House prices to stagnate for 'years'

[robots]

hello,

oh, I understand you want to keep it quiet

hush hush, okay no problem

get that contrarian view going

thankyou

robots

 

[wayneL]

We are in AUSTRALIA

here the market is booming.

Comments? (see image from your website)

 

[BSD]

From my limited geographic perspective (South East QLD) you need to differentiate between quality and rubbish property - all of which has gone up massive in recent years.

Quality is not getting any more supply in a hurry - Inner City and Waterfront - so you should be OK

Boomers (the demographic that matters) have only recently started to retire or downsize.

They are selling McMansions or 3-bedder middle class homes in outer ring suburbs (8kms+) and are buying lifestyle pads.

Inner city and flash Noosa/Byron/GC homes and apartments (minted boomers) or snoozy coast properties (+100s of kms from capitals) for middle class boomers.

In my very humble opinion, the (eventual) bust is going to have a large dichotomy of effects - nappy valleys with no boomers and loads of McMansions built by the 'new middle class" are going to get hit the hardest because of their distance from employment and their monster mortgages.

While regions interesting to boomers will be fine - they are loaded and have no debt

Dont bet against demographics

 

[tech/a]

Well I bought a house in 2005 for $220k, sold for $346k in 2006, then bought another house for $257k, just revalued @ $390k

Perth went up 37% also in the last year.

Dont often agree with the "tree"
But the holdings in property I have increased 22% and 16% in domestic (Different suburbs) and
38% in Industrial. Last year alone.

Rents rose 20% mine are still low relative to the market.
Gearing now down to 32%.

 

[wayneL]

From my limited geographic perspective (South East QLD) you need to differentiate between quality and rubbish property - all of which has gone up massive in recent years.

Quality is not getting any more supply in a hurry - Inner City and Waterfront - so you should be OK

Boomers (the demographic that matters) have only recently started to retire or downsize.

They are selling McMansions or 3-bedder middle class homes in outer ring suburbs (8kms+) and are buying lifestyle pads.

Inner city and flash Noosa/Byron/GC homes and apartments (minted boomers) or snoozy coast properties (+100s of kms from capitals) for middle class boomers.

In my very humble opinion, the (eventual) bust is going to have a large dichotomy of effects - nappy valleys with no boomers and loads of McMansions built by the 'new middle class" are going to get hit the hardest because of their distance from employment and their monster mortgages.

While regions interesting to boomers will be fine - they are loaded and have no debt

Dont bet against demographics

I think that's quite a sensible analysis in the medium term. However it is the lower tier property values which ultimately underpin the higher tier property values.

So a lot depends on the depth of the bust, and what if anything, busts along with property (shares for eg). One could at least expect a long stagnation of values in the higher tier.

While noting the the demographic point and the differing factors going forward, I recall in the last bust in the early 90's, "prestige" properties where severely whacked as well. depending on which way the butterfly flaps its wings, there remains a possibility that boomer properties get whacked again.

Energy/transport/access to services/money supply/geopolitical risks should all be entered into the mix and this is why in chaotic systems such as economies, definitive scenarios cannot be realistically be relied upon.

But you puts yer money down and yer takes yer chance.

 

[wayneL]

Mish discusses employment problems and credit tightening in the US

 

[tech/a]

Some good points here BSD.

 

[Kimosabi]

While regions interesting to boomers will be fine - they are loaded and have no debt

I think you may be surprised how much debt the baby boomers have and how much equity they may have using to fund their lifestyles and investment property's, etc...

All this money doesn't come out of thin air. It also needs to be taken into consideration that Baby Boomers are best positioned to take out the huge loans to be able to purchase some of these property's.

Depending on the bust I think alot of Baby Boomers may get seriously burned.

Australia is no different to the US, while property prices are going up everything will be fine, but once property prices start stagnating/falling and the economy turns, they may find themselves with huge negative equity and a diminishing capacity to pay. When employment gets tough, who will be the first to loose their jobs or who will be wanting to retire but will have to remain in the workforce?

Another thing Baby Boomers need to take into consideration, is that screwing up financially when someone is in their 20's or 30's, is much different than screwing up financially in your 50's or 60's. If you screw up financially in your 20's or 30's, you still have 30 - 40 working years to recover financially. In your 50's or 60's you don't have those extra years to recover financially.

I suspect the vast majority of Baby Boomers won't have taken this into consideration until it's too late.

This boom will not have a happy ending for any that didn't cash in while to going was good...

 

[Kimosabi]

There is correlation however.

The liquidity bubble is a anglosphere wide phenomenon. Credit will tighten in unison.

Didn't you notice they all boomed in unison?

(NB there are local issues which will make this correlation not exact in time and magnitude however)

The liquidity bubble appears to have happened in all the countries that participated in the War in Iraq.

What better way to pacify/distract the populace while conducting an ill-concieved, illegal war in Iraq than lowering interest rates to historical lows, lower lending standards, and fuel asset boom's...

Remember the headlines: "Australian's have never had it so good". I'm sure every other country that has had these booms will have had exactly the same headlines.

 

[YChromozome]

I suspect the vast majority of Baby Boomers won't have taken this into consideration until it's too late.

I couldn't agree more. Many Baby Boomers are asset rich, cash poor and turning to equity release products such as reverse mortgages.

I also suspect a lot of Baby Boomers are complacent about the current boom and risk when forcasting if they have enough super to live off. Maybe some should save a little more for a rainy day, should one day their retirement assets are less than what they are today.

 

[wayneL]

I couldn't agree more. Many Baby Boomers are asset rich, cash poor and turning to equity release products such as reverse mortgages.

