House prices to keep rising for years

[Beej]

Not many auctions scheduled in Sydney I think due to ANZAC day - but check this article out:

http://www.smh.com.au/national/new-buyers-flock-to-terrace-sale-20090425-aiuo.html

New buyers flock to terrace sale
April 26, 2009

FIRST-HOME buyers hoping to gain a foothold in the property market made up a large part of the 190 groups who visited 14 Gibbens Street, Camperdown, before yesterday's auction.

The two-storey terrace with two bedrooms and an attic was popular among younger hopefuls due to its closeness to Newtown and its relatively affordable price.

The price guide had the house at $580,000-plus before auction. Australian Property Monitors said the property last sold for $585,000 in 2005. Before bidding got under way the reserve was fixed at $650,000.

Twelve bidders registered at auction and five were active. Proceedings started with a $580,000 bid and rose quickly in $5000 jumps. As the auction progressed, bids of $1000 then pushed it up to its sale price of $686,000.

......

So there's a concrete example of an individual house that has appreciated 17.5% in 4 years during an over-all flat Sydney market period.

Where's the crash boys??

If it wasn't for the Chinese there would be no one at auctions in Melbourne, the last of the FHBG buyers are lining up before the end of June , after that all sectors of the market will be in decline.

Well I think you will find it will be shown that this prediction could not have been more wrong!


Cheers,

Beej

 

[kincella]

agree Beej....and read my link today ...buyers advocates...said some houses never go to an agent...

 

[robots]

hello,

yes Beej, Keen should be on his way to Mt Kosciosko

thankyou
robots

 

[singlefished]

Where's the crash boys??

When I want to see how Sydney is doing I always look at the suburbs I know best ie: the places I used to live/work/play before moving up to Brisbane.

Artarmon, Balgowlah & Parramatta to name but a few... -21%, -23% & +17% respectively.

Your crash is happening in the suburbs that have house prices way above what a traditional FHB can afford (probably a suburb just like yours actually )

I think it's fairly apparent that the boost at the lower end of the market is working like a charm and sustaining long term medians, but we all knew that anyway.

Here's the APM median for 2 suburbs I am currently watching in Brisbane, Ascot & Hamilton, -52% & -65% respectively.

You bulls really need to stop getting sooooo excited about the slightest glimmer of hope the media provides, open your mind to the bigger picture and smell the dung!!!

 

[nunthewiser]

You bulls really need to stop getting sooooo excited about the slightest glimmer of hope the media provides, open your mind to the bigger picture and smell the dung!!!

this is a quote borrowed from another thread i thought was kind of appropriate to some here

keep your hands over your ears, shout lalalala and everything will be ok.

 

[kincella]

can we believe anything the banks say....
it will be good if its true

In the lead-up to the new financial year we'll probably see more banks become competitive in the fixed-rate market," he said. "I think the gap between variable rates and long-term fixed rates is going to narrow but its hard to say by how much."

http://www.news.com.au/heraldsun/story/0,21985,25382107-664,00.html

 

[kincella]

we might not have a worry in the world soon....if we all get this pig virus....
then there will be plenty of houses available...hmmm does the virus need a body or can it linger in the house ?

 

[nulla nulla]

The housing market, like any market is driven by supply and demand. Unlike other markets the housing market is not one that will disappear as the product will never go out of fashion. With increasing population demand will be constant although values in any given area will fluctuate as the area becomes more or less fashioable.
History shows that with the passage of time the currency buys less with each passing year (inflation?). In our own currency, the farthing, half penny, penny and two cent coins have all been retired. The five cent coin will be next.
By default, housing values will appreciate as the currency depreciates. Ergo housing prices will continue to rise for years.

 

[michael_t_f]

The old supply and demand arguement. I agree, but don't see how this can be an arguement for prices rising. Don't you think if there is higher unemployment, no fhog, no rise in wages, no possibility of high capital gains in the short term, and we are in a period of deflation there will be less demand for this type of investment? All these things will contribute to higher supply as people move out and sell up as they lose jobs and lose interest in paying off there negative equity. Moving in with friends and family creating denser populated housing. All we have at best is a slower decline than other countries, that may not fall as much.

