House prices to keep rising for years

[noirua]

There are big questions being raised about the value of new houses that were sold much above their real value.
In the States and UK this is proving to be a big factor. This is particularly bad in the NEW apartment sector, often referred to as flats in the UK. These falsed sellers are finding prices down by 25% to 35%.

Interesting to see if this proves to be the case in Australia?

 

[gfresh]

Apartments are seem to be the only affordable housing for most people, so I cannot see any particular crash - as it's especially popular amongst renters, of which there is still a shortage of affordable accommodation (or so is said). If new apartments are being built which are too expensive for the average budget, then maybe the demand will drop off.

I think some of the more exclusive rental apartments, that command say $500+/wk, could suffer in a downturn. People will be able to downscale there quite quickly if they need to cheaper rentals, which may in fact drive the rental for those up. Whos' going to be bidding the price *up* on the more expensive apartments in such a climate?

Was down in Melb over weekend.. outer east lots on the market. More than I've ever seen. Equal to the goldcoast right now. Used to live there until a few years ago. Quite a few are selling, but if that stops, vendors will have to drop prices to ensure sales.

With the whole oil thing, people will just need to adapt, or they'll suffer their own consequences. People's ego really gets in the way for many to adapt.

Driving those large people movers really seems silly to me anyhow leading into the future, despite their popularity growing year on year here in Oz. I know I can save 50% of my fuel costs simply by buying a car that achieves 5/6L/100km... Do I want to? Not particularly, as I'd have to drive a small buzz box. If petrol was $3/L, would I have too much choice? no.. Would I be worse off than now? Not at all, I'd just have a smaller car. I guess for families it's more difficult, but surely they can go smaller by changing the way they do things.

$5/10/L would hurt however.. even if you did have a car that achieved 5 or 6L/100km.

 

[numbercruncher]

Yes amoungst skyrocketing fuel and living costs I suspect far lying suburbs and townships to be particularly hard hit in the coming correction.

Its not just the cost of fuel for these people but the time cost, 2 hours + commuting a day would be much more productive spent doing over time.

Well located units/houses etc should fair much better.


The next penny to drop is the currently unfolding of tighter lending conditions , no one actually thought we were immune from the enevitable did they ?

HOMEBUYERS face tougher questions and even knockbacks when applying for a mortgage as banks and non-bank lenders secretly tighten rules on who qualifies.

Leaked circulars show a series of banks and non-bank lenders have tweaked eligibility criteria on some home loans in the wake of rising repossessions, growing mortgage stress and a funds shortage.

http://www.news.com.au/business/money/story/0,25479,23650783-5013951,00.html

These changes will remove 10s (maybe 100s?) of thousands of potential buyers Im certain, Inventory is rising rapidly and this will only accelerate this rate.

 

[Tysonboss1]

Just an update,...

latest figures for one of my investment areas in Brisbane is 16.5%p/a growth for the last 12months, add to that the 5% rental return.

 

[robots]

robi - all your assumptions are based on the "dreamy" fact that in 10, 20, 30 years time, the price of services and goods THEN will be proportionately the same as they are TODAY (especially the price of fuel for transport) and that property will have remained "king" and values continued to rise inexorably.

However, what do you think would happen to the demand for outer metro housing in ALL Australian cities, if as a result of an "unforeseen" drop in world oil reserves or an "unforeseen" calamity that significantly reduces world oil production for months on end?

What if such a scenario rapidly lifted the price of petrol here to $2, $3, $4+ a litre? You seem to be betting 100:1 that this scenario cannot and will not happen. That there is no current or future risk?

Sorry, but I'd be hedging my bet, since IF such a scenario presents itself in the next few months or years (surely a possibility given the current flux of the world?) I would predict the value of outer suburban housing in OZ to plummet like a lead brick and the subsequent economic fallout for many desperate outer suburban familes would then be unthinkable.

In a worst case scenario, inner city areas could become ghettos as outer suburban "economic refugees" flock to the streets of the city centres to try and survive. Oh, but of course - that could never happen. Only in other countries.

Sorry to provide a flip side to the coin. I was an "old school" boy scout in the 60's. You know - be prepared for anything .. including the worst!

Cheers?

AJ

hello,

great reading AJ, all the best, i find it surprising you are quick to call things "dreamy" on my views yet the entire post is full of if's, but's, could's and maybe's

go tyson, great effort bro, get yourself a ruski tonite

thankyou

robots

 

[numbercruncher]

Just an update,...

latest figures for one of my investment areas in Brisbane is 16.5%p/a growth for the last 12months, add to that the 5% rental return.

