The future of Australian property prices

nukz · 6 January 2011

TabJockey said:
This thread has the highest percentage of crackpots out of all the threads I post in.

I used to think the Gold Price thread was bad (GOLD 10,000!?) but thats tame these days compared to some of the stuff that gets sprouted here.

lol i remember reading a Harry Dent book in which he was predicting the DOW at 30,000 around 2007 or something lol

Vicki · 6 January 2011

Kincella,
What's your opinion of the oz r/e market in the near future [assuming rates keep rising].

Vicki

sinner · 6 January 2011

Hi guys,

I have been conducting my own research in private because this thread is just too much to handle most of the time. I thought I would share todays findings in the hope of generating some discussion.

For the last while, my main goal has been in attempting to understand the ABS housing data better from the perspective of supply and demand, especially from the perspective of whether or not housing inventory (established and new for sale) is increasing or decreasing.

So here are the three year plots for construction and purchase of new dwellings, as well as purchase of established dwellings.

From my initial research going back some many years, the plots for purchase of new dwellings and purchase of established dwellings are highly correlated. That is to say, home investors at large generally don't care whether the property is new or established. When they are buying they are buying, and when they aren't they aren't.

What we can plainly see then is that during 2009, new dwelling construction took off in a big way, to the point that during the middle of 2009 we were adding twice as many houses per month as normal to the inventory. While composite (new+established) demand for dwellings is pretty much where it was at the beginning of 2008, during 2009 composite demand for dwellings actually declined!

This to me screams inventory buildup. Without an increase in demand, all those dwellings constructed in 2009 must still be sitting on somebodies books.

Thoughts appreciated.

greebly24 · 6 January 2011

A few stats from "Call of ocean remains strong in Perth" (Australian Financial Review Thursday 6 January 2011).

"At the height of the boom in 2006 and 2007, there were just 4000 homes on the market."

"...there were only 11,000 homes on the market early in the year (2010), when expectations of resurgence loomed."

"But by the end of 2010, prices were declining in Perth, according to Australian Property Monitors."

And now:

"There are about 17,500 homes on the market..."

So only 4,000 homes on the market during the boom, and 17,500 on the market now. Hmm. There obviously is no housing shortage in Perth. Buyers should take their time. Prices will drop. Supply and demand dictates it.

kincella · 6 January 2011

Vicki,
I dont assume rates will keep rising....however with the same silly treasurer and his mate at the rba still smoking whatever it is they do.....who knows how long this madness will go on...
we are still in the middle of the GFC....nothing has changed since june 07, when it was being felt at the beginning...
it is far worse now than I had anticipated....together with the huge bill from the floods, and the subsequent aftermath from the drought
we have a stupid govnut in power, and swan pretending we are not privvy to the GFC is ludicrous....
shocking retail figures for dec should be a wake up call.....but I doubt if it will...
history repeats so by june 2011 we should finally have a repeat of 2008....when after raising the rates non stop, not needed, nor caution, they had to drop the rates by 3%....
the economy is in danger, no roses in sight.....
most people are cautious, no retail therapy in sight.....this may take a lot longer to recover than I had originally believed,
the banks are bleeding people dry, they are not lending to business...they are confident of a govnut handout if they get in strife....even if they are not in strife.....
cautious people are hanging onto their homes...not upgrading etc.....not moving around...
I believe there will be an exodus away from the inner city and its high house prices, out to more affordable places....(tons of them around)
only the mega rich will stay in the city, and investors....who rent to the young crowd....
if you look up my posts for the last couple of years, you may get my drift
no bubbles, a sideways drift for a couple of years before it all picks up again....
the high prices are only in the middle of the cities.....not the other suburbs....and its all about the investors, who saw the kids were determined to stay in close, so they are accommodating the kids.....
the smart money has been moving out, but you will not hear about that, if your only source is the lame stream media, and the majority of economists....or any of the other sprouters...
there has been good growth in some other suburbs, and that trend will continue....
you will not see it, if you are only interested in the city inner burbs..
of course the usual % of high flyers, throw caution to the wind types, will get caught out, and there will still be the sheep who follow the crowd....
your buying power diminishes year in year out, thats why the dollar is worth only 5% of what it was 100 years ago....
with all the govnut borrowing going on, it will reduce at a faster rate.....what other asset or commodity keeps price with inflation....
the current matching of the oz dollar with the us dollars...shows its junk status ...I rate both countries as low, or of a moron status
thats about enough from me for this year....

