House prices to keep rising for years

[Kimosabi]

An all too common misconception by property bears, "oh they must be in pain, the value of their house has dropped x%, boo hoo". The Swedes have a good term for it, skadaglad...meaning, "wound happy"...people who find glee in other peoples injury.

Little do they know...house price went down, but bank account still went up...how is it so???

For a long time the irresponsible and stupid have been rubbing the noses of the responsible in it. Now it's time to return the favour.

 

[theasxgorilla]

On the face of it that looks good, and they could be quids in. But there are sometimes a number of non-transparent factors.

* transaction and holding costs above rental value.
* renovations and repairs
* MEW on bling and other nonsense

etc.

Even so, 60 odd % gross profit is not too shabby... if they get it.

Yes these things. And the cashflow consequence of hold two properties with bridging finance. This can sometimes force the asset rich/cash poor to drastically drop their asking price. I know of at least one person who during a robust point in the cycle, picked up a fundamentally sound property in a fundamentally sound suburb (read, not depressed) for what equated to just less than a 20% discount of the vendors asking price.

I guess that happens less in the UK with the whole buy-sell chaining situation, right?

 

[wayneL]

Yes these things. And the cashflow consequence of hold two properties with bridging finance. This can sometimes force the asset rich/cash poor to drastically drop their asking price. I know of at least one person who during a robust point in the cycle, picked up a fundamentally sound property in a fundamentally sound suburb (read, not depressed) for what equated to just less than a 20% discount of the vendors asking price.

I guess that happens less in the UK with the whole buy-sell chaining situation, right?

It's starting to happen A LOT over here now. The buzz acronym is no longer "BTL", it's "BMV" (below market value), where folks are digging up distress sales and doing lease-backs etc (which many BMVers renege on and toss the vendor out on the street ). Mostly there is no infernal chain involved. (WTF? This chain business and the process of contract exchange is BS over here. The Oz system is much better/cleaner)

But even some of the BMVers are getting caught with declining valuations... and there is a potential glitch.

If the vendor subsequently goes bankrupt, and it can be proven that the property was sold prior to the bankruptcy for BMV, the receivers can go after the purchaser for the supposed shortfall. A couple of recent cases of this has the BMVers a tad concerned.

Also the expectation now is at least 10% off asking in normal sales.

 

[wayneL]

The British media has now comprehensively turned on the housing bubble. There is scarcely a bullish argument to be heard anywhere. It's all a tad late mind you. For years the media has been ramping property as the proverbial golden goose

Check out this one:

Scandal of luring first-time buyers
Gordon Brown is acting immorally by asking for rate cuts that could lead to negative equity
Alice Miles

What are they doing over there? Gordon is in the United States and Alistair is in China: because this is global, isn't it? It's not our fault, they imply; not us, the British Government. We're trying to grapple with worldwide financial problems here.

Except the problem is not global. It's British. House prices in Britain, at six times average earnings, are too high. That's it. We all know that, we've known it for years. Property prices are nonsensical, exorbitant, unaffordable, immorally inflated by investors and a shortage of available land space to build new homes, exploited by a greedy City.

All those buying a property have known this for the past five years at least, and it has then become in their interest to hope that the boom continues. To that extent, property owners have been complicit in the financial recklessness of the past few years: easy credit built on pyramid selling. Buying houses has been a gamble, a cross-your-fingers-and- hope-for-the-best, those-mortgages- are-pretty-generous bet that many of us have indulged in.

Nothing could be more immoral, then, in the current climate, than using government efforts and taxpayers' money to encourage first-time buyers to enter the housing market in order to stabilise the dodgy situation that banks and incautious borrowers have got themselves into through overlending and overstretching themselves: row, row harder, keep us all afloat! Yet that appears to be what the Government's strategy is... FULL STORY

 

[Mofra]

Valuation is now £140,000 and they can't even sell it at that.... got repossessed and lost everything.

Now you may think they were incredibly stupid, and they were, but there are lots of people who've done this with full encouragement from the banks/ mortgage providers. Even "smart" people.

ie. Full encouragement from those with clearly defined vested interests. As harsh as this sounds, this isn't a property problem, it's a gearing problem, one which would have occurred independant of asset class or method of borrowing, given the husband was gearing for personal assets.

