House prices to stagnate for 'years'

[Smurf1976]

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.

Interesting comments there Milk Man. I think there's two kinds of regional tradesmen from what you're saying!

My own experiences relate to having to maintain plant and equipment belonging to the employer rather than doing work for the public. That is, employers with enough work to do that they employ their own tradesmen and do everything "in house". In that context there isn't really an issue with not turning up etc. since you would simply get the sack. The lack of external technical support for specialised work does require a higher degree of resourcefulness IMO. And the good thing about this is that I get to have a go at everything from media relations to financial costings as well as the technical stuff.

Point taken that it's different when you are in a regional area and have to use the services of a contractor. If they don't have competition then I can follow the point that they might not be too good...

 

[amohonour]

I am about to move to a new area and as we looked around at the price of houses and then worked things out it was a lot cheaper to build in a new area and not only have a new home but you also get new up to date services in the ground. In saying that it is a bit daunting as you hear so many stories about dodgey builders and it does put you off a bit. Has any one else built and what are your experiences? Is it all doom and gloom or not? Can you recommend a builder in south aus if allowed.

 

[krisbarry]

New home sales in doldrums

By Nicki Bourlioufas
31oct05

SALES of new homes and units plummeted 16 per cent in September with no sight of a recovery in the housing market, figures released today show.

The sale of new houses fell by 20 per cent while the sale of multi-units rose 9.4 per cent over the month, the Housing Industry Association (HIA) said.

Sales of new houses and units totalled 6030, less than than half their level two years ago before the property market had started to cool with higher interest rates.

Australia's peak building industry body said there was no sight of recovery in housing demand.

"This period of bumping along the bottom is expected to continue for another year before the affordability and household debt equations start to improve, kick-starting demand," said HIA's chief economist, Mr Simon Tennent.

"With rates on hold and incomes rising, this market could best be described as a stand-off between consumers who want new housing but are taking a 'wait-and-see' approach, versus an industry that is struggling to deliver an affordable product and remain financially viable," Mr Tennent said.

The good news for the housing industry was that rental markets remained very tight and weekly rents were on the rise, which was keeping a floor under house prices, Mr Tennent said.

Indeed, house prices were not likely to fall with demand for housing building up the longer people delayed home purchases, Mr Tennent said.

"You'd need interest rates to rise by another 1 per cent over a short time to see house prices fall," he said.

HIA's New Home Sales Survey is compiled from a sample of the largest 100 residential builders in Australia and is the most leading indicator on new housing activity.

Mr Tennent said it was pleasing to see sales in New South Wales (NSW) jumping up for the second consecutive month by 9 per cent as many large volume builders in Sydney reported modest improvements in enquiries and display home traffic.

"Elsewhere however, the falls were largely a correction from the good month in August, particularly in Western Australia (WA)," Mr Tennent said.

Sales falls were recorded in WA, down 24 per cent, followed by Victoria, down 11 per cent, South Australia, down 10 per cent and Queensland, down 1 per cent.

Source:

http://www.theadvertiser.news.com.au/common/story_page/0,5936,17090274%5E1702,00.html

 

[krisbarry]

Rates to rise globally

By Nicki Bourlioufas and AAP
31oct05
PRICES of goods and services eased in October but with inflation sitting above the central bank's tolerance band, a rise in interest rates is likely, an analyst forecast today.

The TD Securities-Melbourne Institute experimental monthly inflation gauge showed prices of consumer goods and services fell by 0.1 per cent in October following a rise of 0.6 per cent in September.

The gauge is now 3.3 per cent higher than a year earlier. As measured by the gauge, the annual headline inflation rate has sat above the Reserve Bank of Australia's (RBA) 2 to 3 per cent target band for the past four months.

"The information on core inflation from the TD-MI data suggests that an interest rate rise is more likely than not in the months ahead as inflation pressures build," said TD Securities chief strategist Stephen Koukoulas.

And according to Citigroup, inflation risks are rising globally, which will push up interest rates in foreign markets.

Contributing most to the overall fall in the inflation gauge in October were falls in the cost of automotive fuel and fruit and vegetables. Increases in house purchase, alcoholic and non-alcoholic drinks partially offset the declines.

Excluding volatile items, the core inflation measure rose by 0.3 per cent in September to be 2.9 per cent higher than a year earlier.

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.

The central bank will meet tomorrow to set the level of interest rates for November. While analysts do not expect a rate rise this month, several economists are forecasting a rate rise next year as higher petrol prices push up prices of consumer goods.

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. But rates could rise above 7.5 per cent if the central bank raises rates by 25 basis points next year, as some analysts expect.

Global rates to rise

According to a Citigroup research note released today, inflation risks are rising broadly, which will push up interest rates around the globe.

"Inflation risks have risen in the wake of higher energy prices, triggering tougher central bank rhetoric and lifting interest rates," the note said.

"Global growth likely will ease as higher energy costs and interest rates restrain demand, helping to cap inflation risks and rates."

