House prices to stagnate for 'years'

Cuttlefish,

IIRC Sydney harbour-front got swatted in the early 90's... the high falutin stuff came off more than the low-brow housing.

wayneL said:

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.

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This is a really good point.

If it gets as bad as bears are predicting (and some sick people are hoping) its not a foregone conclusion that those cashed up opportunitists can get the financing they will need to take advantage of cheaper real house prices. Sure, you might get a payout when you are made redundant, but in times of tight credit (not that long ago, anybody try to get a housing loan in 1999? vastly different landscape) having cash does not supercede not having the means to repay.

Better to have got your credit approved 2 years ago when everything was going gangbusters and there was no rear-vision mirror.

Well theoretically its already harder to get money....

1/ non bank lenders like wizard financing out of the US are struggling.

2/ Some people who would of qualified for loans before latest Interest rate rises would no longer do so.


And its already reflecting in the building figures, just need it to show in the sales figures, Even our resident perma bull realestate agent Robotics has informed us of a MASSIVE increase in the amount of houses coming to market in his suburbs which is potentially a warning.

Activity in the construction industry has deteriorated for the second consecutive month in August, with the Australian Industry Group-Housing Industry Association Performance of Construction Index (PCI) falling 0.4 points to 48.4.

The fall in activity meant the index remained below the key 50 point level that separates expansion from contraction.

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http://www.smh.com.au/news/Business/Housing-affordability-slows-construction/2007/09/07/1188783465252.html

Its pretty much the concept of Peak Debt upon us in my humble opinion.

theasxgorilla said:

This is a really good point.

If it gets as bad as bears are predicting (and some sick people are hoping) .

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I understand your european or whatever.

But do you appreciate that in the country of Australia the Average wage can no longer afford the average property. (at current prices)

These "sick" people you refer too on average are probably Mums and Dads that just want to put a roof over there Childrens heads, Im sure they arnt hoping for price drops because they want to see you lose money, I imagine they couldnt care less about your money, I personally dont understand peoples overwhelming desire to own a house at all costs, but im sure for the most part Home ownership isnt a get rich scheme for these people.

Cheers.

numbercruncher said:

I understand your european or whatever.

But do you appreciate that in the country of Australia the Average wage can no longer afford the average property. (at current prices)

These "sick" people you refer too on average are probably Mums and Dads that just want to put a roof over there Childrens heads, Im sure they arnt hoping for price drops because they want to see you lose money, I imagine they couldnt care less about your money, I personally dont understand peoples overwhelming desire to own a house at all costs, but im sure for the most part Home ownership isnt a get rich scheme for these people.

Cheers.

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Now because I've paid attention, I'm sure I picked up somwhere through this thread that ASX is Australian and just happen's to live in ABBAland

Might be wrong

Dave

Kathmandu said:

Now because I've paid attention, I'm sure I picked up somwhere through this thread that ASX is Australian and just happen's to live in ABBAland

Might be wrong

Dave

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Yes I know hes Australian, I was being vexatious incase thats what he was doing too

wayneL said:

Cuttlefish,

IIRC Sydney harbour-front got swatted in the early 90's... the high falutin stuff came off more than the low-brow housing.

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thanks Wayne - good point and quite true - and particularly so for actual waterfront properties and any property with a large element of vanity pricing.

I'd still argue that the peak of this current boom is a bit different to the last boom in that the regional cities seem to be feeling the heat of the boom the most and this is partly due to the population shifts and wage inflation that have occurred in these area's as a result of the commodities boom. On the flip side for the past two years Sydney has actually experienced relatively flat prices, construction slowdown and rising yields (though not significant enough in my opinion to justify the current prices as yet).

I'd be curious to hear more about people's view on how inflation can affect things because it is a potential wild card. Depending on how central banks act (and in particular the RBA for the Australian situation) we can end up with different type of bust scenario's from deflationary to inflationary (as described in a video Wayne recently posted).