 

[kincella]

the opposite scenario has been the go for over 50 years now....less people per house...down to 2.46 last time I looked...
then I was worried about Gen X and Y...renting in the middle of the city, close to everything....how would they ever move out and buy...
apparently they did change...the latest sales out last week saw them buying out in the suburbs...where its cheaper....
so they are learning to play the game....they are not doing as some suggest and moving back home, or sharing...and increasing the numbers per household...
sharing a house when you have a family would be very hard with children involved...or they might end up divorced ...

 

[nulla nulla]

The old supply and demand arguement. I agree, but don't see how this can be an arguement for prices rising. Don't you think if there is higher unemployment, no fhog, no rise in wages, no possibility of high capital gains in the short term, and we are in a period of deflation there will be less demand for this type of investment? All these things will contribute to higher supply as people move out and sell up as they lose jobs and lose interest in paying off there negative equity. Moving in with friends and family creating denser populated housing. All we have at best is a slower decline than other countries, that may not fall as much.

We have experienced high unemployment, high interest rates, wage and price freezes (what a joke) in the past and the one constant is that, overall, housing prices continue to rise. There may be temporary falls in real estate values but at worst, those periods are merely times of temporary contraction as the less wealthy are weeded out of the market and the wealthy take advantage of the opportunity to consolidate their wealth for the long term future.

 

[glads262]

There may be temporary falls in real estate values but at worst, those periods are merely times of temporary contraction as the less wealthy are weeded out of the market and the wealthy take advantage of the opportunity to consolidate their wealth for the long term future.

You could say the same for the sharemarket.

What you are basically saying is that all investments rise over the long term.

Its just more visable with the sharemarket, as its valued day to day.

Try graphing house prices, next to a graph of six monthly values of the sharemarket - probably more similar than you think (although they may not correlate)

Although, the sharemarket will be slightly more volatile, as it is higher risk and higher return.

 

[Beej]

Although, the sharemarket will be slightly more volatile, as it is higher risk and higher return.

Only "slightly" more volatile??? Try HUGELY more volatile..... and this makes using leverage to invest in shares inherently more dangerous/risky than using leverage for property (as MANY have found out in the past 18 months). Hence, although as you correctly state absolute returns are generally higher over the long term from shares, people don't tend to use anywhere near as much leverage, so if you account for the leveraged return, property can actually do EXTREMELY well -- but it's all horses for courses.

That's generally why for most people purchasing and paying off their first house ASAP provides the best return over that initial period on the capital they actually have available (due to higher leverage), with risk from the leverage offset to a large extent by the fact the alternative is to bleed cash into rent anyway with no possible return from said rent. After the first place is paid off, you are then set up to invest in other asset classes with the ability (financially) to handle the risk.

Cheers,

Beej

 

[kincella]

interesting article...Investors on hold....they did some research....one in five are still waiting for lower prices,that means 4/5 are not expecting lower prices....
believe this article is not about FHB's

half the prop investors think things will be better next year, ...but they may miss out on the lower rates
consumer sentiment turning around

http://www.theaustralian.news.com.au/business/story/0,28124,25391261-5018055,00.html

 

[Trevor_S]

Only "slightly" more volatile??? Try HUGELY more volatile..... and this makes using leverage to invest in shares inherently more dangerous/risky than using leverage for property

You don't think high levels of gearing are extremely dangerous in the Property Market ? Look to the UK and USA for how dangerous high levels of leveraging into property can be.

I would say more dangerous with property ! but less volatile leveraging in the property market is often cross collaterised with your PPOR, this is rare (but does happen ie Storm) in the share market) but very common in property.

That aside,

"I've seen more people fail because of liquor and leverage - leverage being borrowed money. You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing."
- Warren Buffett

 

[kincella]

very interesting.....so if you have a home on a decent block....bulldoze it and build 6-8 stories high....with underground parking of course.....
they have been doing a lot of this in Toorak, Sth Yarra for ages.....

Planning expert says Melbourne must destroy leafy eastern suburbs
Article from: Font size: Decrease Increase Email article: Email Print article: Print Peter Familari

April 29, 2009 12:00am
MELBOURNE must destroy the bulk of its leafy eastern suburbs in order to thrive, a leading planning expert says.

The controversial proposal by Jason Black, president of the Planning Institute of Australia's Victorian division, has been offered as a solution to the state's transport and housing crisis by providing more accommodation in established areas.

