House prices to keep rising for years

Mc Gusto said:

I am struggling with the fact that Australia can be seemingly so decoupled from the global economy. Seems we are defying gravity with house prices, unemployment etc.

Is it sustainable? Are we delaying the inevitable or will it all come to a grinding halt and the effects of the global downturn be trully felt.

Lets face it - for a lot of us it is a matter of 'recession, what recession..?'

This is not meant in anyway to undermine the people who have lost their jobs or houses due to the industry they work in. More about Australia as an economy.

I am absolutely miffed as to the confidence people are showing in bricks and mortar just at the moment. Long term no issue. Short term i remain bearish as i am thinking the most recent gains are a bubble.

Thanks

Gusto

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It is a bubble, very strange goings on indeed, when interest rates go up and the housing grant bribe is removed we will see a different scene.

robots said:

hello,

wow:

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

its on again, and when rates go up we get extra as well, costs extra so nothing really changes

this is amazing, well done brothers, australia the place to be

thankyou
professor robots

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wow robi, you must be on some good **** today. well done bro.

MrBurns said:

It is a bubble, very strange goings on indeed, when interest rates go up and the housing grant bribe is removed we will see a different scene.

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Oh is that what we are waiting for now? I thought it was bank collapses and credit rationing? Oh hang on that didn't happen, then wasn't it meant to be mega-high unemployment and a wave of foreclosures/bankruptcies?/forces-sales? Oh hang that hasn't happened either....

So now it's back to waiting for high interest rates and no FHB grant boost is it? You mean just like we had in mid-2008, plus a full blown global financial crisis, crashing stock market, contracting GDP etc at the same time as well?? And yet prices barely fell then and have now come back?? Strange isn't it?

In the meantime Sydney auction clearance rate 74% today.....

PS: An article from Chris Joye about the so called "bubble" calls on AU resi real estate: http://www.businessspectator.com.au...-trouble-pd20090807-UNVWK?OpenDocument&src=is

Cheers,

Beej

Beej said:

Oh is that what we are waiting for now? I thought it was bank collapses and credit rationing? Oh hang on that didn't happen, then wasn't it meant to be mega-high unemployment and a wave of foreclosures/bankruptcies?/forces-sales? Oh hang that hasn't happened either....
So now it's back to waiting for high interest rates and no FHB grant boost is it? You mean just like we had in mid-2008, plus a full blown global financial crisis, crashing stock market, contracting GDP etc at the same time as well?? And yet prices barely fell then and have now come back?? Strange isn't it?
In the meantime Sydney auction clearance rate 74% today.....
Cheers,
Beej

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We were always waiting for the bribe to cease but Rudd the Wrecker extended it to get some more adulation, the rise in interest rates is just the sealer of the deal.

Both events are coming just wait for it.

I've seen bubbles before but this is the mother of them all.

Clearance rates are up but numbers are down, doesnt really matter nothing will stop whats to come for the housing market.

If you were so confident you wouldnt be so defensive.

this extract from Christopher joye's article from Beej's post sums it up nicely...
and I note the angst against property rising modestly, however its all safe and sound in the stockmarket again....the stockmarket can rise 50% in a week but we dont hear the word boom, from that crowd do we...

and some iriots on another forum think, govt provided public housing units will bring rents down for everyone, and so crash the property market for investors......
the extract..................

In turn, most of the analysts, strategists, economists, investors and journalists’ business models are built on these asset-classes succeeding. It therefore makes little commercial sense to bludgeon them with the relentless hysterics we hear about housing.

In contrast, bricks and mortar is easy game. There are few if any institutional constituents to annoy. Just anonymous individual families with little authority and influence. Indeed, if you can spook as many as these retail punters as possible, you might just convince them to put more of their wealth into, say, shares.

Making unsubstantiated claims about a forthcoming housing Armageddon is a win-win situation. With one hand you distract attention away from the poor performance of your own Australian equities portfolio, while with the other you boost the likelihood of unsuspecting retail money flowing your way.

