House prices to stagnate for 'years'

[Lucky]

Investors stranded by property group collapse

http://www.theage.com.au/news/busin...-group-collapse/2007/05/29/1180205202186.html

Administrators have been appointed to the Australian Capital Reserve (ACR) Group, with $330 million invested by 7,000 investors now in peril.

It is the third major collapse of a property group in recent years, following the failure of Fincorp and Westpoint, which has left thousands of investors owed millions from the failed high-risk investments.

Maybe Vizard could help out and throw a few bucks there way?

 

[Kimosabi]

Well Perth has finally done it, we are now the most expensive city in Australia, and I suspect when this years Demographia Report is released later this year, we'll probably be the most expensive city's in the World for Real Estate.

Perth cements spot as Australia's priciest city

Perth has cemented its position as Australia's least affordable capital city after new figures released today revealed housing affordability has fallen to its lowest level yet recorded.

Nationally, the March 2007 quarter Housing Industry
Association/Commonwealth Bank Housing Affordability Index - a key industry measure of the market set up 23 years ago - fell by 0.6 per cent, 10.3 per cent lower than at the same time last year.

The average house price in Perth rose by 5.6 per cent in the March quarter, which the HIA said equated to fall in affordability of 4.5 per cent.

The new figures proved that, despite stamp duty relief announced in the State Budget, Perth continued to represent an enormous financial hurdle for first home buyers.

The situation was even worse in regional WA, where the average cost of a first home rose by 10.2 per cent, causing affordability to fall by 8.6 per cent.

Conversely, the index rated Hobart as the most affordable capital city in which to live.

Overall, the index fell to 97.8, making it the second consecutive quarter in which the index had fallen below 100, after a 1.3 per cent rise in the average price of a first home.

The 100 level is the base level for the index.

The HIA said the index was at its lowest level since the group was established in 1984, with the monthly loan repayment on a typical first home mortgage rising to $2387 from $2352.

HIA managing director Ron Silberberg said that when it came to housing affordability, all the wrong records were being set, and called for government action to alleviate the crisis.

"The housing affordability crisis shows all the signs of structural supply constraints; it is not part of some market cyclical trend that will correct itself," Mr Silberberg said.

"This continuing decline confirms previous calls by HIA for a national response to restore housing affordability."

The March quarter result was the fourth consecutive decline in affordability, with the monthly loan repayment on a typical first home mortgage rising by 1.5 per cent.

Mortgage repayments now account for 30.7 per cent of an average first home buyer’s income, up 0.2 percentage points on the December 2006 quarter.

HIA said its own projections showed that if the situation was not immediately addressed, housing affordability might not be restored until 2022, even in an environment of strong wages growth and low interest rates.

"With the Australian economy in great shape and with record national surpluses, more needs to be done to alleviate housing stress and to assist those families battling to afford a roof over their heads," Mr Silberberg said.

"Only a targeted whole-of-government approach will make inroads into what is a massive economic and social challenge for Australia."

Affordability fell in all regional areas except for regional South Australia, while all capital cities except Melbourne experienced declines in affordability.

http://www.thewest.com.au/default.aspx?MenuID=145&ContentID=30019

 

[Lucky]

It's property stories galore at the moment!!!

Here's one for Sydney-siders

First home payments hit $3000 per month

http://www.smh.com.au/articles/2007/05/29/1180205251509.html?from=top5

THE average monthly repayment needed to buy a typical first home in Sydney has hit $3000 for the first time.

This is up $442 on a year ago, and second only to Perth-based first-home buyers who shell out $3009 a month, says the Housing Industry Association's latest housing affordability report.

About half the increase is due to last year's three interest rate rises, which added almost $200 a month to repayments on a $400,000 loan.

The rest is due to rising home prices, which have forced people to take out bigger loans.

Although house prices have fallen in some Sydney suburbs, the median Sydney first-home price rose 9.6 per cent to $507,400 over the year to March, figures collected by the Commonwealth Bank for the report show. This exceeds the national first-home price of $403,800.

