House prices to stagnate for 'years'

[nizar]

This is a very one-dimensional assessment. Australia is a very rich country. What if your reference points are all wrong? What if the wages don't adjust upwards to close the gap to mortgage repayments...what if the middle class in this country has had a permanent adjustment down in living standards, and as tech/a says, the OLD MONEY are the new (middle/upper)-middle class ie. them with the guts to have taken a chance some decades ago when none of what has happened was yet written.

The social ladder in Australia might be longer than it was 20 years ago and the bottom rungs a bit lower (and based on how I see many CEOs being compensated I would say that the top rungs are MUCH higher). And what do you think George Bush whispers into John Howards ear during those dinners at the White House? "Hey Johnny, if you let heaps of immigrants in you'll have cheap labour to mow your lawns, tend your gardens and keep your houses when you're all too old and rich to do it yourselves". But when you pick up one end of the stick, you get the other end too. Once in the population these immigrants can climb the ladder too, and the rules are the same for them. What aren't they all complaining?? They're too busy competing and GETTING ON WITH IT.

If this is the case, then your mega bust is fiction. Frankly I can't see where a mega bust will come from when there is so much money sloshing around in this economy. Even with 6.25% interest rates the RBA can't soak up enough of the excessive liquidity in the money supply, and so house prices (among other things) keep on rising. There is still so much money sloshing around!

On a side note, if people are concerned about wages vrs repayments... lowering house prices is just one solution to this imbalance (??). But do you think that Johnny Howard and his constituent are going to let wealth be redistributed from their demographic to another when it's known they're all so close to retirement and will need that wealth to live?? Heck no!

If you want a piece of the pie that the baby boomers have your are going to have to fight for it. Wishing house prices to come down is a very indefinite approach. Rather work out how to increase my income personally. House prices are not expensive...they're just expensive for YOU!

Excellent post there, asx Gorilla!
Very well put.

 

[nomore4s]

Excellent post there, asx Gorilla!
Very well put.

Ditto

 

[tech/a]

they're just expensive for YOU!

This is a fact. Not only for Kris (S.T.C) but for many others. Even those who do this as part of their living (Myself) have to re adjust whats "expensive".

People in Sydney think our Esplanade properties are a steal/same with inner city.So where are they parking $$s---in Sydney? You can buy 3 houses here for the price of one.A 15% rise is the same here as there---but who's likely to get it? Whos taking less risk---those in Sydney or those investors FROM Sydney.

So you cant afford Adelaide.---Look country.

Why is it that the majority of Posters here follow the Smalls?
I'll guess.

(1) They can make 30-50% in a few weeks even days.
(2) They're cheap I can buy more.
(3) Everyones doing it.
The parellels in the Stock market and the Property market are certainly there.

Just as you look for value in stocks---your gem may well be anothers disaster.

Start at the beginning NOT in the middle.
I'll bet those with fore closures started in the middle!!

Think about it.

 

[Dr Doom]

In general I think the thread topic cannot be discussed satisfactorily or to a conclusion due to the disparity between the markets around the country at the moment. If you take Sydney & Melbourne, for eg, should/could we take that as a 'mature' market and as a possible future direction for other markets like Perth now & Adelaide soon?. You could say that, generally, the Sydney market has stagnated for around 3 years now?. Which means that as the other markets 'mature' they will face the same fate. That is, there comes a point where the prospect for meaningful gains diminishes, as the best gains in this cycle have been made.
If you take 'maturity' to be when wages & salaries are unable to service mortgages above the average mortgage then the market comes back to some sort of equilibrium I assume?.

As each city/area gets to this mature (consumer pain threshold?) level then house prices in Australia generally will 'stagnate'?. Or, to put it another way, for those advocating the 'getting on with it' approach what drivers are there to drive Sydneys average house prices higher, because it will always be limited to peoples ability to service their loans. And, what does the record level of loan defaulters imply for the market ?. Possibly that as each level of house price points are breached more borowers will be unable to pay back thier loans. A previous poster implied this level to be currently around $600k, as under this the market was past maturity & in decline.

This is a general statement as obviously there are good investments to be made even in mature markets.

 

[theasxgorilla]

The ultimately irony of this entire thread is that the title itself implies that housing should become more affordable IF you continue to develop your earning ability...so why give up now?

