The future of Australian property prices

[robots]

hello,

oh gidday everyone, great day

http://theage.domain.com.au/real-estate-news/buyers-hit-as-house-prices-peak-20110121-1a02p.html

yeah no worries, and look at the figure for ballarat and melbourne units, amazing

i know i know i know, we going to get a post that tells everyone its not looking good though for property in the future because of this and that

thankyou
professor robots

 

[robots]

hello,

yeah no worries, everyone probably watching the tennis, will check in later

thankyou
professor robots

 

[todster]

Property ads are worth about $60m a year to The Age

 

[robots]

hello,

yeah, go for a walk down the street and see what places are going for

although that never happens as most are too busy with their heads in the textbooks

thankyou
professor robots

 

[IFocus]

So much for the boom state

WA highest rate of repossessions

Signs of mortgage stress are emerging in WA with revelations the State has the highest rate of loan delinquency in the country, with about 20 homes repossessed each week.

The latest statistics from ratings agency Fitch shows nearly two WA homeowners in every 100 were more than a month in arrears in the September quarter last year, compared with one in 100 nationally.

I wonder if the floods could trigger a problem with defaults and lower prices / valuations in flood plains down the road some time.

 

[Agentm]

hello,

oh gidday everyone, great day

http://theage.domain.com.au/real-estate-news/buyers-hit-as-house-prices-peak-20110121-1a02p.html

yeah no worries, and look at the figure for ballarat and melbourne units, amazing

i know i know i know, we going to get a post that tells everyone its not looking good though for property in the future because of this and that

thankyou
professor robots

well said robots

yes we should ignore all the implications of the bubble, and just keep on reporting its impact and size... but regardless of how much its expanding, lets ignore its implication other than "we are all flithy rich on paper..waaahhhoooo!!!!!!!!"

but despite the deplorable 50% clearance rates of the record auction numbers in spring/summer, they managed to keep an occasional bidder alive with bids from the uber competitive neighbours dog and the lampposts bidding hard against the completely bamboozled solo buyer that showed for an auction.. with all the eager neighbours, all looking on with anticipation and greed as the RE auctioneer manages to get those lampposts, dogs cats and parked cars to inflate the one bidder to yet another amazing auction record for the street, postcode, and city or state.. cheering and clapping post the final fall of the hammer, swooning to the admiration and adulation of the admiring neighbours clogging the footpaths.. " hey franks lousy 2 beadroom weatherboard just went for 980k!! man thats insane, and all the crap on talk on the bubble, baloney i say.. just think, our place is bigger, its brick, we would be worth $1.3 mill... this is fantastic!! i am going to ring mum and tell her how good real estate is.. she will be proud of me now i am a millionaire"

thats how i recall all the auctions i went to in the stkilda elwood prahran southmelb region...


i guess the 50% of uncleared stock that failed to clear auction of course easily sold way higher than the reserve at auction.. and in days.. lol

 

[tech/a]

but despite the deplorable 50% clearance rates of the record auction numbers in spring/summer,

Clearance rates vary Adelaide was 70 % this week I believe.
Those that Dont sell at auction sell after auction normally at around reserve (from my experience).

hey franks lousy 2 beadroom weatherboard just went for 980k!! man thats insane, and all the crap on talk on the bubble, baloney i say.. just think, our place is bigger, its brick, we would be worth $1.3 mill... this is fantastic!!

The extreme emotion this topic generates is amazing.
The doomsdayers are just itching to take the Robot down.

Meanwhile life and property goes on.
So it crashes------
So it keeps climbing-----

If you Dont have property you generally fall into "The Sky is falling camp"
If you do then you deal with whatever comes along.

 

[wayneL]

The latest Demographia housing affordability survey

http://www.demographia.com/dhi.pdf

FWIW

 

[wayneL]

The latest Demographia housing affordability survey

http://www.demographia.com/dhi.pdf

FWIW

A couple of interesting comments from the above:

SNIP - "Perhaps most remarkable has been the shift in Australia, once the exemplar of modestly priced, high-quality, middle-class housing, to now the most unaffordable housing market in the English-speaking world," he said. "The real issue is affordability and Australia has gone from a middle-class paradise in that regard into a more stratified society - just as we find in Britain and parts of the US."

Mr Kotkin, who has visited Australia extensively, described the trend as "neo-feudalism" that unravels the social achievement of spreading property ownership.

SNIP - Sydney ranks among the least affordable places, with a 0 out of 5 rating, on a par with San Francisco and Hong Kong, while Melbourne, Brisbane, Adelaide, and Hobart have a rating of 1. "High property prices mean investment that should be in productive infrastructure or capital is spent on property," he said, leaving the country unprepared when the mining boom ends.

