House prices to stagnate for 'years'

[wayneL]

 

[numbercruncher]

OOoh - for those of you without access to xe.com, 28k pounds is 65k AUD - all in a month, and those not familar with the UK its a rock with over 60m in an area much smaller than Victoria, considering our massive land shortage surely we couldnt suffer a similar fate ?

Better hope Our Chinese mates keep buying lots of things from our holes in the ground eh ?

 

[Tysonboss1]

OOoh - for those of you without access to xe.com, 28k pounds is 65k AUD - all in a month, and those not familar with the UK its a rock with over 60m in an area much smaller than Victoria, considering our massive land shortage surely we couldnt suffer a similar fate ?

?

6.8% downturn,.... I should just liquidate an my property holdings and place the funds in the rock solid share market where downturn of 6.8% never happen,...

You are forgoting that it is completely normal for property values to go up and down,... as with the share market.

 

[wayneL]

6.8% downturn,.... I should just liquidate an my property holdings and place the funds in the rock solid share market where downturn of 6.8% never happen,...

You are forgoting that it is completely normal for property values to go up and down,... as with the share market.

You are the first housing bull I've ever heard acknowledge that fact.

So by extrapolation of that logic, housing values could fall 40%?

 

[KIWIKARLOS]

If the US goes into recession followed by China slowing and reducing demand for raw material i think the states hardest hit will be WA and QLD. Their house prices have gone up on the back of commodities if the commodity cash goes there prices will fall. I think established markets in Sydney and melbourne will remain around the same prices maybe with some small gainsas people move out of the markets in WA and QLD and into these mature markets.

Also think about how many people moved to these states for work if the work goes they will be coming home in droves all cahsed up

 

[KIWIKARLOS]

Mate house prices in sydney will not fall 40% your forgeting our demand / supply is much different to the US. We have a shortage if people start hitting the wall and foreclosing others will jump intot he oportunity. Alot of investors will also prob move their money from volatile markets into relatively secure property

 

[Tysonboss1]

Sure looks like you got some good buying there,well done, which town did you buy in ?

Petrie, Just north of Brisbane,....

This property is in the Lower and of the market and is far from the "Trophy" property most Mum and Dad investors go for,

But yes I did negotiate a good deal for a few reasons,

1, It was the type of property most mum and Dad investors would not even look at,

2,The land lord hadn't done a rental increase in 5years,... so the cashflow looked very weak so alot of other investors walked away.

I like the lower income end of the rental market because it offers higher rental yeilds,... and less risk because if the economy does hit the fan it's the topend that suffers high vacancy rates.

I actually showed my sister this property trying to get her to buy it as an investment but typically she didn't like the look of it and went and bought a property for $400,000 that gets $385 / week rent,.... mine is getting $450 rent and cost me $257,000.

 

[wayneL]

Mate house prices in sydney will not fall 40% your forgeting our demand / supply is much different to the US. We have a shortage if people start hitting the wall and foreclosing others will jump intot he oportunity. Alot of investors will also prob move their money from volatile markets into relatively secure property

Things can't change? A credit crunched deflationary recession just couldn't happen, ever, right?

LOL

 

[Tysonboss1]

You are the first housing bull I've ever heard acknowledge that fact.

So by extrapolation of that logic, housing values could fall 40%?

Offcourse anything is possible,.... But extremely unlikely, Because for a drop to be sustained like that especially in the Australian market you would have to see a Massive drop in the rental yeild too,.... other wise buying would increase and offset the negative pressures,... and the rental market here is far to strong to see yeilds retreat any time soon,

I don't actually think I am a Property Bull as much as I am an all round investor,.... I started in the share market, But now invest in many asset classes including shares, Businesses and Property.

I understand that property can drop in value but that is no reason to right it off as a long term wealth creation stratergy any more than you would the share market,..... I mean how many of your friends and family have brought up the arguement that share investing to risky,....

I feel what makes things risky is not the asset class itself, But your level of skill and understanding of how that asset class works.

 

[numbercruncher]

Offcourse anything is possible,.... But extremely unlikely, Because for a drop to be sustained like that especially in the Australian market you would have to see a Massive drop in the rental yeild too,.... .

Why wouldnt it? "average" rental yields are running at like 3pc , I cant see any reason why a correction couldnt happen and rents remain stagnant.