Money management is money management, even a margin loan taken at the start of Nov 07 would have this couple in a similar predicament, albeit one far more transparent.

There are a few malcontented misanthropes who enjoy seeing this, but most bears have been cautioning about this sort of situation for a while, while suffering derision from certain property bulls

I would suggest independant of any bull/bear bias, gearing up to borrow for personal effects would be cautioned by anyone who has even a small amount of financial sense. Perhaps this is where most of debate lies - some of the bulls here aren't highly geared so see smaller risks in their positions, whilst the bears are (justifiably) concerned about the level of risk adopted by many of the rank & file property buyers due to the credit explosion.

The cognitively biased breed we are, view derision from bulls as OK but view anecdotes from bears as doom-mongering, schadenfreude, heretical etc.

Now that depends on which side of the fence you're leaning

 

[Happy]

Money management is money management

People should concentrate more on how to service their loan and forget building into the equation property appreciation.

 

[wayneL]

ie. Full encouragement from those with clearly defined vested interests. As harsh as this sounds, this isn't a property problem, it's a gearing problem, one which would have occurred independant of asset class or method of borrowing, given the husband was gearing for personal assets.

Yes, it is a gearing problem. The chappy mentioned geared up on frivolities mostly, but recent entrants to the housing market are geared up to the eyeballs, just on the house. So these people have a housing problem, and a gearing problem at the same time.

Many more have MEWed on their PPR to gear themselves into BTL.

The problem I see is that encouragement to gear is portrayed as coming from experts, rather than VIs. The few remaining attempts to ramp property from "experts", with a little digging, are coming from those with most to lose from a housing slump. That includes Crash Gordon and his cabal of Champagne Socialists. The current agenda is to "get first time buyers on the ladder".... at the top of the market.

For many years the property VIs have had a free hand in the media; social proof then strongly comes into play, that cognitive bias that creates the "bandwagon effect". The early ones are doing rather well if they kept their portfolios cash positive and LVRs sensible. The late comers and those who continued to highly gear are in deep doo-doo; and that is a substantial slice of the Anglo market.

Fortunately for the FTBs in this country, there are significant voices advising caution at current (falling) valuations.

The catch phrase has changed from "better buy now before it's too late" to "better not buy now, better to wait till value returns". This ins itself creates an opposing bandwagon as people are now scrambling to get out of the market.

In conclusion, the gearing problem and the housing problem, because of the asset bubble have become intrinsically linked. It will be interesting from now on to see what happens.

 

[Adam A]

Gday Wayne L

can you please explain mewed and vi

Thanks allways enjoy an os (overseas ) view

 

[wayneL]

Gday Wayne L

can you please explain mewed and vi

Thanks allways enjoy an os (overseas ) view

Mortgage Equity Withdrawal

Vested Interest

 

[robots]

hello,

sorry for the delay fellow asf members,

melb recorded 64% clearance for the weekend (saturday),

great result considering the no. of auctions with great prices also,

3 i went to were mixed, with only one selling, alls going well for in demand "correctly" priced stuff,

thankyou

robots

 

[motion]

This is a very interesting question, We are lucky as we bought our home before the boom, but my sister is now looking for a place in Sydney after coming back from overseas with her husband. They are on a good wage and want to buy there family home but to break into the market, they are looking around 800k to get a nice family home.

I must say this is nothing special it's just a nice family home, but in today’s market it seems normal.

I gave them some advice to hold off and see what happens but it seems they are going to buy because of all the press on how home prices are rising and going to rise up to 30% over the coming 5 years. I must say I think it will drop about 5% - 10% but you never know.

What are peoples thoughts on buying now in Sydney ?

 

[robots]

hello,

some more great reading:

http://www.news.com.au/business/money/story/0,25479,23560127-5013951,00.html

amazing to see the countries that are way ahead of the aus capitals,

awesome stuff

thankyou

robots

 

[xoa]

hello,

some more great reading:

http://www.news.com.au/business/money/story/0,25479,23560127-5013951,00.html

amazing to see the countries that are way ahead of the aus capitals,
robots

Yes, other nations do have far better rental yields, I agree. And not just for executive 3-bedroom apartments. That's why renting is a wise choice at the moment.