 

[Kimosabi]

I came across the following graph on another forum, but this is probably the best graphical representation of price vs volume and the impact the loss of volume has on price I've ever seen.

Unfortunately it's in French, but the bottom axis is Volume and the Vetical Axis is Price(I think).

I'd love to see a graph like the following but for Aussie housing.

This type of graph could be useful for shares as well...

 

[insider]

I came across the following graph on another forum, but this is probably the best graphical representation of price vs volume and the impact the loss of volume has on price I've ever seen.

Unfortunately it's in French, but the bottom axis is Volume and the Vetical Axis is Price(I think).

I'd love to see a graph like the following but for Aussie housing.

This type of graph could be useful for shares as well...

The X axis says Number of Apartments
The Y axis is price per square meter In Euros

In Paris

 

[insider]

The X axis says Number of Apartments
The Y axis is price per square meter In Euros

In Paris

It's an interesting graph... I think that each next revolution will have a larger price hike every time... You could super impose a graph like that of the share market and offset it showing which market is favored of the other at the particular time... I think houses in Australia are rolling of the top which means Shares in Australia are still bouncing

 

[Kimosabi]

It's an interesting graph... I think that each next revolution will have a larger price hike every time... You could super impose a graph like that of the share market and offset it showing which market is favored of the other at the particular time... I think houses in Australia are rolling of the top which means Shares in Australia are still bouncing

I'd love to run this graph over some indvidual stocks as well...

 

[insider]

I'd love to run this graph over some indvidual stocks as well...

Hmmm... I'd like that too...

If the Sharemarket offsets the housing market... Then according to this graph the bull run may be going for a few more years and will end in 2013... Interesting...

 

[Kimosabi]

Hmmm... I'd like that too...

If the Sharemarket offsets the housing market... Then according to this graph the bull run may be going for a few more years and will end in 2013... Interesting...

Forget the housing cycle, what I'm looking for is volume/price cycles within a particular stock...

 

[insider]

Forget the housing cycle, what I'm looking for is volume/price cycles within a particular stock...

:dunno: That's what she said!!!

 

[insider]

I'd say a graph like this wouldn't suit short term situations as it requires a median... What is this graph called? Spiral, a spring, a coil

 

[robots]

hello,

there you go ychromo, some stats from ABS, no doubt you will still be in denial

http://www.tradingroom.com.au/news_...ished/2007/6/156/catf_070605_115100_9443.html

goodluck

thankyou

robots

 

[Kimosabi]

Well, imagine that, Loan Defaults are on the rise, who would have thunk it.

Loan defaults on the rise

By George Lekakis
June 07, 2007 12:00am

AUSTRALIA'S leading mortgage insurers are feeling the pinch from rising home loan defaults, after insurance claims from banks and other lenders soared more than 500 per cent last year.

The two big mortgage insurers - Genworth and PMI - were hit by sharp rises in claims from home lenders according to 2006 accounts filed with the Australian Securities and Investments Commission.

Home lenders take out mortgage insurance on home loans to minimise potential losses from high risk home buyers who rely on borrowed money to fund more than 80 per cent of their home purchase.

Changes in the claims experience of mortgage insurers are an early pointer to the credit quality of home loans in Australia.

Home loan defaults on the rise

Mortgage insurers are among the first businesses to feel the negative impact of rises in home loan defaults and the 2006 accounts of PMI and Genworth confirm that the credit cycle has peaked.

More borrowers came under severe repayment pressure last year as property values in parts of Sydney fell 20 per cent and the Reserve Bank hiked rates.

The prospect of at least one more rate rise this year is likely to impose even more pressure on mortgage insurers.

PMI's net claims expense increased nine-fold to $64.1 million, while at Genworth net claims expense soared more than six times to $132 million.

The rises in net claims at both companies reflect the rise in payouts to lenders for bad loans and the need to boost provisioning to cover expected rises in defaults.

More defaults coming

PMI, which suffered a 30 per cent slide in its 2006 group profit to $80.6 million, expects the trend of rising default rates to continue in the medium term.

