The future of Australian property prices

[satanoperca]

No doubt about it folks. Property is slanting sideways. Still waiting for the horrendous trainsmash predicted. Normal cycle as usual from what I can see. 1997 Asian economic crisis ring any bells? 1991 economic downturn anyone? 2001 building downturn (GST jitters) is still fresh in my memory. 1987 stockmarket crash?? HUH ??? Anybody?? Or is this the perfect storm that will decimate the housing industry and all that lays before it??

Define crash - ie percentage drop of median price and over what period of time?

There is one thing that has grown and not shrunk over all those normal cycles, debt. The big one may arrive and it may not but world debt just keeps climbing.

Cheers

 

[trainspotter]

crash 1 (krsh)
v. crashed, crash·ing, crash·es
v.intr.
1. a. To break violently or noisily; smash.
1. b. To undergo sudden damage or destruction on impact.
2. To make a sudden loud noise: breakers crashing against the rocks.
3. To move noisily or so as to cause damage: went crashing through the woods.
4. To undergo a sudden severe downturn, as a market or economy.

http://www.economist.com/blogs/buttonwood/2010/06/indebtedness_after_financial_crisis

Great webiste for debt ratios and sovereign debt plus global indebtedness.

No sweat satanoperca. Once we have these in Australia our economy will be saved !

 

[satanoperca]

I will attempt again to get a more definative response from you TS.

How would you measure a crash to determine if it was a correction or a crash? A severe downturn is? Need reference to figures not words.

I will give you a start :
10% fall in median prices would be a correction, healthy at that.
>20% would deem a crash.

Cheers

 

[FxTrader]

crash;
4. To undergo a sudden severe downturn, as a market or economy.

Does not address the question as posed. This is a play on semantics.

Sudden - in the context of the property market, is that 3 weeks or 2 months or 1 year etc.?

Severe - is that a 5,10,20,50% drop from today's median. Or is it a certain percentage on auction clearance rates for one week. LOL

The liberal use of unquantified terms like crash and bubble by the doomsayers here allows them to appear to be right if any downward price move occurs since their definitions of such terms are so fluid and loosely defined.

 

[trainspotter]

I will attempt again to get a more definative response from you TS.

How would you measure a crash to determine if it was a correction or a crash? A severe downturn is? Need reference to figures not words.

I will give you a start :
10% fall in median prices would be a correction, healthy at that.
>20% would deem a crash.

Cheers

Why do I need to quantify what you deem a crash. I have cosistently stated that property is slanting sideways. I have told all and sundry how I make money out of property. I believe it was Steven Keene that claimed a 40% correction \ crash. .... Whatever you want to call it. I am still waiting for this to happen.

 

[satanoperca]

 

[sinner]

ABARE-BRS forecasts export earnings for Australian mineral and energy commodities will increase by 29.9 per cent to around $179.9 billion in 2010–11, compared with $138.5 billion in 2009–10. The main contributing factors to this forecast are higher negotiated contract prices for coal and higher export shipments and prices for iron ore. ABARE-BRS forecasts that export earnings for farm commodities will be around $31.4 billion in 2010–11, slightly up from $28.5 billion in 2009–10.

http://www.innovation.gov.au/section/aboutdiisr/factsheets/pages/australia'sexportsfactsheet.aspx

Not all doom and gloom on the Aussie economy?

Thanks MR. ...... you got what I was eluding to on the Guvmint involvement once they open their sleepy eyes as to what is going on.

No doubt about it folks. Property is slanting sideways. Still waiting for the horrendous trainsmash predicted. Normal cycle as usual from what I can see. 1997 Asian economic crisis ring any bells? 1991 economic downturn anyone? 2001 building downturn (GST jitters) is still fresh in my memory. 1987 stockmarket crash?? HUH ??? Anybody?? Or is this the perfect storm that will decimate the housing industry and all that lays before it??

Hi trainspotter, since you are rattling off dates in your usual antagonistic fashion, why don't I throw out a good one that Ken Henry pointed out recently?

1951.

I post this date in response to your mining sector earnings.

http://www.abc.net.au/worldtoday/content/2010/s3072889.htm

KEN HENRY: Certainly there are some sectors of the economy that are growing very strongly and we would expect to see continue to grow strongly over the next several years. There are other sectors of the economy that are being affected particularly by the high exchange rate, who are finding conditions more difficult. There are businesses also if not directly affected by the high exchange rate are feeling the impact of rising interest rates and the dampening effect that those rising interest rates are having on demand.

