The future of Australian property prices

[robots]

hello,

oh yeah, continue to allow people to post rubbish like above, writings from a failed economist, no mentor of mine but many in bloggosphere love him

on par with UWS

great he coming out with more silly commentary, fantastic

thankyou
associate professor robots

 

[explod]

hello,

oh yeah, continue to allow people to post rubbish like above, writings from a failed economist, no mentor of mine but many in bloggosphere love him

on par with UWS

great he coming out with more silly commentary, fantastic

thankyou
associate professor robots

So you would prefer we hide the truth and not give people a chance to readjust according to possible problems in the offing.

And that the truth may be silly. Tell us more on your truth so that we may be able to measure or comment on it dear Robots?

So just sunshine and lollipops forever Joe

 

[robots]

hello,

so prices higher than pre-GFC, higher than 2001 when everyone was waiting for the crash anymore TRUTH you want to discuss

then doomsdayers like Keen, demographia, bubblepedia, GPHC came along and cost thousands across Australia hundreds of thousands of dollars, yeah thats the truth

yet the true phrophets of society are ridiculed, beaten, banned and mocked

but the money box is full, fabulous, how goods this

havent seen Dowdy around for a while, oh well

thankyou
associate professor robots

 

[trainspotter]

Anyone considered that the Govt borrowing 100 million a day from overseas is not helping this drying up of credit from the banks. Plenty of people still want to buy but the banks have tightened to a point whereby it is nigh impossible to get money from them. 80% LVR, 2.5 times income with residual debt DSR's, zero tolerance for CRAA. If the Govt is out there borrowing money in competition to the banks (Govt gets better rate due to AAA rating) then the banks are surely going to pass on the higher costs of funding to the nupties. As the banks have less access to wholesale funds then they can be picky and choosy on who they lend to.

Now remember we are talking about FINANCE for owner-occupied housing falling 3.9 percent for the month of June. Inquiry level on the other hand has gone through the roof ! BUT the banks will only lend to the gilt edge securitised people who have to jump through burning hoops of fire to be able to obtain the funding.

We are not talking about the VALUE of the properties falling, we are not talking about the market in a FREEFALL, we are talking about the level of loans for owner occupiers dropping by 3.9% for a one month period. GOSH ..... let me see now ??? The RSPT gave the market the jitters with investors pulling out in droves. Ummmmmmm ........ there is an election going on and TELL ME WHEN does the housing market go gangbusters when an election is on??

Keep a perspective peoples

In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions decreased 1.9%.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0

 

[Mr Z]

I am noticing quite a stock build up in the areas I look at. Also a much greater number of "must be sold" type desperation ads. Given the current income multiple this market must run out of legs OR income must rise. I place a lesser chance of the later looking at the global climate. We look setup to take a hit IMO, this bull is long in the tooth and long overdue for a decent correction.

Trainspotter... I think the level of OO loans has been dropping for close to ten months. Look at the charts below. That has been against a background of rising prices for at least the first six or so of those months. Something is wrong with that picture!

 

[matty77]

I am noticing a lot more "price reduced" ads around, also had a real estate agent call me back the other day - amazing!

 

[satanoperca]

Go Robots,

Somebody keeping the bastards honest.

I will not consider the market in retreat until at least 15% is knocked off the median house price and only then will it be back to early last years levels.

Keep on soldering on Robots, I should have paid more attention to your ramblings.

Cheers

 

[explod]

hello,

so prices higher than pre-GFC, higher than 2001 when everyone was waiting for the crash anymore TRUTH you want to discuss

Yes they are, however because of the GFC the Government increased incentives to sustain the building and Real Estate industries. And these efforts did just that but as the incentives have been decreased so too have the increases in the housing sector decreased.

then doomsdayers like Keen, demographia, bubblepedia, GPHC came along and cost thousands across Australia hundreds of thousands of dollars, yeah thats the truth

I am fairly certain that as a percentage, the people who listen to or subscribe to these economists would be a small fraction of the cooling property sector. The doomsayers as you describe them have been at it since as far back as 02, we may say some have been off the mark but if it had not been for government interventions I wonder, and at the end of the day perhaps those stimulas methods may see an end result yet to play out to be far worse.

yet the true phrophets of society are ridiculed, beaten, banned and mocked

It is not about trying to ridicule, on ASF in particular it is about sharing insights so as to protect and help each other forward. Property in its time has been wonderful for my family and many others, however on measuring current economic circumstances I feel there is better value at this time in other financial sectors.

but the money box is full, fabulous, how goods this

Thats good Robots and hope that our mutual discussions help you to continue to meet your objectives.