In the US, the Federal Open Market Committee (FOMC) is widely expected to raise interest rates from 3.75 to 4.0 per cent this week.

"The backdrop of strong (US) demand, still accommodative financial conditions and continued hints of rising inflation concerns points to additional rate hikes beyond next week's action," Citigroup said

Source:

http://www.theadvertiser.news.com.au/common/story_page/0,5936,17089625%5E1702,00.html

 

[amohonour]

They may well say that an interest rate rise will bring prices down but i am trying to sell my house atm which 12 months ago would have got easily 240000 plus but now the buyers just arent there and we have been struggling at under 220000, so i think the proof is in the pudding. I was talking to an agent i know and he said this morning that in adelaide the market is stirring again but it is because the prices have dropped.

 

[tech/a]

Well I sold one in Seaford for the asking price--$235K
The first offer was $210---second $215 both we ignored until the agent said counter offer at what we would accept.
$235K and settled in 3 weeks--they both worked in a bank.

Dont think prices have tappered off that much

 

[Smurf1976]

They may well say that an interest rate rise will bring prices down but i am trying to sell my house atm which 12 months ago would have got easily 240000 plus but now the buyers just arent there and we have been struggling at under 220000, so i think the proof is in the pudding. I was talking to an agent i know and he said this morning that in adelaide the market is stirring again but it is because the prices have dropped.

It's not just Adelaide where house prices aren't exactly booming.

What I have seen in Hobart over the past 3 or so years was a volume surge in Autumn / September 2003 followed by a virtual collapse in volume. Even the real estate agents readily admit to the slump in volumes.

Then the sales volume picked up during 2005 until quite recently. But now we have something new. In short, it seems that many of those who have bought a house haven't sold the one they were living in before. They are just empty with a "for sale" sign out the front. Not that anyone seems in a hurry to buy.

The Real Estate Guide is now a full 72 pages. Lots of houses for sale in a city with only 200,000 people (greater Hobart area). But one thing stands out. And that is the increasing number of "Price Reduced" ads. That says it all IMO.

As for the empty properties, presumably they will have to sell sometime. How many people can forever pay two mortgages, insurance etc? But it really doesn't seem that they can sell at present asking prices. If they could then surely they would be selling now! So the price cuts are on the way IMO.

Not that long ago I was still unconvinced about property prices. But now I see the falling asking prices and the growing stock of empty homes. Meanwhile, builders keep on building even though they already have houses they have been unable to sell. Better value prices are starting to appear in increasing number. I just don't see a bullish case for property prices in Hobart over the next couple of years. I could of course be wrong but during the course of 2005 the evidence has steadily mounted in favour of the bears IMO whilst the bulls are reduced to making statements which avoid mentioning house prices or which quote the price of sold properties only without taking into account the value of those withdrawn due to only receiving low offers.

 

[amohonour]

Thanks for that tech I do live in the country could be part of the reason but am looking to shift down your way back to Aldinga. Love the beaches down there. Thanks again for your input.

 

[krisbarry]

Well I sold one in Seaford for the asking price--$235K
The first offer was $210---second $215 both we ignored until the agent said counter offer at what we would accept.
$235K and settled in 3 weeks--they both worked in a bank.

Dont think prices have tappered off that much

Would be interesting to see if you could post this table again in 6 months time, then again in another 6 months. Will the prices and the returns be the same, higher or lower.

 

[tech/a]

I can do that Kris I get it every week.

There has been a drop I've noticed since the original discussion started.
I remember it being 8% for the South and 10% for Adelaide as a whole.
Its coming off but not to the point of panick.

Even so a rate rise would knock it and 2 would belt it.

I still say now is the best time to get the best price if selling.
As for buying I still think your 4 yr prediction is very optimistic.
In 4 yrs time I doubt you'll be any or much better OR worse off.

I think any drop(Benifit)will be eaten up by rate rises.

 

[amohonour]

The thought amongst the few real estate people that are friends of mine is that they are seeing a price drop not huge but the signs are there that it will go a bit lower soon. Must say though that a couple are from the country and the others are at Aldinga where at the moment there is a bit of a building boom on. Land around $80,0000 to $100,000 in the new areas then put a four bedroom house and it is around the same price if not cheaper than an existing home bit more work but you end up with a new home.

 

[Smurf1976]

It seems that lenders are now turning bearish on the market. Indeed it seems that at least one expects a pretty big slump down 10% next year and quite some time after that to reach the bottom.

http://www.dailytelegraph.news.com.au/story/0,20281,17142605-5001021,00.html

 

[markrmau]

I think any drop(Benifit)will be eaten up by rate rises.

You agree with the efficient market hypothesis?

 

[tech/a]

Yes and no.
It skews in both directons all the time.
But generally returns to the mean.
When it will skew and how long it will remain at the mean are ofcourse the burning questions.

 

[chansw]

I just watched the Sunday on Channel 9. It started at 6:00am instead of 9:00am (Perth time) due to the cricket game today. The cover story of this week is "Safe as houses".

