House prices to keep rising for years

[trainspotter]

Hey, hey, hey ... it's the sunshine and lollipop brigade.

Recent data releases have continued to paint the domestic economy and residential property market in a relatively positive light. Consumer confidence has remained in positive territory the last two months, unemployment figures are lower than most expected, housing finance commitments continue to trend upwards and interest rates have remained at 45 year lows. Additionally, auction clearance rates have remained robust around the nations largest auction markets. Melbourne, which is Australia’s largest auction market, has recorded clearance rates above 75 percent since late March.

Another key piece of data released this week was the National Australia Bank’s Business Survey which reported that business confidence has moved into positive territory for the first time since December 2007. Along with the good news on business confidence, the NAB survey shows business conditions improved sharply with the index returning to levels not seen since September 2007. This latest data also suggests that employers are not shedding staff as rapidly as was expected which may lead to unemployment levels remaining lower than the 8.5% forecast for mid next year.

The number of new residential property listings across Australia remains at about 10,000 new properties being added to the market each week. The total number of properties being advertised for sale has also remained steady at about 115,000 dwellings. The fact that total stock levels are remaining steady indicates that absorption of stock is about neutral: as many properties are being sold as are being added to the market.

 

[robots]

hello,

good evening, apologies for the poor posting of recent times as have been in Mt Martha/Mornington for work commitments

wow, another big weekend on the auction scene, above 80% again, again again

thats 10wks running now, amazing

cant wait for rp data out so I can pickup my prize of satanoperca

thankyou
professor robots

 

[satanoperca]

hello,

cant wait for rp data out so I can pickup my prize of satanoperca

thankyou
professor robots

ABS out 4th of August.

Tyres on bike are pumped and ready to go.

Cheers

 

[robots]

hello,

http://www.theage.com.au/national/economy-set-to-defy-gloom-20090720-dqt5.html

more interesting reading from a fellow economist, strange how many starting to sing a different tune

how time flies when you having fun, another 12mths will be gone soon and Australia will be still be on top

great effort by the Government

thankyou
professor robots

 

[Buckeroo]

hello,

http://www.theage.com.au/national/economy-set-to-defy-gloom-20090720-dqt5.html

more interesting reading from a fellow economist, strange how many starting to sing a different tune

how time flies when you having fun, another 12mths will be gone soon and Australia will be still be on top

great effort by the Government

thankyou
professor robots

So, the future looks rosy for the economy because Access Economics says so? The same experts who failed to predict the financial crises?

And what about data like 90% of China's growth is attributed to massive bank lending. This economic spurt is running on debt that will collapse once the money runs out.

And the only way for average Joe Blow to buy a house now, is to borrow amounts he can't afford when interest rates start heading towards 10%. Yeah great future in property.

Cheers

 

[kincella]

Memo to Robots.....you have won the bet....it was too easy to predict....
so bring on the next bet...or forecast....
how about house prices to keep rising to Dec 09..............
or investors to take over from fhb's....or upgraders to keep the housing market churning over....

oh, and look at this....38% of aussie's June loans have been to people refinancing into low interest rates...
and fhb's finance has dropped to only 21% down from 32% in Mar 09

http://www.news.com.au/business/story/0,27753,25813417-31037,00.html

 

[Mc Gusto]

So, the future looks rosy for the economy because Access Economics says so? The same experts who failed to predict the financial crises?

And what about data like 90% of China's growth is attributed to massive bank lending. This economic spurt is running on debt that will collapse once the money runs out.

And the only way for average Joe Blow to buy a house now, is to borrow amounts he can't afford when interest rates start heading towards 10%. Yeah great future in property.

Cheers

Spot on my friend, spot on

 

[Buckeroo]

Just an observation, but has anyone noticed that the spokesman for Access Economics is actually KRudd disguised?

 

[tech/a]

And the only way for average Joe Blow to buy a house now, is to borrow amounts he can't afford when interest rates start heading towards 10%. Yeah great future in property.

I agree with this astute warning.
Those that cant handle 10-15% interest rates in the not so distant future should avoid property for a number of years until the dust settles.

However those who can and have geared themselves to weather the storm will again reap massive gains.
Rental demand will just go through the roof.So those geared to accept 10-15% interest rates will also benefit from the massive rises in rent.

Inflation will take care of increasing building costs and along with it increase in domestic housing costs.(Towards the end of the Period of high interest rates)

Those who are best placed in this part of the property cycle will find some bargains. Those who cant find 50% down will of course mis out again


This thread has been going for years.
I'm hoping oneday someone proclaims that "NOW" is the time to buy property.
But I'm sure that day wont come---as Now IS the time to buy property just as it was last year and the year before and before that and next year and the year after and the year after that.

Fear will always be the buyers enemy.

 

[Mc Gusto]

Just an observation, but has anyone noticed that the spokesman for Access Economics is actually KRudd disguised?