satanoperca · 6 January 2011

kincella said:
Vicki,
I dont assume rates will keep rising....however with the same silly treasurer and his mate at the rba still smoking whatever it is they do.....who knows how long this madness will go on...
we are still in the middle of the GFC....nothing has changed since june 07, when it was being felt at the beginning...
it is far worse now than I had anticipated....together with the huge bill from the floods, and the subsequent aftermath from the drought
we have a stupid govnut in power, and swan pretending we are not privvy to the GFC is ludicrous....
shocking retail figures for dec should be a wake up call.....but I doubt if it will...
history repeats so by june 2011 we should finally have a repeat of 2008....when after raising the rates non stop, not needed, nor caution, they had to drop the rates by 3%....
the economy is in danger, no roses in sight.....
most people are cautious, no retail therapy in sight.....this may take a lot longer to recover than I had originally believed,
the banks are bleeding people dry, they are not lending to business...they are confident of a govnut handout if they get in strife....even if they are not in strife.....
cautious people are hanging onto their homes...not upgrading etc.....not moving around...
I believe there will be an exodus away from the inner city and its high house prices, out to more affordable places....(tons of them around)
only the mega rich will stay in the city, and investors....who rent to the young crowd....
if you look up my posts for the last couple of years, you may get my drift
no bubbles, a sideways drift for a couple of years before it all picks up again....
the high prices are only in the middle of the cities.....not the other suburbs....and its all about the investors, who saw the kids were determined to stay in close, so they are accommodating the kids.....
the smart money has been moving out, but you will not hear about that, if your only source is the lame stream media, and the majority of economists....or any of the other sprouters...
there has been good growth in some other suburbs, and that trend will continue....
you will not see it, if you are only interested in the city inner burbs..
of course the usual % of high flyers, throw caution to the wind types, will get caught out, and there will still be the sheep who follow the crowd....
your buying power diminishes year in year out, thats why the dollar is worth only 5% of what it was 100 years ago....
with all the govnut borrowing going on, it will reduce at a faster rate.....what other asset or commodity keeps price with inflation....
the current matching of the oz dollar with the us dollars...shows its junk status ...I rate both countries as low, or of a moron status
thats about enough from me for this year....

What have you been smoking lately, are you serious. If you dont like Australia then I suggest piss off to some other country. As you state nothing has change since 07, bit far fetch arn't you, only household debt has increased significantly and property prices have increase significantly. As I see, you would have us go down the US and Japan approach of lowering interest rates to almost zero, we can all see how that has worked out for them.

This thread does make me laugh.

Cheers

Knobby22 · 6 January 2011

My Uncle who is a property multi millionaire (he hasn't worked since he was 43, he is now 69), predicts an Australian property crash in 10 - 15 years from now. He thinks it will be a depression.

I trust his judgement.

TabJockey · 6 January 2011

sinner said:
Hi guys,

I have been conducting my own research in private because this thread is just too much to handle most of the time. I thought I would share todays findings in the hope of generating some discussion.

For the last while, my main goal has been in attempting to understand the ABS housing data better from the perspective of supply and demand, especially from the perspective of whether or not housing inventory (established and new for sale) is increasing or decreasing.

So here are the three year plots for construction and purchase of new dwellings, as well as purchase of established dwellings.

View attachment 40653

From my initial research going back some many years, the plots for purchase of new dwellings and purchase of established dwellings are highly correlated. That is to say, home investors at large generally don't care whether the property is new or established. When they are buying they are buying, and when they aren't they aren't.

