House prices to stagnate for 'years'

[It's Snake Pliskin]

This thread has a lot of replies.

I would like to see even more discussion on stocks, particulary now we have a market that looks challenging.

I think everything has been said regarding property, without it getting to obsessive levels.

Snake

 

[tech/a]

My apologies----the content is not to your liking.
Could you direct me to any threads you have going on stocks which arent recieving enough replies?

33000 replies to the MUL thread---is that the sort of quality discussion you wish to see?

Oh and thanks for your input to the discussion.

 

[Smurf1976]

Think you might have to be careful though. Many thousands of jobs have been lost in the south of Adelaide, due to the closure of many large business' such as the Pt. Stanvac Oil Refinery, Mitsubishi Engine plant at Lonsdale etc etc.

At last someone's mentioned an area that I have actually been to!

The only things of an employment / business nature that I recall seeing there where the Mitsubishi plant, oil refinery and the Lonsdale power station. There were some other industrial type buildings but they looked more like warehouses than anything that's actually productive. With the first two of these closed (although I am moderately optimistic that the oil refinery may re open although it will need some upgrading to do so) and the power station being unmanned and normally idle anyway apart from maintenance and delivering the fuel I'm assuming that most people living in the area commute to work somewhere else? Or did I just miss seeing the business parts of the area? (Quite possible since I didn't venture too far from the train line.)

Is there much else down there? (Genuine question since I really don't know.) I do recall that there was plenty of land though. I mean, thousands and thousands of homes could be built in that area. Land isn't exactly scarce there. Whether or not it would make money is another matter.

 

[Julia]

This thread has a lot of replies.

I would like to see even more discussion on stocks, particulary now we have a market that looks challenging.

I think everything has been said regarding property, without it getting to obsessive levels.

Snake

As far as I'm aware, there's no restriction on your starting new threads on particular stocks. A thread keeps going because of the interested response of forum members. If there's no interest, that thread is replaced by one which has generated more interest. A bit like the market, actually.

The fact that the property discussion has endured as long as it has and with such interesting contrast of opinions by members whose points of view are perfectly valid for their circumstances, is an indication of the general interest in the topic.

If it doesn't interest you, can't you just go on to the next topic, or start a new thread of your own?

I'm personally not interested these days in buying investment property, though I've found it rewarding in the past, but nevertheless have really enjoyed reading this thread with its persuasive arguments on all sides.

Julia

 

[It's Snake Pliskin]

Ok Julia I'll heed your advice.

Snake under the bridge.

 

[The Once-ler]

I agree Julia, fully.

Even though I'm not currently excited about property, I will one day, when the time is right.

Property is indirectly, and directly connected to the stockmarket. It has similar silly booms and busts, although at different times. I think it is possible to creat more wealth from property due to the ability to gear at a much higher level. It will be time to gear into property when the value is there. But not now, not in the eastern states anyway.

Cheers.

 

[tech/a]

Look around--ANYONE you see who has financial security/substantial wealth
will have a foundation built on Property.

While I know a few (2 actually) -- who have substantial share portfolio's both have their basis in property.

To have the substantial share portfolio before the property foundation is very very rare.

Traders in Stock and Futures are for the most part only dabbling trading (And rarely investing) under 50K

Serious traders will have a sound equity base built on property (Investing and rarely trading over $250K)---lack of capital is the downfall of most---before they have a chance to understand RISK and EXPECTANCY--they run out of capital.

 

[mit]

Another reason, I think for the difference is CGT. With property you would never need to sell and can use equity to buy further properties. To get a decent return with shares there would be very few shares you would hold for more than a few years and so have to pay CGT. Also property also covers property developers who (until recently) made quite a large margin on the successful contracts.

Also I think that it is cash flow dependant. If for example you want to make 100k a year cash flow. For a property this is an average NET yield of 3.5% (5% gross) you would need $2.85m of property freehold. This would be a lot of people's definition of rich.

Compared to a long term system return an average of 25% a year. If you ran it at a margin of 60% $200k would enable you to trade $500k of shares. $200k capital would give you an average of cash flow of $100k (After loan costs). I don't think many would call you rich with $200k of capital yet this gives you your desired cash flow.

I know, I know there would be volatility in the returns so you would have say an extra $100k to cover drawdowns but $300k is still a far cry from $2.8m.

So a person can acheive a good cash flow without substantial wealth in shares. And it would be difficult to keep reinvesting the profits without at some


However, knowing the greed of the average person why there aren't people putting their hands up saying I am wealthy through shares (and aren't selling a course). I wonder if they just don't advertise themselves.

Look at property investment Mags. They are full of articles like "Here is John Smith who has a 5 million portfolio of property in five years and this is how he did it". "Ordinary millionaires" is full of property investors/developers and what they are worth. In property investment forums you can figure out pretty quickly what people are worth.

