House prices to stagnate for 'years'

[wayneL]

Bold assumption@!

Lets say he did pay $5 million and then got another 19.8% Cap Growth next year like this year at Mermaid Beach.

That'd be a pick up of $990,000

Something tells me he aint worrying about the outgoings

Tasty!

Dave

What if values come off like they are starting to in the rest of the world.

In a deep recession notional values can (and have done in the past) come off a long way. There is great sense in using historic norms of valuations like yield, when considering illiquid investments such as property.

On the other hand if the cash is sitting in boxes around the house and that's where you want to live, that may be a different matter. But that reality is a for a minority. Most of us have to consider future value even if it's a PPOR.

 

[Kathmandu]

Lets assume he bought it yesterday for 5m and hes now renting it for 2k a week - his repayments on a 30 year 100pc mortgage(using CBA standard variable) are 9,453 + rates, Insurance, maintenance.

Or maybe he paid double that at 10m ? and repays 19k a week, waiting on the massive capital gains? who knows!

Tasty!

Probably should do your numbers again numbercruncher

If he bought for $5m his repayments if borrowing 80% would be more like $5961/week, not $9453/week and probably less with a better discount (I get a full% point off on way less)

If he did the same for $10m it would be $11,923/week not $19k

Dave

 

[Kathmandu]

What if values come off like they are starting to in the rest of the world.

In a deep recession notional values can (and have done in the past) come off a long way. There is great sense in using historic norms of valuations like yield, when considering illiquid investments such as property.

On the other hand if the cash is sitting in boxes around the house and that's where you want to live, that may be a different matter. But that reality is a for a minority. Most of us have to consider future value even if it's a PPOR.

Well if it drops 20% in your crash that has to happen, he'll be back where he started from last year

If he bought it several years back it'll hardly matter, it could probably drop 50%

Bit like the last drop in the share market, who cares, back to January and up it goes again.

Dave

 

[wayneL]

Well if it drops 20% in your crash that has to happen, he'll be back where he started from last year

If he bought it several years back it'll hardly matter, it could probably drop 50%

Bit like the last drop in the share market, who cares, back to January and up it goes again.

Dave

This is true, buyers who bought at better value should be shielded from any real effect apart from a notional level of wealth. I bought my properties several years ago. I expect that the values of those houses (as expressed at todays value) will suffer steep declines in the years ahead. In fact they are officially declining now, according to the latest figures (they are in the UK).

I don't give a toss.

However, if I had extracted equity from them to make more recent purchases, I would be worried (depending on the extent of course)

This is where I think a lot of portfolios will come unstuck. Bubble equity is being used to make purchases where there is a risk of declines on the entire portfolio.

Many LLs came unstuck in the last bust this way. Those with conservative LVR's will survive and benefit in the longer term.

 

[numbercruncher]

Hell no----lifes dandy!

Pleased to hear it, be nice to see it demonstrated, you seem awfully stressed at the fact that some snotty nosed dumb **** punk like myself doesnt beleive in the realestate selling pyramid.

but to that we say ...

"Que sera, sera,
Whatever will be, will be;
The future's not ours to see.
Que sera, sera,
What will be, will be."


The fact that average priced realestate now needs to rise in value each year by the average wage to see any growth what do we say ?


"Que sera, sera,
Whatever will be, will be;
The future's not ours to see.
Que sera, sera,
What will be, will be."


The fact that your baby boomer generation that outnumbers the rest is quickly getting wrapped up in nappys and shipped to nursing homes flooding the market with realestate what do we say ?


"Que sera, sera,
Whatever will be, will be;
The future's not ours to see.
Que sera, sera,
What will be, will be."


The fact that the crash has already started in other countries what do we say ?

"Que sera, sera,
Whatever will be, will be;
The future's not ours to see.
Que sera, sera,
What will be, will be."



I neednt continue theres overwhelming evidence showing just how detached your little realestate scam is from the long term PE average.

In closing


"Que sera, sera,
Whatever will be, will be;
The future's not ours to see.
Que sera, sera,
What will be, will be."