Target suburbs include Brighton, Camberwell, Balwyn, Ormond and Preston.

Mr Black says spacious suburban blocks should be levelled and the homes replaced with three to six-storey apartment buildings.

Mr Black said at a Melbourne planning summit yesterday: "We need to realise that some of the fundamentals driving the Government's 2030 development plan have changed and we need to rethink how we're going to go about delivering some of the objectives and the vision."

The conference heard that metropolitan Melbourne would need an extra 850,000 new homes by 2036 if fertility and immigration levels remained the same.


http://www.news.com.au/heraldsun/story/0,21985,25400503-2862,00.html

 

[Beej]

You don't think high levels of gearing are extremely dangerous in the Property Market ? Look to the UK and USA for how dangerous high levels of leveraging into property can be.

I would say more dangerous with property ! but less volatile leveraging in the property market is often cross collaterised with your PPOR, this is rare (but does happen ie Storm) in the share market) but very common in property.

When I say leveraging into property is "less risky" with a high LVR etc, I'm talking more about buying your first PPOR, rather than carrying on such a strategy into multiple investment properties or other asset classes (aka Storm etc).

When you buy your first home, you would have some sort of deposit, but in all but a few cases the LVR will still be high (80-90%). I don't see this as risky, as the alternative is a lifetime of paying ever increasing rent anyway - which simply means funding the majority of someone else's leverage play. So really with your first home purchase, the risk is very low compared to the potential long term financial benefit you would gain, when compared to the alternative, where you pay the cost of leverage (through rent) in effect with no potential gain at all. It's not like you are even "shorting" property by renting, unless you actually have the full amount sitting in the bank that would otherwise buy a house outright.

Cheers,

Beej

 

[kincella]

I like the theory...one can walk away from a rental prop...but not the same when they own a home with a mortgage......
is it walk away to another rental prop...or back home to mum and dad

home ownership is very popular worldwide....in australia its 70% and 30% renters....of which I guess about 20% are private investors the balance public housing 10%....so one could say about 90% invest in a home and , or a home and IP.....so in this respect most of us are :sheep:

those figures would need to be recalculated to take into affect...some owners have multiple IP's....001% the majority have only one...and some renters only have an IP but not a home...(which can become a home later)

for most of us the option of paying a mortgage compared to renting is a 'no brainer'....and the fact that house prices keep pace with inflation....and provide good capital growth in the long term......means its good for the economy....and the family....plus the kids inheritance down the track

I am not suggesting anyone buy a home or an IP....
Its just a personal preference of mine...and most of the population

 

[kincella]

I am refinancing....was given rates last week at 5.2 variable and 5.49 fixed...I was going to split it 50/50....since they are so slow doing the paperwork....the bank now wants 70% to be fixed and that rate has jumped to 6.59....so I will stay on the variable....taking a punt as per yesterdays article that fixed and variable would move closer...once the competition between the banks starts....

 

[Taltan]

When you buy your first home, you would have some sort of deposit, but in all but a few cases the LVR will still be high (80-90%). I don't see this as risky, as the alternative is a lifetime of paying ever increasing rent anyway - which simply means funding the majority of someone else's leverage play. So really with your first home purchase, the risk is very low compared to the potential long term financial benefit you would gain, when compared to the alternative, where you pay the cost of leverage (through rent) in effect with no potential gain at all. It's not like you are even "shorting" property by renting, unless you actually have the full amount sitting in the bank that would otherwise buy a house outright.

Beej

You don't pay rent to leverage you pay it to meet a need for housing. When you buy a property you are also paying for that need via interest on a mortgage. When you buy you are foregoing the opportunity cost of usign that capital elsewhere.

If say twelve months ago Mr X paid 500k for a property with a 50k deposit than he owes 450k mortgage, lets say Mr X has paid interest only of 6% since, thats 27k and the home is now worth 500k Mr X has paid 27k to be in the exact situation he was 12 months ago. Alternatively Mr Y has rented the same property for say 23k he is obviously better off by 4k. If the property is now only valued at 450k than Mr Y is better off by 54k. Likewise if the property is worth 550k Mr X is better off by 46k.

My point is that renters are clearly shorting on property by staying out because you can always go to the bank and take a loan later. I am not saying property is not a worthwhile investment, just that like any investment it needs to be the best use of capital for it to proceed.