House prices to keep rising for years

[numbercruncher]

hello,

great day yesterday, 65% clearance rate up 5% from last week

thankyou

robots

Yes and prices are still 10pc below last year, many in Neg equity already, and really badly for some considering high transaction costs of properties .

BUYERS put their hands up to pull Victoria's property market out of the doldrums at auctions yesterday.

The clearance rate improved to 65 per cent, reversing the declining trend of this year's sales figures.

The State Budget cut to stamp duty can only have helped to boost the market.

Estate agents reported buyers were still cautious, but vendors were selling their properties provided they were not expecting last year's higher prices.

Agents said there were few runaway results, even in blue-chip suburbs, with properties tending to sell within their expected price range.

They said it was still a buyer's market because properties were selling at prices 5-10 per cent lower than at the end of last year.

They said vendors who did not have to sell were withdrawing from the market, meaning competition for available properties might increase.

http://www.news.com.au/heraldsun/story/0,21985,23677666-2862,00.html

If you paid 500k in 2006 for your house and it got 20pc gain in 2007 to 600k , you are now back to 540k with this 10pc loss. Factor in massive fees duty interest etc , selling now in 2008 you wouldnt get your cash back ?

How is this possible ?

 

[jersey10]

1. Jersey, who are you suggesting should 'sell up' and why?

2. Do you believe that lending in Australia has been equally as irresponsible as that in America?

1. My comment was very tongue-in-cheek. I don't think because an economist on 60 minutes says house prices could drop everyone should go out and sell. Obviously property owners must find out for themselves if they think their own property will lose significant value and whether they want / need to sell.
Irrespective of what the property market does in general, I believe the properties that i own will experience a significant increase in value over the next two years due to the infrastructural changes (bus stations, cafes, medium / high density residential, shopping) planned for the area.

2. I have read and heard a few commentators state that Australian lenders have not been as irresponsible as American lenders. Still, if they have only been half as irresponsible the property market could still be in for somewhat of a bumpy ride??

 

[theasxgorilla]

If you paid 500k in 2006 for your house and it got 20pc gain in 2007 to 600k , you are now back to 540k with this 10pc loss. Factor in massive fees duty interest etc , selling now in 2008 you wouldnt get your cash back ?

How is this possible ?

Well, if you care to crunch the numbers you'll find that it works like this...

Buy a place for 500k, 10% down, mortgage of 450k @ 9% (interest only).

Your repayments are $778 a week. Assuming you can rent the same place for half that (quite and assumption, but lets play the game from a real estate bear angle), you are paying an extra $390 a week in interest, vrs renting the same place. Multiplied over 52 weeks means that it cost you 20k more a year to hold this property than rent...assuming you could rent it for half the interest cost...BIG assumption.

You're a first home buyer, in Victoria (great state that it is), and so you use the grant and bonus to net your stampduty of $22,810 down to $12,810.

Your maintenance and rates and insurances have cost you $5,000 for the year. Again, big assumption, but lets put some fat in there.

After 12 months the property owes you $37,810. But according to your news articles (...like we cant find out own news sources!?!) we're up 20% in CY07 so we're appraised at 600k. Now that the credit crunch has hit, we're down another 10% on the 600k, so we're at 540k.

Take away the $37,810 and you're at something akin to breakeven. Force a sale and pay 1.5% plus some other selling costs and you'd be at about -$10k. Some more BIG assumptions here. Assumes that you're forced to sell. Assumes that the new home owners didn't do anything to improve the value of the property. Doesn't factor in the intangible satisfaction owner has knowing they have freedom to do whatever they like with the place. People can and do pay a premium for this.

Are you really crunching the numbers or just addicted to Internet news?

 

[numbercruncher]

So you wrote all that just to say what I had already said in one sentence ? The " how is this possible " wasnt intended to be taken literally, sorry to waste your time.

Are you really crunching the numbers or just addicted to Internet news?

No its more TV news im interested in with the RE bubble, like 60m tonight, its what moves the masses ! Aussies tend to take people with " professor " attached to their names seriously.

That math you have done would be interesting with the 600k buy price in December down to 540k now 4 months later.

Anyway theres no "House prices to keep rising for years" come true yet, Ill be the first to let you know when it happens!

 

[theasxgorilla]

So you wrote all that just to say what I had already said in one sentence ? The " how is this possible " wasnt intended to be taken literally, sorry to waste your time.

Not at all. Helping you count it out, that's all. I'd hate for the viewers at home to think that you just plaster the thread with select bad news stories and smarmy remarks.