What we can plainly see then is that during 2009, new dwelling construction took off in a big way, to the point that during the middle of 2009 we were adding twice as many houses per month as normal to the inventory. While composite (new+established) demand for dwellings is pretty much where it was at the beginning of 2008, during 2009 composite demand for dwellings actually declined!

This to me screams inventory buildup. Without an increase in demand, all those dwellings constructed in 2009 must still be sitting on somebodies books.

Thoughts appreciated.

Great work Sinner I do love it when someone does some real research and not just blurts out opinionated crap.

I think that to make any plausible conclusions you will have to expand your scope a little bit though. Whats your hypothesis? "A significant amount of dwellings built 2007-2008 have not been sold" ?

One thing that sticks out to me is that in the last 3 years we have seen ALLOT of high density developments coming along in Melbourne. This is because there is demand for apartments in inner suburbs that is not being met atm. However a great many of these projects reach completion in q3 q4 this year and some are predicting a glut. The exact economics of this is quite a study and you need to take allot of factors into account. One thing is for certain and that is that Australian households prefer and will pay for a house with a backyard, even if its 1-2hrs drive out of the city.

For your own studies I think it would be beneficial to split apartments and "dwelling+land" assets and analyse those charts. What percentage of those new buildings are apartments, what are townhouses and what are house and lands?

TabJockey · 6 January 2011

Death to......the politicians....and the capitalists.....someone.....please get me.....some oxygen.....also I.....hate Australia........and all.....of......you

Vicki · 6 January 2011

Kincella,
Do you hold any properties that are highly geared, i.e.80-90% LVR at current values?

Vicki

kincella · 6 January 2011

when I first purchased the resi props, I put up a minimum of 20%....I now have them on average at around 50% geared....I topped up and took equity in that period
the commercial prop was 20% deposit
overall the whole portfolio is geared at 17% using a lower market value (as if fire sale conditions applied)
some props have tripled in value, others just doubled, and another is up over 500%

ps I was buying when everyone else was waiting for a crash....the resi agents were so depressed, they had taken a big hit on the stockmarket, and showed little interest in the housing market.......

UBIQUITOUS · 6 January 2011

kincella said:
when I first purchased the resi props, I put up a minimum of 20%....I now have them on average at around 50% geared....I topped up and took equity in that period
the commercial prop was 20% deposit
overall the whole portfolio is geared at 17% using a lower market value (as if fire sale conditions applied)
some props have tripled in value, others just doubled, and another is up over 500%

ps I was buying when everyone else was waiting for a crash....the resi agents were so depressed, they had taken a big hit on the stockmarket, and showed little interest in the housing market.......

How's the market tracking your 10% a year every year property price model Kincella? Surely now you have to admit that those kind of gains are impossible over the long term?

kincella · 7 January 2011

"some props have tripled in value, others just doubled, and another is up over 500%"

you must have missed that line.....

the 10% rule is alive and well......
if for instance the gain is not 10% in one year, it will average out in the long term, due to a 20% gain in another year......
it is similar to road travel...there are dips and troughs in the ride, then a great big hill....followed by smooth straight roads.....
not dissimilar to a ships captain.....he knows where he is going using a compass.....but the actual journey brings all sorts of decisions, surprises, and unintended consequences.....that he must overcome.......

UBIQUITOUS · 7 January 2011

kincella said:
"some props have tripled in value, others just doubled, and another is up over 500%"

you must have missed that line.....

the 10% rule is alive and well......
if for instance the gain is not 10% in one year, it will average out in the long term, due to a 20% gain in another year......
it is similar to road travel...there are dips and troughs in the ride, then a great big hill....followed by smooth straight roads.....
not dissimilar to a ships captain.....he knows where he is going using a compass.....but the actual journey brings all sorts of decisions, surprises, and unintended consequences.....that he must overcome.......