 

[krisbarry]

In general I think the thread topic cannot be discussed satisfactorily or to a conclusion due to the disparity between the markets around the country at the moment. .

Maybe its time this thread was closed down too, its runs its course, and we are all just rehashin the same old stuff.

 

[tech/a]

Maybe its time this thread was closed down too, its runs its course, and we are all just rehashin the same old stuff.

I agree.
Those that do well out of property will always be on one side.
Those that dont---the other.

BOTH are correct---Both succeed well in their chosen stance.

 

[Bronte]

Average House price hits 200,000 UK Pounds
No Slowdown as yet!

http://news.bbc.co.uk/2/hi/business/6353321.stm

 

[KIWIKARLOS]

perhapes with rental prices set to soar it will attract more investment into housing and potentially give the market a small leg up another factor than may influence pirces in years to come could occur when the mining boom slows. There will be alot of people from WA and QLD with big dollars looking to relocate where to new work or just move out of the desert to a more comfortable environment. Pure speculation

 

[wayneL]

Average House price hits 200,000 UK Pounds
No Slowdown as yet!

http://news.bbc.co.uk/2/hi/business/6353321.stm

http://www.express.co.uk/news_detail.html?sku=1218

UK Market about to roll over

TOP STORIES
HOME LOAN RATES TO SOAR AGAIN
15/02/07
By Graham Hiscott

MILLIONS of households have been warned to brace themselves for another punishing rise in the cost of home loans.

The head of the Bank of England warned that interest rates would have to rise again, leading to another jump in mortgage repayments.

Governor Mervyn King signalled that a quarter-point increase was needed to keep inflation in check.

Any such move would come as a blow for home owners still reeling from last month’s rise of 0.25 per cent.

The increase to 5.25 per cent was the third in just six months and added an extra £200 a year to repayments on a £100,000 mortgage. Families would have to fund the same rise again if, as feared, rates go up to 5.5 per cent.

Some experts are forecasting that rates will rise as early as May. Others believe it will be later in the summer.

Another increase would add to the financial misery being endured by millions of cash-strapped families. The average household is already having to find almost £350 extra a year to cover basic bills. The further expense could prove devastating for borrowers who banked on rates staying low.

Figures published earlier this month showed that the number of people going bust is the highest since records began in 1960, with more than 120,000 declaring themselves insolvent.

It coincides with a sharp rise in the number of home owners at risk of losing the roof over their head. Mortgage repossession orders increased by 29 per cent last year, according to the Department for Constitutional Affairs. It said the overall number of court orders made during the year was 91,195, up from 70,843 in 2005.

Soaring house prices have already led to buyers burdening themselves with ever bigger mortgages.

A report this week showed that the average price of a home rose by 10 per cent in 2006, breaking the £200,000 barrier for the first time.

The surge in prices has hit first-time buyers, with many - struggling with the higher rate of stamp duty - having to borrow heavily just to get on the property ladder.

Citizens Advice policy officer Peter Tutton said: “We are already seeing a rapidly growing number of people falling behind with mortgage payments and in some cases threatened with repossession. We know that some people are taking on mortgages that stretch them to the absolute limit.

“Any increase in interest rates could spell disaster for people whose finances are balanced on the very edge of affordability.”

Mortgage expert Karen Darby of Simplyswitch.com said: “This is really bad news for Middle Britain.

“It will put a real squeeze on families who have re-mortgaged their homes so they can put their children through university or private school but now face much bigger mortgage bills. Suddenly they will find they have very little disposable income and will have to make big cuts to their budgets.”

Mervyn King signalled that rates would have to rise again, with the Consumer Price Index, the Government’s preferred measure of inflation, running
at 2.7 per cent – down from an 11-year high of 3 per cent in December but still regarded as too high.

Mr King said he expected inflation to fall “quite sharply” this year but warned that large pay increases and a strong housing market could upset projections.

* What do YOU think? Does stamp duty need to be reformed to help first-time buyers? Comment NOW at Have Your Say.

 

[wayneL]

Should be 230% not 230 times. But RICS is used to exaggerating

http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=4057&cat=44-0-0

Affordability is 230 times worse for first time buyers than ten years ago - RICS

RICS' "accessibility index" has found that nationally, constantly rising house prices has meant that accessibility is around 230 times worse than it was ten years ago, and currently as low as 1980.