Also Australia differs from the UK and America because of the heavy impact that resources has on the economy as a whole - could this potentially shield us from a slump? (or exacerbate one depending on outlook in this regard).

A friend bought a house some years back, she has about 10 or twenty K left on the loan, can this help her get another loan for another house?

numbercruncher said:

I understand your european or whatever.

But do you appreciate that in the country of Australia the Average wage can no longer afford the average property. (at current prices)

These "sick" people you refer too on average are probably Mums and Dads that just want to put a roof over there Childrens heads, Im sure they arnt hoping for price drops because they want to see you lose money

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Forget the mums and dads..i just want to buy a house somewhere nice
where theres some crappy job for me...for no more than 10% more
than i pay in rent.

Impossible ATM

cuttlefish said:

Also Australia differs from the UK and America because of the heavy impact that resources has on the economy as a whole - could this potentially shield us from a slump? (or exacerbate one depending on outlook in this regard).

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It's a question worth asking. IMO contemplation of the answer is at least a good reason not to go panicing just yet and throwing the baby out with the bath water.

theasxgorilla said:

It's a question worth asking. IMO contemplation of the answer is at least a good reason not to go panicing just yet and throwing the baby out with the bath water.

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You must be joking. lol Australia is not the only resource centre of the world. China Russia Africa have heaps of the stuff. Pull your head outa the sand guys

Flying Fish said:

You must be joking. lol Australia is not the only resource centre of the world. China Russia Africa have heaps of the stuff. Pull your head outa the sand guys

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Maybe they'll do OK to?

numbercruncher said:

I understand your european or whatever.

But do you appreciate that in the country of Australia the Average wage can no longer afford the average property. (at current prices)

These "sick" people you refer too on average are probably Mums and Dads that just want to put a roof over there Childrens heads

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For those not already aware there is a spelling and grammar thread here (or there):

https://www.aussiestockforums.com/forums/showthread.php?t=8241

...if you're not sure how to appropriate the correct form of a given word that thread should be your next point of call. Lest you find yourself in the embarrassing position of being taught English by a European, even though it may not even be their native tongue.

BTW, they're not the sick people I'm refering to.

Flying Fish said:

You must be joking. lol Australia is not the only resource centre of the world. China Russia Africa have heaps of the stuff. Pull your head outa the sand guys

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You know I thought about my comment a bit more Flying Fish and I realised you are right...when our house prices stagnate it's practically a given that the rest of the world will start to boycott our commodity markets. Can't believe I didn't join those dots myself. Carry on.

FF

You must be joking. lol Australia is not the only resource centre of the world. China Russia Africa have heaps of the stuff. Pull your head outa the sand guys

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The US consumer is responsible for about 30% of Chinese GDP. If (when) the US has a recession then there will be effects upon the world markets as demand for Chinese and Asian goods is reduced. However the Chinese economy is growing at 10-11% per year so a reduction to 8% due to a US recession may not be a bad outcome for the Chinese. The pdf article at the lead post of this thread shows the domestic consumption/gdp figures.

https://www.aussiestockforums.com/forums/showthread.php?t=8013

Demand for commodities by the BRIC countries (and soon the Western World as it is forced to re-engineer its infrastructure for new energy paradigms) will continue even with a recession in the US. Just at a reduced pace of growth...which may not be a bad thing given the capcity constraints present in the Australian economy. If the Chinese had all the commodities they needed then they wouldn't be importing commodities from us at inflated prices.

The problem with a lot of commodity producing countries is sovereign risk. When you buy a stake in something you would like to know that you may get the return on your investment that you had planned for. Recent past events in Russia, Venezuala and African countries have shown that sovereign risk is a real concern even for multinational companies.

My worth is that we would have continued but reduced growth in Australia and Canada. Peak oil is the big unknown. If it bites hard then economic output will suffer in an environment of increasing inflation (food,transport, etc etc). The possible outcome is similar to the 1970's when stagflation occurred. Even the Courier Mail had its lead article on page 1 about peak oil on Saturday's paper.