A related and utterly false allegation that one often hears is that housing investment is “unproductive”. I saw this claim in yesterday’s Australian Financial Review – but it is another one of these very convenient but grossly flawed dogmas that suit certain stakeholders (in the case of the AFR article, those lobbying for better tax treatment for their own businesses).

kincella said:

this extract from Christopher joye's article from Beej's post sums it up nicely...
and I note the angst against property rising modestly, however its all safe and sound in the stockmarket again....the stockmarket can rise 50% in a week but we dont hear the word boom, from that crowd do we...

and some iriots on another forum think, govt provided public housing units will bring rents down for everyone, and so crash the property market for investors......
the extract..................

In turn, most of the analysts, strategists, economists, investors and journalists’ business models are built on these asset-classes succeeding. It therefore makes little commercial sense to bludgeon them with the relentless hysterics we hear about housing.

In contrast, bricks and mortar is easy game. There are few if any institutional constituents to annoy. Just anonymous individual families with little authority and influence. Indeed, if you can spook as many as these retail punters as possible, you might just convince them to put more of their wealth into, say, shares.

Making unsubstantiated claims about a forthcoming housing Armageddon is a win-win situation. With one hand you distract attention away from the poor performance of your own Australian equities portfolio, while with the other you boost the likelihood of unsuspecting retail money flowing your way.

A related and utterly false allegation that one often hears is that housing investment is “unproductive”. I saw this claim in yesterday’s Australian Financial Review – but it is another one of these very convenient but grossly flawed dogmas that suit certain stakeholders (in the case of the AFR article, those lobbying for better tax treatment for their own businesses).

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I was a real estate agent for over 20 years, real estate is the only asset class I trust but to mindlessly ignore it's booms and busts is just silly, but does make opportunities for those that are more realistic.

who is mindlessly ingnoring the booms and the busts....are you saying I am ?
well I bought most of the recent properties in 2000 to 2002, sold some in 2004 looking to buy again if and when the heat comes off.....biggest opportunities were missed last year up to Oct.....
and if you hold property for 10 years...you will see booms and busts within that time frame...

Yep Kincella/Beej, your right - the economy is looking fantastic so you should by all means make the most of it.

But when it turns, I hope you will have the courage to stay & take your licks on ASF?

Cheers

I have never said the economy is fantastic....I really only comment on housing and the reasons why it holds up....
how is the stockmarket then .....the gambling den...
I believe its just a roller coaster on the economy for another year or more

kincella said:

I have never said the economy is fantastic....I really only comment on housing and the reasons why it holds up....
how is the stockmarket then .....the gambling den...
I believe its just a roller coaster on the economy for another year or more

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Ok fair enough, should have said property market.

But, I'm concerned about the people who are obtaining bigger & bigger loans to purchase homes. And it not because of house prices being overvalued, its because interest rates are abnormally low. This & the government handouts is causing the bubble.

When this bubble bursts (or if you like when interest rates begin rising), it will be horrific not only to these people, but to us investors. So I say phooey to the real estate agents etc who are encouraging the emotive side of people to think they are missing out & coercing them to pay higher prices.

They won't be missing out on the pain of bankruptcy.

Cheers

MrBurns said:

I was a real estate agent for over 20 years, real estate is the only asset class I trust but to mindlessly ignore it's booms and busts is just silly, but does make opportunities for those that are more realistic.

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Yep that's exactly right - but I hope you are not suggesting that I have "mindlessly" ignored the property boom/bust cycle? As described in many posts here last year, after watching the market last year I decided that Nov/Dec was likely going to be the best time to upgrade my PPOR, with prices having fallen more heavily in the price range that I was buying into (~$1.5M-$2M range) vs the one I was selling into (2 properties, one ~$1M and one sub $500k).

Well it turns out that my call was a good one - would you agree? Since I bought my new PPOR, based on recent sales in my area it seems that I have saved/made at least $150k so far by taking this action when I did. So I don't think people like myself and Kincella etc are being naive about the property cycle at all - I think in fact our actual actions and the benefits we have gained from them show that we understand the market (at least in our respective area's) better than most of the un-informed and often near-hysterical commentary you find about the place!