Have a pleasant evening

 

[tech/a]

Pleased to hear it, be nice to see it demonstrated, you seem awfully stressed at the fact that some snotty nosed dumb **** punk like myself doesnt beleive in the realestate selling pyramid.

Not at all I was where you are once.It was once impossible for me as well,I couldnt see myself getting ahead certainly seemed hopeless.The older generation knew nothing then---not much has changed you know!

Wayne IF prices did drop 20% or more.
Who do you think would buy that R/E?

Those that are waiting for prices to drop who are just outside of "affordability"?
I dont think so.

 

[Kathmandu]

The fact that your baby boomer generation that outnumbers the rest is quickly getting wrapped up in nappys and shipped to nursing homes flooding the market with realestate what do we say ?

Just so you realize,this will be you soon enough as well, so don't be too smugg..

And not all of us with balls and brains are baby boomers.

Dave

 

[tech/a]

Just so you realize,this will be you soon enough as well, so don't be too smugg..

And not all of us with balls and brains are baby boomers.
Dave

Intelligent males?

 

[Kathmandu]

Those with conservative LVR's will survive and benefit in the longer term.

All your comments are correct wayneL, and if it does happen, i'm one of the above, and I hope to be buying.

Dave

 

[numbercruncher]

Just so you realize,this will be you soon enough as well, so don't be too smugg..

And not all of us with balls and brains are baby boomers.

Dave

Youre swimming naked arnt you David ?


If the market turns as quick as it has in the US and seems to be in the UK, youll get that same feeling that you get after having a few laxatives wont you ?

 

[Kathmandu]

Intelligent males?

You know what I mean,

nunbnuts is having a dig at BB's and i'm pointing out that they are'nt the only ones who have property.

I aint no BB, not that theres anything wrong with that, my parents are BB's and they seem quite nice.

Dave

 

[wayneL]

Wayne IF prices did drop 20% or more.
Who do you think would buy that R/E?

Those that are waiting for prices to drop who are just outside of "affordability"?
I dont think so.

I don't know. But I suspect hardly anybody, that's how the psychology works.

It would also largely depend on who could secure financing, and at what level, because it certainly won't be as easy to get money at that point as it is to get now.

But even a 20% drop would not make real estate good value by historical norms. (speaking in real price terms) It would still be a speculative purchase rather than on the basis of value.

 

[Kathmandu]

Youre swimming naked arnt you David ?


If the market turns as quick as it has in the US and seems to be in the UK, youll get that same feeling that you get after having a few laxatives wont you ?

If 35 ish% LVR is swimming naked, well I suppose I must be

Add in the sale of the "Fishing Shack " as you cal it and much better again.

Look at the numbers on Rocky I posted numbnut's, wash of this years 33% and where will I be???

Take that back 5 years.

Dave

 

[numbercruncher]

Not at all I was where you are once.It was once impossible for me as well,I couldnt see myself getting ahead certainly seemed hopeless.The older generation knew nothing then---not much has changed you know!

Wayne IF prices did drop 20% or more.
Who do you think would buy that R/E?

Those that are waiting for prices to drop who are just outside of "affordability"?
I dont think so.

I GENUINELY beleive that realestate is in for long term stagnation or worse (but subject to Central Bank actions, play the game by there policy), I certainly dont feel hopeless and unlike yourself i dont feel irrational exhuberance towards realestate - Ive consciously chosen to sell my house, invest in a better vehicle and rent property from you RE bulls at a mere fraction of the cost of ownership.

From all you realestate bulls i have not received any economic information that would support the argument of continued price growth, other than your irrational beliefs that it always goes up!!

As long as people believe it will go up the psychology drives it, but your at the end of the run until you can convince people otherwise with facts.

But yes I can imagine your generation disregarded the previous generations ideas as nonsense just as mine does !

To me its just simple, prices are so high that they need to increase by to big an amount each year for them to be considered an investment, and a 3pc yield, give me a break, a decade ago you could get nearly 10pc.

Show some proof of continued price rises, ive provided heaps in this thread to support the zero price growth theory.

Thanks.

 

[numbercruncher]

If 35 ish% LVR is swimming naked, well I suppose I must be

Add in the sale of the "Fishing Shack " as you cal it and much better again.

