House prices to stagnate for 'years'

[brisvegas]

blah blah . too subjective , too opinionated , too many POV without applying critical thinking . too many bitter non real estate buyers , too bad so sad.


i'm over it


........................... Pete

 

[wayneL]

blah blah . too subjective , too opinionated , too many POV without applying critical thinking . too many bitter non real estate buyers , too bad so sad.


i'm over it


........................... Pete

Be seein' you then. Ta Ta

 

[wayneL]

Without knowing your friends circumstance Wayne---wouldnt it be fair to say that thats life in general--our situations can change dramatically sometimes through no fault of our own.---both positive and negative.

I doubt that you would be frozen in action by what "could happen"?
Many are.

My rather obtuse point was that the overall economic situation can, and will, change. I used a microcosmic example of an individual to illustrate....not very clear, sorry.

The decision to buy a house because "you can afford it" should be considered in a much broader context.

My friend mortgaged himself to the very limit of his affordability, this, being done in a time of VERY favourable economic conditions.

Many are doing this.

It just so happens that this chaps business is very "price of petrol" ("cost of input") sensitive. He doesn't realise yet that his business is also very "economic activity" sensitive and "interest rate" sensitive.

People (including my friend) have been managing their affairs as if these three factors have been permanently negated.

Factor one is hurting him deeply. Eventually factors 2 & 3 will kick in (as they ALWAYS have and WILL).

It is then I will have to be a friend indeed (because he will be "in need")

Cheers

 

[krisbarry]

I really believe that it is so important to get onto the property ladder,
in any way you can...worst house / unit in best street / suburb etc
Put your money into something and then borrow against the asset.
Please do not wait too long....think long term.

There are good times and bad times to enter or exit the property market.

Today is great for the low interest rates, but high house prices.

A few years time may see lower house prices with a slightly higher interest rate.

And in the 80' it was high intrest rates and lower housing costs.

I guess it depends on where you fit into the market.

I am a "intended first home buyer" and the market does not suit my purposes to buy at the moment. I will buy in 4 years, when I can save a higher deposit and watch house prices fall in that time. I am thinking long-term and believe I will be able to save thousands just by being patient.

For those who own property right now is not the time to pull out that equity in your home to buy more property (Short term Pain).

For those intending to retire, maybe it is a great time to sell the family home, while property prices are high and downsize.

 

[Julia]

There are good times and bad times to enter or exit the property market.

Today is great for the low interest rates, but high house prices.

A few years time may see lower house prices with a slightly higher interest rate.

And in the 80' it was high intrest rates and lower housing costs.

I guess it depends on where you fit into the market.

I am a "intended first home buyer" and the market does not suit my purposes to buy at the moment. I will buy in 4 years, when I can save a higher deposit and watch house prices fall in that time. I am thinking long-term and believe I will be able to save thousands just by being patient.

For those who own property right now is not the time to pull out that equity in your home to buy more property (Short term Pain).

For those intending to retire, maybe it is a great time to sell the family home, while property prices are high and downsize.

Kris,

How can you be so sure that you will "buy in four years time"? A huge amount can happen in one year let alone four years. There are so many possible variables which can all affect the housing market.

Please don't take offence, but you seem to be exhibiting somewhat of a "tunnel vision" approach which effectively blocks out opinions and advice of others who could well be in a position to offer you constructive suggestions.

If I were you, which of course I couldn't be, I would be buying anything I could possibly afford at present while interest rates are still low. I read reasonably widely about property and have yet to see anything convincing which states definitively that property will fall substantially in the next few years. I absolutely believe that if you own property, however modest, as long as it's in an area of growth (ie as someone else said "the worst house in the best street") then you are in a better position to move up gradually towards a property which will one day be what you are really looking for.

If you have determined that you are going to "sit and watch" for four years, I can't begin to imagine the opportunities which will pass you buy.

All the best
Julia

 

[Fleeta]

Anyone in Melb,Syd,Bris,Canberra.
Can you supply me with some suburbs that are likely to show these falls of 10% +

Tech/a - in Melbourne, we have had falls in the housing market of greater than 10% already. I have witnessed it first hand being at auctions and buying a property.

The areas in particular that have declined in value are newly developed areas such as the Docklands, as well as some outer suburb developments. I think the growth will be flat for the next couple of years in Melbourne, which means people like me who pay $20k in interest each year will actually be losing on their investment.

 

[markrmau]

I read reasonably widely about property and have yet to see anything convincing which states definitively that property will fall substantially in the next few years.

Of course no-one can state definitively that values WILL fall, but here is a summary of the reasons they MIGHT fall:

i) The return from rental is at historically low levels. I believe it is less than 2-3%, so basically you are paying a premium in the hope of capital growth.

ii) It looks like tax rates (particularly the top tax bracket) will drop. This will make negative gearing slightly less attractive, so investors will not be willing to pay as much.

iii) Very hard to say what will happen to inflation and interest rates. I notice the electrical trades union just won a high pay rise over next few years. Others will follow. Anecdotal evidence from this board indicates labour supply is tight. This COULD lead to interest rates going up .5-1% over the next year. Petrol is a mixed bag. It has both inflationary and deflationary effects. The commodity boom increases demand for the aussie dollar. This puts downward pressure on interest rates.

Things are probably grimmest in Sydney (of course pockets of sydney such as Marrickville are still going up I think).

 

[wayneL]

The Reserve Bank of Australia shares the concerns of the bears:

http://theaustralian.news.com.au/common/story_page/0,5744,16733003%5E2702,00.html

RBA warning of 'meltdown'
David Uren, Economics correspondent
September 27, 2005

FURTHER rises in oil prices, the collapse of a major bank or an unexpected jump in inflation could be all it takes to send the increasingly fragile global financial system into meltdown.