 

[trainspotter]

Trainspotter... I think the level of OO loans has been dropping for close to ten months. Look at the charts below. That has been against a background of rising prices for at least the first six or so of those months. Something is wrong with that picture!

OO's have been dropping for closer to 12 months Mr Z. 28.4% annualised from June to June in fact. What have prices done in this time? Australian house prices have fallen for the first time in 17 months ..... a massive seasonally adjusted ........ wait for it ............ 0.7% !!!!!!

Meanwhile capital city home prices are still up 10.5 per cent (seasonally adjusted) over the past year. RP Data has been forecasting a slowdown in residential property price growth to around 5 per cent this year.

The title of the thread is relevant.

 

[MACCA350]

Trainspotter... I think the level of OO loans has been dropping for close to ten months. Look at the charts below. That has been against a background of rising prices for at least the first six or so of those months. Something is wrong with that picture!

Govt changes in international property investment rules and cashed up investors could help to explain that divergence.

cheers

 

[bellenuit]

If we were to assume that there is a house price bubble and that house prices fall 40% (which I think has been the worst case scenario forecast), what would be the likely effect on rents.

The reason I ask is that I am close to committing to having two townhouses built at the rear of my existing block. So long as rents don't collapse by a similar percentage, I should be able to hold both properties at just about break even, so I wouldn't be forced to sell.

The land value component would be about 50% of the overall value of the completed townhouses at today's prices.

 

[CamKawa]

Hope this gets off the ground soon so I can short it.

Regulator considers betting market for houses

 

[Agentm]

its a numbers game

“BIS Shrapnel says annual net overseas migration – which includes permanent migration and longer-term but temporary stays – will fall from its pace of 298,900 in the year to June 2009 to 240,000 in the year to June 2010. It will fall more dramatically to 175,000 in 2010-11 and 145,000 in 2011-12.”

game over for some imho

 

[basilio]

I can't help feeling that property prices are in an unaffordable bubble that cannot be sustained. It just comes down to asking how many families can pay 7% interest on $400-500k worth of mortgage. (which in fact is still well below 80% of housing valuation in Melb/Sydney).

There is an interesting story in todays Age on the situation in USA where a number of people are trying to buy a new house before walking away from their old one on which they owe hundreds of thousands more than it is worth. They simply can't/don't want to keep making repayments on houses that are underwater.

Apparently in a number of areas in USA prices have dropped by 30% in the last 3 years.
Here of course it's different. If our house goes underwater we are still liable for any deficit on the sale price. Nice little weight to keep carrying around ??

'Buy and bail' homeowners get past loan hurdles
August 11, 2010 - 8:28AM

Harvey Collier, a mortgage broker in Fort Lauderdale, Florida, says he gets as many as 10 calls a month from people planning to default on their loans. The twist: They first want financing to buy another home.

Real estate professionals call it "buy and bail," acquiring a new house before the buyer's credit rating is ruined by walking away from the old one because it's "underwater," or worth less than the mortgage. It's an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan

...The value of US homes fell by a third from 2006 to 2009, as tracked by the S&P/Case-Shiller index. In some areas, the losses were bigger. Prices declined 56 per cent in Las Vegas, 55 per cent in Phoenix and 49 per cent in Miami.

.

http://www.theage.com.au/business/buy-and-bail-homeowners-get-past-loan-hurdles-20100811-11ymn.html

 

[Mr Z]

OO's have been dropping for closer to 12 months Mr Z. 28.4% annualised from June to June in fact. What have prices done in this time? Australian house prices have fallen for the first time in 17 months ..... a massive seasonally adjusted ........ wait for it ............ 0.7% !!!!!!

Meanwhile capital city home prices are still up 10.5 per cent (seasonally adjusted) over the past year. RP Data has been forecasting a slowdown in residential property price growth to around 5 per cent this year.

The title of the thread is relevant.

Yet you don't see a problem with that sort of divergence? All the while its against the background of a very very mature bond bull market that is over due to turn bear. Housing stock is building, volume is falling and the money supply is drying up. Unless you can think of a reason wages are going to surge, banks are going to loosen up I think that a correction is unavoidable.

If China has a hiccup that may well turn into a bit of a crash as the "risk trade" leaves Australia once again. I don't think that China is close to a major hiccup quite yet but it will come, the last 2 months action in the Baltic Dry have been a cause for concern although it is stabilizing now.

I think we can thank the influx of overseas investors for the relative strength of our capital cities, while that may suit you I am seeing lower prices than a year ago in some areas I look at.

The bottom line is that the average man needs to be able to afford the average house, given the price/income multiples we are at and that the only logical direction for interest rates is up (just ask Bill Gross!).

