The future of Australian property prices

[KurwaJegoMac]

Nobody knows whats going to happen? are we going to coast or are we doing to drop?

What I've noticed from watching the ASF is that the activity on the forums is closely related to market extremes. So when markets are crashing or rising exponentially you have a high volume of posts as people.

Once things are relatively flat/steady activity on the ASF drops considerably.

 

[Aussiejeff]

call me a bear but i assume buyers will have a long memory when it comes to buying houses that went under in the floods of 2011.

To be exact, but concise - prices there have not moved for two years and now they will be down.

Seems LJ Hooker Indooroopilly has the same fears....

LJ Hooker Indooroopilly principal real estate agent Scott Gemmell said it could be 10 to 15 years before some flooded suburbs regain their popularity.

"In the short period it probably scares me a little; what the flood will do to house prices," he said.

"In some cases, houses will be unsellable.

"As we've seen before, with 1974, time goes on and the concern will decrease but again that could take 10 or 15 years to occur.

"After 1974's floods, it took the next generation to forget or not see it as a concern."

He said he expected a surge in property for sale listings later this month.

http://www.heraldsun.com.au/news/br...rices-to-plummet/story-fn7ikbtj-1225989665626

Good luck to any of those poor badly inundated folk across Australia who want to relocate - but now have to likely wait months/years to get a full renovate/rebuild while their flooded suburb's popularity tanks ... there's not always a silver lining as some seem to suggest. Depends on which side of the "cloud" you are sitting?

I would guess that house flood insurance premiums down the track for anyone wanting to buy one of these badly inundated properties would be punitive?? That in itself would tend to deter potential buyers.

aj

 

[TabJockey]

What I've noticed from watching the ASF is that the activity on the forums is closely related to market extremes. So when markets are crashing or rising exponentially you have a high volume of posts as people.

Once things are relatively flat/steady activity on the ASF drops considerably.

I think your right but its probably a lagging indicator not a leading indicator.

 

[Vicki]

What I've noticed from watching the ASF is that the activity on the forums is closely related to market extremes. So when markets are crashing or rising exponentially you have a high volume of posts as people.

Once things are relatively flat/steady activity on the ASF drops considerably.

o.k. I'll play the devils' advodcate.

But we haven't had any extremes on the oz r/e market in recent years have we?

Just int. rates fluctuating from 4.5-10%. Noth'n to out of the ordinary?

If the average fhb's mortgage is 'round 300-400K, then so be it.
Personally, I wouldn't be keen to pay up to 30-40k per annum in interest.
Even half that would be enough.

If average suburbia keeps creeping up in value/mortgage levels, then I'm happy for the average people who can somehow afford it.

Vicki

 

[WaveSurfer]

Seems LJ Hooker Indooroopilly has the same fears....

http://www.heraldsun.com.au/news/br...rices-to-plummet/story-fn7ikbtj-1225989665626

Good luck to any of those poor badly inundated folk across Australia who want to relocate - but now have to likely wait months/years to get a full renovate/rebuild while their flooded suburb's popularity tanks ... there's not always a silver lining as some seem to suggest. Depends on which side of the "cloud" you are sitting?

I would guess that house flood insurance premiums down the track for anyone wanting to buy one of these badly inundated properties would be punitive?? That in itself would tend to deter potential buyers.

aj

Silver lining? On the banks of the brizzy river?!?!?!

Come on... If you buy in such low lying areas, you have to take into consideration that there's a chance that you'll be in 3 meters of water. Complacency mate, not silver lined.

Yes house prices will plummet. They did after 74, and I'm sure that they will again. People will buy, forget, and it (the flooding) will happen again. No doubts about that.

 

[KurwaJegoMac]

o.k. I'll play the devils' advodcate.

But we haven't had any extremes on the oz r/e market in recent years have we?

Just int. rates fluctuating from 4.5-10%. Noth'n to out of the ordinary?

If the average fhb's mortgage is 'round 300-400K, then so be it.
Personally, I wouldn't be keen to pay up to 30-40k per annum in interest.
Even half that would be enough.

If average suburbia keeps creeping up in value/mortgage levels, then I'm happy for the average people who can somehow afford it.

Vicki

Well it depends on what you count as an extreme. As you so rightly pointed out in terms of interest rates we're no where near and extreme - Yes prices are high relative to median wage, but this has been going on for the last 15 years so it's nothing new.

