House prices to stagnate for 'years'

[wayneL]

I know both you & Wayne are not.

Schoolboy stuff toothfairy.

 

[numbercruncher]

I am not arguing anything, I am just stating some facts for everyone else who is interested. I know both you & Wayne are not.
I am also not suggesting to anyone to buy anything now, except milk & bread.
I am simply saying I bought properties long long time ago and they have increased in value since this thread started.
Lucky me, I didn't buy them to annoy you.

Its great debate though !


Im not having a dig at you, I know you bought your properties a long time ago and deserve your return on that investment , But having purchased your properties so long ago did you at the time of purchase think they would be worth anywhere near the prices they are now ?

 

[Smurf1976]

Hi everyone,
This thread was actually started by krisbarry in Sep 05, haven't heard from him much lately, must have bought in 05 and enjoying. The title of the thread has been proven WRONG for the last 22 months. See my charts below from REIV.

With all due respect to all involved, I must point out that asking the REIV to comment on house prices is much the same as asking Ford to comment on whether the Falcon is a good car. They are biased to put it mildly.

One particular problem with most house price data is that it is not quality adjusted. This is significant given the renovation boom - "average" selling prices ought to have risen due to renovations even if the market was falling and the same unrenovated house had declined in price.

I personally put a bit more faith in the Australian Property Monitors data for individual house sales though it's far from perfect. Amongst other things, it's interesting to note that agents seem to be consistently overstating selling prices. Houses are cheaper than you might think when you look at the price they actually sell for rather than what the agent would like you to believe. One high profile agent actually admitted that prices are overstated both asking and sold when questioned on the matter.

 

[MultiFinanceIT]

If financial time series have fractal structure, the central banks can only postpone the real underlying problem. When have central banks been successful in fighting the market?

Related thread:
SIXTH WORKSHOP ON STOCHASTIC ANALYSIS

Scroll down to my lecture:

"Determinism and stochastics in economics"

That paper should have been scanned in and published on the internet.

 

[numbercruncher]

Criminal Deception In Real Estate
Real estate agents in Victoria are often unaware that practices regarded as "standard" in the real estate industry are, in fact, serious criminal offences.

Furthermore, because the concept of agency involves a high degree of trust, an estate agent who commits a criminal offence through a "breach of trust" will be sentenced more harshly if found guilty.

Any breach of trust is an aggravating factor in sentencing. The greater the breach of trust, the more likely it is that a term of imprisonment will result - even for someone with no prior criminal history.

The fact that such practices may be common in the industry is neither a defence nor a mitigating factor to warrant leniency.

http://www.lawyersconveyancing.com.au/deception.asp


Wonder if an RE agent has ever been imprisioned for "breach of trust" or even charged with it ?

 

[Smurf1976]

Getting harder and harder,2 incomes for even a unit.
In the UK its 2 very good incomes and possibly a boader in many cases.
Same in Europe in many cases (Larger cities).

Eventually most will rent until the olds pass on and the House equity split between sibblings and houses then purchased.

Wont be un common to see people buying Reasonable homes for the first time in their 50s+.

Agreed this is quite possible.

But surely you are not arguing that this is a good thing? Should we not as a society be aiming to improve the standard of living of future generations relative to the present rather than sending them backwards?

 

[MultiFinanceIT]

Agreed this is quite possible.

But surely you are not arguing that this is a good thing? Should we not as a society be aiming to improve the standard of living of future generations relative to the present rather than sending them backwards?

A good economist plans as if future generations are present. It is very important to apply the correct discount rate for future generations.

Greed favors present generations.

 

[toothfairy]

Its great debate though !


Im not having a dig at you, I know you bought your properties a long time ago and deserve your return on that investment , But having purchased your properties so long ago did you at the time of purchase think they would be worth anywhere near the prices they are now ?

I didn't expect anything but just solid investment. As I said only 7% PA compound. It's only worthwhile if negatively geared & for long term. Shares have gone up heaps more. But they are risky to gear unless you go for MacQuarie Bank's GEI (Guaranteed Equity Investment) which they charge high interest. No downside except interests which are tax deductions.

 

[Fleeta]

With all due respect to all involved, I must point out that asking the REIV to comment on house prices is much the same as asking Ford to comment on whether the Falcon is a good car. They are biased to put it mildly.

One particular problem with most house price data is that it is not quality adjusted. This is significant given the renovation boom - "average" selling prices ought to have risen due to renovations even if the market was falling and the same unrenovated house had declined in price.

I personally put a bit more faith in the Australian Property Monitors data for individual house sales though it's far from perfect. Amongst other things, it's interesting to note that agents seem to be consistently overstating selling prices. Houses are cheaper than you might think when you look at the price they actually sell for rather than what the agent would like you to believe. One high profile agent actually admitted that prices are overstated both asking and sold when questioned on the matter.

I'll give you some more realistic returns from my experience. Melbourne, 2 bedroom house, 7kms from CBD.

Purchased - Jan 04 - $430k
Sold - July 07 - $519k
Return = 21% or 8% per annum
Take out costs in (stamp duty) and out (commission), more like 5% per annum. Basically lived rent free for 2.5 years (recovered interest costs)

Would you call that booming prices - I think not. Property is still 'fairly' priced I think.

If it wasn't for the Principal residence CGT exemption, it wouldn't have made sense to buy.

I am now renting - although I could buy my place with cash instead of paying rent - so why don't I - good question. Maybe I should. For now I am basically living rent free because the capital I have is giving me a return greater than the rent I pay, whereas if I put it into buying the place, I am no longer getting interest/dividends. This strategy of course only makes sense if you think house prices will 'stagnate'. It's a gamble I am only going to take for 12 months I think.