So there is some dampening of demand evident in the Australian economy currently and we would expect to see those trends continue for some time, for quite possibly several years.

ELEANOR HALL: That is the Treasury secretary Dr Ken Henry answering questions before a Senate committee this morning.

Lyndal, the Government talks this up as the mining boom mark two. How does the Treasury head view it?

LYNDAL CURTIS: Well, the Treasury head views it as you said in your introduction as an external shock, that the rise in the terms of trade in particular he says could prove to be the largest ever to hit the Australian economy.

He says it has not been recognised as such because it has really been building since 2003/2004 and this is how he described it.

KEN HENRY: The increase in our terms of trade is of the same order of magnitude as we experienced in 1951. Everybody in Australia who was alive at that time understood that this was a big external shock hitting the Australian economy, a huge external shock.

This one has taken more years to build up but we are now at the same level of the terms of trade that we had in 1951. Everybody in Australia who was alive in the 1970s recalls the terms of trade shock and it was a positive one that hit the Australian economy at that time, recalls the 17.5 per cent inflation the Australian economy experienced as a consequence of it. That terms of trade shock is somewhere between a quarter and a third the size of the one we are experiencing now.

Mmmm...17.5% inflation last time, this time the terms of trade shock is 3-4 times as large...what inflation rate does that translate into?

As I stated at the end of September:

Basically, what I am trying to say is that Australia has an inflationary collapse (and accompanying decrease in standard of living for the majority) coming no matter what happens. You can be sure that the coming change in board of the RBA will only accelerate this.

Unless Mr Henry thinks the current terms of trade shock is going to be a positive one again (which can only happen if the Government manages the shock well and over a long period of time - going by the Howard govt boomtime policies, not gonna happen), he is surely concurring with my view. Analysts are positing the high AUD absorb the impact so that inflation won't be 17%.

My question is, what happens if the AUD goes back to 0.72? Or hell all the way back to 0.6? Would an AUD even at 1.5 absorb the level of inflation Ken Henry is telegraphing? I don't believe the analyst tripe.

P.S: There is no reason for annoying hyperbole like you continue to use trainspotter. I don't know who predicted a "horrendous trainsmash" or property decimation to happen overnight. I have categorically stated the factors I think to trigger any such event would be a second liquidity crisis or a large increase in the cost of credit. Again, just because I view these things as mathematical certainty, doesn't mean I am predicting them to happen tomorrow morning. Until then, we would appreciate you changing your posting style to something less abrasive.

 

[Bigukraine]

Hi trainspotter, since you are rattling off dates in your usual antagonistic fashion, why don't I throw out a good one that Ken Henry pointed out recently?

1951.

I post this date in response to your mining sector earnings.

http://www.abc.net.au/worldtoday/content/2010/s3072889.htm


Mmmm...17.5% inflation last time, this time the terms of trade shock is 3-4 times as large...what inflation rate does that translate into?

As I stated at the end of September:


Unless Mr Henry thinks the current terms of trade shock is going to be a positive one again (which can only happen if the Government manages the shock well and over a long period of time - going by the Howard govt boomtime policies, not gonna happen), he is surely concurring with my view. Analysts are positing the high AUD absorb the impact so that inflation won't be 17%.

My question is, what happens if the AUD goes back to 0.72? Or hell all the way back to 0.6? Would an AUD even at 1.5 absorb the level of inflation Ken Henry is telegraphing? I don't believe the analyst tripe.

P.S: There is no reason for annoying hyperbole like you continue to use trainspotter. I don't know who predicted a "horrendous trainsmash" or property decimation to happen overnight. I have categorically stated the factors I think to trigger any such event would be a second liquidity crisis or a large increase in the cost of credit. Again, just because I view these things as mathematical certainty, doesn't mean I am predicting them to happen tomorrow morning. Until then, we would appreciate you changing your posting style to something less abrasive.

pot's and kettles....pots and kettles.... and black one's at that

 

[trainspotter]

Hi trainspotter, since you are rattling off dates in your usual antagonistic fashion, why don't I throw out a good one that Ken Henry pointed out recently?

1951.

I post this date in response to your mining sector earnings.

http://www.abc.net.au/worldtoday/content/2010/s3072889.htm


Mmmm...17.5% inflation last time, this time the terms of trade shock is 3-4 times as large...what inflation rate does that translate into?

