House prices to keep rising for years

[KIWIKARLOS]

I think the main advantage we have in OZ is our huge budget surplus which is likely to further expand into the coming years. Our exports next year alone could jump another 45 Billion that could very well leave us with surpluses in excess of 3% !

The best way for us to weather this storm would be to concentrate on trying to maintain current house prices and limit the decreases to as little as possible then massively increase productivity and reduce inflation through federal expenditure on projects which will make a difference. I relise that gov spending can increase inflation but targeted projects may cause short term inflation pressure but medium to lond term would be of great benefit. Lets get more productive, start saving money instead of blowing our wages years into the future and turn the country around. I believe that tightening credit is starting to do this for us and i hope it goes further. These no deposit no interest for 36 month deals are BS, credit card limits are outragous but who's to blame the banks or the person who doesn't even take a minute a day to look at their finances to relise they are living beyond there means
Imagine how much we could gain from a large scale information and teaching program designed to help people learn how to manage their finances ? What would it take a few ads, a call centre and a few trained councilers, hell even centrelink should have free financial advisors.

The projects I would like to see happen are:
1. Murray Darling river. More efficient farming through expenditure in irrigation technology. They are already planning to plant massive amounts of forest alone its banks which will be tradable with a carbon trading scheme and which will also benefit the environment.
2. Spending on Ports and assoicated infrastructure: Sydney , WA and melbourne are already in the first stages. They are upsizing, converting to all electrical and building rail transport systems to remove trucks of the road to strategic cargo Nodes.
3. Stop spending money on pointless road projects and spend big on Public transport, we should be encouraging people to ditch large cars and multiple cars per household and IMO actually be charging people for excessive personal transport use. realistically apart from sport etc nobody really needs a highly inefficient large car.

 

[Judd]

realistically apart from sport etc nobody really needs a highly inefficient large car.

Get real! How else am I supposed to impress other parents as I drop off my children at very expensive private schools. Sheese!!!!

 

[KIWIKARLOS]

Of coarse how silly of me and what about the massive gains in safety. I mean what if I'm driving through a school zone at 70 kmph on the way to my weekly botox party and a small child jumps out in front of me. Thanks god my child will be positioned safely 2 metres above the bull bar impact zone!

 

[xoa]

I'd wager that the UK property crash has more to do with inflated prices, as was the case with the dot com crash, rather than liquidity problems. Trying to correct the situation by injecting more debt into the system is like trying to put out a bonfire with kerosene. Debt is the problem, not the solution.

Hordes of "investors" are fleeing the market, often taking significant losses. They've suddenly realised that property can go down. It's reassuring that not even reckless interest rate cuts are having an effect. Even with government distortion, the free market is working.

 

[stock_man]

A few houses in some smaller towns in the US you could buy a basic house (as in 3 bedrooms), for the price of a new car sold here.

As you can here: http://www.realestate.com.au/cgi-bi...fmt=&header=&c=56024012&snf=rbs&tm=1207715302

(Assuming we are talking about a new bmw and living who knows where?)

 

[nioka]

hell even centrelink should have free financial advisors

They do.

 

[gfresh]

(Assuming we are talking about a new bmw and living who knows where?)

True, guess it's not much different..

http://www.realtor.com/search/listi...&pg=3&lid=1096704242&lsn=24&srcnt=1535#Detail

http://www.realtor.com/search/listi...8d1a864&lid=1096344306&lsn=3&srcnt=226#Detail

http://www.realtor.com/search/listi...&pg=3&lid=1094676023&lsn=27&srcnt=1535#Detail

http://www.realtor.com/search/listi...&pg=3&lid=1094676023&lsn=27&srcnt=1535#Detail

I'm there!! (maybe not)

 

[xoa]

True, guess it's not much different..

http://www.realtor.com/search/listi...&pg=3&lid=1096704242&lsn=24&srcnt=1535#Detail

http://www.realtor.com/search/listi...8d1a864&lid=1096344306&lsn=3&srcnt=226#Detail

http://www.realtor.com/search/listi...&pg=3&lid=1094676023&lsn=27&srcnt=1535#Detail

http://www.realtor.com/search/listi...&pg=3&lid=1094676023&lsn=27&srcnt=1535#Detail

I'm there!! (maybe not)

I'd say it's enormously different. The first American house you linked to doesn't look like much, but it seems to be in good condition on a large block in a rapidly growing city of 650,000 people. Not bad for less than $30k.

