House prices to stagnate for 'years'

[YChromozome]

And, as yet they have never experience economic bad-times, yet...

There was an article about the Boomer bank today :
Boomer bank right behind Gen Y - May 23, 2007.

Mr Salt says Gen Y's day of reckoning will come at the next recession, which he believes is a decade or less away.

I'm not quite sure if I agree with it all. Most of the debt Australian's hold is in housing, and it's not the Generation Y that have houses. Debt in personal loans and revolving credit hasn't grown anywhere near the rate housing debt has.

In a recession, No doubt many Generation 'Y' will default on credit cards and personal loans. For that time in their life, its not too much of a problem, they will recover from it.

However it's the Baby Boomers that are asset rich (housing) and cash poor, expecting their super to fund their current lifestyles. If housing was to deflate and the economy slow due to the wealth effect and the fact we are spending more than we earn each year, who's super is going to be hit too? I don't think Baby Boomers should be all that complacent, either.

 

[stock_man]

It's interesting watching the tell tail signs.

One of the early signs in the US was the builders had such a glut of houses they were offering free cars and vacations.

Over here in Australia AUSTRALAND is cutting the price of houses and apartments in its Sydney estates by up to $100,000 during May . .

Houses on sale as mortgages bite - South-West Rural Advertiser, 23rd May 2007.

Just read the above mentioned article, and the following stood out to me:

''Savings as big as this can be the break many people need to escape the rent trap,'' he said, citing figures that indicated dwelling commencements in NSW in 2006-07 would fall below 30,000 for the first time since 1958-59.


With a rental crisis (?), and the lowest amount of dwellings being constructed in more than 48 years, where are all the people going to live? Sydney alone has a massive migration and birth rate. This has to impact somewhere. Rents increase, property values increase, or everyone just moves to QLD?

 

[Smurf1976]

hello,

the lending standards will get even looser here in AUS, many organisations are starting to offer these discounted loans for 3yrs, the ARM style, it will get looser

yes the un-informed will get involved, yes they will get in trouble, will it bring down the housing market who knows, so far no it hasnt

note in Melb people are jumping in BIGtime and buying properties prior to auction, many in my area selling couple of weeks before auction day, great stuff for all

note one forumite has been staying away from recent discussion, has their view changed?

thankyou

robots

That second paragraph looks like a certain robot might be having a few doubts about the long term health of the property market.

Who's been staying away? (serious question as the regulars seem to be alive and well).

 

[robots]

hello,

good to see you kicking off the weekend, had a great week,

property market seems to be as SOLID as ever and as always said, I wouldnt have a clue what happens in the future

what I do know is there is 2 asset classes, shares and property and its best to be involved in both

goodluck

regards

robots

 

[wayneL]

Half the population (52%) could survive financially for just 17 days, should they suffer an unexpected loss of income, according to research by Combined Insurance

Make of that what you will.

 

[wayneL]

Article from the UK, but equally applies here:
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=457505&in_page_id=1770

Houses 'are priced 65 per cent too high'
by SAM FLEMING - More by this author » Last updated at 22:17pm on 24th May 2007

Annual payments on an average £150,000 mortgage are already £1,200 higher than this time last year

The housing market in Britain is up to 65 per cent overvalued and needs further interest rate rises to cool it, international economists have warned.

The Organisation for Economic Co-operation and Development revealed that UK property prices are among the most stretched of any major world economy.

At the same time, finance experts warned that the Bank of England could increase interest rates to 6 per cent before the end of the year.

The prospect will alarm homebuyers who are already struggling to meet their monthly mortgage payments after four hikes since last August. Annual payments on an average £150,000 mortgage are already £1,200 higher than this time last year.

The Paris-based OECD said it was worried about the valuations of homes in a range of countries following a world-wide boom.

It said a slowdown is long overdue and that a property crash cannot be ruled out.

Among the G7 club of rich nations, only Canadian properties are more over- stretched than the UK's levels.

