House prices to stagnate for 'years'

[tech/a]

Never heard of "101"

Damn I thought I was original.

Preaching to the converted is fine preaching to those who write the scriptures is pointless.

However people like yourself Bullmarket who have possibly been there done/doing that have a great deal to offer to those even if they are converted.

Understanding,agreeing,and nodding knowingly is a far cry from doing it.
Those that are---are valuable assets to those looking to find their Financial Freedom.

 

[Bronte]

As previously posted; WA is also on a strong growth curve.
Battman has just returned from Europe and he says in comparison
"Australia real esate is still very very cheap."

Quote from 16th Oct' 05
Of course I should have quoted Battman as saying:
"W.Australia real estate is still very very cheap."

 

[krisbarry]

I am looking forward to that rate rise it will just make the housing market plummet in all states and in WA the market will stagnate.

Yippee!

Go RBA!

 

[Joe Blow]

I am looking forward to that rate rise it will just make the housing market plummet in all states and in WA the market will stagnate.

Yippee!

Go RBA!

Kris, I think we've all got the picture. Perhaps its time you eased up on your endless wishing for interest rate rises and got onto another topic? There's nothing funny about wishing financial hardship on others irrespective of their financial position. Besides, those affected most by interest rate rises are not the very wealthy but average Australians.

Give it a rest.

 

[Smurf1976]

There's nothing funny about wishing financial hardship on others irrespective of their financial position.

Agreed.

But to be fair, I must point out that it's hard to have any view on the housing market without that involving hardship for someone. Personally, I would much rather we had never had the bubble. But we do and that's life.

If interest rates go up - hardship for borrowers who speculated on interest rates staying low.

If interest rates go down - even more hardship for those with assets not wanting out of control inflation.

If house prices fall - hardship for housing speculators

If house prices rise - more hardship for first home buyers, families wanting kids (therefore a bigger house) etc who have already lost rather a lot.

Bottom line - when you have a bubble, someone has to lose. Question is who? IMO a modest pickup in both wage inflation and interest rates combined with a modest nominal fall in house prices (but a much bigger fall in real terms) would do the least damage.

Worst case? A renewed boom in house prices - we've got more than enough inflation "baked in the cake" already without another surge in house prices to fuel the fire.

It's 6am on Sunday after one huge night out. You can NOT avoid the hangover. You can delay it and make it worse (keep drinking) but you can not avoid it. The "no hangover" option ended when the heavy drinking started. Same with the borrowing binge and house prices.

 

[TimmyC]

Investors are the ones that have primarily gained from the bubble. They don't realise that now their children are going to have such a hard time owning their own home

 

[Realist]

Investors are the ones that have primarily gained from the bubble. They don't realise that now their children are going to have such a hard time owning their own home

If there's one thing that every bubble has in common, it is they all burst eventually.

Logically, kids in 30 years time will find it no harder or easier to buy a place than we did.

If people can't afford houses then who is buying them? If you say investors then you are wrong, because if people can't afford houses they need to rent, and they can't afford exhorbetent rents if they can't afford mortgages so the yield for investors is low - and therefore investors wont buy and guess what no-one buys so house prices go down and everyone is happy.

The bubble is deflating in Sydney and has been for nearly 3 years now, it may pop soon. The rest of Aus will follow eventually. and then sure enough another bubble will form. You need to buy then or before then ideally.

 

[tech/a]

What am I missing here.

When I bought my first home 30 years ago my wage combined was $240/week.
The house was $30,000 or 150 times wage.
Today house is say $300,000 and combined wage for average punters of
$1600 nett or around 180 times wage.

ITS ABOUT THE SAME

The only difference is that when the market was deflated most didnt take uo the opportun ity or more to the point recognise it.

It will happen again but not for atleast 12 yrs.

High density low rental low purchase price 1 and 2 bedroom are my pick if your in the position to develope.
Rents will rise to catch property prices and as such demand will rise for the above in both rent opportunity v investment and or pure sale of developement.