Look at the numbers on Rocky I posted numbnut's, wash of this years 33% and where will I be???

Take that back 5 years.

Dave

Your laughing then Davo!

Your shout bud

 

[numbercruncher]

Probably should do your numbers again numbercruncher

If he bought for $5m his repayments if borrowing 80% would be more like $5961/week, not $9453/week and probably less with a better discount (I get a full% point off on way less)

If he did the same for $10m it would be $11,923/week not $19k

Dave

Neat trick Davo,


You altered the amount I worked on(5 to 4), and changed from full repayments to interest only and rounded down the interest rate to make yourself look smart and attempt to make me look like a doofus.

Good work.

 

[wayneL]

Wayne IF prices did drop 20% or more.
Who do you think would buy that R/E?

Those that are waiting for prices to drop who are just outside of "affordability"?
I dont think so.

Just as an addendum to my earlier comments:

I suspect many who think they will be buyers if prices come off, won't be.

As far as those just outside of affordability. I wouldn't be so haughty as to discount all of them.

Some for sure are ne'r do wells, some are financially competent and have made an alternative choice to "buy at all costs".

 

[Kathmandu]

Neat trick Davo,


You altered the amount I worked on(5 to 4), and changed from full repayments to interest only and rounded down the interest rate to make yourself look smart and attempt to make me look like a doofus.

Good work.

Yeah well, I only ever use IO on IP's so had forgotten about P&I

Dave

 

[cuttlefish]

Is there anyone that believes that blue chip Sydney property (e.g. free standing brick homes on good land in Eastern suburbs, Mosman, North Shore, or well constructed, well maintained established apartments in the inner city ring) could fall by more than 30% in a property bust?

I have heard people talk of the slump that occurred in the UK (in the early 90's I believe) whereby values went down by up to 30% or more in some areas but I'm wondering how blue chip london property fared in those scenario's?

I've no idea whats going on in the US market, but would be curious if there is anyone in the US that can comment on whats happening in well positioned suburbs in the larger cities on the east and west coast at the moment price wise?

Also in Australia I know that in the early 90's (90/91) there were very significant slumps in some areas, including blue chip Sydney suburbs. I saw units in good sydney suburbs languish on the market for months at yields that would have made them positively geared if borrowed at the variable rate of the time. I've also seen instances in large regional Australian cities where properties were yielding well above bank interest rates and still languished on the market for long periods.

Also I'd be curious to people's thoughts on how inflation could impact this equation. Strong wage inflation has the potential to bridge some of the yield gap. Also in densely populated areas with little or no land supply (e.g. inner city Sydney) if there is a general shift from owning to renting then there is marked upward pressure on rental yields - this has already been seen over the past couple of years and in particular the past 12 months in Sydney and has brought yields a little closer to being in line with historical levels, particularly in the unit market.

A lot of Sydney property, unlike many parts of regional Australia, has shown little significant growth over the past two years as well, however Sydney also led the initial boom and so has historically low yields as well, like most parts of Australia do now.

 

[numbercruncher]

Bold assumption@!

Lets say he did pay $5 million and then got another 19.8% Cap Growth next year like this year at Mermaid Beach.

That'd be a pick up of $990,000

Something tells me he aint worrying about the outgoings

Tasty!

Dave

Sure Davo lets work on that then 5m purchase 20pc gain to 6m. Investment property 100pc finance interest only. Leaving out rates too probably massive on a 5m home.


5 000 000 Purchase price
217 475 stamp duty
11 924 Transfer fee
20 000 stamp duty on loan
115 mortgage registration fee
1000 conveyancing
400 000 Interest @ 8pc
------------------------------
5 650 514

Then 100k+ to RE to sell it, less 100k rent return. 350k profit for 20pc price jump. No profit if adjusted for inflation. If prices stagnate for a few years youll spend years more chasing the Interest and Inflation losses.


So the pick up isnt anywhere near what you would hope it too be


Like i said we are at the stage that you need 10pc pa for break even virtually across the board. Prices eventually get to a level that they simply cannot grow on average realestate because of wage etc constraints.