I also suspect a lot of Baby Boomers are complacent about the current boom and risk when forcasting if they have enough super to live off. Maybe some should save a little more for a rainy day, should one day their retirement assets are less than what they are today.

Yes, some demographical scenarios point to a Boomer bust from 2010ish on... eg Harry Dent's work.

Mind you he was ludicrously wrong on Dow 36,000 by 2008 (so far) sooo...

....butterfly wings.

 

[The Red Baron]

Whats going on in South East QLD at the moment?

My parents bought two investment properties in Perth back in 2003 made a bit of a profit, now old man thinks he's a property tycoon (property always goes up and up type)

They just bought one in South East QLD but the funny thing is so did 3 people I work with all around the same area. All of these were purchased from companies coming to Perth and flogging them off in seminars. Went down to footy training tonight another 5 blokes talking about the same thing in the same area.

 

[Kimosabi]

I think the smart Boomers will be the one's who have payed off all of their debts, and have invested the rest of their money 'carefully'.

The other thing that also needs to be taken into consideration, is that a reasonable percentage of Superannuation money would have been used to fund the liquidity bubble and will have invested in mortgage insurance/etc.

When/if the liquidity bubble pops and the mortgage defaults etc really kick in, don't be surprised to see double digit losses in the super funds.

 

[money tree]

Comments? (see image from your website)

lol wayne

You and I both know that was written in 2003.

 

[YChromozome]

All of these were purchased from companies coming to Perth and flogging them off in seminars.

Is that what my free Dinner tickets (worth $180) were for. . .

 

[Freeballinginawetsuit]

Whats going on in South East QLD at the moment?

My parents bought two investment properties in Perth back in 2003 made a bit of a profit, now old man thinks he's a property tycoon (property always goes up and up type)

They just bought one in South East QLD but the funny thing is so did 3 people I work with all around the same area. All of these were purchased from companies coming to Perth and flogging them off in seminars. Went down to footy training tonight another 5 blokes talking about the same thing in the same area.

Direct marketing of an overpriced investment and sourcing demand from an ill informed demographic............smells of a leveraged developer!.

Rekindles memories of those flogging the virtues of investing in Paulownia Plantations in the late 90's.......although a different investment equity, same targeted demographic!

 

[numbercruncher]

Whats going on in South East QLD at the moment?

My parents bought two investment properties in Perth back in 2003 made a bit of a profit, now old man thinks he's a property tycoon (property always goes up and up type)

They just bought one in South East QLD but the funny thing is so did 3 people I work with all around the same area. All of these were purchased from companies coming to Perth and flogging them off in seminars. Went down to footy training tonight another 5 blokes talking about the same thing in the same area.

People quickly forgot about the Realestate marketing scams of the Gold Coast that where rampant in the 80s and 90s, paticularly after the boom hit and all those scammed people that where on TV current affairs shows having paid 50% too much suddenly made their money back and more!

Truth is those same scams are happening now but people are blind to it, because after all, short memories just show that realestate goes skywards and forgets the laws of Physics.

People also forget that realestate literally didnt budge for a decade before this boom as well.

It also cracks me up with some of these boomers that are in there last few years of work going out and getting their 500k investment property convinced that it'll go boom boom boom some more.

 

[theasxgorilla]

From my limited geographic perspective (South East QLD) you need to differentiate between quality and rubbish property - all of which has gone up massive in recent years.

{warning, longish post}

The quality vrs rubbish comment is key IMO.

I continue to be taken by the Michael Hudson post that WayneL made over on another thread. The guy is an economic historian and a real brain and something that he presumed about what might manifest in a genuine property bear market was the that top end properties and the low end properties would be hit the hardest. Since he's American the low-end was constituted by trailer park elements...but the reason for that end getting it worse was simply a supply/demand matter...who wants rubbish property??? Demand dwindles and desperate sellers (made so by poor economic conditions and high interest rates) are forced to sell at what buyers can afford, in either foreclosure or pre-foreclosure scenerios...so prices suffer...and those that can afford to hold are in a negative equitiy situation.

At the top end, those that must sell are selling into a sparcely populated market. Fewer buyers means that finding the right one may involve selling at a distressed price.

In anycase, one of Michael Hudson's definitions of a bubble involved two factors; the ongoing expection that prices would continue to go up AND/OR the subsidising of rent by landlords ie. the rent doesn't cover the interest and other outgoings...now, someone please tell me, when was the last time that it was possible to positively gear a property in an Australian capital city without a 30%+ deposit???

By Michael Hudson's definition many parts of Australia continue to be in a bubble...some parts are taking a breather, but thats not a bear market...it's just that...taking a breather.

Ponder the thought...the last property bear market in the US was caused by abolishment of their equivalent of negative gearing. At around about the same time they tried it here, 1985, and effectively ruined the rental market, caused a shortage of rental properties, and were force to reverse the laws.
This time around they've tried to reel in out of control property prices by increasing interest rates...and they've also tried lowering income tax rates to reduce the effectiveness of negative gearing...another way to skin the same cat...yet we're at 6.25%, almost 6.5%, and property prices are still heading north.

Going forward one or some or all of three things will occur (IMO, of course)...interest rates will continue upward, OR legislation will change ie. change negative gearing or depreciation laws etc. OR income tax brackets will be revised upwards again. All that will differ is who gets the blame...the Reserve Bank, or the government. One is appointed the other voted...my bet is on interest rates and taxes...but more likely interest rates...could we really expect further income tax cuts???

 

[wayneL]

Topical:

Mortgage Crisis Hits Million Dollar Properties

 

[noirua]

Don't worry about todays climate or prices sliding. Buy a property valued at $600,000+, don't hesitate, just do it.