Opportunity is still there but not in the conventional places.

Average UK combined wage is £1000 average house like a $300k Aussie home in adelaide is around £4-500k We have a longway to go.
Imagine how hard it is for kids here!

 

[wayneL]

Some gratuitous bearishness from Safehaven.

http://www.safehaven.com/article-5640.htm

August 01, 2006

Record Household Deficit - Is There Anything Wrong With This Picture?
by Paul Kasriel


With the release of the second-quarter advance GDP data and the revisions to 2003 through 2005 data, we can update our household surplus/deficit chart. Based on first-half data, it looks as though households are on course to run yet another record deficit in 2006. To refresh your memory, we subtract from disposable personal income (after-tax income) the sum of expenditures on consumer goods/services and residential investment (value-added in housing). If households' total expenditures are less than their after-tax income, then they are, in effect, running a surplus. This implies that they are advancing funds to other sectors - businesses, governments and/or foreign entities. If households' total expenditures are more than their after-tax income, then they are running a deficit. This implies that they are borrowing from or selling assets to other sectors. In the first quarter of this year, households ran an annualized deficit of $566.2 billion. In the second quarter, this annualized deficit increased to $588.0 billion. Based on this first-half data, households are on course to run a 2006 deficit of $577.1 billion, which would break the 2005 deficit record of $476.7 billion (see chart below).

Household Surplus (+) or Deficit (-)*Bil.$

* disposable personal income minus sum of expenditures
on consumer goods/service and residential investment
​

Assuming that households do, in fact, run a deficit for all of 2006, this would mark only the thirteenth time since 1929 that this has happened. Two years in which households ran a deficit were in 1932 and 1933 - the depths of the Great Depression. It is not hard to figure out why they might have run deficits then. With unemployment soaring, folks were selling assets and borrowing just to exist. Households again ran deficits in 1947, 1949 and 1950. Again, it is not too difficult to explain deficits in these years. During WWII, durable consumer goods and new houses were not available given that most production was being used for the war effort. And because there was not much to purchase for those working on the home-front during the war, they ran huge relative surpluses, to a large degree, in the form of war bonds. Soon after the end of WWII, with their balance sheets overflowing with assets relative to liabilities, households went on spending spree, buying houses, furniture, appliances and other consumer durables - hence the household deficits. Why households ran a deficit in 1955 is a mystery to me other than that was the year we bought the white-on-turquoise V-8 Ford.

This brings us to the "modern" era. With the exception of 2000, households have racking up large deficits starting in 1999. By the way, these deficits are not just records in absolute terms, but relative to their disposable incomes as well - e.g., 6.15% of disposable income in the first half of 2006. These "modern era" household deficits also are not that difficult to explain. Generational low nominal and real interest rates, in part engineered by the Fed, have had the effect of inflating the prices of assets - equities in the second half of the 1990s and houses in the first half of 2000s. Why should households spend less than their after-tax incomes when the value of their assets is skyrocketing? And, of course, with asset prices inflating, there is all the more collateral upon which creditors can advance loans. So long as asset inflation continues, we guess households can continue to run record deficits. We can't wait to see how the adjustment works out when the asset-price music stops.

 

[Realist]

One of the big differences tech/a is that 30 years ago kids (around 20 years old) would leave school or uni debt free, get a job, get married and buy a comparitively large house with a 20 to 25 year mortgage and they'd pay it off maybe 5 years quicker.

Fast forward to today...

Kids go to Uni and leave owing a large student loan, they own a car and pay exhorbetent parking, tolls, rego and especially petrol prices. They own a mobile phone, have a gym membership, an internet connection, wear trendy expensive clothes, eat out at restaurants, go to expensive nightclubs, and with any spare money (unlikely) they go on an overseas trip. And they do not get married till they are older so there is no-one to share teh mortgage with.

Basically life is easier today, but people 'waste' their money on all sorts of things that were not available or certainly not common 30 years ago.