The "cheap" Australian houses were all in dying outback towns, most of them with populations of less than 1000, and advertised as being in need of repair. It might be hard to find a plumber or carpenter in a town of a few hundred people.

 

[rocket67]

I'd say it's enormously different. The first American house you linked to doesn't look like much, but it seems to be in good condition on a large block in a rapidly growing city of 650,000 people. Not bad for less than $30k.

The "cheap" Australian houses were all in dying outback towns, most of them with populations of less than 1000, and advertised as being in need of repair. It might be hard to find a plumber or carpenter in a town of a few hundred people.

Not necessarilly correct.

I have just purchased a home on a 1,050 square metre block at Millicent, SA
for $80,000. Sure, the house is only a 2 bedroom timber frame - fibro clad, and needs some work to bring it up to scratch. we will do the work on it and then rent it out for a few years, or use it as a holiday home.

Millicent is 50klm`s from Mt Gambier and has a high annual rainfall. Residents in these areas actually have green lawns and can use sprinklers!

Hardly what you would call a " dying outback town ".

Rocket.

 

[theasxgorilla]

Economies are complex. These apples to oranges comparisons are amusing but unless you're planning to move to or invest in the US it isn't going to help you much.

 

[xoa]

Not necessarilly correct.

I have just purchased a home on a 1,050 square metre block at Millicent, SA
for $80,000. Sure, the house is only a 2 bedroom timber frame - fibro clad, and needs some work to bring it up to scratch. we will do the work on it and then rent it out for a few years, or use it as a holiday home.

Millicent is 50klm`s from Mt Gambier and has a high annual rainfall. Residents in these areas actually have green lawns and can use sprinklers!

Hardly what you would call a " dying outback town ".

Rocket.

At every price point, Australian property looks seriously overpriced by international standards. I cruised Millicent listings, and it seems that the median is about $200k. So yes, it's not a dying outback down, but this fact is adequately reflected in its prices. At $80k, you were probably buying the property at land value.

 

[rocket67]

xoa, I totally agree that housing in capital cities in Australia is way overpriced.
My wife wants us to buy some investment properties in Adelaide - but i absolutely refuse to. The possibility of prices coming off the boil here is very high in my opinion.

There are also water considerations. Adelaide can no longer pump water from the Murray river to top up our reservoirs. It does not rain in Adelaide very often and as the city expands - where is the water going to come from?
There is a de-salination plant on the drawing board. Perhaps it will help?

So my plan is to buy property in the South East of the state where there are no water supply issues. Houses can be bought all around the South East for around $100,000. Lots of land is also available from about $55,000 with all services connected.

In the years ahead i believe that there will be a population explosion to these areas - mainly due to the availability of abundant water.

Rocket.

 

[wayneL]

As I reported a few posts up, UK house prices have just had a 2.5% MoM fall, and was just discussing the reaction on the news and the morning shows with another misanthropic malcontent.

There are all these phases people go through, shock, denial, anger, panic, acceptance etc (Can't remember the exact order). The shock was seeing queues outside Northern cRock of Sh!te. Since then there has been steadfast denial. Denial that prices are in a bubble, denial that the credit crunch will affect UK, denial that house prices are coming off, denial that it will affect them personally etc.

Now that the positively skewed official figures are now showing hefty drops, anger has definitely set in. The morning show bobbleheads (who all have BTL portfolios) are seething with rage. Blaming America, blaming the financial press for talking us into a recession, blaming GenXer FTBs for buying iPhones instead of hocking themselves up to the eyeballs and buying an overpriced pile of bricks.

Everything except the real reason - the credit/asset/house price bubble/overvaluaton.

Now the gu'mint is panicking and setting up committees on how to hock up FTBs on a house.