Cheers

Shane

Flying Fish said:

You must be joking. lol Australia is not the only resource centre of the world. China Russia Africa have heaps of the stuff. Pull your head outa the sand guys

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Thats true but a big difference for Australia is that resources make up a very large component proportionally of our relatively small economy. This is not the case for the US, UK, Europe or China where by proportion resources aren't the main contributor to economic growth.

So Australia's forward outlook is very much dependant on the sustainability of commodity prices, and this is in turn very much dependant on the direction of the emerging Asian and Middle Eastern economies as they are the main consumers at the moment of resources. There appear to be differing views on how much impact a US slowdown will have on these economies as illustrated by the post Shane Baker made above. The US does not necessarily have the same proportional impact on the world economy as it once did. China and the Middle East are generating demand of their own that can possibly replace US demand to some extent.

Is is also quite possible that the US currency may also not sustain the dominant position it currently maintains. Macro shifts in the currency landscape can have all sorts of unpredictable impacts , however if demand for commodities remains then the value of Australia's proportionally large commodity resource for our population size means we're potentially shielded from all sorts of earthquake style changes in the global economy, in the same way countries for whom oil production is the main source of wealth tend to be shielded. (which creates another question about how much the US economy is dependant on oil and how a shift away from oil to other fuels can also impact this).

We should also not forget that China thinks strategically and so will quite likely support shifts that may accelarate a move away from a US dominant world economic position.

I don't believe we're likely to see real growth in property prices, but if inflation appears, particularly strong wage inflation (and there's strong pressure at the moment on this within the Australian economy) then we may see an inflationary led continuation of the price increases, or at least maintenance of current property prices. The corresponding inflation in other area's including wages and the price of goods would mean there could still be a reduction in real terms of property value even if prices rise.

Thanks guy to all the above. Makes interesting debate. So in reality, it is probably a better bet to keep money out of property and put it in commodities, like wheat, corn and of course minerals.

Flying Fish said:

Thanks guy to all the above. Makes interesting debate. So in reality, it is probably a better bet to keep money out of property and put it in commodities, like wheat, corn and of course minerals.

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In this part of the world thanks to extreme weather wheat crops were smashed this year. We all know the drought has done likewise in Aust. Commentators and analysts seem to be drawing logical conclusions that wheat prices will rise.

theasxgorilla said:

For those not already aware there is a spelling and grammar thread here (or there):

https://www.aussiestockforums.com/forums/showthread.php?t=8241

...if you're not sure how to appropriate the correct form of a given word that thread should be your next point of call. Lest you find yourself in the embarrassing position of being taught English by a European, even though it may not even be their native tongue.

BTW, they're not the sick people I'm refering to.

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Thanks for the spelling lesson ASX, as im sure you can imagine im not real smart (but i can lift heavy things)

If you think the grasp on English is bad down here you should check out the mathmatics ability, apparently we have been convinced that investment Houses that return less than inflation = awesome.

I guess you can blame your Idol Johnny "big brows" Howard for the state of affairs.

Anyway my IQ issues aside(which incidently came back negative at last test)..

You still havnt told me who these sick people are ? Do you think perhaps there is some sickos waiting on the sideline for a drop to snap up 100 houses or something ?

I for one think that most Aussies arnt one eyed capitalists and actually want to see affordable housing for the masses (they just dont want it affecting the perceived value of there own homes/investments)

Do you have an opinion on this ? Do you own realestate in Australia ?

hello,

the affordability crisis is load of rubbish NC,

look at the "australians for affordable housing", they want donations, come on

the hand out crew are everywhere, I see them going to get $5 pills from the chemist while I pay $20 for 10 tabs of amoxycillin, sick of them

get them going with hammers, nail guns, concrete mixers and build some houses, oh no, work

others have shown RE is available at reasonable prices all over Aus

big day yesterday, around 83% clearance rate, great stuff for buyers

thankyou

robots