House prices to stagnate for 'years'

[numbercruncher]

Just to juice it up we could add in the 80k stamp duty and 35k RE fee should the person in Kew decide to sell

So the average Kew buyer if they purchased Jun07 would probably be out to the tune of 250k+ should they bail today ..... Next quarter result will be Interesting, prices might show some action from the stock market rout eh ?

 

[Kimosabi]

And then I come across this little puppy today...

Economic shockwave hits China

THE rampant Chinese economy that Kevin Rudd and Wayne Swan are confident will help insulate Australia from the worst of the global financial meltdown is starting to falter, with Chinese leaders warning of a "most difficult" year ahead.

As US President George W. Bush used his last State of the Union address to urge bipartisan support for measures to stop the world's biggest economy slipping into recession, China blamed an uncertain outlook on the financial turmoil emanating from the stressed US housing market.

Premier Wen Jiabao warned that 2008 would be "a most difficult year".

"There are uncertainties in international circumstances and the economic environment, and there are new difficulties and contradictions in the domestic economy," he said in remarks released from last week's State Council meeting preparing for the nation's annual parliamentary session in March.

The comment contrasts with the confidence expressed by Australian politicians, some economists and business leaders since last week's global stock market meltdown that the sound Chinese economy would help Australia ride out the financial storm.

China's economy has been growing at double-digit rates, creating huge demand for Australian resources such as iron ore and coal. These have swelled company profits and, as a result, tax receipts for the Government.

Last night, the Treasurer said he remained confident about the country's outlook in the face of the financial market turmoil, which yesterday lopped another 2 per cent off Australian shares, taking losses since the start of the year to 9.8 per cent.

"All the advice that I am receiving is that we are well placed to withstand international turbulence although we are not immune from it," Mr Swan said through a spokesman.

Last week, the health of Asia was central to the Rudd Government's pitch to investors caught in the stock market maelstrom.

Mr Swan, while conceding there were uncertainties, said the fact that Australia was close to Asia, particularly to China and India, helped insulate Australia from the events sparked by the US uncertainty.

"We are certainly well-placed, but families, I think, can be confident that the prospects for ongoing growth in Asia and the region are still strong," he said last week.

Concerns about an economic slowdown in China caused by the problems in the US are now starting to overtake anxiety about the economy overheating. Economists believe any slowdown will become more pronounced after the Olympics in Beijing in the middle of the year.

Severe winter storms - which have swept unusually far south this year, bringing snow even to Shanghai and Nanjing - are exacerbating shortages and fuelling inflation, with blackouts in half the country.
The weather is contributing to economic concerns in China, where shares on Monday suffered their fourth biggest fall in 10 years, down 7.2per cent in Shanghai, before steadying yesterday.

Inflation has exceeded 6 per cent for the past five months, and China is anxious about the impact of the downturn in the US, which buys more than 20 per cent of its exports.
The yuan is also appreciating rapidly against the US dollar, making China's exports more expensive.

In Washington, in his annual address to the Congress, Mr Bush offered a speech that was much less an ambitious sweep on how the US could change the world to more on how it could save itself from slipping into economic malaise.
Mr Bush stressed the need to right the US's listing economy, where a sharp decline in US household wealth has come just as he can boast about good news in Iraq.

"In the short run, we can all see that growth is slowing," Mr Bush said. "America has added jobs for a record 52 straight months, but jobs are now growing at a slower pace. Wages are up, but so are prices for food and gas. Exports are rising, but the housing market has declined."

Mr Bush and Republicans had struck a deal with Democrats who control Congress on a $US150 billion ($170 billion) economic stimulus package.

Yiping Huang, the head of Asia-Pacific analysis at Citigroup, said that Asian economies would slow as a result of weakening growth in the US and Europe because so many businesses were now globally integrated.
He said the impact of deterioration in such important economic zones could not be quarantined.

ANZ Bank, in its latest assessment of the economic outlook, says the key barrier to another stellar year for economic growth and asset prices in Asia is the slowdown already in progress in China.
Real growth is expected to come down from a peak of 11.9 per cent early last year to a still robust 9.5per cent by the end of this year.
The cause was likely to be a fall in the pace of investment in real estate and manufacturing. ANZ warned that extra regulations designed to stem inflationary effects may be "overkill" if there was a slowdown in demand from customers in the US and Europe.

