The future of Australian property prices

[FxTrader]

ps..if the property market collapses, so would shares, FX traders etc might do ok on volatility, but they probably need to have their armed militia handy

On this point I would say you are confused. The U.S. equity markets have been strong since mid 2009 while their property market continues to tank. There is no evidence I know of to suggest a price decline in property would automatically lead to a sustained decline in shares. In fact, it's more likely that as property investors flee more money will go into equities and fixed interest.

Oh yes, I love volatility, that's when I make my best returns. Not worried about my fellow Aussies though, not enough guns in circulation to make me nervous here.

 

[trainspotter]

Now your finally towing the line WG, you must realize by now that modelling, studies, figures, data, cycles, charts, trends, debt funding and foreign experience etc. are meaningless and will never apply to Australia because we are special. As trainspotter says...

So get out there and buy buy buy. Don't be afraid, it always a good time to buy property in Aus.

LOLOL ..... so when I wrote in a previous post not that far back that IMO Aussie house prices OVERALL are on a downward trend that this somehow allows for a cheap shot by such a knowledeable investor?

Oh well ....... each to their own. You keep on doing what you do and I will keep on buying and selling property.

 

[awg]

On this point I would say you are confused. The U.S. equity markets have been strong since mid 2009 while their property market continues to tank. There is no evidence I know of to suggest a price decline in property would automatically lead to a sustained decline in shares. In fact, it's more likely that as property investors flee more money will go into equities and fixed interest.

Oh yes, I love volatility, that's when I make my best returns. Not worried about my fellow Aussies though, not enough guns in circulation to make me nervous here.

My basis for that assertion is that the most likely cause of major property correction in Australia would be a credit crisis/GFC...do you think we are done with that?

There are differences between USA and Oz market. It is my opinion that Oz homeowners would sell everything before the PPOR...so not automatic, but probable.

imo, if you are making satisfactory returns with a particular method, that is probably the best, but things evolve, which is why I have largely moved away from property to shares, and FX is on the radar ( just not as straightforward in SMSF, where the bulk of my liquid assets are)


Depends on your priorities as well, many years ago I made a decision that I wanted to live here, for lifestyle and family reasons. Therefore I also had to make career decisions, including turning down many opportunities.

With greater work mobility required these days, that would probably decrease home ownership

 

[FxTrader]

My basis for that assertion is that the most likely cause of major property correction in Australia would be a credit crisis/GFC...do you think we are done with that?

Are we done with the GFC, no as the massive debt issuance to stave off the crisis only kicked the can down the road. The banks (and finance sector in general) will be hit hard in the event of a property downturn. So much so that some investment houses now consider Aussie banks as no longer investment grade.

There are differences between USA and Oz market. It is my opinion that Oz homeowners would sell everything before the PPOR...so not automatic, but probable.

Probably true but considering the debt burden of the average Australian household, selling the furniture, sleeping on the floor and eating only noodles proabably won't stave off the eviction notice.

...which is why I have largely moved away from property to shares, and FX is on the radar

Good decision and be careful with Forex, trade in sim until you are consistently profitable, it's a very tough market to trade, trust me.

 

[trainspotter]

Probably true but considering the debt burden of the average Australian household, selling the furniture, sleeping on the floor and eating only noodles proabably won't stave off the eviction notice.

Non Performing Loans

Australian banks have one of the lowest non-performing loans ratios of all 97 surveyed economies. Only 1.2 per cent of Australian bank loans are ‘non-performing’, meaning that only a very small proportion of loan repayments have either ceased or are excessively late. This ratio was fairly steady at 0.2% three years rising to its current figure in 2009.

Source: International Monetary Fund’s (IMF) Global Financial Stability Report April 2010

Whale Oil Beef Hooked. They will sell their furniture and sleep on the floor and eat noodles before selling their home.

 

[sinner]

Non Performing Loans

Australian banks have one of the lowest non-performing loans ratios of all 97 surveyed economies. Only 1.2 per cent of Australian bank loans are ‘non-performing’, meaning that only a very small proportion of loan repayments have either ceased or are excessively late. This ratio was fairly steady at 0.2% three years rising to its current figure in 2009.

Source: International Monetary Fund’s (IMF) Global Financial Stability Report April 2010

Whale Oil Beef Hooked. They will sell their furniture and sleep on the floor and eat noodles before selling their home.

Yeah right, 'cos we all know the ratio of nonperforming loans is a perfect indicator, banks never underreport or crap this number.