The average first-time buyer couple will now have to save up to the equivalent of 82 per cent of joint income to build up the amount of savings needed to pay for their home, deposit and stamp duty, compared to 25 per cent in 1996. And with house prices expected to rise another 12 per cent over the next two years, the situation is set to worsen.

Continued interest rate rises could also lead to a surge in house repossessions in the South West.

Last month the Bank of England's Monetary Policy Committee decided to raise rates to 5.25 per cent, and although rates stayed on hold last week, further increases are forecast for 2007.

And with the South West already facing the UK's biggest "affordability gap" - the difference between average incomes and average house prices - the Royal Institution of Chartered Surveyors (RICS) is warning that more people who have made it onto the housing ladder face the prospect of losing their homes.

The RICS "affordability index" also worsened by 8.5 per cent last year and by almost 70 per cent since 1996. RICS estimates that a two-person household on average incomes would have to spend 22 per cent of their take home pay to service their mortgage, up from 13.5 per cent in 1996.

"With more interest rate rises forecast this year, I am genuinely concerned that we could see a substantial increase in repossessions across our region," says Matthew McKaig, Director, RICS South West.

"Meanwhile spiralling house prices, fuelled by the high number of people moving here to retire or purchase a second home, have created a property `glass ceiling' for many first-time buyers, and with couples needing more than 80 per cent of joint take home income to fund the upfront costs of a typical home, the Government's talk of an `inclusive society' seem like a pipe dream."

Mr McKaig says the region's affordability gap actually threatens the whole long-term viability of its economy, particularly the ability to recruit and retain public sector `key workers'.

Recent research carried out by the South West Housing Initiative - which includes RICS plus house builders, housing associations, employers and professionals, the CBI and Chartered Institute of Housing - found that companies of all sizes are finding it difficult to recruit and retain essential workers at affordable pay levels.

"At a time when the region is creating some 27,000 new households each year, we are building only around 18,000 new homes," he comments.

"Continued house price rises have outstripped the region's average incomes by 10 to 1, and mortgage lenders will consider a loan of only half that ratio. This leaves us in the situation which is all too familiar in many of our towns, cities and villages - that young people cannot afford to live and work in the area where they were born.

"The only solution is to focus on building more affordable new homes, no matter how unpalatable that idea may be to many people. Focusing on `brownfield' sites is an excellent idea, but there are relatively few of these sites left in our region - we have to release other land for well-planned, affordable new housing which will enable public and private sector workers to stay in the region."

 

[Dr Doom]

As each week goes by and more information comes out regarding global housing markets it becoming clearer that there is a growing disconnect with what is happening between financial markets and housing markets, so much so that either market will have to re-adjust at more than 'a measured pace' ie a big correction.

The evidence is such that consumers are being squeezed from multiple directions, mirroring the case in Australia with mortgage interest rates and rents rising. The revelation by HSBC that they underestimated their bad sub-prime loans is but the tip of the iceburg.

Some negatives for the US, derived from the real estate bust domino effect -
- as a general measure of how well the US is doing, last qtrs GDP will be revised down by a substantial amount.
- Capital is leaving the US at record levels
- U.S. industrial production fell in January by the largest amount since Hurricane Katrina devastated the Gulf Coast in September 2005
- Ben Bernanke

The other side of the coin is that the 'goldilocks' bull markets haven't yet priced a hard landing for real estate into the equation yet, preferring to have financial pareidolia.

I think we can forget about stagnation, how about a hard landing?. I'm not 'getting it' yet.

 

[Dr Doom]

And closer to home........(emphasis added)

"THE Perth house price boom has ended and Sydney has fallen deeper into the red as the property downturn continues to bite, with analysts predicting months more pain for homeowners.
House price growth in Perth slowed to just 1.7 per cent in the December quarter, with property prices in the city now growing at the fourth-slowest rate in the country, according to Australian Bureau of Statistics figures.

In Sydney, median house prices fell 1 per cent in the quarter - reversing slight gains made earlier in the year - as the impact of last year's three rate rises was digested by the nation's weakest property market.

Housing Industry Association chief economist Harley Dale said housing affordability in NSW remained the lowest in the country, but flat or falling prices were slowly attracting first-home buyers and investors back into the Sydney market.

Mr Dale said the effect of last year's interest rate rises would continue to dampen house price growth until at least June.