And subtract holding costs ? Its also theoretic gains, I notice Brisbane clearance rates are under 30pc and Inventory is rising at an alarming speed.


How about growth over the last quarter ?

 

[numbercruncher]

hello,

i am not a bull, many have made that assumption, repeatedly I have commented i wouldnt have a clue what is going to happen

i am very much for saving hard and investing money into shares and property yourself with the PPOR being for most a substantial investment (wealth creation),

in 10, 20, 30 yrs it will still be a way of people to release capital (via downsizing, suburb change) to "prop up" retirement

thankyou

robots

I think people need to aquaint themselves with the Generous concessions offered to Superannuation, Salary sacrificing, Spouse contributions etc etc if they want to " prop up " retirement, Im tipping these concessions wont be as tasty in the years to come.

What happens in 10 years or so when everyone floods there houses to market for downsizing and capital release as you suggest ? yep oversupply in housing and overdemand for units etc.

 

[robots]

I think people need to aquaint themselves with the Generous concessions offered to Superannuation, Salary sacrificing, Spouse contributions etc etc if they want to " prop up " retirement, Im tipping these concessions wont be as tasty in the years to come.

What happens in 10 years or so when everyone floods there houses to market for downsizing and capital release as you suggest ? yep oversupply in housing and overdemand for units etc.

hello,

downsizing has been happening for years and years already, nothing new I am afraid number,

and in tyson's eg, how about the return on investment (money down), oops, we dont like to discuss that

so after costs may be 10% on ASSET price? thankyou very much, what must ROI be?

great news tyson, have another ruski

thankyou

robots

 

[robots]

hello,

i would also look at re-evaluating the rental for the property as well,

20% rise should be very very easy at the moment, a family friend moved out of place in stkilda 10mths ago was paying $190/wk is $250/wk now

great stuff, still a very small figure though, a couple on average wages could easily afford that,

thankyou

robots

 

[numbercruncher]

hello,

downsizing has been happening for years and years already, nothing new I am afraid number,

and in tyson's eg, how about the return on investment (money down), oops, we dont like to discuss that

so after costs may be 10% on ASSET price? thankyou very much, what must ROI be?

great news tyson, have another ruski

thankyou

robots

Lets explore that as an owner occupier who bought 12 months ago ..... 300k property, fully financed , interest only ?


300,000 House
008,975 Duty
001,200 Mortgage duty
027,000 Interest at 9pc
000,500 Conveyancing
001,500 Rates
----------------------
339,175.00 total cost

300,000 + 16.5pc = 349,500 ( just enough equity to cover selling costs ?)
10k equity.


Renter would have 39,175.00 less 15,000 (300pw rent) = 24,175.00

Alot of faith being placed in continued capital growth for the OO yes ?

Investor, depends on personal circumstances I guess ?


I Note however Brisbane house prices only rose 2.8pc in the last quarter, annualised that will probably not beat holding costs, we can judge this better in hindsight, maybe next quarter will be a good indication ?

Good luck Property Investors !

I hear 150 RE offices a week are closing in the UK ?

 

[numbercruncher]

hello,

i would also look at re-evaluating the rental for the property as well,

20% rise should be very very easy at the moment, a family friend moved out of place in stkilda 10mths ago was paying $190/wk is $250/wk now

great stuff, still a very small figure though, a couple on average wages could easily afford that,

thankyou

robots

How much is the property " Worth " ?

 

[Tysonboss1]

And subtract holding costs ? Its also theoretic gains,

?

Your not much of a number crunchr if you think those gains ar theoretic,...

the rent more than covers the holding costs of the properties I hold in that area, I only hold about 40% debt against them,

and property holding Interest costs are less than sharemarket Interest holding costs, so you can't use the interest rate agrument against property.

 

[wayneL]

I hear 150 RE offices a week are closing in the UK ?

Yes

http://www.telegraph.co.uk/news/uknews/1930019/Estate-agencies-shut-150-branches-a-week.html

...and check out the reader's comments. The mood is very dark indeed.

 

[robots]

Good luck Property Investors !

hello,

thanks number good luck to you as well,

everybody has a choice and if they dont want to buy RE then so be it,

thankyou

robots

 

[numbercruncher]

Your not much of a number crunchr if you think those gains ar theoretic,...

the rent more than covers the holding costs of the properties I hold in that area, I only hold about 40% debt against them,

and property holding Interest costs are less than sharemarket Interest holding costs, so you can't use the interest rate agrument against property.

