House prices to stagnate for 'years'

[tech/a]

Well this stupid money is doing just fine.

Where is the smart money these days?

When I bought my properties many friends labelled me as "Stupid".
I've sold a few since and building now---I'm evidently still "Stupid"

Stupid is comfortable so happy to remain and continue on my stupid way.

 

[Kimosabi]

When I bought my properties many friends labelled me as "Stupid".
I've sold a few since and building now---I'm evidently still "Stupid"

Stupid is comfortable so happy to remain and continue on my stupid way.

OK, maybe stupid was a bad word to use, I was referring to the irresponsible lending environment we have been in.

I wasn't calling anyone stupid, except maybe the irresponsible lending institutions and reserve banks who have fueled the Real Estate Bubbles Worldwide by making too much easy money available.

If you've made money through this cycle, good on you, just don't get caught naked when the music stops playing.

 

[tech/a]

OK, maybe stupid was a bad word to use, I was referring to the irresponsible lending environment we have been in.

Irresponsible Borrowers more to the point.

I wasn't calling anyone stupid, except maybe the irresponsible lending institutions and reserve banks who have fueled the Real Estate Bubbles Worldwide by making too much easy money available.

They are a business just like any other.
They Identified opportunity and took advantage of it.
Stupid people,made stupid decisions,which have placed them in positions which only stupid people would find themselves.

If you've made money through this cycle, good on you, just don't get caught naked when the music stops playing.

Thanks I'll do my best.
Id rather be in my position than paralised by FEAR.

 

[wayneL]

Id rather be in my position than paralised by FEAR.

Oh Puuullleeeeeeze!!!

An economic decision to not buy RE is not necessarily fear FFS! Anyone who is fearful would not be here trading stocks now would they?

 

[Bronte]

When I bought my properties many friends labelled me as "Stupid".

Yes, we can certainly relate to this tech/a
Fortunately we managed to help a few of our friends overcome the fear of buying their first investment property.
They have become even better friends now....strange that.

 

[wayneL]

Yes, we can certainly relate to this tech/a
Fortunately we managed to help a few of our friends overcome the fear of buying their first investment property.
They have become even better friends now....strange that.

Sounds like something straight out of a Jamie McIntyre course.

 

[robots]

hello

could i get a ruling on FFS please

thankyou

robots

 

[WaySolid]

The Brisbane market is looking stronger than I first thought.

I can't believe some of the stories I'm hearing from agents and investors at the moment. I guess I will be skeptical till I get two valuations done myself in the next few months, signs are very positive for me though.

A broker who deals with quite a few HNW individuals was mentioning to me late last year how his W.A clients were bringing their equity over to bayside Brisbane and even Sydney (shock horror). Great call that has turned out to be for Brisbane.

I have done research in my suburbs going back to government grants of farming land and the original subdivision of farming land into residential lots. I'm aware of historical precedent and how property is expensive by the standards of the past, more so than most investors I would say.

Also I was told by a prominent financial educationalist last year that 'now was not the time to be buying -ve geared property' and I know a fellow investor who recently sold his entire portfolio as he didn't see property going anywhere for a long time. This really piqued my interest, and I recently decided to chop into my trading account to buy two properties in Brisbane.

I would like to make a few points.

* You don't buy the whole property market. You buy an individual property. This means you can add instant value and reduce your risk with the use of research and a great purchase price, also sweat equity is a good way to reduce your risk exposure and get better tenants, it's still happening, even today in this mini boom we are having, and I venture it will continue to happen for the next 150 years much as it has for the last 150.

* Be aware of the game you are in. If you are buying property on ridiculous earning multiples then it's possible you are playing the greater fool game. There are plenty of other games to be playing though. I have bought on 20x (or less) earnings multiples, with very strong indications of a rocket under rental prices for some time to come, these properties are also 3's out of 10 on the scale and are rock solid renters for the future.

* Yes there will be a recession/depression, I wish I could place a bet on that! It will continue to have to be of ever greater magnitude to erase the nominal gains I have received over the last few years. Cash will once again be king, but at the moment it still sucks big time, please phone me when you see the changeover happening.

Stagnation rocks!

 

[WaySolid]

When I bought my properties many friends labelled me as "Stupid".
I've sold a few since and building now---I'm evidently still "Stupid"

Stupid is comfortable so happy to remain and continue on my stupid way.

