House prices to stagnate for 'years'

[YChromozome]

and "maybe" a .25 increase coming up

gee that will knock things over wayne

You have to remember we carry a lot more debt these days. So .25% is more significant today that it was 20 years ago.

We also today have a Triple Leveraged Economy - Leveraged investors, who buy highly leveraged companies, that rely on the leveraged consumer . . . So you need to think off the implications of a 0.25% rise outside of the housing market too, and what effect that will have on employment and people's abilities to service their mortgages.

 

[BSD]

We also today have a Triple Leveraged Economy - Leveraged investors, who buy highly leveraged companies, that rely on the leveraged consumer . . . So you need to think off the implications of a 0.25% rise outside of the housing market too, and what effect that will have on employment and people's abilities to service their mortgages.

On average - listed companies are by no means highly leveraged at the moment

Corporate balance sheets are historically lowly geared at the moment - hence all the buybacks and private equity involvement

I don't disagree with the rest of your comments

25 bps is way more effective than 10 years ago

Personal leverage is high - corporate leverage is not

 

[wayneL]

On average - listed companies are by no means highly leveraged at the moment

Corporate balance sheets are historically lowly geared at the moment - hence all the buybacks and private equity involvement

I don't disagree with the rest of your comments

25 bps is way more effective than 10 years ago

Personal leverage is high - corporate leverage is not

Would your comments apply outside of the ASX? i.e. How highly geared are the larger and more influential foreign markets, US, Europe et al?

 

[robots]

hello,

people dont carry heaps of debt, the "majority" I think are in reasonable positions

things are no different to somebody's parents buying a house thirty years ago

they were nervous then when purchasing and thought it was huge step just like most people today but they dont regret it for one moment

it is all talk, just get out and have a look for yourself before jumping down my throat

thankyou

robots

 

[BSD]

Would your comments apply outside of the ASX? i.e. How highly geared are the larger and more influential foreign markets, US, Europe et al?

As far as my un-referenced knowledge extends - yes. I would like to provide some links.

US and Aust corporate debt levels are low and many balance sheets are ridiculously flushed with cash - hence the activities of private equity.

Credit Defaults Swaps are at all time lows. Some of this pricing results from exuberance, but just as much is related to very low gearing across the majority of companies.

I would say that large leverage remains in property and infrastructure - but the volatility of cash flows in this sector will always lend themselves to a heap of leverage and financial engineering/wizardry.

With the exception of the warmongering US - government debt is very low across the major countries

The first-world consumer is the debt laden party at the moment

 

[wayneL]

As far as my un-referenced knowledge extends - yes. I would like to provide some links.

US and Aust corporate debt levels are low and many balance sheets are ridiculously flushed with cash - hence the activities of private equity.

Credit Defaults Swaps are at all time lows. Some of this pricing results from exuberance, but just as much is related to very low gearing across the majority of companies.

I would say that large leverage remains in property and infrastructure - but the volatility of cash flows in this sector will always lend themselves to a heap of leverage and financial engineering/wizardry.

With the exception of the warmongering US - government debt is very low across the major countries

The first-world consumer is the debt laden party at the moment

OK thanks.

Again unreferenced, but I think the UK gummint is up to its @rsehole in alligators as well, with reference to debt.

Agree re the first world consumer; he's up to his nostrils.

 

[money tree]

House prices here in Brisbane are booming.

Cheap properties go under contract within 48 hours at list price or above.

Maybe we need a new topic title?

Im doing a reno on a house in Redcliffe, paid $250k in December, just revalued @ $390k

Been trying to find another house around the 250k mark but they get snapped up before they are listed on the net. I've given my details to 14 agents & have had no contact.

In the last few weeks there have been heaps of people cruising my street looking for "for sale" signs.

Redcliffes boom has a lot to do with the promoting of the area in Brisbane TV ads. But, this area is still real cheap for what you get. Where else in Australia can you buy 400m from the water & 20 mins from CBD for 300k?

 

[wayneL]

hello,

people dont carry heaps of debt, the "majority" I think are in reasonable positions

things are no different to somebody's parents buying a house thirty years ago

they were nervous then when purchasing and thought it was huge step just like most people today but they dont regret it for one moment

it is all talk, just get out and have a look for yourself before jumping down my throat

thankyou

robots

Nobody is jumping down anyones throat. It's called a discussion. People may hold opposing points of view in discussions.