 

[Tysonboss1]

If prices fell 50pc and an army of New investors jumped in able to rent out lower than your rentals ? .... your tenants are so faithful to your empire that theyll continue paying your asking price ?


Good article though, sure to add to growing negative sentiment and downward momentum.

Just because te price fell 50% doesn't mean the rent would drop 50%,...

there would still be the same rental demand no matter what the price of the houses are,...

 

[numbercruncher]

Just because te price fell 50% doesn't mean the rent would drop 50%,...

there would still be the same rental demand no matter what the price of the houses are,...

The rents only need to be 10pc lower to undercut you.

If prices fell 50pc (which is unlikely for alot of areas, but has already happened in many parts of Sydney) , alot of people would become owners so rental demand could drop away.

According to the ABS there is 800k unoccupied dwellings in this country, I envision these will increasingly come to market.

Hot off todays newspress is tales of how severe this correction is becoming in Sydney ....

Sydney properties halve in price

HOUSE prices in some parts of Sydney have almost halved as battling borrowers struggle to keep up with increasing interest rates.

One property in Bankstown, bought for $500,000 in August 2005 sold in February for $215,000 - a loss of $285,000.

The data - complied exclusively for The Daily Telegraph - showed that even the more affluent suburbs are now beginning to suffer. Several homes in Waverley, Coogee and Paddington were sold for losses of more than 25 per cent. The worst hit was the Waverley house bought in July 2003 for $725,000 and sold for $465,000 in March.

Shane Oliver, chief economist at AMP Capital, said: "The pain of higher interest rates has only just started to kick in and we will see further falls over the next 6-12 months.

"The Sydney housing market is in a bind - we have a shortage of housing and huge demand but that isn't going to stop prices declining further. I think we'll see prices fall by another 10 per cent this year - and that's without another interest-rate rise." When the RBA decided to leave the cash rate at a 12-year high of 7.25 per cent last week, it hinted that rates might have to rise later this year if inflation kept rising, which would be disastrous for Sydney's homeowners

http://www.news.com.au/dailytelegraph/story/0,22049,23680992-5001021,00.html

Shane Oliver is a respected name, Im sure many many people take his commentary into consideration.

 

[numbercruncher]

Plenty of commentry on the housing crash today ....

IT'S every home owner's heartbreak - watching the value of their home plummet to half the price they paid within a few years.

And in working-class suburbs around the country, it's becoming an all-too-regular occurrence.

Zaia Dawood, a real estate agent at Fairfield in Sydney's southwest, last week sold a two-bedroom unit - bought for $240,000 in 2006 - for just $140,000.

"It is a massive decrease, but it's not rare in these areas," Mr Dawood said at the weekend.

"A property that was worth $400,000 last year is unlikely to sell for more than $300,000 this year.

"The housing market all over Sydney is slowing down, but in southwestern Sydney it's the worst."

Mr Dawood said the high level of repossessions because of failure to pay mortgages was the major reason for the rapid price decline.

"In Fairfield alone, I think there were something like 5000 repossessions last year," he said

http://www.theaustralian.news.com.au/story/0,25197,23682102-5013404,00.html

PROPERTY markets around Australia continued to struggle over the weekend, with auction clearance rates now below 50 per cent in the key markets of Sydney and Brisbane.

The only city bucking the trend is Melbourne, where the market is being driven by a population boom.

In Sydney auction rates this weekend were at a dismal 46.5 per cent, well below last year's 66.9 per cent for the same weekend, according to Australian Property Monitors. Volume was also sharply down, with more than $100million less in sales than at the same time last year.

The weekend's total of $93.9 million in property sold at auction was well under half of last year's figure of $201million.

The Brisbane market was even worse, with a 20 per cent clearance rate in contrast to 55.6 per cent last year.

http://www.theaustralian.news.com.au/story/0,25197,23682106-5013404,00.html

20pc, must be some kind of record ?

 

[Julia]

1. My comment was very tongue-in-cheek. I don't think because an economist on 60 minutes says house prices could drop everyone should go out and sell.

Thanks, Jersey. I'm relieved to hear it!
I usually manage to avoid "60 Minutes".

I have read and heard a few commentators state that Australian lenders have not been as irresponsible as American lenders. Still, if they have only been half as irresponsible the property market could still be in for somewhat of a bumpy ride??

Sure. I'm also a little tired of only the lenders being blamed. Don't the borrowers have some responsibility also?