It's considered a great contrarian compliment by me.

I was looking at a blue chip suburb of the future in SEQ in January, at the moment it's still considered 'Boganville' by most however, a clear case of attitudes lagging reality as I'm convinced this suburb will outperform for the next 10 years or so until attitudes catch up. I was told 'buy there.. and we will never visit you!' by a family member who incidentally never visited me when I lived at Mermaid Waters on the Gold Coast.. (go figure)... and 'You can't buy there... that's a terrible area' which convinced me I was spot on with my analysis.. But I chose somewhere else that is 'On the wrong side of the tracks' according to my Dad (A dad who loved Bond Corp, Quintex and Ariadne) thanks Dad!

Of course sometimes people will call you stupid and they will be right

 

[tech/a]

Oh Puuullleeeeeeze!!!

An economic decision to not buy RE is not necessarily fear FFS!

True its not.
But I'm sure there are many who are not making an economic decision even though they could well be in the position to make one that wouldnt involve the paralising fear of risk which obviously the majority on this thread appear to have.

An economic decision not to buy R/E as a blanket decision IE---period--- or until prices fall---- I would say IS fear based.

Those with blinkers on are in my view not capable of making a balanced economic decision.

A personal decision based upon whatever--- entirely different.

 

[tech/a]

Of course sometimes people will call you stupid and they will be right.

They will always be right---its their perception.

I'm often wrong---thats my perception.

 

[wayneL]

True its not.
But I'm sure there are many who are not making an economic decision even though they could well be in the position to make one that wouldnt involve the paralising fear of risk which obviously the majority on this thread appear to have.

An economic decision not to buy R/E as a blanket decision IE---period--- or until prices fall---- I would say IS fear based.

Those with blinkers on are in my view not capable of making a balanced economic decision.

A personal decision based upon whatever--- entirely different.

That's a lot of assumptions based on zero information. Therefore the blinkers appear to someplace other than you imagined.

 

[tech/a]

That's a lot of assumptions based on zero information. Therefore the blinkers appear to someplace other than you imagined.

1300 posts---Zero information?

 

[robots]

hello,

here we go, is this really whats going on

http://www.domain.com.au/Public/Art...py days here again: Sydney market on the rise

had a great week,

thankyou

robots

 

[Kimosabi]

Or is this the real story about what's really going on???

Is the great Australian dream out of reach?

Alison and Bryce Morgan had to give up on their dream rather than borrow hundreds of thousands of dollars to buy a house up to 40 kilometres from their work and friends.

The couple has decided to live in inner-city Windsor as it is convenient and close to where they work and study. Here, they rent a "1 ½"-bedroom home for $320 a week.

In the weeks leading up to Christmas they began looking around the beachside neighbourhoods of St Kilda and Elwood, searching for a place to buy and maybe start a family.

But with a budget on the trimmer side of $300,000 and a dog in need of a yard, the Morgans quickly realised the dream would have to wait a little longer.

"We bit the bullet and decided to move inner-city for the experience, knowing we'd have to pay big rent,"

Mrs Morgan says. "We realised pretty quickly we weren't really in the market for much, and what we could afford we were advised that it was probably not a great investment option anyway, because one-bedrooms are hard to move."

Their experience is part of a worsening social crisis, which is also bad news for business ”” very bad news.

People on typical incomes are struggling more than ever to buy their first home. For others on lower incomes, the situation is even grimmer as they are locked into a vicious cycle of rising rents and the reduced ability to save.

For business, the residential arms of Australia's largest listed developers have reported flat or falling earnings in the recent profit season while the home-building industry continues to face sluggish conditions.

Yet talk of a crisis in something as basic as housing seems crazy in a time of such plenty.

Many Australians have never had it so good with the sharemarket boom, falling unemployment and solid wages growth helping private-sector wealth reach record highs last year.

But it appears not everyone is able to share in the opportunities that abound.

In Victoria, data compiled by BusinessDay shows that the first-home buyer share of Victoria's home loan market has changed dramatically in the past decade.

From 1997 to 2001, first-time buyers made up on average 24.7 per cent of the market. Since 2002 this average has shrunk to 18 per cent as prices boomed. The trend confirms that more people are rethinking their plans.

