults is of no consequence....

Not really much of a margin for error there if the economy is so finely balanced.

The initial example is extreme and simplistic in it's nature and was clearly outlined as so. It was posted to highlight the fact that households servicing a mortgage these days generally require 2 sources of income to service the average mortgage and that even though a low unemployment figure of 8% may result at the end of the day, the implications of a low unemployment rate are far more reaching than during previous economic downturns because of this.

 

[Beej]

hello,

good evening and best wishes to all, another great day by the looks of it:

http://www.reiv.com.au/home/inside.asp?ID=162&nav1=652&nav2=162

to effort Enzo for getting the results up and its definitely a surprise to many the resilience of bricks and mortar, bricks and mortar, bricks and mortar

a MaSsIvE 78% clearance rate on this fine day here in Melbourne

great to be alive, walking tall around this fine country

well done

thankyou
robots

68% in Sydney in good volume, lot's of higher priced sales once again ($1M+), including a couple of ~$3M and a $5M sale at auction:

http://www.homepriceguide.com.au/saturday_auction_results/sydney_domain.pdf

Beej

 

[satanoperca]

Singlefish, an interesting illustration to the current issues of most family households with a mortgage -two incomes are required to service the debt. More interesting how increasing unemployment could have a potential multiplier effort on defaults over the previous recession.

In the previous recession were it was not prevalent to require two incomes to service the debt, 10% unemployment would have resulted in 10 mortgage defaults in Singlefish's simple example. With two incomes required, this defaults to 20.

It would be interesting if someone had some stats on the number of people of working age in 1990 who were employed compared with today. I assume that that

Kincella, I agree the figures look very small, but if Singlefish's example is somewhat correct, then 1% change in unemployment in 1990 would have had a smaller impact on mortgage defaults than a 1% change today. I think this same situation was also seen when interest rates increased to 9%, it had a similar effect to when interest rates were in their teens in the 90's.

If two incomes are required to support the debt to acquire a home, is it affordable?

There must be a tipping point whereby unemployment rising results in realestate prices decreasing due to increased defaults and fire sales. Eg. 5% unemployment <1% defaults, 10% unemployment <4% defaults, 20% unemployment defaults - a hell of a lot.

As unemployment increases, employees are not the only group under stain, business owners are generally not as affluent and not looking to invest profits in any other asset than keeping their business alive as it generates them their greatest cash flows.

I know of several small business owners that would love to take advantage of some realestate buying opportunities at the moment but are more concerned with keeping their often well established business afloat through as the RBA announced, a recession.

I think Singlefish's example presents the idea that if two incomes are needed to services a mortgage, then an increase in unemployment will see greater mortgage defaults than seen in the 90's which leads to the issue, is housing affordable and are prices going to see a correction due to the current economic situation?

Went to several auctions today in South & Port Melbourne, good results for those properties with realistic prices, just below peak prices. Quite a few discerning buyers around, just no one being silly.

Cheers

 

[kincella]

Mortgage relief for up to a year will be available..to be announced today..

another rate cut coming this week......alls safe and well in the resi market
next problem you want to focus on is ??????
just put it forward and some of us will try to find an answer for you...


http://www.theage.com.au/national/mortgage-relief-for-jobless-20090404-9sjg.html
:sheep:

 

[kincella]

state govts building hundreds of new homes...for the homeless...

so just in case you or your mates lose their jobs, and you cannot negotiate the mortgage relief,,,,you become homeless.....we have an answer for you,
20,000 new homes for the homeless by 2010
hehehehehehe....I think that is a really tall story.....I just cannot see them building that many homes...in just over a year or lets say 2 years...
the state govt takes that long to fiddle with red tape for the land, the roads, and everything else
but it makes enlightened reading for their followers
:sheep::sheep:
http://www.theage.com.au/national/government-plans-to-build-667-new-homes-20090404-9sjn.html

 

[satanoperca]

What next, the Government using taxpayers money will pay your mortgage if you got yourself into to much debt and can no longer service it.

How about some greater attempts to make housing more affordable by the Government so that FHBG and mortgage relief are not required.

 

[kincella]

satan opera....please read the article....
and no..the taxpayers are not paying the mortgage for the unemployed....

the banks will allow interest to be capitalised and added to the loan balance....
the relief is between the banks and the mortgagee...
all the pm has done is ask the banks to provide this relief...

 

[robots]

What next, the Government using taxpayers money will pay your mortgage if you got yourself into to much debt and can no longer service it.

hello,

government already using taxpayers money for those who dont want to work and contribute in society i.e. dole, disability pension (not all but alot)

got to share the love Satanoperca, its all about fairness

ps. Dan Murphy's have ruskies on special at the moment $64/slab

thankyou
robots

 

[Beej]

What next, the Government using taxpayers money will pay your mortgage if you got yourself into to much debt and can no longer service it.

What next?? The government to use tax payers money to provide rental assistance payments to those who lose their jobs and failed to provide a paid off home for their family to live in during the good times, because they kept waiting for property prices to fall 50% so they could buy in Paddington instead of Penrith?



PS: Thanks satanoperca for expanding on singlefesheds posts/points. I can see what you guys are trying to say - more double income mortgages could be like the period of low interest rates where you don't need as big an increase as in the past (in unemployment vs interest rates) to get the equivalent level of mortgage stress/defaults. Those are valid points - but I think it is clear that the government is hell bent on ensuring that we don't have a US style housing market crash (ie stability is good), plus they also have their eyes on stimulating a housing (building) led economic recovery, as this is often been the event that has pulled the AU economy out of past recessions. Housing affordability will in the longer term be addressed by building more lower cost housing IMO, not by a price crash.