What is now obvious (and the Austrians knew it all along) is that the entire UK economy is predicated on ever growing house prices. And Oz is exactly the same, it is just fortunate for 'Strayans that dirt is expensive and they can flog it off.

Chuck in POO and a few other things going on atm and I think it's fairly obvious that the US and UK (and Euro) economies are in for a very tough time.

The $64,000,000 question for buyers is, with all that in mind, do house prices look reasonable and sustainable?

Certainly not here.

 

[explod]

xoa, I totally agree that housing in capital cities in Australia is way overpriced.
My wife wants us to buy some investment properties in Adelaide - but i absolutely refuse to. The possibility of prices coming off the boil here is very high in my opinion.

There are also water considerations. Adelaide can no longer pump water from the Murray river to top up our reservoirs. It does not rain in Adelaide very often and as the city expands - where is the water going to come from?
There is a de-salination plant on the drawing board. Perhaps it will help?

So my plan is to buy property in the South East of the state where there are no water supply issues. Houses can be bought all around the South East for around $100,000. Lots of land is also available from about $55,000 with all services connected.

In the years ahead i believe that there will be a population explosion to these areas - mainly due to the availability of abundant water.

Rocket.

A good post, same in Victoria, Melbourne is in grid locked, they are deepening the bay when in fact the best deep sea port is in Portland. The combined Portland Warrnambool area has the resources, climate and space to replicate Melbourne. As is the case with your south east SA, and just over the border too.

 

[Bill M]

Tonight on TV a Morgan Stanely guy said that Sydney house prices will probably fall about 25 to 30% this year. Then on another program they showed two guys from Melbourne who were buying up RE in Brisbane and in 14 Months they accumulated something like 2 dozen properties. The two guys said their properties were well up in value and that they were planing to buy more. Interesting perspectives but who do you believe?

 

[rocket67]

We all know that the USA is screwed, and according to Wayne - so is the UK
and Europe. Are we next?

Bill, things are starting to look grim. Surely we are not going to be spared from the global financial crisis, so my money is on the Morgan Stanley bloke being correct. However a drop in Sydney prices of 25 - 30% sounds a bit extreme ( we all hope ).

Explod, I think you are onto something. Maybe we need some visionary politicians to plan a couple of " satellite cities " in the area between Warnambool and Mt Gambier. Plenty of water, The port at Portland, lots of coastline and lush green land.

Perhaps if we did that it would give our young people an opportunity to buy into " the great Australian dream " at affordable prices.
Something has to give with the current prices, and surely we have an obligation to give our young children the opportunity to be able to buy decent homes to raise their children instead of renting those " dogbox " inner city apartments.

Food for thought.

Rocket.

 

[Mofra]

Yeah, I get it...but when things go wrong I think it pays to strip away the layers of 'professional' fluff that have been put in place here.

If you were an average Aussie looking for an investment property, would you buy the property that the sub-prime mortgagee has, and rent it to him/her/them? If the answer is, "no, because they're not a good tenant because...<insert essentially the same reasons why you wouldnt give them a home loan>, and because <insert reasons why it doesn't make sense on a macro-level to invest in said property in said neighbourhood of said suburb of said city>", then why does layering in all this complexity and professionalism suddenly make it okay to invest that way??? Clearly after all the write-downs it wasn't/isn't.

Where did common sense go?

A "sub-prime" mortgagee would own the property so wouldn't rent it, and in the US contruction activity was at ridiculous levels as opposed to our stifled rental market so it is hard to compare. It is a moot point regardless as the sub-prime market is Australia is miniscule compared to the market in the US which is where most funding originates (thanks to Societe Generale, we used to fund quite a bit out of Europe but alas no more).

Unfortunately secured credit standards here make little difference to the funding source (cost of funds) which is what is hurting lenders (and by second degree borrowers) at the moment.