This the same Access who claimed we were all doomed in January. To buy up on canned goods and prepare for the worst? All of these 'economists' should have to back up their current forecasts with their past claims...

 

[Glen48]

Access Econ. only had 1 good idea but they were wrong.
With USA paying $44,000USD a second in interest and looking for third throwing money at every thing package and like Australia not asking like why the other two didn't work all I can see are things going down further for longer.

 

[Soft Dough]

1. However those who can and have geared themselves to weather the storm will again reap massive gains.

2. Rental demand will just go through the roof.So those geared to accept 10-15% interest rates will also benefit from the massive rises in rent.


3. Now IS the time to buy property just as it was last year and the year before and before that and next year and the year after and the year after that.

4. Fear will always be the buyers enemy.

1. Nope, if capital growth stalls those who have geared will go backwards.

2. How will rent prices rise when household incomes decrease and unemployment increases?

3. No the last 6 months has been the right time to buy shares. I think that there is still a lot of risk in buying property, albiet the risk is moderated by a short sighted prime minister who has no idea where the money for the country actually comes from.

4. Wrong, greed in the medium term will be the enemy. Prices can never keep going up much faster than inflation ( historic growth is almost at inflation levels in the long term ), and a correction, either a fall or stagnation in prices ( see point 1 ) is going to happen.

 

[kincella]

Tech...you will scare the kids off with a 10-15% rate call....
I doubt that rates will rise over the next 2 years.....but people should factor in an average rate of 6.5 -7% for the long term.......
house growth has been a modest 1 -3% over the past year...not a 40% drop as some were screaming.....but look at the hyper enthusiasm with the stock market now.....we are not out of the woods just yet......some sobering up to do for another year IMO

Don't bet on an early rate rise
extract from the article......

And a soft labor market means no rate rise. That was highlighted by Macquarie Bank chief interest rate strategist Rory Robertson in a prescient note just ahead of the board minutes:

''Even when key developed economies start growing again rather than shrinking, as they will, the big issues will be the pace of growth over the next year or two - probably seriously sub-par on average - and the extent of remaining excess capacity - remaining huge,'' wrote Robertson.

The RBA said much the same thing, but in more restrained language and with no dashes:
''The large downside risks had abated. Nonetheless, the recovery was likely to be gradual, reflecting the weakness of consumption in the developed countries as households saved more, as well as the effects of the stress in the global financial system. Given this outlook, spare capacity was likely to accumulate for some time and unemployment in the advanced economies was likely to increase further.''

Robertson summed it up (before reading the minutes) thus:
''With wages and core prices growth continuing to decelerate, it'll be hard for central banks to make a strong case to hike rates for at least a year or more.''

''In Australia, the trough in official interest rates will be locked-
only once a peak in the unemployment rate - near 7%, 8% or 9% - is apparent to policymakers. In the US, with the latest Payrolls report showing net job losses of about half a million in June, it's still a bit early to pay much attention to demands for "exit strategies''.

http://business.smh.com.au/business/dont-bet-on-an-early-rate-rise-20090721-drim.html?page=2

 

[gfresh]

Well you're going to need rampant inflation of 10%+, to give us these 10-15% rates. To make it a decent real investment, property would need to be going up at 15% y/oy for a sustained period ..

I look forward to our sharemarket exploding in rampant commodity speculation if such massive inflation is to be the case. 8000 here we come!

8.5% was enough to really put the knife into the property market last time. 10% or more would burn it to a crisp.

 

[satanoperca]

A quick synopsis of my target property area.

Sold my apartment in Docklands, Jan 09. Since then two very similar properties have sold for 7% & 10% less.
Rentals, very few available around Jan in price target, approx 2, now there is 10 or more.

Port Melbourne houses, prices dipped at the end of 08 and have come back in the last few months strongly.
Have been to several auctions, with the majority properties returning to the market as rentals. What seems strange is the high selling prices and low rental returns. Eg Sold for $680K and been on the rental market for 1 month asking $450 p.w. %3.5 gross return. Another $850K, rental $570 p.w, 3.5% gross return.
Rentals in Port Mebourne, many available in targeted price range, was not the case in Jan and seem to have come down by 10% in the past six months.

Note : just my observations based on a small sample size.

Cheers

 

[Buckeroo]

I look forward to our sharemarket exploding in rampant commodity speculation if such massive inflation is to be the case. 8000 here we come!
.

Whats your reasoning for the share market exploding if hyper-inflation occurs?

If it does, all I can see is everyone will be broke due to the excessive personal debt - any spare cash will be put into interest payments. So I'd expect spending on goods & services would be limited to food - not much iron goes into food I'm afraid.

If anything, a depression I reckon would be better than hyper-inflation that's been generated by Governments. Yep my asset values will decline in a depression but at least people will still be able to afford their debts. Cash will still hold value.

