House prices to stagnate for 'years'

[tech/a]

I'm actually wallowing in my "Mess" a 150% gain on 12 properties in 8 yrs is my kinda mess-----.

Dont place everyone in the same toilet---there are only a few in comparison to the many Kris.

Back to Kris's glee in dropping housing prices and increasing interest rates---as its been agreed one will go hand in hand with the other.

Lets take a $300,000 property that you can get a loan for 6.8% over 30 yrs.
Calc (1)

30 yrs at 6.8% = $612,000
Plus Property = $912,000

Lets say Kris gets his 20% reduction in price to $260000 and interest rises 2 points to 8.8%
Calc (2)

30 yrs at 8.8% = $686,000
Plus Property = $946,400

Now I know the calcs arent 100% accurate for principal and interest but they are indicative of the flaw in Kris's arguement.

The best time to buy in my veiw is NOW and in 2,5,10 yrs time the best time will have been NOW 6/11/05
In any year ---any year ago was the best time to buy.And at that time a year before that year would have been even better.

Dont expect spectacular rises as we have seen but played right you wont be worse off buying now.Sure you dont over stretch yourself or buy over priced property---again seek advice.

If you can afford to buy and pay for a property (Seek financial advice) then there will be no better time.
There have been better times and in the future there will have been better times but NOW there is no better time.

 

[Smurf1976]

In recent years the general public has added terms such as "texting", "internet", "geopolitical" and so on to commonly used words and phrases. The next candidate for a new term in common usage would appear to be "negative equity".

 

[tech/a]

Smurf

Kids have got that now with Card debt. I know of one with 40K debt.

All I'm saying is think outside the square ALWAYS.
Dont be drawn into every argument as gospel. Look at ways to turn adversity into opportunity.

 

[krisbarry]

I'm actually wallowing in my "Mess" a 150% gain on 12 properties in 8 yrs is my kinda mess-----.

Dont place everyone in the same toilet---there are only a few in comparison to the many Kris.

Back to Kris's glee in dropping housing prices and increasing interest rates---as its been agreed one will go hand in hand with the other.

Lets take a $300,000 property that you can get a loan for 6.8% over 30 yrs.
Calc (1)

30 yrs at 6.8% = $612,000
Plus Property = $912,000

Lets say Kris gets his 20% reduction in price to $260000 and interest rises 2 points to 8.8%
Calc (2)

30 yrs at 8.8% = $686,000
Plus Property = $946,400

Now I know the calcs arent 100% accurate for principal and interest but they are indicative of the flaw in Kris's arguement.

The best time to buy in my veiw is NOW and in 2,5,10 yrs time the best time will have been NOW 6/11/05
In any year ---any year ago was the best time to buy.And at that time a year before that year would have been even better.

Dont expect spectacular rises as we have seen but played right you wont be worse off buying now.Sure you dont over stretch yourself or buy over priced property---again seek advice.

If you can afford to buy and pay for a property (Seek financial advice) then there will be no better time.
There have been better times and in the future there will have been better times but NOW there is no better time.

NO..NO....NO, the best time buy is not now, the best time to sell is now, as discussed, wait till the market becomes flooded with houses, that is when to buy. Plenty more choice and more bargains to be gained. I will be the biggest ******** out to buy in this current market with all indicators pointing down!

 

[Smurf1976]

Whether or not you are better / worse off depends heavily on how much deposit you have.

If you have a 5% deposit as many do then interest rate rises could well offset house price falls. You might have even been better to buy at the peak.

But if you have a 50% deposit then if interest rates rise 2% and house prices fall 20% then the amount you need to borrow has been reduced by 40% and you are clearly much better off.

It also needs to be considered that with most people choosing to not fix their interest rate those who bought at the peak are somewhat vulnerable if interest rates rise.

It all depends on your specific circumstances. There are some properties which will rise in value whilst others fall.

 

[TjamesX]

These comments will definitly affect the market. On one property forum there was a poster who was holding out on an offer they recieved to try and get a bit more - they took the offer immediatly after the John Symond comments. This was not a mug investor, but they believe the influnece of the comments made will be reasonable;

JOHN SYMOND: If I'm an investor, I would be selling as soon as I can. If I am a home buyer and I have got to sell the house and buy another house, it evens itself out. If I am looking for a home and I don't have a house to sell, if I could find a property that ticked all the boxes for my own home, for me and my family, I would buy. I think we will see more and more forced sales, mortgagee signs, mortgagee sale signs coming up in the market. That is why I am saying no rush to buy, people, no rush. We will have a wider selection of properties to choose from at probably a lower price. So why would you rush in?

original transcript of the interview

http://sunday.ninemsn.com.au/sunday/cover_stories/transcript_1904.asp

I also found these comments interesting;

BERNARD SALT: Because between 1950 and 2000 our population went from 8 million to 19 million. Over the next 25 years you will not have that level of population growth. Therefore, the demand for suburban property will diminish and you won't have that price tension. The baby boomer children is Generation Y, that are now between the ages of 14 and 30. This generation has really never experienced anything other than rising gentle prosperity.