HSBC chief economist John Edwards remains optimistic, noting that China's problems were mainly those of controlling growth and inflation as well as dealing with energy shortages.

While they may have an effect, Australian financial authorities and companies such as mining giants BHP Billiton and Rio Tinto would have allowed for those difficulties. Coal prices were high and a shortage of coal would mean demand for Australian exports would be strong, he said.

"The issue they are addressing is not particularly a downturn in the US but domestic inflation and they have taken a series of measures to deal with it.

"And in this respect, they are rather more like us than the US."

Access Economics also remains confident that China's strength should carry Australia's economic growth, underwriting a notable lift in coal and iron ore prices.

But the consultancy group has warned in its latest assessment this month that the risk of China "turning from a benefactor to basket case is rising".
"If and when China finally stumbles - perhaps in 2009 rather than 2008, with the Beijing Olympics safely out of the way - Australia could see what has been a long-delayed downturn," it says.

"And it has been so long since we've had one that the next downturn will hurt."

http://www.news.com.au/business/story/0,23636,23131118-462,00.html

 

[wayneL]

UK Home Prices To Drop 10% In 2008?

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=510980&in_page_id=1770

That's it!! When The Mail says it, it's true !(for the seething masses of useless eaters)

Game on! The crash gets real in the UK!

 

[robots]

hello,

from article:

"The fall may be much worse in some parts of the country, warned the 47-year-old investment guru, with the biggest losers the owners of new-build flats aimed at buy-to-let investors which he fears are "almost unsellable".

any chance on getting an indication on a typical london house or flat and not the BTL stuff which appears to be the SOLE thing being affected

more predictions though really

thankyou

robots

 

[wayneL]

hello,

from article:

"The fall may be much worse in some parts of the country, warned the 47-year-old investment guru, with the biggest losers the owners of new-build flats aimed at buy-to-let investors which he fears are "almost unsellable".

any chance on getting an indication on a typical london house or flat and not the BTL stuff which appears to be the SOLE thing being affected

more predictions though really

thankyou

robots

I can tell you everything is being affected; even big detached houses. Proof to come as it comes online. (there is a delay of some months for land registry data to be recorded)

 

[Kauri]

not much to go on.. IG punters market for June London house...
Cheers
.........Kauri

 

[BSD]

Most people on these sites and in the investment community (myself included) have NO idea about people on average incomes despite the fact they (by definition) drive the majority of pricing in housing.

Note the following analysis from the academic quoted earlier:


ASHLEY HALL: You talk about financial pressure. Is that the concern - the stress associated with it? Or what's the broader concern?

STEVE KEEN: This is where the trouble's coming from. People have got so many financial commitments, that they have, mainly mortgage, but then of course they go and get into credit card debt, which is where a large number of these bankruptcies are coming through. So they have an enormous financial pressure and they ultimately find they simply can't meet their living expenses and their outgoings, and then they are forced into liquidating assets, which is a large part of what's driving the ending of the property boom in western Sydney.

ASHLEY HALL: What's the main cause of that?

STEVE KEEN: Excessive borrowing for house, speculation on house prices. We've encourage people - certainly in the last 15 years in particular - to borrow money to go and buy an asset which then they expect to sell to somebody else for a higher price. But it's a merry-go-round. The only way you can keep on doing it is somebody else borrows yet more money than you've done and they've got to borrow money faster than they're earning in income. And ultimately we're getting towards to crunch point where that game no longer works.


How much of Australian property is in the hands of these types of people?

How many 'middle class' couples live 30kms from the city and have one partner working just to meet the mortgage? How motivated will they be when prices drop 10% or 30%?

The "western suburbs of Sydney" is now duplicated in Brisbane, Melbourne, Gold Coast, Perth etc...

A couple of other points:

1. Beware the 'Nouveau Rich' suburbs.

Investment bankers, brokers, dealers, agents are not going to have a good year and this means 60% paycuts in many cases, coupled with a crippling debt load.

Properties that supported multiple other properties and leases will come on the market at massive discounts.

