House prices to keep rising for years

[Pommiegranite]

This happened during the last slow patch from 02-05 (roughly). Should one reasonably expect the western suburbs to be upstanding during soft patches?

2002-2005 : low inflation+low interest rates = softpatch

2008: High Inflation+High interest rates = ?

 

[lusk]

There you go

2002-2005 : low inflation+low interest rates = softpatch

2008: High Inflation+High interest rates = :grenade:

 

[pepperoni]

There you go

2002-2005 : low inflation+low interest rates = softpatch

2008: High Inflation+High interest rates = :grenade:

Good point.

Could this article support the idea that further falls are likely?

http://business.smh.com.au/australia-in-mortgage-recession-20080703-313n.html

 

[wayneL]

2002-2005 : low inflation+low interest rates = softpatch

2008: High Inflation+High interest rates...

...+ credit crunch + rising unemployment + impending recession =?

Just thought I'd add to the equation.

 

[dhukka]

...+ credit crunch + rising unemployment + impending recession + deflation

In 2009 the conversation will shift to deflation in the developed world not inflation.

 

[explod]

As the prices of all things continue to rise, (oil, food etc.,) money in the bank will shrink to nothing so having a bit of dirt will become very important. And a bit of gold in the meantime some insurance.

At the end of it all, it will be tangible assets that you can see that will survive.

 

[gfresh]

Banks & Mortgages article:

http://www.abc.net.au/news/stories/2008/07/03/2293917.htm

Brian Johnson, the managing director and banking analyst at JP Morgan Australia:

"I find it bizarre that Australia would be the only country in the world where there wouldn't be some kind of decline in housing property values."

 

[CamKawa]

Banks & Mortgages article:

http://www.abc.net.au/news/stories/2008/07/03/2293917.htm

Brian Johnson, the managing director and banking analyst at JP Morgan Australia:

The ABC seems to be giving fairly straight answers, as opposed to The Age newspaper which has sold out to its real estate and banking advertisers. The Age is only really good for starting fires with IMHO at moment.

One point I found interesting in the article was

"Mr Johnson said Australian banks are actually more vulnerable to the credit crunch than many of their global counterparts because of their high levels of gearing, or loan to capital ratios.

"We're talking banks geared 25-30 times, whereas the global peers may be geared 15-20 times... even a moderate loan-loss cycle creates negative earnings," he said."

and we keep getting told how secure our banks are here – interesting.

 

[pepperoni]

In 2009 the conversation will shift to deflation in the developed world not inflation.

If it werent for 1 billion chinese beavering away for 1 cent a month inflation would probably be over 5% already.

Trouble is this wont last and our reliance on them will result in huge imported inflation (they already run at 8% or something over there).

 

[pepperoni]

Here are some of the most telling stats ive seen ... average mortgages up from 96k in 2002 to 400k in syd today!

Holy baby jesus what has gotten into these peope ha ha.

400k is alot of money IMO ... I hope the the average mortgage holder earns a fair bit more than the average salary!

http://www.smh.com.au/news/National...cent-in-7-years/2005/02/23/1109046971276.html

http://www.news.com.au/story/0,23599,23966531-2,00.html

 

[wayneL]

Holy baby jesus what has gotten into these peope ha ha.

I believe somebody wrote a book on the subject... Mass Delusions and Hysteria or something like that.

All about tulip booms etc etc.

 

[gfresh]

That's a pretty staggering statistic in those two articles.. In 2002/03 the average outstanding mortgage (Australia wide) was $96k, in 2008 it's $341k..

6 years, 255% increase

 

[YChromozome]

That's a pretty staggering statistic in those two articles.. In 2002/03 the average outstanding mortgage (Australia wide) was $96k, in 2008 it's $341k..

6 years, 255% increase

For sure. It's the level of debt and the serviceability of it that will kill us in the end.

The above figures don't take into account wage growth, or increasing household incomes. If you think the period 2002/3 onwards was bad have a look at household debt as a percentage of household disposal income (i.e factoring in wage growth) since about '91 onwards.



In say '91, for every dollar your household took home, you had 40 cents debt. Now it's $1.60. Interesting the first quarter this year it fell for the first time since, well, in a very long time.

 

[Mofra]

That's a pretty staggering statistic in those two articles.. In 2002/03 the average outstanding mortgage (Australia wide) was $96k, in 2008 it's $341k..

6 years, 255% increase

Would love to see a breakdown of loan purpose - most people assume that he mortgage rise is solely due to people borrowing up to the hilt to fund property purchases, however there a good many financial advisers/accountants/brokers & snake oil salesmen who have been convincing people to draw down the equity in their properties to fund their investment portfolio. This is a phenomenon that was largely unprecedented in the history of domestic personal lending.