 

[alanding]

give me such simple numbers mean nothing.
We need more, at least the proportion of income for rent.
Maybe in Hongkong Rental is 1xxx, but income is 10xxx.

 

[wayneL]

More evidence of the sentiment change in the Old Dart:

http://commentisfree.guardian.co.uk/carole_cadwalladr/2008/04/albion_come_to_great_confusion.html

Albion come to great confusion

The property market is nothing but a pyramid-selling scam, with the last in losing out. If house prices are falling, so much the better
Carole Cadwalladr

Crisis? What credit crisis? You'd think from a week of headlines involving words like "doom", "panic", "collapse" and "plunge" that it's bad news that house prices might just finally fall.

But for whom exactly? Not for anybody wanting to buy a bigger house - if the price of your two-bedder drops, the price of a three-bedder will fall even more. And most certainly not for the first-time buyers. Last week, I read piece after piece on the misery that the squeeze on mortgages was causing them. What? Are you kidding?

Almost exactly a year ago, I reported on the residents of Albion Drive, a street in East London which I picked at random, to see how house price hyper-inflation had affected their lives. There were the winners, like Alan Rossiter, who'd bought his house for £9,300 back in 1977 and who, when I told him that it was probably worth £800,000, nearly fell off his chair.

And then there were losers, like 29-year-old Jodie Banaszkiewicz who was renting an ex-local authority flat with a friend, who scrupulously saved a portion of her income every month, but, earning less than £30,000 a year working for a record company, couldn't see any way that she'd ever be able to afford to buy.

Rosemary Stott, a film lecturer, whose house like the others on the street had risen 30% in value between 2006 and 2007 compared it to living in the Weimar republic. The rate of increase was such that it had distorted the value of everything; another householder, I met, who didn't want to be named, pointed out that in the last year, his house had earned approximately five times as much as he had. He earned £35,000 by working from 8.30am-6pm five days a week; he'd have still "earned" £150,000 if he'd just sat on his sofa.

The British property market is one of the greatest pyramid selling schemes the world has ever seen. And it depends on gulling those coming in at the bottom to borrow ever-increasing amounts of money to enrich those at the top. As Martin Weale, the director of the National Institute of Social and Economic Research, told me, it is a process of state-sanctioned and endorsed inter-generational robbery; a form of wealth redistribution against the young towards the old.

The money that people are said to have "made" on their properties - this wasn't free cash that fell off the money tree; it was earned by first-time buyers, or at least, they pledged it in promissory notes, debts, to earn over the course of a lifetime. Britain is going to be living with the consequences of these debts for decades yet to come. This is very far from free money.

On Albion Drive, the only young people I found who'd been able to buy had been lucky enough to have be gifted £125,000 deposit on a one-bedroom, £265,000 flat by their parents. But then, as they told me, "house prices don't go down in London."

Hmm. Well, let's see, shall we? Hackney, where Albion Drive is situated, is one of three London boroughs identified by Experian today as being most likely to experience negative equity. Anecdotally, London already is: a three-bedroom house I looked at last year now has its near-neighbour on the market - only, it's £80,000 cheaper.

House price hyper-inflation has distorted almost every aspect of society. And the prospect of Gordon Brown convening an emergency session to put it back on track is political expediency of the worst order, a reinforcement of the status quo to keep the rich (those with property) rich, and the poor (those without, the young, the not yet born) poor. A mechanism for restricting social mobility and ensuring that the worst-off in society stay worst-off.

It was the posters on housepricecrash.co.uk who, when discussing my original article, pointed out something I missed. A 12-year-old boy told me that prices wouldn't go down - which as one of the posters said, is about the closest you can find to the apocryphal "tip from a shoeshine boy": the moment that signals to investors that the market has passed its peak, that the bubble will shortly burst.

Forget Gordon Brown, the mortgage providers, the estate agents, without you - us, actually, because - oh, I can't go into it now, but I do have a vested interest here (I, too, am one of the great dispossessed) - the pyramid will collapse. Without us coming in at the bottom, there is no "market"; we're the crucial link in the chain, the suppliers of the cash; ATMs to anybody older, cleverer, luckier than us - who didn't leave the country, or have a gap in their career, or experience a relationship breakdown; who bought earlier.

