House prices to stagnate for 'years'

[Kathmandu]

Tomorrow marks 2 years to the day that I actually started this thread..and in all honesty not much has changed most states have had a little bit of growth, but better growth has come from the stock market.

Sure some suburbs have had major growth, but averaging it out state by state and suburb by suburb little has changed!

Hip, Hip Horray, looks like the housing bear is dancing for joy as house prices are about to fall, with higher interest rates on the way, according to the new RBA head honcho

A shame you won't be able to take advantage of fall's (if any) as all your dollars are tied up in super

Oh well, roll on 60 eh.

Dave

 

[numbercruncher]

In the short to medium term, I still see game on.

ASX.G

Hello G,


So whats your prediction in percentage growth terms for average realestate in this short/medium timeframe ?

Which Realestate market are you invested in ?

 

[WaySolid]

Tomorrow marks 2 years to the day that I actually started this thread..and in all honesty not much has changed most states have had a little bit of growth, but better growth has come from the stock market.

Sure some suburbs have had major growth, but averaging it out state by state and suburb by suburb little has changed!

Hip, Hip Horray, looks like the housing bear is dancing for joy as house prices are about to fall, with higher interest rates on the way, according to the new RBA head honcho

If I had chosen not to invest in property over the last 2 years based upon reading the first post in this thread then I would be poorer today. If this is little growth or no change then I would settle with the same for the rest of my life, many people have become much richer over the last two years from property in this country.. I have met and talked to a lot of them.

I'm pretty happy with the way my portfolio has performed over the last two years, which strangely enough is pretty much in line with my analysis of how property in my areas has performed for over 100 years now.

Beware of toxic information and follow your own investing plan, refine and repeat and don't let fear guide your decisions.

 

[numbercruncher]

So developers stop developing. No new stock. Less people per household and immigration increasing to offset declining worker numbers leads to more competition for existing rental stock therefore rising rental returns.

Be careful what you wish for

And rising Interest rates will easily devour your rising rentals, also you will get more people per household in shared accomodation arrangements and Gen ys staying at home alot longer than they are already, negating demand and pushing residential construction further into recession than it already is.


Next idea ?

 

[Shane Baker]

And rising Interest rates will easily devour your rising rentals, also you will get more people per household in shared accomodation arrangements and Gen ys staying at home alot longer than they are already, negating demand and pushing residential construction further into recession than it already is.


Next idea ?

Sorry missed that point entirely.
Did you say you had no idea?

Did you miss the part about fixed interest loans when they taught you finance at high school??? Doh!!

I'd suggest you have a look at some free sites with hard info re demand and supply for housing, such as Michael Matusiks site before receiving your fail mark for economics 101 on ASF.

While you are looking around a basic economics 101 textbook may I suggest you look at a few basic things such as multistrategy approaches to investment of which direct and indirect property investment is one. Once you get some substantial money together you need to have a multistrategy approach that takes in different asset classes, portfolio allocation, taxation strategies etc etc etc.

But don't let me bore you with those tedious concepts. You must be really be too busy looking those houses in Cleveland now you have built up your nest egg and prices have fallen 30% to bother with some fundamental principles. Let me save you some time. Here's one that may be suitable.

http://www.10realty.com/detail.asp?id=2921

Cheers and good luck

Shane

 

[wayneL]

So developers stop developing. No new stock. Less people per household and immigration increasing to offset declining worker numbers leads to more competition for existing rental stock therefore rising rental returns.

Be careful what you wish for

This is exactly what normally happens.

The rent cycle and the price cycle are almost inversely correlated.

 

[theasxgorilla]

So whats your prediction in percentage growth terms for average realestate in this short/medium timeframe ?

I don't know and it's not important as I don't invest in average real estate. In any case I didn't say that I could see what would happen, but have an idea about what is happening.

Tech/a said earlier that he invests for capital gains and soon to be a hedge against inflation. I would argue that for the last 5-10 years investing in real estate has been a hedge against asset price inflation. And since CPI based inflation has been benign relative to asset prices then in consideration of the low cost of living it has been possible to get ahead by investing for capital gains in real estate. I don't know if this will continue, but suffice to say if you're already ahead all you need to do now is maintain your position.

ASX.G

 

[cuttlefish]

Wage inflation can skew things a lot.

 

[numbercruncher]

Sorry missed that point entirely.
Did you say you had no idea?

Did you miss the part about fixed interest loans when they taught you finance at high school??? Doh!!

I'd suggest you have a look at some free sites with hard info re demand and supply for housing, such as Michael Matusiks site before receiving your fail mark for economics 101 on ASF.

While you are looking around a basic economics 101 textbook may I suggest you look at a few basic things such as multistrategy approaches to investment of which direct and indirect property investment is one. Once you get some substantial money together you need to have a multistrategy approach that takes in different asset classes, portfolio allocation, taxation strategies etc etc etc.