The Reserve Bank of Australia warned yesterday that the current calm in financial markets could be the prelude to a storm that could wreak havoc in the world economy........

 

[Smurf1976]

The Reserve Bank of Australia shares the concerns of the bears:

I see comments from the RBA in general as being more of an advance warning rather than simple "what if" advice commentary. Central banks choose their words VERY carefully in general and don't start throwing around seriously bearish comments without good reason.

 

[wayneL]

Without knowing your friends circumstance Wayne---wouldnt it be fair to say that thats life in general--our situations can change dramatically sometimes through no fault of our own.---both positive and negative.

I doubt that you would be frozen in action by what "could happen"?
Many are.

Tech, here is an article (British but same thing happenning here) that highlights just a part of what I'm seeing out there.

http://today.reuters.co.uk/news/new...ON838707_RTRUKOC_0_BRITAIN-FINANCIAL-DEBT.xml

LONDON (Reuters) - The consumer boom has come on the back of plastic spending to such an extent that some people are now carrying unsecured debts of 100,000 pounds, a leading personal finance expert said.

"I ceased being surprised by 100-grand debts two years ago. It's very common," Martin Lewis, author of the bestselling Money Diet, told Reuters on Wednesday.

Lewis said financial illiteracy, spending compulsion and dyscalculia (where people have difficulty understanding arithmetic) were key reasons behind people taking out high levels of debt that they had little hope of servicing.

I wouldn't take much of a change in the economy to push a whole bunch of people over the edge of the financial abyss...snowball theory from then on.

I have another friend who is a crayfisherman. He has borrowed $3,000,000 (thats right! 3 MILLION) to purchase boat, pot licenses etc.

Crayfish prices are trending down and at multiyear lows due to overseas competition (which australians have set up). At the same time, the Dept of fisheries are reducing their allowable catch by revoking the right to use a percentage of their pots and are increasing this this season. One worried chappy.

I realise this is an atypical case, but there are many other more mundane and typical examples such as my other friend mentioned above.

This is the tip of the iceberg. The majority of businesses are blithely unaware of the current structural problems in the economy, some aren't, they're battening down the hatches.

Cheers

 

[It's Snake Pliskin]

Yes, as I deduced in my property management days, property is an emotional topic. There are a lot of opinions on this thread which makes interesting reading.

I would simply like to say that leverage is the key to financial freedom. How you go about leveraging is up to you, but it doesn't mean you will be destroyed if interest rates go up a half point. Good debt, income producing debt is the key; healthy rental income and low interest rates without overextending yourselves. An example of bad debt is your family home that is an accounting liability. Add high interest rates and you have your state of serfdom. In Japan because of deflation the property you own is not an assett when you go to borrow money. They very much treat that as a liability and a cross against your application, not to say it is the determining factor in any loan application, but simply a negative aspect. (Actual experience by a friend).

Do your research and look for those growing areas or areas with housing shortages for quick gains in property prices. I have seen too many people with dud dud dud dud properties because they didn't research the areas or markets they were buying into. They didn't educate themselves, and believed hype due to greeeeeeed! (Not all though) Experienced the leaking shower? The cheap fixtures in the quickly built building? The many strata title, body corporate PROBLEMS? It goes on and on in Sydney apartment investing. I wouldn't buy anything built after the 80's.

I see prices going down for a while in Sydney, but will always buy when I find something that suits my criteria.

Kris, don't be afraid of buying, just do it smartly.

 

[wayneL]

http://www.stuff.co.nz/stuff/thepress/0,2106,3426610a6009,00.html

Renting seen as cheaper option
29 September 2005
By ALAN WOOD

Homeowners are being tempted to cash in the windfall equity in their homes in favour of renting as mortgage payments and rents fall out of kilter.

Market experts say many homeowners are poised to sell as market conditions mean the weekly cost of renting is far lower than paying a mortgage.

 

[tech/a]

Tina.
Brilliant.

Under the bridge?(Harbor?)

 

[RodC]

There are good times and bad times to enter or exit the property market.

.

Yes, but you can generally only be sure which is which with the benefit of hindsight.

Rod.

 

[RodC]

Tech/a - in Melbourne, we have had falls in the housing market of greater than 10% already. I have witnessed it first hand being at auctions and buying a property.

The areas in particular that have declined in value are newly developed areas such as the Docklands, as well as some outer suburb developments. I think the growth will be flat for the next couple of years in Melbourne, which means people like me who pay $20k in interest each year will actually be losing on their investment.

Fleeta,

I don't know if those areas are typical of the whole Melbourne market, both the docklands and some of the outlying areas have been subject to overdevelopment and oversupply.

Rod.

 

[tech/a]

Rod.

Exactly.Supply and demand. There will be a correction or flattening in R/E pricing across the board. More areas will decrease--a few % a year---some will do nothing---some with over supply will decrease dramatically---those with under supply and demand will actually rise a few % each year---and the odd area will increase well---but generally and across the board----a pullback.

Thats my view--others may be crash orientated and others Boom--but generally--middle ground.

 

[RodC]

I agree, I think it will mostly be middle ground.

I sold 2 IP's about 18 months ago and then bought another late last year.

Not planning on doing any further buying or selling at the moment.

Rod.

 

[It's Snake Pliskin]

Fleeta,

I don't know if those areas are typical of the whole Melbourne market, both the docklands and some of the outlying areas have been subject to overdevelopment and oversupply.

Rod.

That certainly was the case in the cbd of Sydney years ago.

Tech,

Not the harbour bridge, not any bridge.

 

[tech/a]

OK I give in whats the Handle all about then??

 

[It's Snake Pliskin]

OK I give in whats the Handle all about then??

Handle?