What happens from here? Is there a new boom coming? I actually don't think so. In Sydney at least, after 4-5 years of relative stagnation in nominal prices already (that's hardly a bubble by the way!), I think we are about where the market was in 1991/92 right now. The falls are done, the top-end has taken the hardest hit, there *were* some mega-bargains for those cashed up and with the guts to buy when everyone else was too scared. Prices have since risen again, bargains are now few and far between, and interest rates/government grants etc have put a solid floor under the market. We may well see some more moderate median price declines next year, but they will be small if they happen. After that prices will start to slowly rise again for the next 5 years, probably at something like a 5% pa rate or there-abouts on average. Look at a house price chart from the 90s and you will get the idea IMO.

Other parts of Australia have risen much more than Sydney in the past 5 years, so the outlook may be a little different for them - but I suspect it will only mean a higher chance of falls next year, followed by less growth (maybe below inflation) for the 5 years after that - or it may not! Maybe the shift in city relative pricing in the last 5 years is permanent??

Cheers,

Beej

Buckeroo said:

When this bubble bursts (or if you like when interest rates begin rising), it will be horrific not only to these people, but to us investors. So I say phooey to the real estate agents etc who are encouraging the emotive side of people to think they are missing out & coercing them to pay higher prices.

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But Buckeroo - is your memory so short that you have forgotten we already went through the high interest pain thing through 2007 and into mid 2008? Did the housing market collapse then? No - it certainly was under some pressure, and lower priced area's in Sydney in particular struggled and saw prices fall for a while there, but there was no great collapse. Since then over-all house-hold debt levels have actually fallen - so what makes you think rising interest rates in a few years will have any more of an impact than they did in the last 2 years??? What's more, the guys with their hands on the monetary policy levers (ie the RBA), don't want a house price collapse (due to the wider implications for economic growth etc) - so as soon as things start to look too bad in that regard you can bet your last dollar they will not raise rates any further, and will probably cut them again, and the cycle starts all over.....

Cheers,

Beej

most people are not that stupid to just rely on the low rates, they will have factored in rates of 6.5- 7% as the average....some were very smart, bought low priced houses with low rates...
most commentators including stevens is saying it will be 2 years and the cash rate back to 5%...= 7% loan rates.....thats if the economy is strong....

Beej said:

But Buckeroo - is your memory so short that you have forgotten we already went through the high interest pain thing through 2007 and into mid 2008? Did the housing market collapse then? No - it certainly was under some pressure, and lower priced area's in Sydney in particular struggled and saw prices fall for a while there, but there was no great collapse. Since then over-all house-hold debt levels have actually fallen - so what makes you think rising interest rates in a few years will have any more of an impact than they did in the last 2 years??? What's more, the guys with their hands on the monetary policy levers (ie the RBA), don't want a house price collapse (due to the wider implications for economic growth etc) - so as soon as things start to look too bad in that regard you can bet your last dollar they will not raise rates any further, and will probably cut them again, and the cycle starts all over.....

Cheers,

Beej

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OK, I'll try an answer:

Australia's interest rates then were never as low as they are now, granted they are not 1% such as in the US, but it does set the scene for some turbulent times particularly when coupled with the near panic response caused by the first home buyers handouts.

The problem lies in the capability of people to absorb increases in interest rates. The first home buyers for instance, how much do you reckon they can absorb? Maybe 5%? After that its free fall. And yes, they aren't stupid, they are though, gullible because of their inexperience.

Anyway, you shouldn't rely on recent boom history as an indication of things to come, its pure folly.

Its far more realistic to think of how things will pan out with the current circumstances. For instance, higher taxes, higher interest rates, high indebtedness of consumers, loss of incentives from the Government and the stimulus construction program (will drive up building costs).

Incidentally, they weren't high interest rates in 2007, they were just in the normal monetary band to combat minor inflation. And yes debt levels have fallen slightly - only because wisely, people are beginning to save and it will continue. And wasn't it Stevens & economists that have been getting everything wrong?

I invest in real estate, have been for 30 years and am worried about the future - I can't see anything rosy for quite some time.

Cheers

Buckeroo said:

OK, I'll try an answer:

Australia's interest rates then were never as low as they are now, granted they are not 1% such as in the US, but it does set the scene for some turbulent times particularly when coupled with the near panic response caused by the first home buyers handouts.

The problem lies in the capability of people to absorb increases in interest rates. The first home buyers for instance, how much do you reckon they can absorb? Maybe 5%? After that its free fall. And yes, they aren't stupid, they are though, gullible because of their inexperience.

