House prices to keep rising for years

[Kimosabi]

Record Debt Levels + Negative Savings Rates = All Hell Breaking Out, the only question is when...

 

[Kimosabi]

Does anyone have any data on the Volume of Houses being bought/sold around Australia?

 

[hangseng]

Interesting read, but imho it makes a better case for land prices going up faster than ever than for governments to ease restrictions. Land use restrictions are increasing, and will continue to increase (a) as environmental concerns mount, and (b) as food production gets more important.

The outcome will be more people crammed into less space, making land and house prices less affordable than ever.

I agree it is an interesting read although taking the median income of Perth as ~$59k is misleading. This is the lower end of Perth incomes, not what would be regarded as median.

I am remaining in the property market as I see excellent rental returns continuing in fact increasing significantly. I am close to positve gearing now and will definately be so in 6 mths.

 

[wayneL]

Anyone involved in overseas markets such as the US or UK must be experiencing deja vu reading these threads. I'm most familiar with the UK market as I had a bit of a flutter here a few years ago.

The very same arguments that the bulls are using on this thread, was being used by the bulls here... exactly the same. i.e. immigration, supply and demand, strong economy, this market is different yada yada yada.

Yet the RE market here has turn to **** in the last six months. It's happening folks, it's beginning to crash... and quickly. Whether that continues and we see rather large reductions in prices, we'll just have to wait and see; but these cycle tend to be played out over a period of years rather than months.

Distress sales are everywhere and "buy at 20% below market and rent back to owner" companies are busy as anything. (These figures are not reflected in most indicies, or in the mortgagee sales number). Realistic vendors are flogging there houses at 2005 values while everything else is sticking.

I Cheltenham where I live, the amount of "won't sell, so I'll rent it out" rental stock is amazing and rents are dropping as there is competition for tenants.

I've just signed on to a new build (six months old) property that represents 2.9% yield and at a 15% discount to what the first tenant paid. LOL

Now remind me why Australia is so different? It's just a matter of time and global economic tipping points. Already stuff is happening behind the scenes in Oz financial markets.

The prudent will come out fine in the end, but prices are set at the margins and the margin is veeeery stretched... everywhere.

Now, I'm sick of this discussion because we are going around in circles and repeating ourselves. I'm off to lech at some hot Polish ladies before they all go home to Poland.

 

[Tysonboss1]

The figures show that Gen-Y simply arnt buying, thats when Pyramid schemes come undone, when they dont get new entrants.

Gen y simply arnt interested in debt slavery home ownership, they are the gimme now generation, Ipods, foreign holidays, rock concerts, generally having a ball and adding to Inflation

Gen x seem to be the ones obsessed by home ownership, they are something like 20pc of the population and 50pc of the debt

What the,.....I am gen Y and I hold plenty of real estate,... My sister is gen Y she owns 2 properties,... out of my 5 closest mates 4 hold realestate one of them holding more than myself.

But yes alot of other gen Y members i know don't hold any investments let alone realestate,... they have more important things to spend there coin on such as binge drinking, consumer goods, new cars and holidays

Its funny I actually had my girlfriends besty telling me she couldn't move out of home because rent was to expensive as she was plugging her new digital video camera into the tv to show me footage of here latest over seas trip to europe,.... she was also drinking her 5th vodca crusier of the night and was thinking of heading out to the club later on.

 

[theasxgorilla]

And yet you seem to ignore that this is not the case in at least some countries comparable to Australia (Canada & parts of USA in particular) or even in some high population density countries like Germany (where prices have been flat or falling for decades) or Japan..

I'm glad you look abroad Tom and try to find some answers or get some perspective. But I think it's important to understand why a situation is the way it is. If we want to throw in comparisons why can't we also cite examples such as South Africa or Ireland. Why is RSA an interesting case? Well, it's prime borrowing rate is 14.5%, and it's economy continues to grow. How can that be?