 

[Julia]

OECD data shows our house prices are more overvalued than the US. It shows in our household debt per disposable incom. Australian leaders have probably been more irresponsible.

Thanks for that chart. Interesting. We can't blame all that household debt on housing though. A decent chunk of it will be credit card debt which a lot of people seem to think is never going to have to be paid back.

 

[Temjin]

Lots of bad news.....

RE bull: Lies! Lies! It hasn't happened to my property yet! The news doesn't matter, what I see in my area is completely different to what they report. Don't trust them! Just keep buying!

Sorry, just had to pass on this... Now back on topic...

One thing I'm more interested in is how come our property market is several months lagged behind other Western countries like US and UK? While our share markets are all in sync, the property market doesn't seem to be so even given the same fundamentals. Yes, there were the same HIGH DEMAND and LOW SUPPLY both in US and UK before the blow off, but how come they go off first?

 

[Temjin]

Sure. I'm also a little tired of only the lenders being blamed. Don't the borrowers have some responsibility also?

Unfortunately, this is simple human nature. It's better, or more socially acceptable for one to blame someone else (especially when they are better off) for their problems. Everybody does it.

But it also comes down to the lack of financial education to those borrowers who blindly believed that the banks/lenders are acting responsibly. Remember, lenders make their money through commission, the more they borrow, the more $$$ they get. Those individuals need to feed their family and to pay their mortgage. So why should they care about the borrowers' financial well being?

 

[numbercruncher]

Originally Posted by Julia
Sure. I'm also a little tired of only the lenders being blamed. Don't the borrowers have some responsibility also?

What came first the Junkie or the Drug Dealer ?

The alcoholic or the Pub ?

Banks lending people their maximum serviceable loan at 6pc with total disregard for rates rising or lending huge money with nothing but a ABN and 5pc deposit have to wear the brunt of the blame,imho. RE agents and the Media also played a central role in causing RE mania.

But sure those who " bought " into the dream of untold riches for merely joining the pyramid can accept some to, personal responsibility and all, but the most lax lending standards that we will ever see in our lives is what allowed it to happen this way.

 

[Tysonboss1]

The rents only need to be 10pc lower to undercut you.

If prices fell 50pc (which is unlikely for alot of areas, but has already happened in many parts of Sydney) , alot of people would become owners so rental demand could drop away.

.

what your saying doesn't make sense,

a Fall in house prices can't reduce the number of people needing a roof in the market,... If a renter buys a house and moves into it then the person who sold the house still needs some where to live so demand doesn't change.

In short There is no shortage of tenants at the moment lining up for rental properties,.... houses prices falling will not change this, only building more dwellings will, but a fall in prices will actually result in less new construction so the reverse will happen....

I rented a house about a month ago and had 21 applications,.... landlords can pick and choose at the moment, there is simply to much rental demand to lower prices,

 

[Julia]

What came first the Junkie or the Drug Dealer ?

The alcoholic or the Pub ?

Banks lending people their maximum serviceable loan at 6pc with total disregard for rates rising or lending huge money with nothing but a ABN and 5pc deposit have to wear the brunt of the blame,imho. RE agents and the Media also played a central role in causing RE mania.

But sure those who " bought " into the dream of untold riches for merely joining the pyramid can accept some to, personal responsibility and all, but the most lax lending standards that we will ever see in our lives is what allowed it to happen this way.

Well, we will just have to disagree about this, NC. There is a huge and increasing tendency in all facets of life for people not to take responsibility for their own decisions. If you are going to get involved in what is for many people the biggest financial decision they will ever make, i.e. buying a house, then it's up to you to educate yourself about such a venture in every aspect.

We are constantly inundated with fantastic offers for everything under the sun, all of which - if we believe the advertising and marketing - will allow us to realise our every dream for next to nothing. Believe it at your own risk.

 

[alwaysLearning]

So you wrote all that just to say what I had already said in one sentence ? The " how is this possible " wasnt intended to be taken literally, sorry to waste your time.



No its more TV news im interested in with the RE bubble, like 60m tonight, its what moves the masses ! Aussies tend to take people with " professor " attached to their names seriously.

Yeah I also am intersted in how sentiment is changing in the media. It was only two months ago that all the articles were predicting that the house prices would keep going up and up and up.

Now all the articles have done a back flip and it's all negative sentiment.

I don't trust the media much these days..especially now that I'm reading more into technical analysis. One can see how these types of stories affect the sentiment of buying and selling.