But don't let me bore you with those tedious concepts. You must be really be too busy looking those houses in Cleveland now you have built up your nest egg and prices have fallen 30% to bother with some fundamental principles. Let me save you some time. Here's one that may be suitable.

http://www.10realty.com/detail.asp?id=2921

Cheers and good luck

Shane

Not capable of playing the Ball are you Shane, in a desperate attempt to portray yourself as an expert you belittle the person rather than substantiate your side of the debate ? *applause your our hero*

Despite you being a prudent and sophisticated investor figures show that as of May this year Fixed Interest rate mortgages account for only 17.4pc of the market, my argument would be that average people really dont understand that we are in a Inflationary enviroment and they continue to sit on these rising variable rate mortgages right upto the point of forced selling.

Id be interested in your response if you can do so in a civilised manner otherwise dont bother.

Cheers, Good Luck and Good Karma

 

[Shane Baker]

And rising Interest rates will easily devour your rising rentals

It didn't appear to me that you were playing the ball. I took the tone of you post to be personal and responded in kind. If I misinterpreted your tone then I apologise.

To lump sophisticated investors in with everybody else and to believe that everybody who has property is in the same situation as the poor unfortunate people who are struggling in Wetern Sydney or in those similar regions in the US is quite naive. The numbers that you quote probably reflect the large proportion of the investor market as opposed to the owner occupier market who tend to take out P&I variable rate loans.

I agree that we are an inflationary environment and in fact my real concern is that over the medium term we could be heading for a stagflation environment as higher energy prices gradually erode economic growth whilst continuing to feed inflation. On a personal front to this end for the last eighteen months I have gradually reduced leverage to a low LVR and increased cash assets parked in a mortgage offset account to deal with any adverse circumstances arising.

I get very concerned when people advocate a one size fits all or single focus strategy as being the end all of investing or even trading. The needs and requirements of people are all different dependent upon age, risk profile, assets accumulated, stage of life expenses (kids, aged parents, etc etc). Successful wealth creation rarely relies upon a single method and what may suit your personal requirements may be totally unsuitable for someone in different circumstances.

Your example of people who are in over their head hanging on with variable rate mortgages is an excellent example of people requiring different things. It could be argued (and I am pretty sure that in the US there will be litigation) that some of these people should never have been given the mortgage of that amount in the first place. The repricing of risk to more prudent levels will affect a lot of people associated with the finance and mortgage industry (brokers, lenders, financial planners etc) adversely as well as the poor person who was enticed into a loan they couldn't really afford.

Most of the contributors here are at least financially literate if not sophisticated in their wealth creation strategies. The forum tolerates a lot of different perspectives (because we all have differing circumstances) but I might suggest that you are flogging the dead horse a fair bit in this thread. You are doing what suits you and that's great.

I wish you well and hope you reach a level of wealth that requires a multistrategy approach. Once again if I misinterpreted the tone of your post then I sincerely apologise.

Cheers

Shane

 

[numbercruncher]

No Shane I certaintly wasnt launching a personal attack, had I just omitted the word "your" I guess i could of avoided copping that eye full


I concur that lumping all in together is naive, but committing an argumentum ad crumenam or an argument of the purse hardly benefits a blanket debate about house pricing stagnating for years ....... perhaps a new thread needs to be started such as House prices to stagnate for 'years' (except for investors) or House prices to stagnate for 'years' (but only for the owner occupier).

See the only way this debate can really be run is using publicly available news, figures and statistics - anyone can come up with a personal argument or experience, and that includes myself , I can add an example of my own I am currently fortunate enough to have a little invested in a land delvelopment in Perth, I cant go wrong(but this single investment isnt representive of the re market), yet I still believe the Mum and Dad retail buyer who whacks a Home on this will find that House prices stagnate for years especially when adjusted for the ongoing cost of these properties.(actually im currently very bearish and think they will fall)

The core of my argument is that average house prices have now passed the affordability threshold, the average wage can no longer afford the average House or more importantly service the required mortgage, public fact, and all whilst we are in a Inflationary enviroment and probably facing more interest rate rises.

I guess what im looking for here is a logical argument as to why and how they can continue to rise (minus the personal arguments such as My house located beside a new copper mine doubled in value etc!)



Cheers mate.

 

[cuttlefish]

The only way that I can see house prices continuing to rise is if there is a strong breakout of wage inflation, and even then I don't believe the rise will be in real terms.

In terms of them being 'stagnant for years' then I think this will come down to location. Property in high population growth area's with scarce supply traditionally recovers more quickly because the inevitable yield increases drive price recovery. In these area's people have to live somewhere and the choice is limited. There is no doubt that in a recession when consumer confidence is low people will go for lower cost approaches to acommodation (more people to a dwelling basically) but overall if there is population growth but no growth in supply, yields will start to rise in real terms. Price growth will usually lag yield growth quite a bit after a slump, but it will eventually catch up to yield growth. (and even if it doesn't, as long as the yield growth continues investors will still see improving returns which would justify increased investment).