Or what about Ireland? From a practically bankrupt country back in the 80s, to some 25 years later where they're the second richest country in Europe, per capita, behind little Luxembourg. How is this so? Furthermore, what does this look like? Well, from what I understand (having some great Irish friends myself) it means that if you want to find a rental you get up at the crack of dawn every Saturday and fight your way to open houses and fill in applications hand over fist. It also means that the landlord of the place you are renting is raising rents as fast as your own salary and house prices are increasing so you continue to struggle to get the deposit needed to break free. Things can get much worse and stay bad if the conditions for their perpetuation remain.

I'd be more interested in lengthy discussion if it included answers to some of these questions, because I think it's just as relevant as it is to identify why Germany is a bad example. I have an idea, lets give Western Aust and parts of SA and NT to an empirical communist state for a few decade and lets see what kind of shape it's in when we get it back. Then we try growing our combined economies from there, whadda ya say?

And Japan. I think Japan is one of the most unique countries on earth and has suffered a unique fate for many decades now. Use it as a reference point at your own peril, IMO.

And that brings us to the US and Canada. Hmmm. Speak English and use dollar signs when they count money. That's good enough for me. Our fate will mirror theirs.

ASX.G

 

[Kimosabi]

Well I'm Generation WTFU(Woke The F^ck Up)

I'm going to buy a lump of Semi Rural Land and Grow all of my own Organic Fruit, Veges and Herbs, etc and become completely self sufficient.

I'm going to sell some of what I produce so I'm getting a return on Investment, but ultimately I don't give a F^ck about money, there are more important things in life than the Rat Race where your drinking water is poisoned, your food is poisoned and the air you breath is poisoned.

Goodluck yo'all, I'm off to lead a long, healthy life...

 

[Tysonboss1]

Anyone involved in overseas markets such as the US or UK must be experiencing deja vu reading these threads. I'm most familiar with the UK market as I had a bit of a flutter here a few years ago.

The very same arguments that the bulls are using on this thread, was being used by the bulls here... exactly the same. i.e. immigration, supply and demand, strong economy, this market is different yada yada yada.

Yet the RE market here has turn to **** in the last six months. It's happening folks, it's beginning to crash... and quickly. Whether that continues and we see rather large reductions in prices, we'll just have to wait and see; but these cycle tend to be played out over a period of years rather than months.

Distress sales are everywhere and "buy at 20% below market and rent back to owner" companies are busy as anything. (These figures are not reflected in most indicies, or in the mortgagee sales number). Realistic vendors are flogging there houses at 2005 values while everything else is sticking.

I Cheltenham where I live, the amount of "won't sell, so I'll rent it out" rental stock is amazing and rents are dropping as there is competition for tenants.

I've just signed on to a new build (six months old) property that represents 2.9% yield and at a 15% discount to what the first tenant paid. LOL

Now remind me why Australia is so different? It's just a matter of time and global economic tipping points. Already stuff is happening behind the scenes in Oz financial markets.

The prudent will come out fine in the end, but prices are set at the margins and the margin is veeeery stretched... everywhere.

Now, I'm sick of this discussion because we are going around in circles and repeating ourselves. I'm off to lech at some hot Polish ladies before they all go home to Poland.

No doubt this year will be the worst in some peoples lives then,.... other more advanced investors will probally say it was the best time of there investing life.

it's all a cycle wayne,.... downturns come and go,... you just have to have your business setup so it doesn't wipe you out,.... and think of stratergies that you will still beable to keep working at throught the down turn.

 

[theasxgorilla]

Now remind me why Australia is so different? It's just a matter of time and global economic tipping points. Already stuff is happening behind the scenes in Oz financial markets.

There can only be answer to that question, since there only one thing that Australia does well and that is sell the stuff dug up out of it's backyard to China. And China, as an unusually governed country, doesn't have to play by the rules of a global market economy as moral high-grounders like the US and UK have to appear to do. I see it as plausible that China might crack the whip, so to speak, and use softer commodity prices to continue meeting its agendas. It might not propel Aust growth at the same rate of knots, but it may be enough to keep us steady. Last time I checked, sub-prime and credit-crunch was not a Chinese agenda. Olympics and industrialisation seem to be.