 

[wayneL]

Offcourse anything is possible,.... But extremely unlikely, Because for a drop to be sustained like that especially in the Australian market you would have to see a Massive drop in the rental yeild too,.... other wise buying would increase and offset the negative pressures,... and the rental market here is far to strong to see yeilds retreat any time soon,

Actually, a drop like that would only return yields to the historic norm of around 7%.

Like 95% of people (including most economists) you make the error of extrapolating the most recent set of economic conditions into infinity.

The world could be on the cusp of a radical economic change... and I'm not just talking of a classic Austrian bust (though that is a real danger), but also due to climate and energy.

Sydney, would not fare very well in a credit denuded, energy deficient and/or severely energy regulated world.

I'm not saying any of this will happen, but recognizing that it could. "It'll never happen here mate" type thinking is pure hope, but professionals hedge.

The question becomes, how does one hedge against this possibility?

 

[KIWIKARLOS]

I agree we are on the cusp of a major economic change.
The change is we are quickly running out of the cheapest most energy dense liquid on earth and when we do start the downward production trend the enormous amount of petro dollars in every economy of the world will be worthless.

Sure 40% drop is possible but you have to acknowledge that if we do get to that scenario there will be more things to worry about than having to foreclose on your family home. The queues for basic food , petrol + high chances of social unrest and rioting will probably be a more immediate concern :

If that happens were all up the creek without a paddle

 

[tronic72]

Just speaking to an older (nearing retirement) friend of mine who has made a heap of money with property over the past ten years. He's now whinging that he's getting to the point where he's "almost" run out of his own money to get them all going. (Rentals aren't covering enough).

If someone who's been in the game for 10 years is struggling I think it won't before the masses follow suite.

TWT (Time Will Tell).

 

[numbercruncher]

Weve got Hundreds of thousands of baby boomers retiring each year, once they start to fret or indeed panic, its game on.

Geny-Ys simply arnt buying, banks are getting fussy with whom borrows, sure everyone has to live somewhere, But once the banks stop lending 400k to people earning 50k,,,

 

[wayneL]

But once the banks stop lending 400k to people earning 50k,,,

Already happening here in the UK.

And in further developments, people are having their credit card limits slashed and some are even not being reissued.

Sub-Prime is dead.
MEW is dead.
BTL is dead.
Now CC avenue crumbling right before our eyes.

 

[numbercruncher]

Already happening here in the UK.

And in further developments, people are having their credit card limits slashed and some are even not being reissued.

Sub-Prime is dead.
MEW is dead.
BTL is dead.
Now CC avenue crumbling right before our eyes.

Wow scary, there is surely no way that Australia can avoid this, but we have this rare and unique position of being forewarned and have an opportunity to position accordingly.

 

[Tysonboss1]

Just speaking to an older (nearing retirement) friend of mine who has made a heap of money with property over the past ten years. He's no whinging that he's getting to the point where he's "almost" run out of his own money to get them all going. (Rentals aren't covering enough).

If someone who's been in the game for 10 years is struggling I think it won't before the masses follow suite.

TWT (Time Will Tell).

As I said it's your Up to your level of skill and choosing the right stratergy for the current market,... your current goals and the stage of your life, your friend has obviously purchased the wrong property to suit his needs.

I mean arguements like this is like saying,.... My friend lost all his money investing in the share market there fore the share market is flawed,....

 

[Tysonboss1]

Why wouldnt it? "average" rental yields are running at like 3pc , I cant see any reason why a correction couldnt happen and rents remain stagnant.

3%,..... what area are you talking about,.... Are you basing your calculations of asking prices,... or actual sale price,... there is a big differance.

Based on my example I used earlier I am achieving nearly 9%,....

 

[wayneL]

3%,..... what area are you talking about,.... Are you basing your calculations of asking prices,... or actual sale price,... there is a big differance.

So you get 10% off asking and get 3.3%?

...and thats gross BTW (excuse the unintentional double entendre)

 

[KIWIKARLOS]

We will be fine as long as our economy stands up through this if you have low unemployment , wage growth etc prices will remain ok. Fortunatly if the commodities markets slow i think we can partially offset that with our agriculture. For the last five years our farmers have been hurting and output low but the drought now looks like it is breaking with la nina well into formation we will prob see ag output increase sharply next year.

Even if our economy does slow abit that will take the pressure of interest rates a bit well just have to see how expensive credit gets. The other bonus is our mining big guys have good cash flows and dont need to borrow large sums to keep current outputs.

My forecast is a slowdown in Oz economy but still growth with home prices remaining fairly steady for medium term while the rest of the world starts to fill the US consumers role