However, in share forums it is more process based and you never know whether one of the gurus has a $5k portfolio or a $5m portfolio.

MIT

 

[Milk Man]

Property is out of favour with me at the moment because too much % capital is reqd to positive gear and still have a good chance at capital growth IMO. Positive gearing is the key I reckon. Seems to be with rural land anyway. Get your cashflow past your interest and living expenses, improve the joint, whack on your price and wait. That way youre never backed into a corner. I never say never, but like.... never .

Once I get a few mill (if property is still the same- not under water ) then I may hedge with some "safe as houses". Til then its shares, forex and commodities (good enough hedge?). Unless foreign property is different...

 

[Smurf1976]

Look at property investment Mags. They are full of articles like "Here is John Smith who has a 5 million portfolio of property in five years and this is how he did it". "Ordinary millionaires" is full of property investors/developers and what they are worth. In property investment forums you can figure out pretty quickly what people are worth.

However, in share forums it is more process based and you never know whether one of the gurus has a $5k portfolio or a $5m portfolio.
MIT

The fundamental difference is quite simple here. A "property millionaire" as the magazines call them, is someone who has $1 million (or more) worth of property under their management.

Any other kind of millionaire is someone who actually has cash or assets which could be sold to raise the sum of $1 million or more in cash that is actually theirs. True, there are genuine millionaires who actually own $1 million or more worth of property. But these aren't the "property millionaires" in the magazines and that spruikers feature.

Anyone can become a "property millionaire" just by borrowing $1 million and buying some properties. Simple. Instant "property millionaire". This is the exact basis of the "I'll make you a property millionaire" claims of spruikers etc.
A share investor with $250,000 that is actually theirs has greater financial wealth than a typical heavily leveraged "property millionaire" with their $100K or so equity.

As I said, there are genuine ones but a lot aren't. No wonder the authorities weren't too keen on those spruikers...

 

[tech/a]

Look at property investment Mags. They are full of articles like "Here is John Smith who has a 5 million portfolio of property in five years and this is how he did it". "Ordinary millionaires" is full of property investors/developers and what they are worth. In property investment forums you can figure out pretty quickly what people are worth.

However, in share forums it is more process based and you never know whether one of the gurus has a $5k portfolio or a $5m portfolio.

MIT

Mit your spot on.
I am however interested in how you can tell from a forum what an individual is worth without him telling you and you accepting what he tells you as truth.

 

[Julia]

Really interesting responses here - all with valid reasoning.

If I were starting over again, I'd try always to keep a "foot in both camps", i.e. hold both property and shares of pretty much equal value. That way, whichever is currently in favour, you feel OK about your investments.

I know that's bringing the whole question down to a very basic level, but ultimately for me what it's all about is that very simple feeling OK and not anxious about my choice of investments.

In the past I've engaged in some risky ventures, some of which have paid off handsomely and some of which have bombed and I've lost the lot. So now, I choose to let go of the anxiety and have a spread over the markets so that not everything looks bad at any given time. Then I sleep better!

Julia

 

[mit]

Mit your spot on.
I am however interested in how you can tell from a forum what an individual is worth without him telling you and you accepting what he tells you as truth.

Truth is always an issue. In a share forum I might say that I hold Zinifex (which is down 2.4% atm :swear: ) but I could hold any amount of the shares. If I then talked about my IP which is a free standing house in Double Bay (which I don't have :swear: ) you would instantly have an idea of my minimum worth (or at least my minimum debt).

In property forums some people just come out an say that they have x properties worth a total of y or just by their comments you form an idea of the number of properties and the probable value and at least in the Sommerset forum they are social so you get independant verification. Although there are surprises. The naieve (sp?) sounding person suddenly reveals having 19 properties and the guru who doesn't have any.

Not that the value of the person should depend on the value of their portfolio but it is difficult to hide your wealth in a property portfolio.

MIT

 

[krisbarry]

More facts, figures and data out today...

Housing slowdown worsens

By Nicki Bourlioufas

24oct05

THE downturn in the housing construction sector may be worse than previously feared due to a glut of apartments, according to ANZ Bank.

Total dwelling construction permits declined in June, July and August 2005 for a cumulative fall of 18 per cent. The bulk of the fall was for multiple-unit developments, down 42 per cent, according to ANZ Bank.

But even approvals to construct houses were down 10 per cent over the past two months, ANZ Bank said.

"Recent data on building construction permits are raising concerns that the bottom in this cycle may not yet have been reached," ANZ said in its outlook for the December 2005 quarter.

"The multi-unit sector is highly volatile from month to month, but a continuation of these recent trends would be of concern to the industry," ANZ Bank said. p> The slowdown in the housing sector has weighed on economic growth, which fell to a low of just under 2 per cent in late 2004 and early 2005.