The recent credit explosion was not simply confined to a single asset class - the significance of the onflow must be taken into account.

Lets put all our equity into bank shares - they never go down do they

 

[explod]

Lets put all our equity into bank shares - they never go down do they

Dont' seem to go up much either. NAB are the same price today as they were in the year 2000. Good job there is a bit of a dividend.

 

[CamKawa]

Would love to see a breakdown of loan purpose - most people assume that he mortgage rise is solely due to people borrowing up to the hilt to fund property purchases, however there a good many financial advisers/accountants/brokers & snake oil salesmen who have been convincing people to draw down the equity in their properties to fund their investment portfolio. This is a phenomenon that was largely unprecedented in the history of domestic personal lending.

In the past share market falls property has gone up because it has been seen as a safe haven. Maybe we aren't seeing it this time because people have borrowed against their house to buy shares with the prospect of getting even richer. Some even went a step further and took out a margin loan against the shares they bought with the equity in their house to buy even more shares. Now faced with a falling stock market the collateral underpinning all this may have be called upon, leading to a greater supply of houses with fewer interested buyers. Houses prices can only move in one direction from here.

 

[Warren Buffet II]

Why people keep thinking that immigration is going to keep the house prices rising for years?

70% of people come from very poor countries, they do not have access to any credit and it will take them years to even been able to buy a unit.

I know an immigrant that has been in Oz for 4 years, he is in the IT industry and makes 60K in Brisbane, he is married and with one kid, he has around 20K for a deposit, no credit card debt. He went to the bank to buy a property at Forest Lake for $320.000, the bank checked its paperwork and rejected his application.

Now explain to me how immigration is going to help with the current prices?, I do not think so, this is happening so demand is less now and supply is increasing by the day.

WBII

 

[Temjin]

Why people keep thinking that immigration is going to keep the house prices rising for years?

Because the economists say so?

YChromozone, thanks, similar but it doesn't seem to have the type of "volatility" around the index (100). I.e. It looks quite smooth from the 1990s, where as, there were mini booms in my previous chart. I was looking for the same one but with updated data.

I actually did a very brief research on the Canada housing market and it seem to have fairly similar characteristics as to Australia. They have tons of resource, and we have them too. They have yet to experience the type of house prices drop that US/UK is experiencing right now. As for public sentiment, it's around the same between us and the Canadians but it's extremely negative for those in the US/UK right now. If one pick just any bloke in the US/UK and tell them that how house prices will ALWAYS RISE because supply/demand and immigrations, they will think you are BSing. Hardly anybody there now are believing house prices will always rise, they've seen reality now.

However, if you do the same here and in Canada, you may get some BSing as more and more people realise the truth, but you would also get the traditional "in agreement" responses. Reality has not yet fully present itself upon us yet. The housing market here does seem to be "lagging" amoung those two major western economics. My guess is that the resource boom that our two countries are benefiting from is indeed shielding us to a certain extent, though it would only delay the inevitable.

Can't wait to see the general sentiment when we went pass the denial stage.

 

[pepperoni]

Why people keep thinking that immigration is going to keep the house prices rising for years?

70% of people come from very poor countries, they do not have access to any credit and it will take them years to even been able to buy a unit.

I know an immigrant that has been in Oz for 4 years, he is in the IT industry and makes 60K in Brisbane, he is married and with one kid, he has around 20K for a deposit, no credit card debt. He went to the bank to buy a property at Forest Lake for $320.000, the bank checked its paperwork and rejected his application.

Now explain to me how immigration is going to help with the current prices?, I do not think so, this is happening so demand is less now and supply is increasing by the day.

WBII

I made the same point before on this thread.

I remember Hawke and Keating bringing in rich Hk Chinese and South Africans almost as if to counterbalance the $a flowing offshore/cook the books .. well sort of .

Anyway those migrants may have given the market a kick. But nowadays most of our migrants seem to come from thrid world type economies and I suspect most have never had $1000 to their name. I really cant see that type of immigration supporting house prices or rents.

 

[Pommiegranite]

....it just gets worse and worse. When they say 'more to come'...what do they mean...lol?

http://business.theage.com.au/bank-lifts-home-loan-rate-interest-20080704-31o5.html

Bank lifts home loan rate interest

July 4, 2008 - 3:15PM


St George Bank has lifted its standard variable home loan rate by 0.20% to 9.67%.
Australia's fifth largest bank attributed the rise to the continuing high cost of funds it sources itself.
The 0.20 per cent rate rise equates to an increase in a home loan payment of about $10 per week on an average sized loan of $250,000 over 30 years.
More to come
AAP