 

[CamKawa]

The latest Demographia housing affordability survey

http://www.demographia.com/dhi.pdf

FWIW

Here's a report on the report.... Melbourne housing now 'severely unaffordable'

London is more affordable than Geelong.

 

[schnootle]

London is more affordable than Geelong.

To me that says more than most of this thread has. Cut through the rhetoric, this is wrong people and it will end in tears.

 

[c-unit]

If I was a property investor, I would certainly be looking at selling off all my properties and locking in the gains. As schnootle said, this will end in tears. Particularly for the over-levered FHBs who haven't done their research before buying, instead believing the "property always goes up" mantra that the irresponsible MSM has been peddling for years.

 

[KurwaJegoMac]

The statement that London is more affordable than Geelong should be taken with a grain of salt. Typical sensationalist journalism to keep the masses scared and in the rat race.

Demographia base their results on the median earnings relative to median price - and that's it. Are you going to make your entire investment decisions on one ratio? It's like looking at a stock and saying "All the stocks in the ASX have a P/E of over 15. Yet London stocks are at 13 :O Australia is so unaffordable!"

What a load of tripe.

What about general living costs, taxes, lifestyle costs? Food, rents, insurance, etc etc. These all need to be factored into the equation when trying to compare two prices. London has always widely been regarded as an expensive city to live in relative to many others. In Geelong you might be buying a large house by the water, whereas in London you're buying a cramped apartment for the same amount of $$. I know which one i'd rather live in.

Affordability is related to living expenses too - not just median income relative to median house prices. You have to put all the pieces of the puzzle together to get the total picture.

And another thing that grinds my gears - in the news they're spouting the median house price as $550,000 with a median wage of $63,000. Now that's a median HOUSEHOLD wage - not an INDIVIDUAL wage. What you need to ask yourself, is what idiot with a household income of $63,000 is buying a median house of $550,000. Fools. You can find plenty of houses for $300-400K within 25km of the CBD, in leafy suburbs close to train stations. Hell, if you look hard enough you can sometimes snap one up within 10km. Of course if you're spending 80% of your household wage to service your debt you're just asking for trouble. But this doesn't make housing 'unaffordable' - it just means the massive mansion you want in the inner city suburb might be *shock horror* out of reach of low income households :O Who'd have thought??? THE BLASPHEMY! How DARE i not be able to afford a big house in an affluent suburb. This is outrageous. It's all the governments fault and those greedy investors and those First Home Buyers, and baby boomers and of course that damn old lady at the end of the street with all the cats.

People use these ridiculous claims about affordability, relatively constant growth in prices (which is of course alllllll because of speculative investment ) and an incredibly poor understanding of negative gearing and cashflow to spout nonsense to all those that will listen because in reality THEY'RE ALL TOO DAMN SCARED TO GET OFF THEIR A** AND EDUCATE THEMSELVES AND INVEST IN THEIR FUTURE

Much easier to blow all your money now, whinge that everything is too expensive and convince yourself you'll jump in once houses have dropped 40%

 

[Tysonboss1]

If I was a property investor, I would certainly be looking at selling off all my properties and locking in the gains.

And then what, I would rather own property than sit on a pile of cash

 

[schnootle]

Much easier to blow all your money now, whinge that everything is too expensive and convince yourself you'll jump in once houses have dropped 40%

No its much easier to save your money, invest it in something else and have a stupid amount of cash on hand when the music stops.

 

[c-unit]

And then what, I would rather own property than sit on a pile of cash

Would rather sit on cash than negatively geared property where capital gains have dried up. 70% of Australian investment properties are negatively geared. Even if the tax breaks mean a $10k deficit is only a $5.5k or $6.2k deficit, it's still a deficit. Will these negative gearers have the balls to sit on the potential of net losses for a few years whilst they prey the gains will one day resume? They may, but I wouldn't.

 

[sinner]

And another thing that grinds my gears - in the news they're spouting the median house price as $550,000 with a median wage of $63,000. Now that's a median HOUSEHOLD wage - not an INDIVIDUAL wage. What you need to ask yourself, is what idiot with a household income of $63,000 is buying a median house of $550,000. Fools. You can find plenty of houses for $300-400K within 25km of the CBD, in leafy suburbs close to train stations. Hell, if you look hard enough you can sometimes snap one up within 10km.

Just for the record:

1. Within 25km of the city, at least for Melbourne, is pretty much the entire city of Melbourne! Even in Sydney 25km is a broad brush to be painting the picture of "close to the city".

2. I just checked around where I live (about as far from the city as I'd be willing to live) as well as some cheaper suburbs for dwellings under $400k, turns out to be a very small number of overpriced apartments and that's it. Not a single house, certainly nothing near a station.