Were you to leave Uni debt free and get a good paying job, and marry a person in a good paying job, use the bus, use a pre-pay mobile for about $10 a month, not use internet, maybe live at home rent free, not join a gym, not eat out or travel overseas or wear trendy clothes you would easily be able to buy a house and be comfortable.... and boring.

I'm a housing bear!!


But I realise there will be a good time to buy soonish in Sydney and I will try and not miss it.

 

[Bronte]

As previously posted; WA is also on a strong growth curve.
Battman has just returned from Europe and he says in comparison
"(W) Australia real esate is still very very cheap."

This was posted on 16th October 2005
Perth M.H.P. was: $308,000 Sept Quarter
Perth M.H.P. now: $455,000 June Quarter (just relaeased)
Phew! Up a whopping +$147,000 in nine months

 

[Realist]

This was posted on 16th October 2005
Perth M.H.P. was: $308,000 Sept Quarter
Perth M.H.P. now: $455,000 June Quarter (just relaeased)
Phew! Up a whopping +$147,000 in nine months

 

[krisbarry]

I really feel sorry for the young people in Perth trying to buy a house, god help them. I hope they got a pay rise of more than the 4% inflation rate.

More young people out on the streets...a housing crisis in the making

 

[Realist]

I really feel sorry for the young people in Perth trying to buy a house, god help them. I hope they got a pay rise of more than the 4% inflation rate.

I don't feel for them at all.

Owning a house is not always a wise thing to do.

A smart young person in Perth would find a cheap place to rent, save their money, invest wisely and wait for the bubble to deflate, if not burst.

Young people in Sydney in 2003/4 faced far more difficulties in buying than Perth residents do now. The smart ones (me included) just flagged buying a place, saved their money and invested elsewhere.

There is nothing wrong with renting. It can at times be financially wiser not to own.

Perth residents are lucky that Sydney has recently shown what 'will' happen after a boom.

Just be patient, ignore any idiot that tells you "house prices will always go up" - they sure as hell wont! Sydney has proved that recently.

 

[Bronte]

Love it
Who was it that said "All Booms are followed by Busts ?"

 

[Smurf1976]

What am I missing here.

When I bought my first home 30 years ago my wage combined was $240/week.
The house was $30,000 or 150 times wage.

Presently it's about 440 times wage in Sydney and 340 times wage in Adelaide or Hobart. Most of the other capitals are around 300 times wage.

Worse still, we now have low wage inflation such that the real value of the debt is not rapidly eroded as was the case in the 1970's and 80's. Not that low wage inflation doesn't have benefits, it does, but if you're in debt then inflation is exactly what you want. Those who bought 30 years ago had the twin benefits of lower prices (relative to wages) and higher wage inflation after they bought, neither of which applies today (though IMO wage inflation is coming).

As for the interest rate change, it is the house price boom, not the rise in interest rates, that is the ultimate cause of the coming misery.

To argue that the interest rate is the problem is like arguing that the price of herion going up is causing misery to drug addicts. The ultimate cause of the problem is the addiction itself, not any change in the price of the drug.

 

[Bronte]

Love it
Who was it that said "All Booms are followed by Busts ?"

We have been emailed:
Rivkin's Rules page 7
"All booms must bust! The only question is when."

 

[Bronte]

We have lots of property in Perth
Do you think we should Sell ?

 

[krisbarry]

To argue that the interest rate is the problem is like arguing that the price of herion going up is causing misery to drug addicts. The ultimate cause of the problem is the addiction itself, not any change in the price of the drug.

Yes this addiction to housing that some are having will see a marked affect on coming generations and how they perceive that very same market.

Do they have a name for this addiction yet, and a cure?

What about a de-tox program?

or a pill to pop?

or a 12 step program....Hi my name is stop_the_clock and its been 31 years since I have owned a house....

LOL

 

[Realist]

We have lots of property in Perth
Do you think we should Sell ?

My opinion...

Yes, you should sell some if it is tax effective to do so.