My tongue-in-cheek correlation was not looking at prices and interest rates. When I wrote that comment I was thinking about auction clearance rates as well as median price growth rates.

Where for the last 2-3 years there have been very high auction clearance rates (used as an indicator of supply/demand by many on this forum) of at least 80%+ and quarter on quarter growth of house prices in relatively high percentage terms. During this period this thread has been bombarded with doomsdayers, naysayers, optimists and bears and everything in between.

Now look at what's been happening for the last 3-4 months. There's been a real slowdown in the regularity of posts on this thread. It also comes at a time when auction clearance rates are in the range of 60-75% and we've had many areas posting relatively flat growth.

So thats how I came to that observation, of course it's all tongue in cheek and not really an accurate reflection of market sentiment...

...or is it?

*queue dramatic music*

:

 

[explod]

On 3AW this morning, short blurb that blocks of land sales have dropped 70% in latest figures.

 

[KurwaJegoMac]

On 3AW this morning, short blurb that blocks of land sales have dropped 70% in latest figures.

Do you have any more detail? Did they mention what states/areas? Also for what time period? Week? Month? Quarter?

That's a very big drop but can't jump to conclusions without knowing some more details.

 

[explod]

Do you have any more detail? Did they mention what states/areas? Also for what time period? Week? Month? Quarter?

That's a very big drop but can't jump to conclusions without knowing some more details.

No more given than that.

And yep thats a bit up in the air.

 

[Agentm]

No more given than that.

And yep thats a bit up in the air.

the age did a report on that

http://theage.domain.com.au/real-es...ut-prices-hit-new-heights-20110118-19v9n.html

they dont say 70% but 74% a fair bit higher than 3 AW

but of course it all means nothing, with the land banking consortium keeping the land available in short supply we can expect prices to be held high on land.. great news for the bubble imho..

 

[freebird54]

Extract from MM

Meanwhile…

“Floods tipped to hit house prices”, says today’s The Age.

The mainstream press has got it spot on for once.

Of course, the mainstream still denies the existence of an Aussie housing bubble. The floods will be a scapegoat. We can picture their argument now: “Oh, if it wasn’t for all the flooding, Aussie house prices would be up 10% this year – that’s the normal growth rate you know.”

Kris Sayce
For Money Morning Australia

 

[damien275x]

Even the dumb, uneducated bogans in my family aren't property investing anymore.
All talk about property is negative lately. Everyone I am talking to is 'holding off buying property at the moment, to wait and see what the market does' .. and well, if nobody's buying......................... what happens to prices? Down they go.

 

[Tysonboss1]

If property prices have a correction,

What sort of rental yields do you think the average residential property will trade on.

 

[sinner]

Hi guys,

I am back with some more research numbers.

According to RPData, the total sales volumes for housing is dropping precipitously across the board.

Sydney: at 6000 Nov'10 from nearly 10000 Nov'09, ~40% decline in volume, with 5 consecutive declines in sales volume.
Melbourne: at 4000 Nov'10 from nearly 9000 Nov'09, ~55% decline in volume, with 5 consecutive declines in sales volume.
Brisbane: at ~2500 Nov'10 from nearly 5000 Nov'09 ~50% decline in volume, with 6 consecutive declines in sales volume
Perth: at ~1750 Nov'10 from nearly 3000 Nov'10 ~40% decline in volume, with 6 consecutive declines in sales volume

Adelaide is holding up significantly better on all fronts, with much lower % declines and consecutive volume declines as prices continue to rise there. Canberra and Darwin aren't looking great though.

However it is plain to see that across the board, volumes are way way down. in most cases way below pre-GFC levels!

Add to this my previous post about the large run-up in housing inventory last year, I am failing to see how all those new dwellings built last year will be consumed at this rate. Demand is simply not there. Volume drop + inventory buildup spells trouble.

I used: http://www.myrp.com.au/melbourne_house_prices.do to work the numbers out, just replace "melbourne" with the capital of your choice.

 

[tronic72]

Even the dumb, uneducated bogans in my family aren't property investing anymore.
All talk about property is negative lately. Everyone I am talking to is 'holding off buying property at the moment, to wait and see what the market does' .. and well, if nobody's buying......................... what happens to prices? Down they go.