However, the ANZ Bank expects the housing construction sector to rebound in 2006 as demand for housing outstrips supply. The bank estimates the nation requires 163,000 new houses per year, but current supply stands at around 143,000.

Rental vacancies have also fallen to their lowest level in since the late 1980s, which will ignite demand for housing from investors.

A booming mining sector is also supporting economic growth and strong demand for houses in mining states, particularly Western Australia.

ANZ Bank estimates economic growth will rise to an annual pace of 3.5 per cent in 2006 and 3.75 per cent in 2007 due to rising commodity prices and the mining boom.

The housing market has slowed and house prices fallen in Australia's largest states as housing affordability has dived in recent years due to the sharp rise in house prices.

The central bank in March raised interest rates to their highest level in four years, taking the official cash rate to 5.5 per cent, and standard variable lending rates to 7.3 per cent. That rates rise helped to depress demand for housing.

source:

http://www.theadvertiser.news.com.au/common/story_page/0,5936,17014957%5E1702,00.html

 

[krisbarry]

Press release just out...

Rates to rise in 2006: ANZ

By Nicki Bourlioufas

24oct05

THE central bank will raise interest rates in 2006 to offset the boom to the economy from the mining sector and a rebound in housing, according to ANZ Bank.

Recent comments from the central bank suggest upside risks to inflation and interest rates, said Tony Pearson, head of Australian Economics with the bank.

The central bank sets interest rates to keep inflation between 2 and 3 per cent. Over the year to June 2005, inflation was 2.5 per cent.

Recent comments from The Reserve Bank of Australia's Deputy Governor Glenn Stevens suggested high oil prices would pressure inflation.

"Mr Stevens noted that where there is a persistent trend for prices to rise quickly over a longish period, the case for ignoring that (in setting interest rates) is weak," said Mr Pearson.

"This all sounds suspiciously like the RBA is building a case for another rate rise to further tone down domestic spending and demand for credit, and to offset the boost to the economy from the resources boom."

"We are maintaining our view that there will be no need to further lift rates until late in 2006, as the effects of a rebound in housing construction progressively flow through to boost domestic demand," said Mr Pearson.

The RBA last raised rates in early March to 5.50 per cent, which took official cash rates to their highest level in four years.

Standard variable home lending rates are currently set around 7.3 per cent after lenders add a margin to the cash rate for profit.

Economists are increasingly forecasting a rise in interest rates next year as higher petrol prices push up the prices of consumer goods.

The release of producer price data today confirmed higher oil prices are pushing up prices.

Producer prices rose 1.5 per cent in the September quarter and jumped 3.4 per cent from a year earlier in a sign of growing inflationary pressures Australia faces.

The Australian Bureau of Statistics said during the September quarter 2005, the prices paid by manufacturers for their material inputs increased by 8.1 per cent and 9.3 per cent through the year.

Increases in the price of crude oil was one of the main contributors to the quarterly result.

Source:

http://www.theadvertiser.news.com.au/common/story_page/0,5936,17015097%5E1702,00.html

 

[Kauri]

Over here in the West they (the govt ) are in the process of cutting apprenticeships in the building trades to 2 years to overcome the shortage of skilled workers which has/is causing a shortage of new housing.
Then they will look at other trades i.e. resources, automotive, metals, and hospitality. And to think it took me 5 years .... :swear:
Pretty soon it will be quicker to complete a trade and be qualified to build a house than it will be to complete a traineeship and be competent to make a hamburger at McDonalds!!!!!

 

[Smurf1976]

Over here in the West they (the govt ) are in the process of cutting apprenticeships in the building trades to 2 years to overcome the shortage of skilled workers which has/is causing a shortage of new housing.
Then they will look at other trades i.e. resources, automotive, metals, and hospitality. And to think it took me 5 years .... :swear:
Pretty soon it will be quicker to complete a trade and be qualified to build a house than it will be to complete a traineeship and be competent to make a hamburger at McDonalds!!!!!

The best tradespeople (I would say "tradesmen" but must be PC... ) IMO are those that have done proper apprenticeships and preferably worked in a situation where a degree of improvisation is required from time to time.

Using the electrical trades as an example, anyone can swap cards or replace assemblies. But outside of Sydney / Melbourne / Brisbane you can't necessarily get whatever part is required "off the shelf". It has to be ordered and in most cases that means a delay of at least 24 hours if not a few days.

But bosses and customers in rural areas want the machine fixed NOW just as they do in Sydney. The technician in Sydney just gets the new part and swaps it whereas in a regional area it's far more likely that you'll actually have to fix it because of the lack of immediate parts availability. This leads to a far greater range of problem solving skills and an ability to make things happen.