"Having had a seven-year period of favourable conditions the decline we're now seeing in home loan affordability has brought our default experience in line with long term trends," said PMI chief executive Ian Graham.

"We've taken a prudent position on provisioning to reflect the weakness in the Western Sydney property market."

Senior Genworth executive Peter Hall said his company had also boosted provisioning due to the weakening of Australia's property market.

"Management considers it appropriate to carry a higher provision for default," he said.

While not ruling out the possibility of premium increases, Mr Hall said it was unlikely.

"Default rates are now moving back in line with the long term trend for Australia and pricing is currently in line with that trend," he said.

"It (a premium increase) is not imminent but we do a pricing review each year that will take into account material changes."

Mr Graham agreed that there was "no pressure" on premiums at the moment.

The duopoly in the local mortgage insurance market is about to be challenged by US-based Mortgage Guaranty Insurance Corporation which recently secured regulatory approval to operate in Australia.

http://www.news.com.au/business/story/0,23636,21864030-462,00.html

 

[theasxgorilla]

Well, imagine that, Loan Defaults are on the rise, who would have thunk it.

And those poor mortgage insurance companies are being forced to honor claims...F%&K 'EM...I bet they thought they had a cash cow when the going was good.

 

[BradK]

And those poor mortgage insurance companies are being forced to honor claims...F%&K 'EM...I bet they thought they had a cash cow when the going was good.

I Second that!!!



Brad

 

[Kimosabi]

And those poor mortgage insurance companies are being forced to honor claims...F%&K 'EM...I bet they thought they had a cash cow when the going was good.

Well according to some people on this forum, Real Estate is always a good investment, no matter how much you pay for it.

Well, the good old Mortgage Insurance companies had better get used to making some big losses, because it's only going to get worse.

Now we haven't seen much about Mortgage Insurers in the US's housing bubble bust which I find quite interesting. I'll have to try and dig up some info on the impact of the US Housing Bubble Bust on US Mortgage Insurers.

 

[theasxgorilla]

Suffice to say the different parts of the world do it differently.

Sweden doesn't have mortgage insurance as such. Instead, if you don't have the right amount of deposit (80-90% LVR) then you must take a "top loan". The interest rates for this portion of your mortgage can rival that of credit cards.

Imagine that?? Buying a house on your credit card! Obviously the exhorbitant interest payments go toward mitigating the bank's risk for lending at such a high LVR.

 

[wayneL]

Suffice to say the different parts of the world do it differently.

Sweden doesn't have mortgage insurance as such. Instead, if you don't have the right amount of deposit (80-90% LVR) then you must take a "top loan". The interest rates for this portion of your mortgage can rival that of credit cards.

Imagine that?? Buying a house on your credit card! Obviously the exhorbitant interest payments go toward mitigating the bank's risk for lending at such a high LVR.

Sounds pretty sensible to me.

 

[tech/a]

And those poor mortgage insurance companies are being forced to honor claims...F%&K 'EM...I bet they thought they had a cash cow when the going was good.

They did and do.

Mortgage insurance picks up the difference between what the property is sold for and what the Mortgage is left owing.

It will be a rare case where they will be left paying the gap.
Even so it will be only a small % of book value written.

Few are written against 100% lending---this was only taken by companies in cases where total asset bought the LVR to 95%.
In most cases it was/is 90% so there is a 10% buffer straight away.

They aint stupid.

Well according to some people on this forum, Real Estate is always a good investment, no matter how much you pay for it.

Good property is never to expensive.There are many good property deals out there. Idiots dont do the numbers.
If I can positively gear for a great passive income return (And I can often right now ) I'll buy. In time (This varies ) I'll also have capital gain.
In 10 yrs Ill have massive return on initial investment.(Not only from Capital gain but passive income relative to initial investment will be staggering.)

Its pretty obvious many havent done or dont understand how to make property work for you.

let me know if you want an example.

 

[theasxgorilla]

Sounds pretty sensible to me.

From the banks point of view, yes...and from the consumers perspective they get their place to live, so in that sense they're satisfied.

Why people don't save a 10-20% deposit would possibly be asking just one too many smart a%&e questions