 

[Kathmandu]

I'll give you some more realistic returns from my experience. Melbourne, 2 bedroom house, 7kms from CBD.

Purchased - Jan 04 - $430k
Sold - July 07 - $519k
Return = 21% or 8% per annum
Take out costs in (stamp duty) and out (commission), more like 5% per annum. Basically lived rent free for 2.5 years (recovered interest costs)

Would you call that booming prices - I think not. Property is still 'fairly' priced I think.

.

Was'nt that when Melbourne was in a bit of a flat period, dont do Melbourne so havent been following, but had heard that it is getting picked over again, possibly read for another jump.

Dave

 

[tech/a]

Agreed this is quite possible.

But surely you are not arguing that this is a good thing? Should we not as a society be aiming to improve the standard of living of future generations relative to the present rather than sending them backwards?

No.

But it has manifested itself in other countries.
I'm sure it will here.
Sure you can go out further and further and in
Aust there is no land shortage.
but inner city and sought after R/E like
Great views or larger blocks/tennis courts are likely
To be in this lot I'm afraid.

 

[wayneL]

But it has manifested itself in other countries.

I think you are making that assumption on limited information, if, as you mentioned before, you are referring to Europe.

Don't forget the credit bubble is worldwide. Based on multiples of local earnings, many western European countries, EVEN NOW, are cheaper than Oz.

Germany for instance, is at bargain basement prices in comparison. Even the UK at the beginning of the boom was WAY better value than here (which is part of the reason I invested there). Check out Berlin if you want to see value.

 

[wayneL]

Germany for instance, is at bargain basement prices in comparison. ... Check out Berlin if you want to see value.

e.g.

http://www.immowelt.de/Immobilien/I...riMa=500000&ECat=1&ESR=1&Sort=createdate+desc

 

[tech/a]

But it has manifested itself in other countries.

Dont see the word ALL in the above sentance.
Perhaps the addition of the word SOME would be more appropriate.
AND
Just my opinion could have been another.

 

[Ageo]

Dont see the word ALL in the above sentance.
Perhaps the addition of the word SOME would be more appropriate.
AND
Just my opinion could have been another.

Hehe tech not good enough!

 

[tech/a]

Hehe tech not good enough!

Open to suggestions.

 

[moses]

Lets not forget the effects of a tradie shortage, plus greater expectations (bigger houses), higher "eco" standards and tougher OHS standards are having on the the cost of building a new home, all of which maintains price pressure on existing homes.

 

[Ageo]

Open to suggestions.

was tongue in cheek

 

[TjamesX]

hello,

save your money flying fish and put into shares or property,

84% clearance rate in melbourne yesterday,

thankyou

robots

Hi everyone,
this thread has become quite hot since the share market had a bit a correction. More people have become interested in properties and are wondering whether it will crash like the stocks. Quite a few bears around this thread as well, some has been here for a long time since 05, much longer than myself.
This thread was actually started by krisbarry in Sep 05, haven't heard from him much lately, must have bought in 05 and enjoying. The title of the thread has been proven WRONG for the last 22 months. See my charts below from REIV.
If someone still wants to debate (I won't say "argue" because I got told off last time by someone) about the topic, we should start a new thread called "House prices to stagnate from 08/2007 for 'years' " ! Any takers?

Predicting the future is a mugs game, but valuing something is not necessarly about predicting price action and time - only what the price in all probability will tend towards.... as an investment theory it does have some heavyweights in its corner (ie W.Buffet)

You can debate current price action V's fundamentals till the cows come home - they're two different methodologies looking at different things.

Fundamentals for a house price asset should be seen in things like average income, savings & deposits. These support the fundamental future cash flows and deposits for purchasing the assets. Things like 'economic & population growth', 'commodity boom' are all good catch cries but ultimately should be revealed in increases in deposits and average income.

Supply and demand is another favourite - ofcourse housing demand is not going away, just like i'm sure waterfront mansion demand in sydney currently outstrips supply... what matters is the price at which demand and supply clears.... debt and debt enabling facilities have a huge role to play in the price at which houses clear, but do not necessarily affect the fundamental future cash flow and servicibility of the asset.

Have a look at the RAMS home loans prospectus - maybe i'll post the chart sometime... look at debt growth CAGR for australian mortgages, that is the key... that will need to continue at its current growth.... debt expansion (beyond fundamentals) is a game of CONfidence.... buyers today need to convince buyers tomorrow to increase debt proportions relative to anything of importance (ie income, GDP etc)....The US are currently having trouble facilitating this, and if you think Aus is fundamentally different then you need to go back and have a look at some very basic ratios (income/interest debt/wages debt/GDB) and compare the two markets...


But please keep updating on what the current housing market is doing.... Although its adds about as much value as telling me the the speedo reading for a car traveling at 100kph heading towards a brick wall.... keep your eyes fixed on the speedo so you can tell me exactly when things turn

or you can replace the words "brick wall" with "optimus subprime"

 

[robots]

Lets not forget the effects of a tradie shortage, plus greater expectations (bigger houses), higher "eco" standards and tougher OHS standards are having on the the cost of building a new home, all of which maintains price pressure on existing homes.

hello,

thanks moses, I think these items you have listed are the main reasons why existing homes have been "re-valued" upwards across AUS

material supply companies want massive profits for there tiles, plasterboard etc, the tradie wants his cut, the local council wants his share and so it rolls

replacement cost has skyrocketed

save your money

thankyou

robots