As I stated at the end of September:


Unless Mr Henry thinks the current terms of trade shock is going to be a positive one again (which can only happen if the Government manages the shock well and over a long period of time - going by the Howard govt boomtime policies, not gonna happen), he is surely concurring with my view. Analysts are positing the high AUD absorb the impact so that inflation won't be 17%.

My question is, what happens if the AUD goes back to 0.72? Or hell all the way back to 0.6? Would an AUD even at 1.5 absorb the level of inflation Ken Henry is telegraphing? I don't believe the analyst tripe.

P.S: There is no reason for annoying hyperbole like you continue to use trainspotter. I don't know who predicted a "horrendous trainsmash" or property decimation to happen overnight. I have categorically stated the factors I think to trigger any such event would be a second liquidity crisis or a large increase in the cost of credit. Again, just because I view these things as mathematical certainty, doesn't mean I am predicting them to happen tomorrow morning. Until then, we would appreciate you changing your posting style to something less abrasive.

Dear sinner,

It must be lovely sitting up on high and looking down on us mere neophytes who are in awe of your "mathematical" approach. I notice you have used the royal "we" in your repost. Have you canvassed the majority of posters in ASF and decided that you are the spokesperson for the group? HUH ?? WTF ???

So the dates I have put forward did not happen then sinner? How is this antagonistic by putting forward that these occurences on these dates did not seem to have a lasting effect on property prices in Australia? I was merely pointing out that it is "CYCLICAL". DERRRRRRRRRRRRRRRRR !!!!!!

At no stage have I said that you are wrong in what you are delivering here sinner. You seem to have taken it personally that I am doubting what you have written?? Very bizarre behaviour IMO.

The mining sector earnings have come straight from the Guvmint website. Not my opinion sinner. The Gov's. I even placed a question mark pointing out that it might not be all doom and gloom. (sarcasm is lost here)

All these things are yet to come to fruition. I am still waiting for this to happen BTW !!!!!!!!! Not from you personally either sinner.

GEEEEEEEEZZZZUUUUUUUUUZZZZZZZZ ..... get a grip.

 

[trainspotter]

I concur satanoperca. What is it that you are looking for? For me to say something like:

"I think if auction clearances go below 40% in the next 3 months and that the mean average of house prices between the 8 capital cities decline further than 20% on a pricing structure over the same period of time then I believe that this would quantify to be a CRASH !!!!"

OR

"I think that the market trending sideways over the next 3 months to be less than between 10% to 15% and auction rates to stay above 50% then I would think that this would be called a CORRECTION."

How's that ???

 

[schnootle]

I love this thread, individual posts sometimes have dubious credibility but the ratio of bulls/bears at any given time could be a used as a new market indicator I reckon - like the famed clearance rates. The balance has definitely tipped to the bear recently.

 

[FxTrader]

I concur satanoperca. What is it that you are looking for? For me to say something like:

"I think if auction clearances go below 40% in the next 3 months and that the mean average of house prices between the 8 capital cities decline further than 20% on a pricing structure over the same period of time then I believe that this would quantify to be a CRASH !!!!"

OR

"I think that the market trending sideways over the next 3 months to be less than between 10% to 15% and auction rates to stay above 50% then I would think that this would be called a CORRECTION."

How's that ???

Nice try, but the point is words like "crash" and "bubble" are essentially meaningless and subjective terms intended to instil a sense of fear and urgency to grab attention - scaremongering.

It's easily possible to argue that the Aus property market is historically overvalued by quoting many available metrics and a reversion to historic norms inevitable. However, invoking terms like crash informs us of nothing.

 

[satanoperca]

I concur satanoperca. What is it that you are looking for? For me to say something like:

"I think if auction clearances go below 40% in the next 3 months and that the mean average of house prices between the 8 capital cities decline further than 20% on a pricing structure over the same period of time then I believe that this would quantify to be a CRASH !!!!"

OR

"I think that the market trending sideways over the next 3 months to be less than between 10% to 15% and auction rates to stay above 50% then I would think that this would be called a CORRECTION."

How's that ???

There you go, wasn't that hard. I would say that auction clearance rates have to many variables to determine anything meaningful except if demand is growing or easing, price action or that be it median price action is what I'm after.

Thanks for persisting.

Cheers

 

[MR.]

If I can borrow Beej again:

Auction clearance rates are an historical leading indicator of what's going on in a particular residential property market

It is interesting the see the week to week changes as they unfold.