What do others reckon, prefer depression or hyper-inflation and for what reasons?

Cheers

 

[Beej]

Posted 22 Jul 2009 8:52 AM
RBA vs Steve Keen

Oh dear. Life must be really tough for all those brave commentators willing massive house price falls. (I guess they got the media air time they wanted.) Based on the RP Data-Rismark numbers, Steve Keen will be hiking to Mount Kosciuszko in June this year (in fact, he should be pulling on the winter weather gear in approximately one week’s time, if he was to treat his bet with Rory Robertson literally – I know Steve will, however, argue that he wants to see the index sit above its February 2008 peak for a number of months before embarking on his long journey).

Interestingly, this is what I anticipated in December last year – so much so that I formally wrote to Dr Keen to warn him that “if I were a betting man, I would venture that you will be on your way to Mount Kosciuszko before the end of Q3 next year. I used to spend a lot of time up at Thredbo and it gets very chilly mid year – I have only ever done the Kosciuszko summit hike in summer.”

On a calendar year basis, Australian house prices fell by a tiny 2.6 per cent in 2008. In 2009, they have risen by 4 per cent in just the first five months of the year. And they look like they will continue to edge out modest gains going forward......

[Snipped the rest - read for yourself including a graph that breaks down the performance of low-end, mid and high-end indices]

From:
http://www.businessspectator.com.au...ument&src=is&is=Property&blog=Concrete Detail

Wheres Numbercruncher? Wasn't he always badgering us for evidence last year of rising prices? Well here it is for all to see. Across Australia, ow end up over-all since peak of early 2008, mid-range back where it was then and a little bit, only top 20% still down from early 2008 peak, but up significantly from the low late last year. (See attached price graph).

Cheers,

Beej

 

[Taltan]

I
I'm hoping oneday someone proclaims that "NOW" is the time to buy property.
But I'm sure that day wont come---as Now IS the time to buy property just as it was last year and the year before and before that and next year and the year after and the year after that.

Please explain how last year was the time to buy property. Per the optimistic RP Data. Property fell 2.6% in 2008 and is up 4% in 2009. Now of course considering the improvement in renovated houses, property into which no money was put in lets say conservatively fell 3% and than rose 3%. So if you bought in Jan 2008 per RP Data you have earned thus far just under 0%. So would putting your money in a non-interest earning bank account not been a better option???

 

[gfresh]

Whats your reasoning for the share market exploding if hyper-inflation occurs?

It depends on whether it were high inflation with low growth or high inflation with reasonable growth. If we were to get into the former, then I can't see the RBA jacking up the rates until the growth signals were there. Their mandate isn't simply to fight inflation, but to do so hand-in-hand with growth.

The latter, well, under that scenario you would expect things to be doing ok in the broader economy, so people have the income to pay higher rates. If not and the economy struggles, the RBA drops rates, etc. But of course what the rest of the world does plays a part and that is probably the curve ball.

My reasoning for a strong stock market is that if hyper-inflation were to take place, whatever profits companies are making will be higher (even just in nominal terms as inflation runs away), as people will be made to pay more for the goods and services sold. These should result in higher profits, and higher share prices, even if it's simply in nominal terms. They may not be selling or producing any more items, just the cost of these items is higher.

Under hyperinflation, funds will flow in to Australia buy anything exposed to commodities (if we haven't sold it all that is), pushing those exposed stocks higher, as well as our dollar. I mean we've already seen this occuring before the end of the bust, and even now all the traders are trying to fight inflation by speculating on commodities once again, and our market is being pulled up with it.

If anything, a depression I reckon would be better than hyper-inflation that's been generated by Governments. Yep my asset values will decline in a depression but at least people will still be able to afford their debts. Cash will still hold value.

In the Depression scenario, most people are out of work, and simply can't afford to pay their debts either, so still can't afford to put food on their table and have to burn their excess cash simply living. So similar end result.

 

[kincella]

well lets say one did buy in 2008 at 3% discount or 15,000 less on a 500k house....apart from the high interest rates until Oct 08....now the house gained 3% so in front now by 15,000....and opportunity to pay down the loan faster with the low 5% interest rates.....
or if it was rented out at 4% say 20,000 in....less 40,000 interest expense
claim the loss of 20,000 off tax at 30% = 6000 refund of tax....net loss 14,000 for the year...plus capital gain 15,000....about even....but there could be building allowance and depreciation claims, rates and insurance to increase the losses and increase the tax refund...
the next year rent stays the same...but the interest expense decreases to 5% say 500k @ 5% = 25,000.....and the capital gain of 3% ......
each year the loan reduces, the interest cost is reduced, and the capital gain stays a modest 3%......
sounds boring...slow and steady until one day the house is worth 750k's..the loan is down to 250ks.....thats what entices people into property.....
if one has a good job or career they enjoy....the property is a passive investment.....no need to spend too much time on it....just get on with the rest of their life...