I would be very wary about basing future plans on any significant capital growth for at least the next handful of years. This market is overdue to cycle down in real terms and this time I think that will result in a decent nominal price decline as well.

JMO

The title of the thread is relevant..... er well yes, of course it is

 

[Mr Z]

It just comes down to asking how many families can pay 7% interest on $400-500k worth of mortgage. (which in fact is still well below 80% of housing valuation in Melb/Sydney).

There is an interesting story in todays Age on the situation in USA where a number of people are trying to buy a new house before walking away from their old one on which they owe hundreds of thousands more than it is worth. They simply can't/don't want to keep making repayments on houses that are underwater.

Apparently in a number of areas in USA prices have dropped by 30% in the last 3 years.

With the global stimulus efforts that have been going on double digit interest rates are assured sooner or later. Unlike the early 80's we don't have a suitable economic back drop to live with that, although I think that Australia will fare quite well given the USA's prospects.

Some areas of the US have dropped by 90%, some house's near places like Detroit where offered for a $1 + costs. The banks are withholding stock in areas to keep the price as high as is possible. Banks are also refusing to foreclose in many cases because they don't want to incur the costs on an unsaleable property. That has left land tax revenues falling ---> the ex-owner says its not mine, I am in default and have given the keys back (its so common its called jingle mail!) the bank say we don't own it look at the paper work! LOL... house's lost in space! In many area's forced sales out number organic sales significantly.The scene is much worse over there than our media, or theirs for that matter are reporting.

Mark Hanson is probably the best US housing analyst I have come across, goes by Mr Mortgage for the free stuff he puts out on the Internet. He has been very prescient over the last five years or so that I have kept up with his work.

Anyway, if we have half the problem that the US have had we have a big problem!

 

[Mr Z]

its a numbers game

“BIS Shrapnel says annual net overseas migration – which includes permanent migration and longer-term but temporary stays – will fall from its pace of 298,900 in the year to June 2009 to 240,000 in the year to June 2010. It will fall more dramatically to 175,000 in 2010-11 and 145,000 in 2011-12.”

game over for some imho

Many of the migrants counted in any given period are already here for a significant amount of time before they are counted (years!). They are counted when the paperwork is done and they are official but they are very often here on sponsored working visa's well before that. Anyway, the point is that the immigration figures lag badly in many cases, working visa's issued is more of a real time indication of what is going on now. At least that is my understanding of the situation.

 

[Mofra]

Hope this gets off the ground soon so I can short it.

Regulator considers betting market for houses

Could have a negative impact on the Mt Kosciusko tourist market though Cam

 

[trainspotter]

basilio - When houses drop by 30% in Australia please let me know. Your example of the USA is exactly why it wont happen here. We do not have non recourse loans. If anyone above 80% LVR goes under than Lenders Mortgage Insurance looks after the banks on the shortfall. This means the banks are not taking a hit like the banks in the USA. But you are right .... the banks will pursue you for the loss as well. Hopefully you would have sold prior to this happening??

Mr Z - it is cycling down ........... 0.7% already. Some areas of Melbourne down 2.5% for the year. Not over yet. But bear in mind we have had over 10.5% increases in capital cities then it is not that much of a correction. There are still plenty of jobs. China is still buying our iron ore and LNG deposits at a furious rate. Labor is still in power to keep spoon feeding the punters money. Interest rates WILL go up which will slow the housing market further. We are talking about the rate of sales now and not the property prices. Prices will remain modest for quite some time IMO. YES there will be foreclosures on those people who have over extended themselves to get into the market. YES the naughty greedy developers will get caught holding stock again. Ho hum ....... just another cycle really.

The relevance of the title of the thread is "property prices" ..... not clearance rates at auctions, not housing affordability, nor is it about declines in OO's borrowing money from the banks. YES these are relevant to the topic BUT we have not seen the MASSIVE downward corrections that some have been squawking about. Wake me up form my slumber when it happens will you please?

 

[Mr Z]

The relevance of the title of the thread is "property prices" ..... not clearance rates at auctions, not housing affordability, nor is it about declines in OO's borrowing money from the banks. YES these are relevant to the topic BUT we have not seen the MASSIVE downward corrections that some have been squawking about. Wake me up form my slumber when it happens will you please?

You cannot discuss price without discussing the things that underpin price, to do so is a one line statement of fact and a trifle boring! Price in the short term is often irrational, I invest on the fundamentals, the discussion has been around measures of the fundamentals. I can't see why you would not want to go there if you have a genuine interest in the subject.

I was "a greedy property developer" (???!), now I am very cautious to the point I no longer own any property. Why would you given the current risk reward profile? I can't make sense of it!