Weekend of the 20/11/2010
REIV 59% clearance
http://www.reiv.com.au/home/inside.asp?ID=162&nav1=1226&nav2=162

APM 56% clearance (Melb)
54% clearance (Sydney)
http://www.homepriceguide.com.au/Default.aspx

Realestate.com ? Have the week before last weeks? Anyone know when last weekends is updated.
http://www.rs.realestate.com.au/cgi...||4178404343&gclid=CKDX15fps6UCFQHabgodXSOh_g

Since you mentioned it, been a while since we took a look at the:

https://www.aussiestockforums.com/forums/showpost.php?p=593025&postcount=3455

Last time you brought that list up I thought we were at the second last and I think we are still there!

22 posts today so far. Are we to read them all?

 

[trainspotter]

A crash is a price drop of the median price of 30-50% would be a crash.
A drop of 10-20% would be a correction.

I for one believe that the next two reported qtrs of property statistics will show further gains. Only if interest rates increase over the next six months and unemployment stays the same or increases will a correction be seen.

Written on the 18th of November 2009. Seems the writing is on the wall.

 

[satanoperca]

Cheers TS,

So we are talking the same language. I find it hard to see a crash occurring, but to some a 20% drop will seem like one or more like a train hitting them at full speed.

Good evening

 

[trainspotter]

Thanks goes to you satanoperca.

Remember it is only a loss IF you have to sell. RBA could still drive rates DOWN if necessary. Inflation is under control (for now sinner) Jobless rate is 5.4% (pretty damn low) Low national debt compared to "other countries" blah blah blah.

YES there are some very large MACRO GLOBAL concerns that "could" see a price squeeze in the future. IRS coming to end terms as well as all the other factors that sinner has pointed out are in the mix currently. Cost of funding for the banks whilst they still make billions of dollars in profit might be a soft target for the Guvmint to point out but in reality there is nothing they can do to dictate how much profit a company can make. Lotta white noise from Canberra about banks increasing rates over RBA moves etc is sabre rattling and vote grabbing at it's best.

I have typed it before and I will type it again. There WILL be defaults on mortgages and prices WILL fall in some areas. Nothing new here.

 

[BigAl]

Let me take this discussion sideways for a moment,

And discuss the state of play in the car industry, right now,

Facts and figures from Motoring Organisations on Month by Month Sales. These figures aren't Deliveries and nor are they Licensed cars. They are, what we call in the Car Industry a "Pre RDA". It's a Sales stat to the Manufacturer, the car gets locked into the Dealereship and can't be traded or Dealer Transferred to another. Remember that, not a real figure, it's not a delivery. A Pre RDA'd car is also when the Warranty Starts. Car sells 6 months later, so what, the Warranty started from the Pre RDA date. And of course there a big $ Incentives to Dealerships from the Manufacturer to Pre RDA a certain number of cars at the end of a month / quarter, so the Manufacturer goes back to Japan / Korea and can say, we are doing our bit in OZ, we made RDA budget.

New Car Sales have come savagely off the pace within the last 2 months, Used Cars picked up slightly, but New deliveries are at least 20% down and the Gross's are being slashed, everywherem every Manufacturer.

If Dealerships are making budget (for the last few months), it's not because of a great trading result, it's because they had cash reserves hidden away, dummy expense accruals in the good times etc...


So what the hell has this got to with houses?

In down times, it's the luxuries that get hit hardest the fastest. And boy are we struggling, it's like death valley at the moment.

I'd like to know how bad the boat business's are doing again.


But disregard my views...

It's all Paddlepops and Urine in my Overinflated Latte down at the Crisis Shelter.

 

[MR.]

Above is the average monthly auction clearance rates (melb) over 12 months vs Interest rates.

A lot of the demand for property was coming from pure "hype"
Higher prices clearly came from cheaper credit!

The elephant is in the room alright!

What happens when wide spread expectations of house prices moving in the opposite direction occurs? We may soon find out!

 

[MR.]

In down times, it's the luxuries that get hit hardest the fastest. And boy are we struggling, it's like death valley at the moment.

I'd like to know how bad the boat business's are doing again.

Interest rates again? Interesting regarding the cars. I'm not sure the boat companies recovered!

Most small boat yards did and are still disappearing. Mustang put off another 50 after voluntary administrators took control 5-6 months ago before Bill Barry-Cotter bought in. However, Riviera is still trading after receivers took control a year and a half ago. Went to service the boat last week to find my machanic had just vacated his new factory! But this is the Gold Coast and if the boat industry is anything like the property market they are both in the doldrums.