I'm sorry to hear that the pretty Polish cleaning ladies might be heading home. DIY could mean something different in the coming years.

ASX.G

 

[numbercruncher]

Thats nice Tyson, doesnt show in the figures though ....


This is what i typically see/hear from Gen-Ys

Feedback from a news article ....

We are better educated, more mobile (vertically and internationally), and are earning much more at a younger age than previous generations. The next 20 years will be a buffet of opportunity for us as the boomers retire and sell up all the assets that they have acquired in lieu of a lifestyle. You certainly don't need to feel sorry for this inner city renter.

Perhaps my experience is not generalisable, but in my social circles the only people who seem to be worried that my generation aren't buying houses is the generation who wants to sell them to us.

http://www.abc.net.au/news/stories/2007/11/05/2081872.htm


Seriously Gen-Y are on easy street renting at a fraction the cost of ownership and a never ending stream of Genx and Boomer property speculators adding to the rental property market

Piece of useless information for ya'll , in 1989 in the 25-29 age group 45pc of ppl had children, in 2004 that had dropped to 29pc - I wonder how much can be directly attributed to affordability and how much to lifestyle ?

 

[wayneL]

No doubt this year will be the worst in some peoples lives then,.... other more advanced investors will probally say it was the best time of there investing life.

it's all a cycle wayne,.... downturns come and go,... you just have to have your business setup so it doesn't wipe you out,.... and think of stratergies that you will still beable to keep working at throught the down turn.

Hang on a minute! That's my argument! WTF?

You've been agreeing with me all this time? Sheesh, talk about teaching me to suck sausages!

 

[chops_a_must]

I'm glad you look abroad Tom and try to find some answers or get some perspective. But I think it's important to understand why a situation is the way it is. If we want to throw in comparisons why can't we also cite examples such as South Africa or Ireland. Why is RSA an interesting case? Well, it's prime borrowing rate is 14.5%, and it's economy continues to grow. How can that be?

Because there are stringent laws regarding the exporting of company and personal dollars. So a lot of money gets put into RE there because there isn't anything else to do with the money. And then you get people, like the one who explained this to me, a stockbroker here that has won the West Australian Newspaper competition forever and a day piling in because they see a way to make a buck on the back of legislation in a country forcing overly inflated investment.

(Obviously there are reasons why they made the legislation but it has side effects) South Africa this is.

 

[wayneL]

Last time I checked, sub-prime and credit-crunch was not a Chinese agenda.

Might pay to check again. I've heard some stories of dodgy lending there too. hard to get the real picture though.

I'm sorry to hear that the pretty Polish cleaning ladies might be heading home. DIY could mean something different in the coming years.

ASX.G

Oh they're sharper than that! They kick the local chavette's backside in the jobs stakes. My personal banker at HSBC is a very pretty Polish lady. Fortunately she is engaged (or unfortunately as the case may be ) to a Pom so will be staying on.

 

[theasxgorilla]

Piece of useless information for ya'll , in 1989 in the 25-29 age group 45pc of ppl had children, in 2004 that had dropped to 29pc - I wonder how much can be directly attributed to affordability and how much to lifestyle ?

As a person putting off having kids I can give my own answer. And for us it's both lifestyle and affordability.

Increasingly the middle-class ain't looking so middle any more. Take the house I grew up in with my parents out in the suburbs of Melbourne as an example. When that was new and we were living out there in an idyllic little suburban community it was something to behold. Today, the same houses are run down, and many in the street have become investment properties changing hands through various owners and tenants, and the community is in shambles. And I'm supposed to pay more, in real terms, for that existence? To me, this is an affordability crisis. Paying a lot of money for a **** existence.

The only alternative I see is upward social mobility. And that don't come easy when you add kids to the balance sheet too early on in life. Neither does world travel or both parents working 60+ hours a week.

I don't expect that everyone who puts off having kids sees it this way. Some people who put it off until later in life are still broke when they start a family.