If interest rates are not raised to slow down the economy, a major slump may do the same job - but with far worse consequences.

The OECD's report said: "Some slackening in the pace of of housing investment is likely in many OECD countries, and that may contribute to a cooling down of some fast-growing economies.

"There is always a risk, nonetheless, that it takes the form of a pronounced slump with, possibly, substantial knock-on effects to activity in the rest of the economy."

The research in the OECD's biannual Economic Outlook compared the price of the average house with annual rental incomes.

The measure is widely used by experts because if houses do not generate enough rent, then landlords will be willing to pay less for property, pulling down prices.

This indicator in Britain is now 65 per cent above its historic average since 1970.

An alternative-measure compares house prices with average annual incomes.

This shows that UK prices are 45 per cent higher than their long-term average, the OECD reported.

Ed Stansfield of research organisation Capital Economics said there are good explanations for Britain's decade-long house price surge, including lower borrowing costs and a shortage of new property on the market.

His own calculations suggest that the market is at least 15 to 20 per cent overvalued.

"We are in for a very, very subdued picture in term of house-price inflation and housing market activity," he said.

Despite fears for the housing market, the outlook for the UK economy remains buoyant, according to the OECD.

It predicted that gross domestic product will increase by 2.7 per cent this year, little changed from last year's healthy 2.8 per cent.

But it urged the Bank of England to be "vigilant" following a recent surge in inflation.

The OECD also criticised Chancellor Gordon Brown for failing to do enough to rein in public spending, calling for greater restraint.

Its estimates show that the UK's deficit will be higher than any other western European country this year, as NHS budgets soar and Mr Brown struggles to control public sector pay.

The figures compare public deficits with the size of overall economies across the 30-nation OECD.

In Europe only Hungary and the Czech Republic are experiencing a more dramatic deterioration in the public finances.

A Treasury spokesman said: "As this report shows, the UK has one the fastest growing economies in the G7 this year, and is forecast to grow faster next year than any other major European economy, building on a record 58 consecutive quarters of economic growth."

A poll of 62 economists by the Reuters news agency showed that one in three believed interest rates will hit 6 per cent this year.

 

[Smurf1976]

what I do know is there is 2 asset classes, shares and property and its best to be involved in both

Bonds?
Gold?
Commodities?
Cash?

 

[robots]

Bonds?
Gold?
Commodities?
Cash?

hello,

could you help me out and tell me how to INVEST (not trade) in those items you have listed

new to this

thankyou

robots

 

[YChromozome]

The research in the OECD's biannual Economic Outlook compared the price of the average house with annual rental incomes. This indicator in Britain is now 65 per cent above its historic average since 1970.

An alternative-measure compares house prices with average annual incomes. This shows that UK prices are 45 per cent higher than their long-term average, the OECD reported.

Interesting. I don't have data from the OECD Economic Outlook Issue No 81, but I do from Issue no 78. The graph is attached.

Back then when the U.K. was 60% overvalued, Australia was about 75% overvalued based on price to rent ratios. On house price to average income ratios the UK was about 45% overvalued, compared to Australia at 50%.

I wonder where Australia stands now? Does anyone have access to these figures?

 

[Kimosabi]

Interesting. I don't have data from the OECD Economic Outlook Issue No 81, but I do from Issue no 78. The graph is attached.

Back then when the U.K. was 60% overvalued, Australia was about 75% overvalued based on price to rent ratios. On house price to average income ratios the UK was about 45% overvalued, compared to Australia at 50%.

I wonder where Australia stands now? Does anyone have access to these figures?

It's good to see there isn't a housing bubble in Australia

 

[YChromozome]

I wonder where Australia stands now? Does anyone have access to these figures?

Data just in for Australia up to the December 2006 quarter. (I don't have wage data for March 2007 qtr yet)

Also note that the ABS has modified parameters of its house price index, and started a new one, so the data is the two indexes merged together. I also haven't moved the average - I don't have data prior to '86 (OECD average was from 1970).