"Get out of the real estate market now. That's the blunt warning to Australians with investment properties from the country's most respected lender, "Aussie John" Symond of Aussie Home Loans"

If you miss out, here is the web site that you can read the story. The transcript of the story is not there yet when I post this message.

http://sunday.ninemsn.com.au/sunday/cover_stories/article_1904.asp

 

[RichKid]

Its coming off but not to the point of panick.

Even so a rate rise would knock it and 2 would belt it.

I still say now is the best time to get the best price if selling.
As for buying I still think your 4 yr prediction is very optimistic.
In 4 yrs time I doubt you'll be any or much better OR worse off.

I think any drop(Benifit)will be eaten up by rate rises.

Looks like Aussie John agrees with you going by the Sunday programme on Ch9 today, except he thinks it's going to get worse not stay the same. He says people should cut their losses as it's going to get worse. Particular warnings for high-density apartment dwellers, I feel sorry for those people who thought they'd retire in those units (or off its capital gain).

Also heard some guy on the same programme (Australian Property Monitors?) say that even one rise could put us into some big trouble, especially in Sydney, otherwise it'll just stagnate for years. They also said that most people in their 30's may not recall the hard times of the past. They also showed clips of those high interest rates of the 80's and the protest rallies and meetings- seems like another planet.

 

[chansw]

Looks like Aussie John agrees with you going by the Sunday programme on Ch9 today, except he thinks it's going to get worse not stay the same. He says people should cut their losses as it's going to get worse. Particular warnings for high-density apartment dwellers, I feel sorry for those people who thought they'd retire in those units (or off its capital gain).

Also heard some guy on the same programme (Australian Property Monitors?) say that even one rise could put us into some big trouble, especially in Sydney, otherwise it'll just stagnate for years. They also said that most people in their 30's may not recall the hard times of the past. They also showed clips of those high interest rates of the 80's and the protest rallies and meetings- seems like another planet.

Richkid, your are right, that is Australian Property Monitors. The guy mentioned 0.25 percent rise on interest rate could start to create some trouble. Perth and Darwin are the only two markets doing well at the moment. He also mentioned 1 percent would even get Darwin market (he did not mention Perth but I think that can hurt Perth, too) into trouble as well.

I heard from a real estate agent here in Perth said a lot of Eastern States investors come to Perth and that is one of the main reasons pushing the house prices up here. The areas that I am looking to buy a house have been so quiet in the last 2 months. Not many new houses are put on the market for sale. He mentioned they usually have 50 properties in stock at this time but only 8 properties this year when I talked to him about 3 weeks ago. That real estate agent mentioned to me a few smaller real estate companies around his have closed the business already.

 

[chicken]

Richkid, your are right, that is Australian Property Monitors. The guy mentioned 0.25 percent rise on interest rate could start to create some trouble. Perth and Darwin are the only two markets doing well at the moment. He also mentioned 1 percent would even get Darwin market (he did not mention Perth but I think that can hurt Perth, too) into trouble as well.

I heard from a real estate agent here in Perth said a lot of Eastern States investors come to Perth and that is one of the main reasons pushing the house prices up here. The areas that I am looking to buy a house have been so quiet in the last 2 months. Not many new houses are put on the market for sale. He mentioned they usually have 50 properties in stock at this time but only 8 properties this year when I talked to him about 3 weeks ago. That real estate agent mentioned to me a few smaller real estate companies around his have closed the business already.

Do what the KIWIS did increase immigration from china and your housing market is fixed..Auckland is going through the roof in prices...Housing is an important part of the total economy...and take of your capital gains tax no one gets any benefits through it..let the market decide where the price should be and everyone wins....just a thought ....I did real estate as a job

 

[krisbarry]

Yes I caught the Sunday program this arvo, recorded it as I was at work. very interesting. I think if you live in Sydney and have bought in the last couple of years and have not sold, then your chances are very limited.

As mentioned Perth and Darwin are booming, but a a couple of rate rises would kill these markets off too. So I think now is the time to sell those investment properties.

And yes I was pretty much correct in saying that 4 years time will be a better time to enter the market as a first home buyer. There will be plenty of choice, at a much cheaper price within a few short years, as much as 10-25% less.

Yes My eyes light up with glee, when all the doom-and-gloom experts come out of the woodworks and tell us the housing market is stuffed, no matter which way you look at it, for the next 4-5 years!

Thank god, my time is coming closer and closer now! Too many have had it too good, for too long and have tripped up in their own little mess!

 

[RichKid]

....I did real estate as a job

I will not doubt that for one moment - were you an auctioneer? just having some fun chicken, hope you don't mind!

Funny thing is that the first thing I saw on the SMH homepage this morning was a headline saying banks think prices will not fall (or something to that effect)- why wouldn't you trust em? On the other hand Aussie John appears to have the average home owner's ear and comes across as far more empathetic, especially as he doesn't have a vested interest in making his claims, apart from building trust with potential customers.