 

[nioka]

Another angle. The tougher things get the more thoughts go towards security for the future and the harder people work towards that end. Home ownership becomes more the primary goal and new cars, travel, entertainment become less important. That is why those of us brought up in really tough times made a point of owning our home early in life. Not that times are tough now, they aren't. It only seems like it to some who have been in the habit of too much unnecessary spending.
The demand for property will continue to maintain prices and anyone waiting to get in cheap will end up in the back blocks in in a dying country town. ( Although the way this state is managed this could be the heart of Sydney)

 

[theasxgorilla]

Your example of people who are in over their head hanging on with variable rate mortgages is an excellent example of people requiring different things. It could be argued (and I am pretty sure that in the US there will be litigation) that some of these people should never have been given the mortgage of that amount in the first place. The repricing of risk to more prudent levels will affect a lot of people associated with the finance and mortgage industry (brokers, lenders, financial planners etc) adversely as well as the poor person who was enticed into a loan they couldn't really afford.

About two years ago people in Sweden had the opportunity to lock a mortgage for 10 years at 3.5%. It never ceased to amaze me the proportion of people I was meeting (some working in finance related jobs themselves) who felt compelled to play the market and let at least half of their mortgage float...many floated the lot. This is what I see as a key difference in the mindset of an investor (even if we're talking about investor's PPOR) and a misguided, news affected, dinner-party/peer-group influenced home owner. 12 months after the fact news came to light that the prime minister himself had locked his 12 million kronor loan back at 3.5%. Variable rates were already at about 4.5% at this stage and now we're at 5%. Boat = missed.

 

[robots]

hello,

checked out the outer suburbs today, was interesting to see the auction process wandering out

I think it is fair more transparent way than the private treaty,

all properties sold that I went to, good bayside areas

dont shoot the messenger (got that from one of wayno's post)

thankyou

robots

 

[numbercruncher]

Australian New Home Sales Decline to Seven-Month Low (Update1)

By Victoria Batchelor

Sept. 20 (Bloomberg) -- Australian sales of newly built homes fell to a seven-month low in August as the central bank's interest- rate increase damped the property market.

The number of sales dropped 8.6 percent from July to 7,712, the Housing Industry Association said in an e-mailed statement today. Sales of detached houses slipped 8.9 percent and apartments declined 6.8 percent.

Australia's central bank raised its benchmark interest rate to 6.5 percent last month, the highest in almost 11 years, raising the cost of borrowing and cooling demand for property. A slump in the housing market may slow Australia's economic growth, countering rising business investment and consumer spending.

``Leading indicators such as new home sales continue to portend further deterioration in housing activity,'' said Harley Dale, chief economist at the association in Canberra.

The August rate increase cost borrowers an extra A$40 ($34) a month on the average A$235,000 mortgage, according to the Housing Industry Association. The average Australian household's debt-to- income ratio has more than doubled to 158 percent in the past decade.

Home-loan approvals fell 4.1 percent in July from June and construction of new homes started in the second quarter dropped 4 percent from the previous three months, adding to signs of a weaker property market.

The Housing Industry Association represents the nation's building companies. The series is compiled from a sample of the largest 100 residential builders in Australia and provides a leading indicator of housing.

To contact the reporter for this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net .

http://www.bloomberg.com/apps/news?pid=20601081&sid=aTSqegGeXC_M&refer=australia


Amuses me how these stories never appear on TV, but the prices up 80pc this week ones do ?

 

[Kathmandu]

http://www.bloomberg.com/apps/news?pid=20601081&sid=aTSqegGeXC_M&refer=australia


Amuses me how these stories never appear on TV, but the prices up 80pc this week ones do ?

Don't want the sheeple to stop buying all the over priced stuff now do we

Dave

 

[Smurf1976]

I've found a commercial building going real cheap right in the city centre.

Myer Hobart store, just metres from the mall and the only proper department store in southern Tas.

Location, location, location! Nice and warm too...

(Seriously, my condolences to all those who have presumably lost their jobs due to the massive fire in the Hobart CBD today. Thankfully there aren't thought to be any deaths or serious injuries.)

 

[robots]

hello,

great that people can highlight all the NOISE that surrounds RE, but NC find me 10 blue chip properties that have decreased in value, you will come up with nothing

even the apartments in docklands that people bought of the plan are thriving

and in 5-yrs time in the US the same will happen

82% clearance rate in Melb yesterday, with some 360 more auctions than this time last year

goodluck

thankyou

robots

 

[numbercruncher]

Hello Robots


Im Not really debating Blue Chips but the overall market, evidence is mounting.

WHAT does it feel like to cancel your home loan? The financial equivalent of cancelling your wedding, I suppose, or your 21st birthday party.

Home loan cancellations are soaring and it makes me wonder what sort of recovery we are really seeing in house prices.

Figures for home lending in August showed the value of cancelled home loans jumped 25 per cent on a year earlier to $1.8 billion.

The value of loans "advanced but not taken up by buyers" hit a record $35 billion ”” up 30 per cent.

That's a lot of unreported financial traumas in the suburbs where the home price recovery is supposed to be happening.

While these figures get no attention, everyone hears about clearance rates which are looking stronger in most cities, especially in Melbourne. But look closely at clearance rates and a bleaker reality emerges there too.

http://www.theage.com.au/news/business/house-prices-yet-to-feel-the-trickledown-effect/2007/09/22/1189881828855.html