National house price growth slowed to 0.9 per cent in the December quarter, resulting in annual growth of 8.3 per cent.

That slowdown was driven by the cooling Perth market, which had delivered total house price growth of 34.6 per cent in the first three quarters of last year as the state rode the resources boom.

Elsewhere in the country, house price growth remained relatively subdued in the December quarter except in Brisbane and Darwin, where prices grew by a respectable 3 per cent.

"We expect Brisbane will lead the housing recovery over the next two years," BIS Shrapnel senior analyst Jason Anderson said yesterday. "Brisbane is where rental growth has been strongest, it's where pressures are greatest and I think that's showing up in this price growth."

Mr Anderson said Perth prices were likely to fall 1 per cent this year because that market had "overshot" during the boom.

Macquarie Bank head of property Rod Cornish said interest rates were expected to remain on hold this year as inflation pressures eased.

And he predicted the Reserve Bank would probably cut rates early next year in an attempt to stimulate building activity in the floundering NSW and Victorian markets.

Mr Anderson said Sydney would remain a two-tier market, with house prices in the city's struggling outer-western suburbs expected to fall as much as 5 per cent this year, while inner-city areas could show slight growth.

"There's still this tug of war going on between what buyers are asking and what people are prepared to pay," he said.

In a sign of the weakness in Sydney's outer suburban housing market, Stockland - Australia's second-biggest property group - last week revealed only 96 of the 1900 blocks of land it had sold in the past six months were in NSW."

 

[Dr Doom]

....and one more......

http://www.afraccess.com/Index_mxml.html?URL=ATL://20070215000018546104

 

[Bronte]

Has anyone heard of the Scarborough Environs Area Strategy Project (S.E.A.S) ?
We bought luxury Scarborough Beach W.A. apartments back in 2001
Same story: "Rents just keep flying ahead".

Just out of interest:
The West Australian newspaper is reporting today that:
Scarborough was the 'Top Performing WA Suburb' for the December 2006 quarter.
With a whopping 17.9% increase just for the December three month period.

 

[wayneL]

Just out of interest:
The West Australian newspaper is reporting today that:
Scarborough was the 'Top Performing WA Suburb' for the December 2006 quarter.
With a whopping 17.9% increase just for the December three month period.

It is also reporting that 118 suburbs have gone DOWN.

 

[Bronte]

Yes this is true Wayne.
Not even half of Perths suburbs (118 of 277)
We are surprised it wasn't more, after such an increase.

 

[wayneL]

Yes this is true Wayne.
Not even half of Perths suburbs (118 of 277)
We are surprised it wasn't more, after such an increase.

Not a bad start to the crash though... could be a gen-u-wine blow off top.

Yankee bubble markets in deep doo-doo. London showing slight falls - BTL in trouble. East coast Oz stagnant/down. West Coast blow off top.

Hark! Is that thunder I hear?

N.B. Expect some government pani... errr, plan to prop up house prices.

 

[rockingham178]

Not a bad start to the crash though... could be a gen-u-wine blow off top.

Yankee bubble markets in deep doo-doo. London showing slight falls - BTL in trouble. East coast Oz stagnant/down. West Coast blow off top.

Hark! Is that thunder I hear?

N.B. Expect some government pani... errr, plan to prop up house prices.

WayneL
The largest reported "drop" was 8.4% with most under 6%.......put in perspective with an average increase over the previous 12 months of 39% I would hardly term this a sell off "panic" situation. The same paper analysts are forecasting a "return to normal growth" of around 2% per quarter.

Also factor in Eric Rippers gaff of announcing "the possibility" of stamp duty cuts in the next budget in June causing a significant drop in first/new home buyer purchases.

There is no major panic sell off or ongoing major drop in Perth
property prices, there is a levelling off which is healthy. The papers just love to dramatise and report only selected information rather than balancing the picture. The West is no exception.

My disclosure I invest in property and will continue to do so.

 

[Smurf1976]

WayneL
The largest reported "drop" was 8.4% with most under 6%.......put in perspective with an average increase over the previous 12 months of 39% I would hardly term this a sell off "panic" situation. The same paper analysts are forecasting a "return to normal growth" of around 2% per quarter.

But it is very clearly a sharp change in trend from up to down.

As for a return to "normal" growth of 2% per quarter, I assume those analysts are expecting wages to do likewise or interest rates to fall?