Anyway, you shouldn't rely on recent boom history as an indication of things to come, its pure folly.

Its far more realistic to think of how things will pan out with the current circumstances. For instance, higher taxes, higher interest rates, high indebtedness of consumers, loss of incentives from the Government and the stimulus construction program (will drive up building costs).

Incidentally, they weren't high interest rates in 2007, they were just in the normal monetary band to combat minor inflation. And yes debt levels have fallen slightly - only because wisely, people are beginning to save and it will continue. And wasn't it Stevens & economists that have been getting everything wrong?

I invest in real estate, have been for 30 years and am worried about the future - I can't see anything rosy for quite some time.

Cheers

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These were all the exact same arguments people were making back in 2000 when interest rates were about 1% higher than they are now.....

Look - since 2007/08 (only 1 year ago) the FHB buying of the past 9 months hardly changes anything - you are talking about ~100,000 new home owners, of whom at least 60,000+ would have bought anyway even if there were no grants and so on. So out of the 8M Aussie households, or out of even the 1/3 of them with a PPOR mortgage (= ~3M let's say), that 40,000 recent grant induced FHB group represents only 0.5% of total households, or 1.3% of mortgaged households. As you can surely see, things have not changed *that* much - so we know that even if interest rates hike back up to 9% again like last year, we have already seen what impact that would have. Rates will NOT go higher than this unless we really start to have a serious inflation problem down the track - in which case wages will be going up as fast anyway and all that mortgage debt will get inflated away.

So in either case it's not going to matter *that* much - certainly that scenario is not going to be the trigger for a crash/collapse.

PS: At current debt levels, 9% was considered to be "high" - high enough to be a major factor in the change of commonwealth government; just think about the implications of that for the future for a minute.....

Cheers,

Beej

Yeah, what I was going to say.. FHB who have bought in the last 12 months aren't going to be enough the entire housing market down even if every single one had to sell. It's been a large percentage of houses sold in the last 10 months, but as the entire market 1 year worth of sales is still only a fraction of total homes.

gfresh said:

Yeah, what I was going to say.. FHB who have bought in the last 12 months aren't going to be enough the entire housing market down even if every single one had to sell. It's been a large percentage of houses sold in the last 10 months, but as the entire market 1 year worth of sales is still only a fraction of total homes.

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But people are forgetting the the FHB are they only ones keeping the housing industry strong these days.

When interest rates rise and the government grant goes and the FHB market crashes, then there goes the market and we'll see a normality in prices

hello,

and that will be an even better time for the HOLDERS of property Dowdy, the q at the door will be fantastic

thankyou
professor robots

Beej said:

These were all the exact same arguments people were making back in 2000 when interest rates were about 1% higher than they are now.....

Look - since 2007/08 (only 1 year ago) the FHB buying of the past 9 months hardly changes anything - you are talking about ~100,000 new home owners, of whom at least 60,000+ would have bought anyway even if there were no grants and so on. So out of the 8M Aussie households, or out of even the 1/3 of them with a PPOR mortgage (= ~3M let's say), that 40,000 recent grant induced FHB group represents only 0.5% of total households, or 1.3% of mortgaged households. As you can surely see, things have not changed *that* much - so we know that even if interest rates hike back up to 9% again like last year, we have already seen what impact that would have. Rates will NOT go higher than this unless we really start to have a serious inflation problem down the track - in which case wages will be going up as fast anyway and all that mortgage debt will get inflated away.

So in either case it's not going to matter *that* much - certainly that scenario is not going to be the trigger for a crash/collapse.

PS: At current debt levels, 9% was considered to be "high" - high enough to be a major factor in the change of commonwealth government; just think about the implications of that for the future for a minute.....

Cheers,

Beej

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Ok Beej, we could go argument/counter argument for some time & still won't change our positions on property. I suppose the future will finally give the correct answer

Cheers

hello,

here we go Beej, another 12mths, 24mths, 36mths for "it" to occur

special word out to "house prices to stagnate for years", the original back in 2005

paradise for the holders, well done give yourself a pat on the back for the hard work and smart decisions many have made

the one and only top of the list tax free investment vehicle keeps on and on

thankyou
professor robots