PPS: Just to put some FHB numbers in context, 42000 FHBs taking up the grant boost = 0.5% of Australian homes purchased by FHBs in the past 6 months. It's not that many. Even if 1/4 defaulted in the next 2 years that would only add about 0.2% to the aggregate default rate. (Calc based on 8,000,000 AU households, 1/3 mortgaged OOs, assume FHBs are OOs).

Cheers,

Beej

 

[robots]

What next, the Government using taxpayers money will pay your mortgage if you got yourself into to much debt and can no longer service it.

How about some greater attempts to make housing more affordable by the Government so that FHBG and mortgage relief are not required.

hello,

man, i thought you telling us its come off 10% based on the research you are doing in your area, so isnt it now more affordable?

forget the Government, do your own thing

plenty of joints out there in everyone's price range across australia

ps. Satanoperca, i wouldnt mine going to that pub on Kings way that does the best parma'a in Aus on collect day, you in?

thankyou
robots

 

[kincella]

so now that we have eliminated mortgage stress from the argument ....
what other issues are there out there, that will create a 40% drop in prices

I am waiting to hear from the people who are actively out there at inspections looking to buy a home.....

 

[robots]

hello,

look out brothers, Numbercruncher is online

anything else we can help people with?

thankyou
robots

 

[robots]

hello,

http://www.theage.com.au/national/clearance-rates-best-in-2-years-20090404-9sji.html

how time flies when you having fun, bonafide thread

people in already are smashing the mortgage, people buying are getting best rates in 45 yrs, paradise man

the internet back up and running in the UK yet?

thankyou
robots

 

[Ruincity]

From robots article.

"But buyers' advocates and property analysts are cautioning that the sustained high in the clearance rate could not be understood apart from the extremely low stock levels, with just 3144 properties put up for auction for the year to date, half last year's level."

People simply aren't selling at the moment, this is something that I would like you realestate permabulls to elaborate on.. Why is this?

I agree that it seems the first home buyers region seems to be faring ok.
This is artificially propped by the FHB grant as we are all aware.
Yes this could have a flow on effect to the upper range as well.

Couple of stories from the road.

Yesterday I inspected a trashy 2 bedder unit in elsternwick, asking price was similar to when I was looking last year at $430. One thing I did notice is I saw the youngest looking prospective buyers I have ever seen...

I then proceeded to an Auction in Sth Melbourne asking price was $570-600 four seperate bidders in the end resulted in a final sale price of $630.

I have a friend who bought a unit in Collingwood for around $310 exactly a year ago. Relationship has gone sour and they want to sell, realestate are saying that he will be looking at around 400k.
Place is an absolute dark shoebox, will be interested to see what they end up with.

 

[satanoperca]

hello,

ps. Satanoperca, i wouldnt mine going to that pub on Kings way that does the best parma'a in Aus on collect day, you in?

thankyou
robots

It is not over until the fat lady sings. The first quarter stats are not out from the ABS until May. Have to wait until the second quarter results expected in July/August to declare a winner. Those results published by RPdata only included January with Feb being indicative only.

Parma sounds good on collect day. I have judged you wrong Robots, always thought you would be a VB man not ruskies.

For those interested in price trends for suburbs of Melbourne, get Sundays Age for a blow by blow account of housing prices.

 

[robots]

It is not over until the fat lady sings. The first quarter stats are not out from the ABS until May. Have to wait until the second quarter results expected in July/August to declare a winner. Those results published by RPdata only included January with Feb being indicative only.

Parma sounds good on collect day. I have judged you wrong Robots, always thought you would be a VB man not ruskies.

For those interested in price trends for suburbs of Melbourne, get Sundays Age for a blow by blow account of housing prices.

hello,

push bike riding alcopop drinker Satanoperca, ruskies all the way, keep an open mind

1 up though bro, so i wont be buying

if its a draw?

thankyou
robots

 

[robots]

From robots article.

"But buyers' advocates and property analysts are cautioning that the sustained high in the clearance rate could not be understood apart from the extremely low stock levels, with just 3144 properties put up for auction for the year to date, half last year's level."

People simply aren't selling at the moment, this is something that I would like you realestate permabulls to elaborate on.. Why is this?

I agree that it seems the first home buyers region seems to be faring ok.
This is artificially propped by the FHB grant as we are all aware.
Yes this could have a flow on effect to the upper range as well.

Couple of stories from the road.

Yesterday I inspected a trashy 2 bedder unit in elsternwick, asking price was similar to when I was looking last year at $430. One thing I did notice is I saw the youngest looking prospective buyers I have ever seen...

I then proceeded to an Auction in Sth Melbourne asking price was $570-600 four seperate bidders in the end resulted in a final sale price of $630.

I have a friend who bought a unit in Collingwood for around $310 exactly a year ago. Relationship has gone sour and they want to sell, realestate are saying that he will be looking at around 400k.
Place is an absolute dark shoebox, will be interested to see what they end up with.

hello,

great work ruincity,

people are just sitting put, not moving and it is occurring for both OO's and renters

good property is still selling well anything which has an "issue" is in the doldrums

thankyou
robots

 

[kincella]

Ruincity...the answer you are looking for was addressed by Robots...but I will add my 2 cents worth....the market up to 600k is hot...so 630 is not too far over the top with 4 bidders...
oh and another 2 cents.....Melbourne is probably the most conservative place on earth......so dont expect wild fluctuations.....
and voted the most liveable city in the world...(forget about the train fiasco bit here)
so everyone wants to live here....if they could....