Just as hold the opposing point of view to the above post. The levels of personal debt are in no way comparable to 30 years ago. The figures show they are higher by a quantum leap adjusted for inflation even.

...and I think you'll find my, and others comments are from "getting out and looking around".

Many people are just fine. But prices are set at the margins and it is at the margins where the trouble will come from. Just look at the US property apocalypse in progress right now. It started at sub-prime and is now spreading to Alt-A.

There are real price falls because of a few inappropriate loans to unemployed ex-cons and subsequent repos

That contagion will spread to prime and eventually across sectors and across the globe.

The first sign of trouble has appeared in the UK sub-prime now.

Look! There is nothing wrong with owning property and most will be OK. As long as folks can comfortably afford their mortgage with a margin for adversity they will be just fine. But there is quite a substantial group who are way over committed, and have no margin for adversity and are a couple weeks from real trouble should there income become compromised.

Remember prices are set at the margin.

 

[BSD]

Again unreferenced, but I think the UK gummint is up to its @rsehole in alligators as well, with reference to debt.

Agree re the first world consumer; he's up to his nostrils.

If I was running the UK Central Bank I would be printing sooooo many GBPs I would be out of debt in a second

The GBP is so overvalued; a printing flurry would hardly be a bad policy

As for the consumer, they are massively over-leveraged by historical standards, but we remain to see whether it is actually a problem

Sustained CADs above 6%, previously unheard of, have been sustained easily by growing economies without problems - who is to say consumers shouldn't/can't carry multiples of the debts of those from decades ago?

Gearing up into the last ten years of property and sharemarket booms has been the way to make money and get tax deductions

Hard to argue with those motives.

I fear the effect of a massive devaluation in assets - but cannot see too many bubbles

The differentiation needs to be made between those who borrow to buy real quality assets and those who borrow to buy cars/LCDs/weddings/holidays etc

 

[BSD]

Redcliffes boom has a lot to do with the promoting of the area in Brisbane TV ads. But, this area is still real cheap for what you get. Where else in Australia can you buy 400m from the water & 20 mins from CBD for 300k?

And 20 KMS from anyone with a job !

Redcliffe is 20min from the CBD by helicopter

It takes 20 minutes to get to the Gateway On-Ramp at Hamilton in commuting traffic


What yield do you get on a $390,000 pad in Redcliffe?

 

[wayneL]

If I was running the UK Central Bank I would be printing sooooo many GBPs I would be out of debt in a second

The GBP is so overvalued; a printing flurry would hardly be a bad policy

The printing presses can only go so fast and are in danger of overheating already. Increasing money supply would cause an inflation breakout they would be unable to hide even with the currently fraudulent CPI measure. There is already wage-breakout pressure and the BOE would have no choice but the raise the (currently negative in real terms) interest rates substantially.

The British consumer is on a knife edge already and this would cause defaults on a massive scale and take out the property market big time. Though they deny it, there is a substantial sub-prime mortgage market in the UK, nearly as irresponsible as the US version.

Notwithstanding true inflation is in the region of 6-8% (10% or more by some measures) the BOE cannot afford inflation to work itself into the CPI/RPI fraud.

Stay tuned, interesting times approacheth.

 

[BSD]

I bristle when I hear 'fraudulent' and 'inflation measure' combined.

I want to do some more numbers on the UK scenario before I make a call - but why do you think the GB inflation numbers are fraudulant and what effect do you think a 10% - 20% fall in property values would have on this number(?) with the flow through effect on rents and overall demand.

Perhaps a stagnation in the property market for 5-10 years (like in Australia through the 90s) would sort this out without a more severe event.

I am not a property bull by the way and think the Aussie, USA and GB property markets need to stagnate for years - as per the thread topic.

I just dont see a savage depression.

 

[wayneL]

I bristle when I hear 'fraudulent' and 'inflation measure' combined.

I want to do some more numbers on the UK scenario before I make a call - but why do you think the GB inflation numbers are fraudulant and what effect do you think a 10% - 20% fall in property values would have on this number(?) with the flow through effect on rents and overall demand.