Of course if you're spending 80% of your household wage to service your debt you're just asking for trouble. But this doesn't make housing 'unaffordable' - it just means the massive mansion you want in the inner city suburb might be *shock horror* out of reach of low income households :O Who'd have thought??? THE BLASPHEMY! How DARE i not be able to afford a big house in an affluent suburb.

Mate, you better calm down or you'll give yourself a hernia. Personally, I'm not complaining about the proportion of my household income which goes to mortgage. I am much more interested in the metric "rate of change of % of household income spent on mortgage", and what it means for the economy at large.

Let me re-iterate, not bemoaning houses being overpriced. Rather observing that these situations are structurally unsustainable and generally lead to a decreased standard of living for all.

This is outrageous. It's all the governments fault and those greedy investors and those First Home Buyers, and baby boomers and of course that damn old lady at the end of the street with all the cats.

Yes. Government subsidies of the housing market to those who really don't need it are a big gripe for me. No denying it. I would prefer the Government assist those who need it and otherwise keep their nose out.

People use these ridiculous claims about affordability, relatively constant growth in prices (which is of course alllllll because of speculative investment ) and an incredibly poor understanding of negative gearing and cashflow to spout nonsense to all those that will listen because in reality

I cut your shouting out of the quote because it was frankly, obnoxious.

Funny you say those who understand cashflow and negative gearing would of course just jump right into the perfect property market we are in right now. Because I've been following the adventures of one didactic guy who has spent an extremely large amount of his personal time coming up to speed with the property market and all its machinations so he could buy a property for income generation during his fast approaching retirement.

Guess what? He's abstaining from the market and staying in cash. He sees much better opportunities taking properties from weak hands in a year or two.

Much easier to blow all your money now, whinge that everything is too expensive and convince yourself you'll jump in once houses have dropped 40%

Taking out a $400,000 30 year loan with 80% leverage doesn't count as blowing your money...but paying a fixed monthly rent less than 20% of your net income somehow is gonna blow all your money right now because you didn't jump into the property pool?

Nonsensical. The reality is much simpler: if the property bears are wrong, they can simply hop into the apparently healthy property market at any time.

What I've convinced myself is that if I saw a house I actually wanted as a PPOR, priced within 3-5x my gross income I would buy it. So far very very happy to continue renting on all fronts.

 

[Tysonboss1]

Would rather sit on cash than negatively geared property where capital gains have dried up. 70% of Australian investment properties are negatively geared. Even if the tax breaks mean a $10k deficit is only a $5.5k or $6.2k deficit, it's still a deficit. Will these negative gearers have the balls to sit on the potential of net losses for a few years whilst they prey the gains will one day resume? They may, but I wouldn't.

I am not negative geared.

Where did you get the 70% of property is negative geared figure.

In your brash statement you simply said if you were a "property investor" you would sell, You didn't say if you were a "negatively geared property speculator" you would sell.

The is a big difference. Property is a longterm investment that allows you to park your wealth and recieve income similar to a bond where your capital is protected from inflation. It is not an investment where you should try and jump in and out timing the market.

 

[Tysonboss1]

I bought my first house back in 2001, and it was renting for $250/week but to service the loan cost $435/week,

So the repayments were 74% higher than rent.

Today the rent is $425/week and the loan would cost $850 / week to service.

So the payments are 100% higher than rent,

So your right the gap has widened. But the big difference that I see as causing this is that rents tend to rise steady year on year with inflation. Where as the price of houses booms and stagnates. when I bought in 2001 it was following a period of several years of stagnated prices, so the gap between rents and prices slowly narrowed.

After I bought prices boomed for serveral years widening the gap again. I think one things is clear though. rents will overtime increase and the interest you pay decreases

So given the first example 10 years later renting is still $10/week cheaper than the payments on the loan, However the owners repayments only have $252 worth of interest so $182.00 / week is repaying the loan. so reverse compound interest is on his side.

Not to mention every year the rental increases will compound against the renter, where reverse compound interst is working for the owner.

Also should he sell he would have a lump sum of over $200,000 capital gain + over $40,000 of forced savings from reduction of the loan.

 

[c-unit]

I am not negative geared.

Where did you get the 70% of property is negative geared figure.
In your brash statement you simply said if you were a "property investor" you would sell, You didn't say if you were a "negatively geared property speculator" you would sell.

The is a big difference. Property is a longterm investment that allows you to park your wealth and recieve income similar to a bond where your capital is protected from inflation. It is not an investment where you should try and jump in and out timing the market.

A research paper from an asset manager, read mid last year, will try find it this afternoon. And I did mean negatively geared speculators, but said "property investors" given that statistically, the majority of property investors are indeed negatively geared speculators. And that is the heart of the problem.