Yes I know you like using yourself as an example, your success is commendable. Especially being part of Gen-Y, you must be in the top 5pc of your age demographic financially.

My debate is with RE going forward, yes 2007 was a huge surprise to me personally, I cant for the life of me see anything similar for a very very long time outside serious intervention such as severe Inflation, especially wage inflation.

The numbers filtering through are painting a very gloomy picture. ie / Rising Interest rates, Tightening Lending standards, Rising inventories, Tumbling clearance rates, worldwide events etc etc

 

[Tysonboss1]

I Note however Brisbane house prices only rose 2.8pc in the last quarter, annualised that will probably not beat holding costs, we can judge this better in hindsight, maybe next quarter will be a good indication ?

?

I prefer not to look at overall figures for whole cities as it is not really accurate,

For exampe Brisbane some suburbs were -4% others were +20.... you really have to take it suburb by suburb.

And at the end of the day remember property is a long term asset quarterly and annual figures don't mean as much to me,.... I look at the 10year forecast, and I fully accept that if I have had a run of above average returns for a few years I may have a flat or down period,

one thing that has kept brisbane kicking for so long is that it had alot of ground to catch up to due to the prolonged flat period in the 90's... and it is till one of the cheaper capital cities.

 

[numbercruncher]

Yes

http://www.telegraph.co.uk/news/uknews/1930019/Estate-agencies-shut-150-branches-a-week.html

...and check out the reader's comments. The mood is very dark indeed.

Great read ....

Wow the comments, wouldnt want to let people know your a RE or ex RE agent in the UK by the sounds of the feedback Modern day withches it seems they are viewed as by those posters, theyll be whipping out the stakes soon!

Must be gut wrenching for those who bought at the height of the mania last year

I was reading through a blog for Brits emigrating to Oz, was completely amazed by the number of Skilled visa holders waiting on their houses to sell to finance the move out here, comments like on the market 12 weeks and only 1 Viewer etc ....

 

[wayneL]

Great read ....

Wow the comments, wouldnt want to let people know your a RE or ex RE agent in the UK by the sounds of the feedback Modern day withches it seems they are viewed as by those posters, theyll be whipping out the stakes soon!

Must be gut wrenching for those who bought at the height of the mania last year

I was reading through a blog for Brits emigrating to Oz, was completely amazed by the number of Skilled visa holders waiting on their houses to sell to finance the move out here, comments like on the market 12 weeks and only 1 Viewer etc ....

Estate Agents are even lower than NuLabour politicians here atm, and that's low. They are hated with a venom that is startling. That was even true during the boom. But people should look in the mirror first. It is the buyers who coughed up the ludicrous amounts for houses and created the situation where agent's made money for jam.

It is now the hysterical bandwagoners, both estate agencies and buyers who are now suffering.

As a rule expats in waiting tend to be the most delusional with price. They want someone to finance their plans by overpaying for their sh!tty pile of bricks.

On paper it's costing me heaps (from peak valuation to current valuation) and will drop a lot more, but I'm not a seller so WGAF. In the long term it will be healthy... value to return. Then I'll be in the market again.

 

[Macquack]

I prefer not to look at overall figures for whole cities as it is not really accurate,
For exampe Brisbane some suburbs were -4% others were +20.... you really have to take it suburb by suburb..

Would not the same principle be extended to individual property to property. No two properties are the same.

And at the end of the day remember property is a long term asset quarterly and annual figures don't mean as much to me,.... I look at the 10year forecast, and I fully accept that if I have had a run of above average returns for a few years I may have a flat or down period.

If your a long term investor, why are you always trying to beat-up the market. It does'nt matter what it is worth until you sell it.

one thing that has kept brisbane kicking for so long is that it had alot of ground to catch up to due to the prolonged flat period in the 90's... and it is till one of the cheaper capital cities.

A friend of mine moved from Sydney to Brisbane about 4 years ago. His simple reasoning - " Incomes are lower, so real estate prices are lower ".

 

[xoa]

A friend of mine moved from Sydney to Brisbane about 4 years ago. His simple reasoning - " Incomes are lower, so real estate prices are lower ".

That's a concept many southern investors are unable to grasp.

Plenty of rural towns have seen prices inflate to near Brisbane levels. Unaffordable housing is the kiss of death for towns which are already struggling with population declines.