.............Because it's unaffordable. Simple. The banks want a $50K deposit on a new home. Most families would take at 2 years to save that deposit To top it off, Banks are no longer allowing buyers to use the equity of their own or families existing properties.

 

[c-unit]

.............Because it's unaffordable. Simple. The banks want a $50K deposit on a new home. Most families would take at 2 years to save that deposit To top it off, Banks are no longer allowing buyers to use the equity of their own or families existing properties.

Is that a fact? If true, then it shows the banks are nervous about the Aussie housing market. If the banks are nervous - well that's saying something.

 

[Tysonboss1]

To top it off, Banks are no longer allowing buyers to use the equity of their own or families existing properties.

Rubbish.

 

[FxTrader]

The banks want a $50K deposit on a new home. Most families would take at 2 years to save that deposit

Actually the banks are bending over backwards and reducing LVRs to get people into home loans (desperation) to boost their loan book and keep the bubble ticking along. Review this link for a no deposit home loan...

http://www.loanmarket.com.au/home-loans/no-deposit/

Also from Debtwatch...

At present, you need a $30,000 deposit to bid $1 million for a property if you get a loan from the Commonwealth Bank, which currently has one of the highest maximum LVRs of 97%: “The maximum we will lend you is 95% of the valuation amount. We also add the Lenders Mortgage Insurance or a Low Deposit Premium to your loan (up to a maximum of 97%), so it doesn’t cost you anything upfront”.

This press release implies that you could approach St George with $20,000 in savings, be given a $1 million loan, and have it recorded as a 95% LVR loan (since St George probably has the same maximum published LVR as Westpac of 95%) where $20,000 was your actual deposit and the effective LVR was actually 98%.

The effect of this trick is to expand the pool of potential borrowers to whom St George can extend a loan, while appearing not to alter its lending standards.

From the Loan Market press release: “This is a major step forward which will also boost activity in the struggling home finance sector and we expect other lenders to follow suit.” It will enable the banks to meet their loan sale targets, by expanding the number of applicants who qualify for a loan.

 

[sinner]

Actually the banks are bending over backwards and reducing LVRs to get people into home loans (desperation) to boost their loan book and keep the bubble ticking along. Review this link for a no deposit home loan...

http://www.loanmarket.com.au/home-loans/no-deposit/

Also from Debtwatch...

Great info and perspective.

You can lead a horse to water but you can't make him borrow, for all efforts of desperate Government and Financials which issued massive amounts of new credit, housing finance is pretty much where it was. New borrowers (and new loans at greater amounts) are required to keep prices moving.

Total Aus housing finance since Jan 2008:


If it smells like consumer deleveraging it probably is.

 

[RandR]

mmmm.

It's my understanding that without value adding to a property, house prices should more or less just move with inflation, because people can only pay for a house what they can earn, and wages for the most part toe the line with inflation. I think baby boomers just have a skewed perception that house prices do more then move with inflation because of the following ...

- the emergence of double income households
- the lessening restrictions upon lending, making it more accessible to borrow more from the start
- the large scale use of equity and leveraging to enable the procurement of many properties for a lot of people
- continued population growth

Its my view that all of these 4 principles are unsustainable. I believe with the lessening of these influences affecting the supply/and ease of supply housing will/should more or less move with inflation in the future. But this wont move in a nice straight line ... I think we will see a couple of years of no growth/slight retraction (less the 10%). Then a couple of years of increased growth (a period of time where appreciation in property is 5% +) Once wages have inflated to the point where property must appreciate.

Really just a cyclical period of no growth followed by considerable growth.

At present me and my lady are saving for our first house, we are targeting a deposit of between 60,000 - 80,000. Shopping for a property somewhere in the range of 300,000 - 400, 000. Between the 2 of us saving for the deposit will take somewhere between 1 and a half to 2 years ...

I dont think that is an unreasonable timeframe at all to achieve a 20% deposit ... we are 2 avg income earners, in our early twenties, and if we are perfectly capable of achieving a 20% deposit in 1 and a half to two years of saving i dont think it is extremely difficult at all for first home buyers to enter the property market. Especially when that ss not taking into consideration the first home buyers grant. Which we see as merely a bonus and are not calculating that in to the money we'll need for a minimum 20% deposit ...

So in short, i think any suggestion property is overpriced on any massive scale is really just a load of broo ha ha... because property is not unaffordable !