CPI is dubbed the Chav Price Index (Chav is a yobbo bludger) as its contents reflect mainly frivolous discretionary expenditure and specifically excludes larger and more important expenditures. One of the latest additions to the CPI is mobile ring tones ffs!!!

RPI is nearly 5% and at it highest point for quite some years. Interest rates were in excess of 8% when RPI was last at this level. But even this measure manipulated measure is ignored.

The BOE's remit is to target CPI and this entirely misses the main economy, henceforth is a fraud.

Add to that the previous BOE governor has come out last week and admitted to this in effect, and that interest rates are unsustainably low.

 

[Kimosabi]

I bristle when I hear 'fraudulent' and 'inflation measure' combined.

I want to do some more numbers on the UK scenario before I make a call - but why do you think the GB inflation numbers are fraudulant and what effect do you think a 10% - 20% fall in property values would have on this number(?) with the flow through effect on rents and overall demand.

Perhaps a stagnation in the property market for 5-10 years (like in Australia through the 90s) would sort this out without a more severe event.

I am not a property bull by the way and think the Aussie, USA and GB property markets need to stagnate for years - as per the thread topic.

I just dont see a savage depression.

It's getting rather savage in the US and it's only going to get worse.

Watch US consumer confidence plummet next...

 

[BSD]

CPI is dubbed the Chav Price Index (Chav is a yobbo bludger) as its contents reflect mainly frivolous discretionary expenditure and specifically excludes larger and more important expenditures. One of the latest additions to the CPI is mobile ring tones ffs!!!

Chav Price Index!!!!!

GOLD !!!

I am fascinated by the Chav and love the connection to the Aussie Bogan - they just have smaller engines!

Unfortunate for the sophisticates amongst us - the Chav/Bogan/Rednecks are the majority.

Heck people are apparently paying $350K to live in Redcliffe!!!

I dont think the majority of finance focussed people are in touch with the majority of people and their comments on the relevence of the CPI are equally as irrelevant

Why not include TXT or Mobile Ring Tones?

They include things middle class people use - why not bogan expenditure?

More people live in the lower/middle than the upper

 

[Kimosabi]

hello,

people dont carry heaps of debt, the "majority" I think are in reasonable positions

things are no different to somebody's parents buying a house thirty years ago

they were nervous then when purchasing and thought it was huge step just like most people today but they dont regret it for one moment

it is all talk, just get out and have a look for yourself before jumping down my throat

thankyou

robots

You obviously live in fantasy Robots land

A significant number of people are up to their necks in debts, paying off "over-priced assets"

I overheard a conversation at one of my clients who is a Life Insurance/Super Advisor and one of the Super Funds Representatives.

And I quote,

"Most people are paying off huge mortgages and aren't putting very much or anything into super" The average amount in Super for the average person was something like $30,000

Below I have run trend lines on the WA Median House Price graph.

I have been very generous and have run the trend line across the top of the the last boom in 1989.

Now if prices in WA stagnate based on current prices, we could be waiting for 30 years before they start rising again.

Now if anyone finds anything wrong with my Trendline analysis below, please let me know...

 

[BradK]

Wayne,

Are you in England at the moment? I am moving my family across there in late December this year. In terms of money management and creative ways to budget are there any wizz bang products over there that I can research?

Brad

 

[robots]

hello,

employer puts money into super thats the idea of it, a style of compulsory savings which is showing clear signs of being a great thing

not sure what super has to do with anything

quality RE assets are sound and thats my view all along in this thread, they havent stagnated, they have increased

within 10-15km of syd, melb, adel and perth things are sound as

stop reading the rubbish in the media and thinking you r an expert in monetary policy, send your resume to the RBA or the Fed's

I havent forecast anything!

thankyou

robots

 

[Dutchy3]

Hi Kim

Assuming Perth has actually stopped ... I recently bought a 'Renovators Delight' almost fearing I'd bought at the top of the market in Perth ... seems I'm wrong and the price continues to rise .... China/India et al. are insatiable and will see me out this lifetime

 

[wayneL]

Wayne,

Are you in England at the moment? I am moving my family across there in late December this year. In terms of money management and creative ways to budget are there any wizz bang products over there that I can research?

Brad

Not yet, next month I think.

But if you're 102 years old, you can get a 25 year interest only mortgage to invest in "Buy To Let" property.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/03/25/nmort25.xml