The future of Australian property prices

[trainspotter]

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!

I repeat ... "YES these are relevant to the topic BUT we have not seen the MASSIVE downward corrections that some have been squawking about." So let me know when this massive housing bubble is gonna pop then ??? My statement was this "Mr Z - it is cycling down ........... 0.7% already. Some areas of Melbourne down 2.5% for the year. Not over yet."

I also mentioned the word "naughty" as well when I described the property developers.

This is how we are perceived in the market place by the punters ... "Oh you are a property developer are you?? Oh you must be making a killing then !! You must be ripping me off as well"

This is how we are perceived by the banks "Oh goody ... we can place this guy on a margin loan for 12 months at 3.75% above base rate PLUS ongoing fees and charge him a $4000 pplication fee" Oh yeah forgot to tell him unless he has a 40% deposit in this we aint playing" ..... sound familiar?

I invest on price and screw the fundamentals. If I listened to all the naysayers in the market place I would be at home wrapped in cotton wool.

P.S. - I still own a lot of property just in case you haven't figured it out yet.

 

[Mr Z]

I invest on price and screw the fundamentals.

Good luck.

 

[trainspotter]

Good luck.

Thank you Mr Z. Appreciated.

 

[explod]

P.S. - I still own a lot of property just in case you haven't figured it out yet.

Your passion has made it very hard to detect there Trainspotter.

If we have gone from what some say in some places was up to 25% in some areas late last year on an annual basis, this would then make a levelling out a huge difference. If this continued then a 25% drop over the next 12 months could be on the cards.

May not, but could, I do not wish these things and it is not being a doomsayer to consider them.

The same as interest rates, they have been going up for some time so they too could contiue to go up.

 

[trainspotter]

Hey explod ....... only time will tell. My prediction is for modest gains in "some" areas as well as falls in others. Not sure on a 25% drop but like you say it could be "possible". If interest rates do go up this means the RBA is trying to curb inflation. If inflation is going up then so is your house price. What I am more worried about is stagflation. Interest rates on hold, prices on hold with small blips in the market as people drop away. Nil velocity in purchasing means the heat has gone from the market as the "punters" fall away which IMO is a good thing. Investors buying then flogging for a higher price does not do the average "Joe Blow" trying to get into the market place any good at all !!!!!!!

RE is not everyones cup of tea. I buy some to hold and rent, some to speculate and some for long term investment. It is the holding costs and capital tied up is the killer for most "naughty greedy developers".

Just like the sharemarket. Some are risky and speculative and others are blue chip. It depends on what you want to get out of it I suppose.

 

[MACCA350]

And you don't think a recent 25% increase in house prices is inflationary?

Cheers

 

[trainspotter]

And you don't think a recent 25% increase in house prices is inflationary?

Cheers

Which is why interest rates went up I am guessing? Note the 25% is only in some areas. Seasonally adjusted figures are only 10.5% for capital cities for the previous 12 months as per ABS advice.

 

[prawn_86]

Once again our rent has not gone up this year.

Not sure where the rent rise figures come from, but since i have been renting, we have had one 5% increase in the last 5 yr (across 2 different places/states)

 

[Mr Z]

Typically rates are driven by the bond market regardless of what the various central banks are doing. The CB's do influence rates with in a spectrum when things are hunky dory but as soon as the pressure comes on they lose their power rapidly. Witness the situation recently when the RBA was cutting rates and the banks where raising... the bond market determines cost of funding...period, end of story. When the US ten year yield starts to rise again we will see more interest rate pressure, depending on what the AUD is doing. Our interest rates stabilizing has had more to do with easing bond market yields allowing the RBA some scope to move. These recent Euro zone troubles and concomitant "flight to safety" (gold and UST's) have in fact eased the pressure on our mortgage holders. There is however a growing realization that the US is in fact unable to meet its commitments now and that more QE is inevitable. Once that unavoidable outcome is discounted the bond market will drag the central banks rates higher (kicking and screaming all the way!) then we will start to see a much larger upward pressure on general price levels including the price of money. Real estate will respond positively eventually but the first response is down as the cost of money rises. The only remaining question is when does it become clear that the UST market has turned? For now it is the deepest, most liquid bolt hole available but to describe it as a long term safe harbor is real stretch!

Having said that the US bond market has remained remarkably resilient for some time now, I would argue it is in over reach and ripe for a catalyst to trip it up, but as has been said, markets can remain irrational longer that you can remain solvent! So I'd not be shorting it just yet!

Mind you it is looking overbought from a T/A stand point!

 

[UBIQUITOUS]

http://smh.domain.com.au/real-estat...market-slows-new-research-20100809-11t6i.html

So what happens in spring, when even more properties come onto the market? Anybody?

Supply outstrips demand as market slows: new research
August 9, 2010
Comments 36
An increase in the number of online property advertisements in July is further evidence the housing market is slowing, research suggests.