The Morgans try to look at their situation positively, but the experience has so affected

Mrs Morgan that the idea of home ownership has been shelved indefinitely.

They now say that they are happy with their decision to rent because it gives them greater flexibility.

The decision by many people to rent rather than buy is reflected in rental vacancy rates, which are at 25-year lows, as more people rent for longer because of soaring house prices.

Despite the dip in the March quarter, the median price in Melbourne has risen more than 65 per cent since the end of 1999.

And a closer look at the top suburbs where first-home buyers move ”” Craigieburn, Cranbourne, Pakenham, Berwick and Caroline Springs ”” reveals all bar one recorded price growth over the past year.
Prices in Pakenham grew 10.4 per cent.

The rising prices and downward spiral in the share of first-home buyers is forcing developers across Australia to come up with innovative solutions as they try to maintain a market.

These innovations vary from the obvious ”” smaller homes on smaller blocks of land ”” to the more creative. Late last year, in response to rising interest rates, Stockland offered Melbourne buyers a monthly rebate paid into their bank accounts.

The fall in first-home buyers is exercising the mind of Delfin Lend Lease chief operating officer David Keir. "The thing we find now is that first-home owners are such a small part of our overall mix, they are probably circa 10 to 15 per cent," he says.

So Delfin is increasingly aiming at other parts of the market, such as baby boomers, and offering a wider range of housing types to attract as many buyers as possible.

While Victoria is relatively unaffordable, he says, sales and inquiries in recent months have been good and the situation is better than in Sydney and Perth.

Nationwide, affordability is in the doldrums, with an HIA/Commonwealth Bank survey finding it worse now than when interest rates were 17 per cent.

Keir believes there are two parts to the affordability issue. There are those on middle incomes who are finding it harder to buy in the private market, while people on low incomes need assistance.

His latter point is supported by research from RMIT University's Australian Housing and Urban Research Institute, which has found that housing affordability has plummeted.

The research, based on housing transactions across Melbourne between 1990 and 2003, found that of 57,160 housing transactions in 2003, only 1130, or 2 per cent, would be affordable for someone on a low to average income.

This compares with 13.5 per cent in 1996. The figures are slightly better for units and apartments.


Professor Gavin Wood, who works for the centre and who did the research, says it has created a more segregated society of haves and have-nots.

In a federal election year, the causes of the housing crisis ”” and the suggested solutions ”” have become hotly contested.

Last election the Government's pitch was about economic management and low interest rates.

This time speculation abounds that the Government may do something in next month's budget.

Economists warn against measures such as increasing the $7000 first-home owners grant, saying it would simply push up house prices rather than improve affordability.

ANZ chief economist Saul Eslake thinks it highly likely the Federal Government will release "bad policies" to try to win votes.

Prime Minister John Howard had previously said he would consider increasing rent assistance, but changed his mind. He says that increasing Commonwealth rent assistance would just deal with the symptoms.
The solution is for the states to release more land, which will eventually decrease values and make housing more affordable, he says.

Although Labor has not committed to any proposals yet, its policy platform for last weekend's national conference contains a key part focusing on strategies to improve housing affordability.

These strategies include such possible moves as restructuring the first-home buyers grant to benefit low and middle-income households, shared equity schemes, and increasing rent assistance.

But it is not just the politicians offering solutions. A slew of schemes and proposals from interest groups and lobbyists has emerged in recent times.
One proposal has attracted support from the competing interests of industry, unions and welfare groups.

Under the plan ”” which a coalition of the HIA, ACTU and Australian Council of Social Service is backing ”” state and federal governments would provide incentives to boost the supply of rental homes by up to 15,000 a year.

The point of the plan is to encourage superannuation funds to invest in residential property, with the subsidy flowing directly to the investor rather than the tenant.

In return, rents would be kept well below market rates. The plan aims to boost the supply of homes and to allow more people to reduce their housing costs.

But it is the question of the causes of the housing crisis where much of the debate gets bogged.

Eslake argues the affordability problem has come about because of relatively lower interest rates in recent years, more competition in mortgage markets and rising real incomes that have fuelled borrowing and pushed up prices.