 

[chicken]

These comments will definitly affect the market. On one property forum there was a poster who was holding out on an offer they recieved to try and get a bit more - they took the offer immediatly after the John Symond comments. This was not a mug investor, but they believe the influnece of the comments made will be reasonable;



original article

http://sunday.ninemsn.com.au/sunday/cover_stories/transcript_1904.asp

I also found these comments interesting;

what you just posted...the population not growing...Australia will have to get used to it to take a larger proportion of Immigrants than they are used to Queensland gets 200 people per day so John Symonds does NOT know the answers and Scaremongering is also not the answer I said that supply and demand is the answer and....a Builder works for $50 an hour and try and get a builder...not easy as they are all bussy..so house prices will not rise as quick as the last 3 years but rise they will..buy some building material and it all costs......so we all have to pay as far as people giving the houses away....well we can all dream.....at least that is for free....houses will just cost money....even caravans cost money....in Redcliffe where I life....all the land is now subdivided and to buy a section...from $175000.....to $1000000 or you buy an old house and start again...still costs over $200000 so prices dont fall that much and the market will rise further..why...its called inflation....and its just a merry go round what TECH/a said is right NOW is the time to buy..tomorrow its dearer........

 

[happytrader]

Lets get real here!

A high divorce rate, foreclosures, public trustee auctions. As long these events occur you will always find a bargain. Does a tiger change its stripes? Might take a bit of hunting down and some patience but they are there.

Cheers
Happytrader

 

[charttv]

I've seen and heard alot of scaremongering regarding the fact that the baby boomers won't be replaced in the workforce because of the sheer number of them. How often do these scaremongers come up with statistics indicating that they are replaced by a far more efficient workforce thanks to the wonders of technology.

There are supposedly four baby boomers for each Gen Xer, but is it not possible that thanks to modern management techniques and technology that each Gen Xer is just as productive as four baby boomers? Take banking for example, instead of having rows and rows of tellers waiting for your business, branches nowadays are permanently understaffed, forcing everyone onto the internet and net banking. The banks are processing more and more transactions with less and less staff!

Also, what about immigration? If the ageing of our population becomes such a huge problem I wouldn't be too surprised to see a massive immigration program similar to the immigration wave we experienced post World War II. I'm sure there are millions of foreign highly skilled and educated workers who would love to take up the slack in the economy which would help to prop up any shortfalls in the welfare system and potentially lead to further economic prosperity.

My two cents

 

[chansw]

Lets get real here!

A high divorce rate, foreclosures, public trustee auctions. As long these events occur you will always find a bargain. Does a tiger change its stripes? Might take a bit of hunting down and some patience but they are there.

Cheers
Happytrader

I agree that, Happytrader. Sometimes, peoples situation might force them to sell asap especially for those arranging divorce. Patience is needed for grabbing a bargain.

 

[krisbarry]

I've seen and heard alot of scaremongering regarding the fact that the baby boomers won't be replaced in the workforce because of the sheer number of them. How often do these scaremongers come up with statistics indicating that they are replaced by a far more efficient workforce thanks to the wonders of technology.

There are supposedly four baby boomers for each Gen Xer, but is it not possible that thanks to modern management techniques and technology that each Gen Xer is just as productive as four baby boomers? Take banking for example, instead of having rows and rows of tellers waiting for your business, branches nowadays are permanently understaffed, forcing everyone onto the internet and net banking. The banks are processing more and more transactions with less and less staff!

Also, what about immigration? If the ageing of our population becomes such a huge problem I wouldn't be too surprised to see a massive immigration program similar to the immigration wave we experienced post World War II. I'm sure there are millions of foreign highly skilled and educated workers who would love to take up the slack in the economy which would help to prop up any shortfalls in the welfare system and potentially lead to further economic prosperity.

My two cents

I somewhat agree, although many (stats people) use super computers to determin population/trends well into the future and Australia's workforce is falling and more are drawing benefits.

 

[MichaelWhyte]

There are supposedly four baby boomers for each Gen Xer

No longer correct.

I was at a presentation by Michael Yardney of Metropole Properties last month where he presented the latest ABS stats on population which showed that about 5 years ago the Gen Xers actually crossed the line and now outnumber the Baby Boomers. Mind you, I think the model he presented aggregated the Gen Ys and the Gen Xs together so might have been misrepresentative.

Whichever way you cut it though, the BBs are diminishing. This "mass exodus" from the workforce and its impact has no doubt been over-played. It certainly hasn't adversely impacted our economy to the extent that some pundits predicted. Its more likely to result in a gradual redistribution of wealth to the next generation who are more than capable of stepping in and filling the gap.