Data released today by SQM Research shows residential real estate listings across the country rose by 5.1 per cent to total of 309,000 property advertisements last month.

Property advertisements for Melbourne jumped 6.97 per cent from June to July.

In a normal market during the traditional winter slowdown listing numbers remain flat or record a marginal drop.
Over the past three months the SQM Index has recorded an increase in supply, research manager Louis Christopher said.

New stock was coming on the market at a normal or ''slightly elevated'' rate but the overall volume of advertisements increased was because older stock was not moving, Mr Christopher said.

"Vendors have been more often than not failing to get the price they're after. The old stock hanging on the market is competing with new stock coming on, resulting in an increase in overall supply," he said.

Advertisements for south-west Melbourne, covering suburbs like Altona and Sunshine, showed a significant jump of 14.1 per cent to 4990. Advertisements covering north-west Melbourne increased in volume by 12.3 per cent.

SQM research tracks individual property advertisements in all the major online classified sites in Australia.

Recent data from the Real Estate Institute of Victoria shows auction clearance rates have fallen from 85 per cent before Anzac Day to an average of 67 per cent in July.

In further signs the market is slowing dwelling approvals posted a surprise 3.3 per cent fall in June and the volume of new home sales also declined.

Experts suggest the market also backs off during election campaigns.

REIV figures show 580 auctions are expected this weekend. On election day 320 auctions are listed. The following week 720 properties are expected to go under the hammer.

Spring will be the next big test for the property market with more vendors expected to put their homes up for sale.

 

[Mr Z]

So what happens in spring, when even more properties come onto the market? Anybody?

I was wondering that the other day, the stock build seems large considering its winter. What of the traditional spring rush we have here in the south? I am going to watch with interest.

 

[trainspotter]

OK ...... I'll play along. "Experts suggest the market also backs off during election campaigns."

Ummmmmm ..... guessing the auction clearance rate will drop to around 50%. BUT with contracts being presented after close of auction making the effective rate around 70% as usual.

Some will drop prices to sell once again pulling the median average down a further 0.7% over the period of 20 months to a staggering 1.4% drop overall nationally.

Real Estate Agents will not be able to afford their kids orthodontist bills and put petrol in the Porsche due to lack of sales.

Banks will only lend to gilt edge clientelle furthering the slowdown effect which will keep the RBA happy and not pull the trigger on rates again.

People will still live in their houses and pay their mortgages to the banks.

Naughty, greedy property investors will feel the pinch as holding costs begin to bite as they speculated rather than figured out it is better to hold and rent in this climate.

I could go on but I am boring myself with one liners now.

 

[satanoperca]

I could go on but I am boring myself with one liners now.

And me to, maybe you are just trying to convince yourself everything will be OK.

 

[Mr Z]

Expert cherry picking!

 

[robots]

hello,

gidday trainspotter, thats the thing, you take a "product" to the people, sell it and make 100k, 500k or 1mil and you are a legend

surely the mods can delete these posts with information from failed researchers to ensure the reputation of ASF, like we dont want it to become a bucket shop forum like creditcrunch, GPHC et al

GPHC still going?

thankyou
professor robots

 

[trainspotter]

And me to, maybe you are just trying to convince yourself everything will be OK.

Why thank you vey much satanoperca. Only time will tell I spose. We will then see who is swimming naked when the tide goes out.

Mr Z - More like expert pear hunting. :

Gidday robots ... just keeping it real brother. Hang onto those green titles (banks will lend you money to buy shares with them when you own them outright) !

 

[electronicmaster]

Home loans sink to a nine-year low

 

[UBIQUITOUS]

Home loans sink to a nine-year low

9 year low? As in 'NINE'? Nein! This cannot be. It must be because everybody is so wealthy that they are buying with cash.

 

[electronicmaster]

9 year low? As in 'NINE'? Nein! This cannot be. It must be because everybody is so wealthy that they are buying with cash.

lol, that idea is in the works for a later date, got Gold and Silver? :guitar:

 

[trainspotter]

ROFL ...... talk about telling the same story twice? This is the same report that said "Total loans for owner-occupied homes dropped 3.9 per cent in June, reversing a revised 3 per cent increase in May, according to the Australian Bureau of Statistics."

Yeppers ... seasonally adjusted to 1.9% nationally. Boring stuff here.

''It's a pretty consistent story, whereby tightening from Reserve Bank has flowed through into softer demand among Australian households and we're seeing that in housing finance numbers,'' Macquarie economist Ben Dinte said.

New figures from the Australian Bureau of Statistics reveal the weighted average of housing prices in Australia's eight capital cities grew by 20% over the 12 months to March 2010.

http://www.smartcompany.com.au/econ...-months-abs-figures-show-economy-roundup.html

Ho hum .... it's that perspective thingy again !! LOLOLOL