Thanks. SO in effect what you are saying is that buying at a peak can be very costly and can take a long while to realise any gains. Nice of you to come around because I'm sure previously you were saying that buying at any time is a good time. Those who over leveraged at lower interest rates a few months ago are not only sitting on capital losses, but also increasing expenses.

kincella · 7 January 2011

No, I did not say that at all......
apart from staying away from the 'inner city hype'....(just dont go there, not now, nor ever)
There are plenty of affordable properties out there, they are not in the inner city areas.
I am not talking about buyers flipping properties, just home owners, who want their own place, whilst they get on with their lives. Something with a half to one hour commuting distance for work and rellies etc, later on after the kids become teenagers, they can upgrade to a bigger and better place.
I believe the interest rates, long term average, since Howard came to office, is around the 7% mark. You cannot expect much better than that.
They are selling new homes just north of the city of Melb, at around 250k's, 4 beds 2 baths etc, close to the tollways.
I believe the trend will move away from the inner city, and it may well stagnate.....after all they are ridiculous prices, for what is on offer.

finnsk · 7 January 2011

kincella said:
N
They are selling new homes just north of the city of Melb, at around 250k's, 4 beds 2 baths etc, close to the tollways.
I believe the trend will move away from the inner city, and it may well stagnate.....after all they are ridiculous prices, for what is on offer.

I am not from Melbourne, but would like to know what suburbs you are taking about. Had a look in Wallan, Doreen, Beverage, Lilydale and Eden Park, could not find anything at that price only thing I could find was one in Wallan which is from $293.000.
Also as I live in Sydney do not believe it will be possible to find anything below $450.000

kincella · 7 January 2011

finnsk said:
I am not from Melbourne, but would like to know what suburbs you are taking about. Had a look in Wallan, Doreen, Beverage, Lilydale and Eden Park, could not find anything at that price only thing I could find was one in Wallan which is from $293.000.
Also as I live in Sydney do not believe it will be possible to find anything below $450.000

Well here is just one agent.....$277,000
http://www.realestate.com.au/new-ho...in-wallan,+vic+3756/list-1?source=refinements

more here....starting from 277.000......all the 250's must have gone
http://www.domain.com.au/Search/buy...subs=1&to=300000&searchterm=wallan+vic&page=2

wayneL · 7 January 2011

kincella said:
Well here is just one agent.....$277,000
http://www.realestate.com.au/new-ho...in-wallan,+vic+3756/list-1?source=refinements

more here....starting from 277.000......all the 250's must have gone
http://www.domain.com.au/Search/buy...subs=1&to=300000&searchterm=wallan+vic&page=2

"***$26500 First Home Owners Grant Has Been Deducted - Conditions Apply***"

Also - "All photos and illustrations are representative only, this proposed package is subject to engineering plans and developer’s approval (if required) and may need to be mirrored or altered to comply. Any additional costs associated will need to be added to the price as unavailable at time of advertising."

finnsk · 7 January 2011

kincella said:
Well here is just one agent.....$277,000
http://www.realestate.com.au/new-ho...in-wallan,+vic+3756/list-1?source=refinements

more here....starting from 277.000......all the 250's must have gone
http://www.domain.com.au/Search/buy...subs=1&to=300000&searchterm=wallan+vic&page=2

My apologies. When i did my search had maximum price set at $1000000 normally prices start from button up but not in this case, those prices would be on page 10, when i changed to $300000 prices come up just like yours? go figure.

wayneL · 7 January 2011

finnsk said:
My apologies. When i did my search had maximum price set at $1000000 normally prices start from button up but not in this case, those prices would be on page 10, when i changed to $300000 prices come up just like yours? go figure.

Look at my post above yours. The real price is > $300,000

The future of Australian property prices

nukz

888

Vicki

sinner

greebly24

kincella

satanoperca

Knobby22

Mmmmmm 2nd breakfast

TabJockey

TabJockey

Vicki

kincella

UBIQUITOUS

kincella

UBIQUITOUS

kincella

finnsk

kincella

wayneL

VIVA LA LIBERTAD, CARAJO!

finnsk

wayneL

VIVA LA LIBERTAD, CARAJO!

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