My 2c,
Michael.

 

[tech/a]

Michael is that an S2000 Honda on your avitar?

My prediction.

Baby Boomers have been the wealth creators.
Next generation will be the "Silver Spooners"
One after will be the "wealth destroyers"As they will have no idea how to grow it or maintain it as will some of the wasteful "Spooners"
Finally there will come the next generation which will complete the cycle out of necessity and become the next "Wealth builders"

Then the cycle will begin again.

 

[MichaelWhyte]

tech/a,

Hope your wrong on those generation predictions. I'm a Gen Xer (35) and already have $1M net worth. Through the next property boom I'll be leveraging a large portion of that at 20% down on growth IPs and riding the wave. For now I'm in stock as most of the mums and pops haven't realised that property is dead for the foreseeable future and still rate it as the better asset category. Hard to believe isn't it, but that's based on surveys only a month or two back, and 1/3 of Boomers saying they're going to buy an IP in the next 12 months. If you want to do simple big plays and be counter-cyclical then the ASX is a nice place to be for now despite alot of the "over-heated" stock market talk going on.

I've got a little under $1M leveraged in the XJO blue chips now and have seen my portfolio grow over 5% in a month. I bought in at 4410 after the big "Ides of October" drop. Hoping to see a strong rally through to the end of the year. Not as flashy as the spec guys and the tech traders, but hey, I'm a simple guy! :

PS. Nope, that's the Mazda Mx5 Mark III (NC). I've got the Mark II (NB), a '99 model and she shure is pretty. I do like the S2000 though, lots of ponies under the bonnet.

PPS. I'm just a super newbie here to learn some stock stuff coming off an IP background.

Cheers,
Michael.

 

[tech/a]

Michael.
Being a builder--developer I look at R/E a little differently.
Currently doing High density community title developements 6-30 on a developement. Negotiating 8000 Squ mtrs at the moment.

I'm selling I/Ps to decrease gearing and maximise passive income.

Anyway I look at the numbers--thats all I'm interested in.
The wife runs the construction side and I'm involved in civil.

Mentioned the 2000 as I just sold my "Midlife crisis" it was fun great to drive,a real drivers car actually like a slot car. 6 sec 100k and a head turner.

But at my age they are looking at the car!!!!

Bugger

Longterm investment filtered by index performance is in my veiw the very best way to work with shares particularly larger investments.

 

[RichKid]

Back to house prices, this is a great graphical look from the Fat Prophets (relying on 3rd party reports), just buying an asset because it's dropped in value doesn't mean you'll make a profit antime soon, or ever (ie opportunity cost and other costs associated with holding the asset) similar to buying shares which are going South imo. I'm surprised you don't use more charts in your analysis of housing figures tech? Isn't it easier to see trends and cycles? http://www.fatprophets.com.au/content.aspx?page=Market+Outlook+-+6+Dec+05

 

[mit]

Back to house prices, this is a great graphical look from the Fat Prophets (relying on 3rd party reports), just buying an asset because it's dropped in value doesn't mean you'll make a profit antime soon, or ever (ie opportunity cost and other costs associated with holding the asset) similar to buying shares which are going South imo. I'm surprised you don't use more charts in your analysis of housing figures tech? Isn't it easier to see trends and cycles? http://www.fatprophets.com.au/content.aspx?page=Market+Outlook+-+6+Dec+05

It would be nice to see more data. The graphs only show one and a half cycles.

MIT

 

[tech/a]

When Ive got time I intend to write up some opinion on the data graphs shown.

But interested in how others interpret them.

like charting what I see may not be what you see.

 

[RichKid]

I thought I'd posted the original studies done a few months ago in this thread or a similar one. Read it in the Economist, they had longer time cycles. Maybe someone can dig em up if i can't find it. There were reports by local and international research houses. I think Comsec had some detailed reports recently as well. Be wary of real estate industry sponsored/associated reports, especially in investment magazines. They just want you to part with your money instead of staying out of the market.

 

[tech/a]

The Hindsite meter shows 97 as the best time to have bought.

Affordability is now far worse than in the 90s and the balance is with renting currently.(Cheaper to rent).

This will change fairly soon as (2 yrs) as those who cannot afford to buy and come into the rental market find housing hard to find (thats not the case now).A raise in interest rates will see less home buying and a possible exodus of higher geared investors.Many are using their grey matter and leaving the market now.(Taking profit).
So the cycle will start again and by the gap it seems it will be a long while before cost of renting and cost of building or purchasing a home again match or better chaeper to buy.

So if your young enough look for this to happen and then buy all you can afford as the out of balance will occur again one day.The last time they matched was in 84 if I remember.