The fall after 2003 was predominately the softening of the Sydney market. The current surge is Perth. Too bad for a two stage economy. We might need graphs for each state. .

 

[Kimosabi]

Data just in for Australia up to the December 2006 quarter. (I don't have wage data for March 2007 qtr yet)

Also note that the ABS has modified parameters of its house price index, and started a new one, so the data is the two indexes merged together. I also haven't moved the average - I don't have data prior to '86 (OECD average was from 1970).

The fall after 2003 was predominately the softening of the Sydney market. The current surge is Perth. Too bad for a two stage economy. We might need graphs for each state. .

Try this ==> http://www.anz.com/Business/info_centre/economic_commentary/Snapshot_April07.pdf

 

[Smurf1976]

hello,

could you help me out and tell me how to INVEST (not trade) in those items you have listed

new to this

thankyou

robots

Bonds. Just buy and either hold to maturity or sell at some future date prior to maturity.

Gold. Just buy and hold it for as long as you like and then sell.

Commodities. The obvious one is simply buy stocks in commodity producing companies but that's not the only option.

Cash. Banks generally offer accounts which accept cash deposits and pay interest. Just put it in one of these.

Note that I'm not suggesting that anyone SHOULD invest in any of these, just that it is possible to do so. And it's generally a lot easier in a practical sense than buying property. Whether or not it is profitable will depend on the markets as with property.

 

[wayneL]

off the subject of price direction for a git of levity.

http://www.tedtruitt.com/

LOLOL

 

[Flying Fish]

How about buying land? If housing crashes then there will be lots of builders out of work right? You should be able to bargain well to build a new home on a decent block?

 

[YChromozome]

In the Adelaide Sunday Mail today :

'What Rental Crisis'
Some properties on the market up to five weeks

ADELAIDE's rental crisis is over, according to real estate agents. Rental properties which earlier this year were being snapped up before being advertised are now are more than a month on the market, a property survey shows. Other rental homes in traditionally high-demand locations are falling to attract anyone to open inspections.

"Greedy landlords and an increase in investors had seen the rental market return to normal much quicker than expected, real estate agent Anthony Toop said."

I guess putting up rents higher than inflation does effect the supply and demand cycle, Really who would have guessed?

 

[krisbarry]

I have my doubts about this Anthony Toop dude, he is always on the radio spruking up the housing market, obviously for his own interests. I wouldn't trust what he has to say. He says 1 thing and does another...I hear his radio ads saying the rental market is hot, sales are going balistic etc etc. I have been to many of his auctions and the houses just don't sell, and some with no bidders at all!

Better to go by the latest sales figures, etc. and take a non real estate agents point of view. Then you will really get the truth!

 

[krisbarry]

Same as Devine Homes...slogan: Rent Money is dead money.

What a load of crap...as proven by many people on this discussion board that renting in many cases makes a far better investment than buying.

Again...take out the comercialism and put in the truth!

 

[YChromozome]

Better to go by the latest sales figures, etc. and take a non real estate agents point of view. Then you will really get the truth!

True. The article was written around stats from a property survey. The article was padded out with quotes from Real Estate agents, but they were not the source. The opening statement/quote comes from a property manager, "The crisis is over - some rental homes are now up to five weeks on the market," Elders Real Estate Glenelg property manager Sue Belleli said.

Maybe all the investors can see Anthony Toop about selling their investment properties. Keep that commission coming in. It's a bit like share brokers, now only if they made a cut of your portfolio, not brokerage on buy and sells.

 

[prawn_86]

i am young and cant afford to own a house, and even if i could im not sure i would.
As has been mentioned, various studies have shown investing to achieve higher results than property, especially if you take the boom out o it. The only reason however, i would like to own a house, is that of security. As it is for us at the moment, there is nothing stopping the landlord saying 'ok time to move out', but i think if you can get a good long term renting agreement and a good relationship with the landlord, renting can definetly be the better option. Especially in the current market