No doubt there are exceptions and I certainly don't mean to offend anyone. It's just something that I and others I know have observed. I have personally spent 24 hours straight fault finding and repairing equipment which I know for a fact would simply have been swapped for complete replacement ($10,000) units (there was more than one faulty unit hence the time taken) in Melbourne or Sydney. Indeed faulty units requiring only simple repairs are virtually given away in Sydney because "we only swap".

That's not to say that faulty machines shouldn't be swapped. It often does make economic sense when lost production etc. is considered. But there is a huge benefit in being able to fix things if necessary IMO. Something that's unlikely to be helped by shorter apprenticeships.

 

[wavepicker]

House prices to stagnate for 'years'
By Nicki Bourlioufas

19sep05

HOUSE prices will likely stagmnate for "many years," dragging on consumer spending and economic growth, according to analysts at ABN AMRO.

Rising petrol prices are also causing shock to consumers, which will weigh on the economy, the analysts said in a report on consumer spending.

"House prices are likely to stagnate across the country for many years, most likely drifting lower as wages and rents slowly catch up," said analysts Felicity Emmett and Kieran Davies at ABN AMRO.

"Record high petrol prices and interest-servicing costs have both contributed to the slowdown in household spending, with growth in real household income slowing sharply, but the weakness in house prices also seems to have played an important role."

"House prices remain wildly out of line with wages and incomes, so it seems likely that household wealth will be a noticeable drag on spending for a very long time," the analysts said.

Households finances are in a fragile state, with people spending more than they earn and drawing down on the value of their homes to support spending, the report said.

"The admittedly poorly-measured saving rate is still negative, with income slowing in tandem with spending over the past year or so," the analysts said.

"Similarly, households are still actively drawing down equity in their homes." Households draw down on equity in their properties if rises in debt exceed the increase in the value of housing.

"New South Wales householders have been the most enthusiastic extractors of household equity, consistently withdrawing equity at the highest rate," the analysts said.

"This reached a peak in late 2003 when (NSW) households were withdrawing the equivalent of 12.5 per cent of consumption spending.

"Surprisingly, with Sydney house prices falling for a more than a year, households in New South Wales are still withdrawing equity at a rapid rate, equivalent to around 6 per cent of consumption spending.

"Elsewhere, housing equity withdrawal continues in the smaller states, but at more modest rates than seen in New South Wales," the report said.

Sydney house prices are around one-third more expensive than the next most expensive city, Melbourne, the report said. Sydney prices are around 12 times average earnings, while Melbourne prices are only around 9 times average earnings.

Rising petrol prices are also causing shock to the economy, the analysts said.

"Almost all industrialised countries, with Australia no exception, are net oil importers of oil, so the rise in energy prices is a negative for growth."


Source:
http://www.theadvertiser.news.com.au/common/story_page/0,5936,16649116%5E1702,00.html

Just hope they don't go the same way that they did in Japan 15 ago(median price down from an average of 1.3 million to 375,000 in 8 years) Nobody really knows what tommorow holds, but history has proven that every financial mania in history has ended up in bust after over extending itself to manic proportions. Borrowing hugely for property investment appears to have become fashionable. It's almost as if the average guy seems to be thinking about one thing , and that is where prices are going. Which means he is following everyone else in thinking that property prices in this country have only one direction. Call it greed, fear of "missing out", or even others saying that "this is your last chance to be able to afford a home".

Personally I think this is their last chance to sell

 

[Milk Man]

Just in reply to Smurf on regional tradesmen. (manus?(man)= hand in Latin therefore it is politically correct ) Every single tradesman I have hired out here is crap. Thats putting it nicely. They care less because they know damn well that theyre the only tradesman you can get for miles.

To give an example, I fixed in a couple of hours what the plumber couldnt in half a day (priming a pressure pump line). The local mechanic commented that my nephews car had a broken water pump; it has straight cut timing gears (any mechanic in Brizzy could pick this easily). The electrician left a pulsator box with live wiring hanging off the wall.

And I thought not turning up, like some of the city ones do, was bad enough. Its not so much being resourceful; its doing a half a.... job in my town. You could train a monkey to do what some of them do and it would do a better job.

 

[krisbarry]

Cathy Jane, the lively Adelaide property guru, featured on Today Tonight. Looks like shes in the poo now!

Over inflating house prices and promising returns to investors of 30% LOL, what a joke this lady is going down, down with many other property developers.

The Adelaide market is cooling and she going under! Hence the reason she is leaving the property market and heading up to Queensland. Funny how that happens. Stay and promote while the going is good, then nick off when its going bad.

Kinda glad these stories appear...was waiting for the day these property spruikers getting on ACA and TT night after night, would go under. It was cruel that they continued to get air-time spruiking up the market and telling others how to make squillions. Its not rocket science to make money when the market is going well. BUT what happens now that she has sucked them all in and the market drops.

Dental Assistant to property guru, hmmm!