ASX.G

 

[numbercruncher]

another good article on the Gen difference .... I'll quote a little ....

1 November, 2007: Generation Y's preference for the inner city rental life over mortgages and McMansions isn't a sign of immaturity or snobbery, writes Scott Hickie. Rather, it shows their knack for sophisticated microeconomic modelling

Economically speaking, the boomer seachange is ironic because their financial profile opens up a wider spectrum of choices in the property market, yet they select areas that won't have the infrastructure demanded by well-heeled retirees, until they have more than one foot in the grave.

Yet it is Gen X real estate economics that really crumbles into a flickering wasteland of empty home ownership dreams, when compared to the advanced calculus deployed by Gen Y. Sailing beyond the idealism of their 20s into the distorting social pressures of haphazard mortgage chasing, Gen X economics reverberate the simplistic notion that financial sacrifices made in obtaining a mortgage are a guaranteed future windfall. It's elementary classical economics where lost cultural development, martial disintegration and psychological mortgage belt stress are costs neither internalised into accounting ledgers nor ascribed adequate value.

They are undeterred by sub-prime trying to tear the US economy a new orifice, or by the hordes of mortgage-stressed families evicted by predatory backyard financiers hiding behind solicitor lenders across Sydney's western suburbs. For Gen X it is full steam ahead in claiming their rightful access to the Australian home ownership dream, regardless of their capacity to service exorbitant and grossly inflated interest repayments.

Gen X real estate economics resembles that of a drug runner trying to make the transition to drug dealer. The mentality pervading Gen X economic modelling is essentially: 'I don't give a **** where, when, how or why, just deal me into the game.' Home ownership becomes the magical panacea to financial security and the road to becoming Mr BIG.

( Genx profile is so well backed by the massive distortion of Debt Genx hold )

http://www.newmatilda.com/2007/11/01/unbearable-logic-gen-y-real-estate-market

 

[Tom Ronalds]

I'm glad you look abroad Tom and try to find some answers or get some perspective. But I think it's important to understand why a situation is the way it is. If we want to throw in comparisons why can't we also cite examples such as South Africa or Ireland. Why is RSA an interesting case? Well, it's prime borrowing rate is 14.5%, and it's economy continues to grow. How can that be?

Many reasons, but amongst the most important ones would be the fact that a majority of the South African population is trying to climb up from a very low base. It's similar to China in that context - high single or even double digit rates of growth can be sustained when you are starting at the very bottom. Most of these people do not have much debt, as they cannot borrow much anyway on the incomes they are earning. So interest rates are not necessarily directly relevant to them.

Nominal interest rates also do not mean much on their own. You need to look at the real interest rates, taking into account the rate of inflation. On top of that, many other factors influence economic growth. As I said above, high interest rates may not be such an impediment, if personal and business debt is low. Just look at Brazil - not so long ago their interest rates were over 20% and they are one of the new economic "tigers" now - member of the BRIC bloc.

Or what about Ireland? From a practically bankrupt country back in the 80s, to some 25 years later where they're the second richest country in Europe, per capita, behind little Luxembourg.

Ireland had received massive amounts of EU subsidies, but they also significantly freed up their economy and reduced taxes.

They are a good example of free market reforms delivering real and fast increases in wealth.

Compare with Portugal, which started from a similar level, also received a lot of support from the EU, and its income per head is still stuck at around 65% of the EU average - not a great deal more than that of the "new Europeans" - fast growing post communist countries like Slovenia or Czech Republic. Many of the post communist countries have introduced low, flat tax systems and they will soon start overtaking the sclerotic members of the "old" Europe. Unlike many western European countries, the post-communist ones have experienced socialism first hand, so they do not hanker for a cradle-to-grave government support, as is the case in places like France, Belgium or Italy.

Portugal is a relatively socialist country. Their results are also quite predictable for that reason. Spain had an unemployment rate of over 20% for many years, until finally it got a non-socialist government at about the same time John Howard first got in here. Now its unemployment rate is in single digits, its GDP per head is about to overtake Italy's...and the Socialists are back in power! It'll be interesting to see how long the Spanish miracle will last, especially as Spain has had one of the most severe housing bubbles in Europe, which apparently is now starting to keel over.