Old money may be OK - but beware areas filled with 911s.

2. Commercial is about to get chopped up - note JPMorgan's bank analyst on the DJ newswire today talking about the denial in commercial at the moment:

"Commercial property values haven risen to the point where yields are at historic lows compared to interest rates, which suggests that either (i) the Australian 5 year swap rate is going to fall 300 basis points, (ii) rents are going to double, or (iii) commercial property prices are going to fall 50%,"

Lemme tell ya, rents aren't doubling in a bear market and rates aren't dropping 300bps with inflation above 3%


Many wealthy boomers are now sh!tting themselves about the sharemarket and will make the final 'mugs play' moving into property at historic low yields and high interest rates. We may see a final blip in prices - but as per the US, UK, Ireland, NZ, Japan, Spain experience, reality will catch up to Australia.


At least in equities you can have the Chinese economy as your 'tenant'.

 

[numbercruncher]

Let me requote something for the Realestate perma-bulls

Lemme tell ya, rents aren't doubling in a bear market and rates aren't dropping 300bps with inflation above 3%

 

[ROE]

Why are we even discussing property in a share market forum.
Let these property guru go off to their property forum and have it there.

I'm happy for them to buy these property asset that pay 3 or 4 % yield and capital gain will always be double digits.

Keep them coming I need these investors when I sell my house.

 

[theasxgorilla]

"Commercial property values haven risen to the point where yields are at historic lows compared to interest rates, which suggests that either (i) the Australian 5 year swap rate is going to fall 300 basis points, (ii) rents are going to double, or (iii) commercial property prices are going to fall 50%,"

Hasn't anyone told this guy that the most extreme arguement types are also the weakest??? If only economics was this logical then most trained economists could GET IT RIGHT. Alas it isn't and they can't/don't.

At least he got in the paper for his 15 minutes. Sheeesh.

ASX.G

 

[wayneL]

Why are we even discussing property in a share market forum.

Because this is the "General Chat" forum where you can talk about anything you like.

 

[BSD]

Hasn't anyone told this guy that the most extreme arguement types are also the weakest??? If only economics was this logical then most trained economists could GET IT RIGHT. Alas it isn't and they can't/don't.

At least he got in the paper for his 15 minutes. Sheeesh.

ASX.G

So which one do you think is coming?

a. Rents doubling
b. Bonds dropping 3%
c. Values falling

Or are you betting on illogical outcomes?

Sheesh

 

[robots]

hello,

let me remind people of a couple of things:

isnt property still 7-8x average salary?

as that is what people are always telling me, which means guess what lads property is still as high as ever

thankyou

robots

 

[numbercruncher]

What are you saying Robots ?

 

[robots]

hello,

maybe none of those three will occur, most likely that would be the outcome

thankyou

robots

 

[Flying Fish]

What are you saying Robots ?

robots is alluding to inflation and more.

If my wage is insufficient to maintain my lifestyle then something must give. thankyou robots

 

[theasxgorilla]

So which one do you think is coming?

a. Rents doubling
b. Bonds dropping 3%
c. Values falling

Or are you betting on illogical outcomes?

Sheesh

Why are they the only possibilities? Why not a blend of each? Much more likely in reality. Rents probably will go up, as inflation kicks along. Bond rates are not likely to drop in Australia in the short to medium term, IMO. Values? Refer to the title of the thread. Having said that, commercial probably is more likely to drop than residential, from what I understand of that market (between very little and nothing).

ASX.G

 

[Kimosabi]

Why are we even discussing property in a share market forum.

Because this is the most entertaining thread on the Forums...

It sure would be boring if we didn't have Roborampingbots....

 

[robots]

hello,

yes yes, thankyou

just doing my bit AGAIN for society,

making people laugh and enjoy discussion

have a wonderful day tomorrow

thankyou

robots

 

[Kimosabi]

hello,

yes yes, thankyou

just doing my bit AGAIN for society,

making people laugh and enjoy discussion

have a wonderful day tomorrow

thankyou

robots

Uuuummmmm, I don't think ramping overpriced property is a service to society.

When making people laugh, I've found it's better to have people laugh with you instead of at you, and ramping over-priced property isn't really a laughing matter either...