Although buyers' borrowing capacity has more than trebled in the past 15 years, and immigration has risen, there has not been a corresponding increase in housing supply.

Eslake says the Federal Government also needs to have an input through measures such as increased tax incentives and aiming the first-home buyer grants at lower-income earners.

Institute of Public Affairs deregulation unit director Alan Moran thinks it is fundamentally a state issue.

Moran says there is a major misallocation in savings in Australia. "We have created this overpriced asset and we are spending a lot more on it than we should be, and less on other things that are more productive," he says.

The median house price has gone from three times the average income to more than six times the average income in the past 20 years, he says, but not because of lack of land.

"We have got a lot of land in Australia … but it's (state) government decisions on residential urban growth boundaries that has restricted the amount of urban land to growth boundaries," he says.

He says there are three main aspects, and costs, to building a home.
"Firstly there's the cost of virgin land itself," he says. "A block of land is usually less than $1000. Then there's the cost in making sure it's habitable; the power lines, sewerage, the guttering. This usually is about $40,000.

"But over $100,000 is created by scarcity of the land, which governments control. And Melbourne is not the worst by any means."

"In my opinion, it's gobsmackingly obvious that a huge increase in 'home-buying power' was the dominant force behind the big upswing in the average price of Australia's 8 million homes over the past decade or so," he says in a report.

For those struggling to buy, the debate may seem academic, but they can expect to hear much more about the causes and solutions to rising housing costs this election year.

Link

 

[robots]

hello,

remember the title:

house prices to stagnate for "years"

you can pull up what ever crap you like about affordability issues, unethical lending practices, government should do this or that

i would love to live in a 100sqM apartment in Paris too, think someone should help me out?

i think its very evident that prices are not stagnant, around 18mths, their must be another article from the FSU (financial sense university) for the weekend

thankyou

robots

 

[wayneL]

hello,

remember the title:

house prices to stagnate for "years"

you can pull up what ever crap you like about affordability issues, unethical lending practices, government should do this or that

i would love to live in a 100sqM apartment in Paris too, think someone should help me out?

i think its very evident that prices are not stagnant, around 18mths, their must be another article from the FSU (financial sense university) for the weekend

thankyou

robots

Remarkably, 100sqM in Paris would cost less than 100sqM in Sydney.

4 beds with a few acres cheaper in Bordeaux than Gerladton.

I know where my weekend getaway will be. Baguette anyone?

 

[BSD]

When I bought my properties many friends labelled me as "Stupid".
I've sold a few since and building now---I'm evidently still "Stupid"

Stupid is comfortable so happy to remain and continue on my stupid way.

Buying the Lotto or entering into a game of russian roulette with a sixshot pistol can make people heaps of money - but calling the participants fools BEFORE the result is known is rational.

Eventual winners look very smart for the dumb; but most intelligent people can establish that a winner of either game is lucky but not smart.

We should never confuse luck and smarts.

And who gives a **** what your friends thought?

I would assume that 80%+ of most people's 'friends' wouldnt know what makes for a good investment anyway. Many (in any investment environment) would say rubbish like, "my uncle lost money on stocks/property/options etc count me out"

We need to look forward not backward

Idiots who bet on lotto, pokies etc are not smart. If they win - their success is due to randomness and not shrewd investment.

Buying an illiquid, indivisible, undiversified asset with a 2% gross yield and 90% leverage is not good finance - regardless of previous results.

Why rent assets to bogans for 2% return when you can sell Iron/Copper/Oil to the Chinese for enormous returns on equity?

BTW: I firmly believe that many good property assets still exist but they represent about 4% of stock.

 

[robots]

Remarkably, 100sqM in Paris would cost less than 100sqM in Sydney.

I think that's a bit of a porkie their wayne,

22sqM, yes 22sqM in suburb of paris (400K aussie) not talking the champs here, good area though

thankyou

robots

 

[Freeballinginawetsuit]

4 beds with a few acres cheaper in Bordeaux than Gerladton.

Not 5 years ago, isn't that the point?, and the correct spelling is Geraldton.

Property dosent have the same returns as the market's presented the last few years, no argument thier.

Like wise its reasonable to asume those that have speculated in recent times on both........ have simply spread the risk of investments.

Those that continually speculate without real liquidity conversion, are akin to the house odds at the casino .