Even the people in the £2m houses, selling to people in the £1m houses, selling to the ones in the £800,000 houses, finally depend on somebody's decision (ours) to take on a mortgage - or not - on a one-bedroom, £185,00, ex-local authority flat on a bad estate. This is E8's very cheapest property for sale, and it still requires a mortgage of five times London's average wage of £35,000.

Just say no. The confidence trick is over. First-time buyers unite. You have nothing to lose but the prospect of a mortgage on a multiple of five times your income on a property that tomorrow might be worth a lot less. For the first time in a decade, it's the young, the landless, the renters, Kirsty Allsop's basket cases, one and all, who have the power to influence what happens next. Feel the force. And use it wisely.

 

[numbercruncher]

Wouldnt want to be a seller if this report is on the money hey ?


One in five will lose homes: report

Up to one in five households under mortgage stress will lose their homes, according to new figures.

The findings in the monthly Anatomy of Australian Mortgage Stress to be released on Thursday show that about 20 per cent of people who go "into the slippery slide" of borrowing never get out.

But "once you're in severe stress there's only about a 50-50 chance of getting out," Martin North from Fujitsu Consulting, the firm that compiled the report, told Fairfax on Tuesday.

The firm's previous monthly mortgage stress report indicated an alarming 750,000 Australian households would be under mortgage stress by mid-2008 - with about 300,000 under severe stress.

Fairfax reported that 72 per cent of households blamed interest rates hikes for the mortgage stress this year, up from 14 per cent in 2005.

Mortgage stress has hit young families the hardest with 35 per cent experiencing the pressure.

http://au.news.yahoo.com/080421/2/16kcj.html

Sooo .. that report implies another 150 thousand established properties to flood onto the market ?

 

[professor_frink]

Wouldnt want to be a seller if this report is on the money hey ?


One in five will lose homes: report

Up to one in five households under mortgage stress will lose their homes, according to new figures.

The findings in the monthly Anatomy of Australian Mortgage Stress to be released on Thursday show that about 20 per cent of people who go "into the slippery slide" of borrowing never get out.

But "once you're in severe stress there's only about a 50-50 chance of getting out," Martin North from Fujitsu Consulting, the firm that compiled the report, told Fairfax on Tuesday.

The firm's previous monthly mortgage stress report indicated an alarming 750,000 Australian households would be under mortgage stress by mid-2008 - with about 300,000 under severe stress.

Fairfax reported that 72 per cent of households blamed interest rates hikes for the mortgage stress this year, up from 14 per cent in 2005.

Mortgage stress has hit young families the hardest with 35 per cent experiencing the pressure.

http://au.news.yahoo.com/080421/2/16kcj.html

Sooo .. that report implies another 150 thousand established properties to flood onto the market ?

I wonder how many of those people blaming rate hikes have a lot of consumer debt to go with the mortgage?? Quite a few I would think

 

[wayneL]

I wonder how many of those people blaming rate hikes have a lot of consumer debt to go with the mortgage?? Quite a few I would think

That's the predominant feature of folks who are in the schtook over here, massive MEW on frivolities... or very recent (last 1 - 3 years) buyers with humungous LVR/wage-mortgage ratios.

 

[robots]

hello,

and where will they all go once all sold?

no tent city in melbourne, no public housing, maybe end up in the rental market?

sensational

thankyou

robots

 

[professor_frink]

http://www.news.com.au/dailytelegraph/story/0,22049,23567042-5013110,00.html

PROSPECTIVE homebuyers should buy now before Sydney prices start to climb again with signs of a recovery in the housing market looming, property insiders claim.

New figures released this week by property analysts Residex reveal Sydney property values have risen by more than six per cent in the past year despite talk of a continuing slump due to rising interest rates and low levels of affordability.

While gains have mostly been in the more affluent suburbs, overall Sydney has recorded a growth in median home values of 6.39 per cent in the year to the end of March, 2008.

Head Residex statistician John Edwards predicts Sydney values to increase by six to eight per cent this year.

"For the next couple of years there will be growth, particularly in the unit sector,'' Mr Edwards said.

"If you can afford to buy you must do it now because it's not going to get any cheaper.

Had read this shameless spruiking on Sunday, and thought I'd throw it out there to counter the downramping from the bears

Wonder if the author of this article has a house for sale and is looking to get a bit more interest!

Love the parts in bold