How is this so? Furthermore, what does this look like? Well, from what I understand (having some great Irish friends myself) it means that if you want to find a rental you get up at the crack of dawn every Saturday and fight your way to open houses and fill in applications hand over fist. It also means that the landlord of the place you are renting is raising rents as fast as your own salary and house prices are increasing so you continue to struggle to get the deposit needed to break free. Things can get much worse and stay bad if the conditions for their perpetuation remain.

The Irish housing bubble is pretty much over now; it's just a matter of how quickly it will deflate. A bit like next door in Britain.

Besides, Ireland still retains quite a few places with a lot lower prices than Dublin, which is where the majority of the massive increases in house prices were located. Overall, it is nowhere near as unaffordable as Australia.

I'd be more interested in lengthy discussion if it included answers to some of these questions, because I think it's just as relevant as it is to identify why Germany is a bad example.

Germany is a totally valid example for the point I was making - i.e. that urban planning and high population density do not necessarily equal massive house price rises. Germany also has had relatively high rates of immigration over the past 15 or so years, so in my view it serves as a reasonable comparison.

I have an idea, lets give Western Aust and parts of SA and NT to an empirical communist state for a few decade and lets see what kind of shape it's in when we get it back. Then we try growing our combined economies from there, whadda ya say?

I think the results would be quite predictable. It's quite possible that having wall-to-wall Labor governments in this coutry will soon give us a taste of what spin-based economic management from the left angle is all about. ;-)

And Japan. I think Japan is one of the most unique countries on earth and has suffered a unique fate for many decades now. Use it as a reference point at your own peril, IMO.

Japan is indeed unique. Its very own property bubble was also unique - in how massive it got before it burst. Yet it can serve as a good example of the fact that property bubbles do burst eventually, and that sharemarkets do not always have to go up - even for decades at a time.

Cheers,

Tom R.

 

[krisbarry]

In 1996 we had high interest rates and by 1999/2000 the bottom of the housing market was hit.

In 2008 we have high interest rates and by 2011/2012, the bottom of the housing market will be hit.

Get my drift....house prices are heading down

Its all cyclic, not straight up as some head strong housing gurus suggest!

Please "robots" stop ramping this over-heated housing market

 

[BradK]

Its all cyclic, not straight up as some head strong housing gurus suggest!

Please "robots" stop ramping this over-heated housing market

I agree...

 

[Tysonboss1]

In 1996 we had high interest rates and by 1999/2000 the bottom of the housing market was hit.

In 2008 we have high interest rates and by 2011/2012, the bottom of the housing market will be hit.

Get my drift....house prices are heading down

Its all cyclic, not straight up as some head strong housing gurus suggest!

Please "robots" stop ramping this over-heated housing market

yes exactly,... But to try and pick the exact top andsell all your property investments then try to pick the exact bottom is not really worth doing.

especially if you hold properties in strong areas the down turn will most likly only be a period of stagnation, not a massive drop like the bears here are predicting.

So if you have a property portfoilio of properties that have features that will become sort after in the future, it's best just to hold it through gloom and boom and just steadily add to it over the years,

Property is not like shares you can't just sell today and buy into the exact property again in the future, some I the properites I own would be very difficult to replace in the future,

 

[ROE]

In 1996 we had high interest rates and by 1999/2000 the bottom of the housing market was hit.

In 2008 we have high interest rates and by 2011/2012, the bottom of the housing market will be hit.

Get my drift....house prices are heading down

Its all cyclic, not straight up as some head strong housing gurus suggest!

Please "robots" stop ramping this over-heated housing market

looking we may have highest interest rate in 2009 and 2011 as well ...

http://business.theage.com.au/bracing-for-the-new-china-flu/20080216-1slf.html

High inflation, no more cheap chinese import, Petrol at record high it's building into an atomic bomb

Cash is king save up, go bargain hunting in a couple years ahead...