 

[wayneL]

For anyone interested, Alistair Daaaaaahhhhhling (UK Chancellor of the Exchequer {Treasurer}) gets a grilling on the BBC. Interviewer could have skewered him a bit more IMO, but not bad for the government's property ramping division (BBC).

http://www.bbc.co.uk/radio4/today/listenagain/ram/today4_darling_20080409.ram

 

[Tom Ronalds]

As I wrote earlier on this thread, the writing is now well and truly on the wall here in Australia. An example - here's some data regarding property for sale listings over the last 12 or so months across Australia:

State....Feb 07.....Feb 08.....Latest
QLD.....17,165.....29,754.....34,041
NSW....15,888.....31,160.....43,957
VIC......18,190.....23,312.....28,926
WA......10,643.....19,119.....22,620
SA.........5,192.......7,168.......8,677
NT............575..........806..........928
ACT..........556.......1,024......1,166
Aus.....68,208....112,342..140,315

(Source: RPData Information Services)

Notice anything about that table?

Listings have gone through the roof. Correspondingly, other data available at the same site shows that the levels of unsold stock sitting on the market are closely following.

When plotted on a chart, the picture looks suspiciously like the US housing market some time ago - shortly before it all fell over over there.

Clearly all these properties are coming on the market for a reason. The most likely explanation being that the costs of owning are becoming unsustainable for many people. Others possibly just want to cash in whatever profit they think they have and get out. Many will probably be disappointed with the offers - if any - they will get on their properties.

Either way, this is creating an oversupply and ultimately it will lead to prices going down. Here goes the fallacy of "supply shortages".

Next item concerns employment. The Australian reported today that job vacancies have declined for 5 straight months in a row. The newspaper concluded that "some softening in employment appears inevitable". Business confidence has already tanked to levels not seen for many years. Retailers are reporting sales have "fallen off a cliff".

The above factors of course will trigger the next stage of the downward spiral - people losing their jobs and having to liquidate; or having their banks do it for them. Either way, it will lead to more drops in property prices.

Banks are already tightening up credit; not quite like in the UK yet, but they will soon. One just needs to take note of the rate at which the majors have been increasing provisions for bad debts. They claim so far it's mainly targeted at corporate debt, but residential and unsecured loans (credit cards etc) will not be far behind.

Someone here has already mentioned the predictions of certain economists about Sydney house prices possibly dropping by up to 30% - like for example in this article:

http://tinyurl.com/5hwztr

My opinion is that it won't be confined to just Sydney and that, depending on the severity of the recession the developed - and possibly also the developing - world, Australia included, will be going through over the next 12-18 months (and maybe longer, if the absolutely shocking data coming out of the US is any indication), the overall declines may be even larger.

For many Australians, particularly the younger ones or those with short memory, this will be a novel and rather painful experience. It will once again demonstrate that contrary to popular wisdom, it is possible to go broke owning property because it does not always go up.

For those pundits who think we are somehow "different" here in Australia and therefore immune, I would suggest to do a search for relevant newspaper articles from 2 or so years ago from the US and about 12 months ago from the UK. You will get a very strong sense of deja vu reading those...

Regards,

Tom R

 

[theasxgorilla]

A "sub-prime" mortgagee would own the property so wouldn't rent it, and in the US contruction activity was at ridiculous levels as opposed to our stifled rental market so it is hard to compare. It is a moot point regardless as the sub-prime market is Australia is miniscule compared to the market in the US which is where most funding originates (thanks to Societe Generale, we used to fund quite a bit out of Europe but alas no more).

Unfortunately secured credit standards here make little difference to the funding source (cost of funds) which is what is hurting lenders (and by second degree borrowers) at the moment.

Thanks for pointing that out! :

Yeah, I get it. The point I'm trying to make is that you're looking at the details of the situation. Strip away the layers of fluff here and you basically have people in houses who couldn't afford them.

I'm suggesting that the average Aussie (or American) landlord would apply more stringent scrutinisation to the same people as tenants. Yet the banks didn't. Put the formality of the arrangements aside for a second and think a bit laterally. You know they call interest ränta in Sweden (pronounced, renta). You know what that implies? Who becomes your landlord when you have a mortgage? IMO, this terminology cuts through it. And the implied landlords in this case were negligent. Not only that, they attempted to dilute their negligence into the so-called CDOs.