Anyway it's all very educational for me

 

[numbercruncher]

what your saying doesn't make sense,

a Fall in house prices can't reduce the number of people needing a roof in the market,... If a renter buys a house and moves into it then the person who sold the house still needs some where to live so demand doesn't change.

In short There is no shortage of tenants at the moment lining up for rental properties,.... houses prices falling will not change this, only building more dwellings will, but a fall in prices will actually result in less new construction so the reverse will happen....

I rented a house about a month ago and had 21 applications,.... landlords can pick and choose at the moment, there is simply to much rental demand to lower prices,

Well done with your rental, must be a hotspot, ive never had a problem finding rentals, never seen a shortage in Areas I live.

Theres nothing to stop our current small household sizes growing rapidly ie/
A young guy buys a deceased estate, gets 3 mates in renting a room - Dead guys freed up a house, 3 mates make 2 units vacant, plenty of other examples.

Falling prices will also bring some of the many 100s of thousands of vacant homes to market.

Your RE debate seems to only centre around supply/demand and we all know the Gov is going to tackle this head on.

Heres another great example of the Gov attempting to tackle the issue ....

Chief Minister Jon Stanhope has introduced a bill in the Legislative Assembly to allow low income earners to rent their land for a home, rather than buy it.

Based on the average price for blocks selling in Franklin this weekend, the rental would be around $150 a fortnight

Mr Stanhope says under the proposed legislation, residents who are renting land will be able to buy it from the Government when they can afford it.

http://www.abc.net.au/news/stories/2008/05/08/2239326.htm


and the rollout of the National Rental Affordability Scheme

This Scheme will help create 50,000 new and more affordable rental properties across Australia.

The National Rental Affordability Scheme offers annual incentives for a period of ten years. The two key elements are:

* A Commonwealth incentive of $6,000 per year refundable tax offset or grant; and
* A State or Territory incentive of $2,000 per year in direct or in kind financial support.

http://www.fahcsia.gov.au/internet/facsinternet.nsf/housing/nras.htm


How can a current investor compete with this ? Obviously places more downward pressure on prices and quite possibly rental returns.

 

[Tysonboss1]

Theres nothing to stop our current small household sizes growing rapidly ie/
A young guy buys a deceased estate, gets 3 mates in renting a room - Dead guys freed up a house, 3 mates make 2 units vacant, plenty of other examples.

[.

Won't lower price cause the oppisite though,... with gen y etc being able to buy there fore moving out of home,.... and there would also be less reward for elderly people to down size.

Any way this arrguement is never going to end,... so I might check out for a while,.... only time will tell what happens.

I am not trying to convince anybody here to invest, you guys all have to make your own call on how you see the feild,

 

[professor_frink]

Just got around to watching the 60 min vid, found it quite interesting that the report was indirectly trying to link a place like kellyville in Sydney to the subprime fiasco happening now.

From the transcript -

PETER OVERTON: It's a similar picture all over the country.

PROF. STEVE KEEN: This is the bursting of the bubble because some houses here were purchased for $950,000 sold in the last six months for $550,000.

PETER OVERTON: Economist Steve Keen has brought us to Seymour Way, Kellyville, in Sydney's north-west. In this one street, four houses have already been foreclosed and resold at nearly half-price. Is what we're seeing happening in America, coming our way?

PROF. STEVE KEEN: It has to because we've got ourselves in the same level of household debt as America as. It simply has to squeeze us the same way it has squeezed the Americans at some point, and if we think we're going to evade it I think we're living in a fool's paradise.

PETER OVERTON: What's your time frame?

PROF. STEVE KEEN: It certainly has to happen within the next two years. That, I would be willing to put, well, my house on.

That entire area has been a disaster zone as far as house prices are concerned for 4-5 years now. It's quite likely that the house he is describing was purchased in 2003 and sold off recently. This area went bust before the term 'subprime crisis' was even coined

Apart from that, was quite a sad story. Having said that, most of the sympathy I had for these people went right out the window when they moved on to talking about what they were doing to their pets

Given the choice between my dogs and the pile of bricks that they live in, I know which one I'd be walking away from, and which I'd be doing my best to protect

 

[numbercruncher]

Yes was sad about the Pets ....

I think the gist of the Pets in the US side of the story, thousands are forced into bankruptcy, forced to sell and move and Im assuming they cant take the pets to the rental property.

I recently read one about Townsville, record amounts of pets being dumped at the RSPCA because people cant afford to buy up there and the PIs wont let them have pets.