I mean, in the US, they had heaps and heaps and heaps of reported nonperforming loans which were screaming trouble before the GFC...right...right?

Oh wait.

Nope. That's bull. Turns out that going into the housing peak the US actually held a 10 year low in nonperforming loans!

Nonperforming loans in 2005 in the US and Aus on a relative basis were pretty much identical. So um yeah to say that we have a low proportion of nonperforming loans therefore everything is cool is fallacious at best.

 

[FxTrader]

Non Performing Loans
Australian banks have one of the lowest non-performing loans ratios of all 97 surveyed economies. Only 1.2 per cent of Australian bank loans are ‘non-performing’, meaning that only a very small proportion of loan repayments have either ceased or are excessively late. This ratio was fairly steady at 0.2% three years rising to its current figure in 2009.

Yes, non-performing loan stats for Australian banks have been a positive so far. The key issue though is the banks total exposure to housing and what effect a downturn will have on their liquidity and performance. The excerpt from Keen's commentary below hits the nail on the head...

"The most obvious losers from a price downturn will be the buyers enticed into the market by the FHVB, many of whom began with 5% equity and who can therefore be easily thrown into negative equity territory by even a small price fall.

This won’t lead to “jingle mail” defaults in Australia because our housing loans are full recourse. But since a trigger for the downturn will be a decline in aggregate demand as the Credit Impulse turns negative, unemployment will rise—certainly in NSW and Victoria that don’t directly benefit from exports to China—and this will cause forced sales, though a lesser rise in bankruptcy sales than in the USA"

"The second obvious group of losers will be the banks themselves, who have dramatically increased their share of profits via the huge increase in mortgage debt. A decline in mortgage originations will reduce their profitability, and their solvency since mortgages now constitute the more than a third of total bank assets and over half of all banks loans."

"Australian banks assert that they are well capitalised and that a downturn in house prices would have little impact on their liquidity, let alone their solvency. That claim has proven false after the fact of a property price crash everywhere else on the planet, and I expect Australia to be no different."

 

[trainspotter]

Steven Keen right? The guy that said prices will crash 40% right? Yep ... he's an expert alright?

Ummmmmmmm ........ haven't we just been through a GFC and our banks didn't even shudder? Nor did the non performing loans spike? Has something to do with employment I believe?

I REPEAT ...... we are NOT THE UNITED STATES OF AMERICA !!!

YES YES YES we have all the economic indicators and pie charts and pretty graphs BUT BUT BUT ....... IT HAS NOT HAPPENED ??????? ........ yet !

 

[satanoperca]

Ummmmmmmm ........ haven't we just been through a GFC and our banks didn't even shudder? Nor did the non performing loans spike? Has something to do with employment I believe?

Come on TS, our banks did shutter, why else did the govnuts have to providing assistance to them. If they we so sound, they wouldn't need help. I sure you will provide some excuse for this action.

Why did the govnuts boost the FHBG, not all is what it seems. To keep the property market going as it is toooooo big to fail.

Cheers and carry on, been a good debate so far, just running out to the shops for some more popcorn and beer.

 

[explod]

Steven Keen right? The guy that said prices will crash 40% right? Yep ... he's an expert alright?

Ummmmmmmm ........ haven't we just been through a GFC and our banks didn't even shudder? Nor did the non performing loans spike? Has something to do with employment I believe?

I REPEAT ...... we are NOT THE UNITED STATES OF AMERICA !!!

YES YES YES we have all the economic indicators and pie charts and pretty graphs BUT BUT BUT ....... IT HAS NOT HAPPENED ??????? ........ yet !

Yet

The GFC started but has not ended. Trainspotter you have been directed to the real underlying facts many times but some people just do not want to know.

The tremendouse problems coming due to Q/E can be read today (The Busines Age) in the newspapers. In Australia tourism, manufactor and retail sectors for startes.

The pressures on supply, food in particular (real cause of current uprisings) are being felt around the globe now, and Australia will not be immune in my view.

Relying on past performance has been good but one would believe that those who are committed to R/I would be a little nervous and a tad cautious for the moment.

 

[MACCA350]

Come on TS, our banks did shutter, why else did the govnuts have to providing assistance to them. If they we so sound, they wouldn't need help. I sure you will provide some excuse for this action.

Why did the govnuts boost the FHBG, not all is what it seems. To keep the property market going as it is toooooo big to fail.

Not to mention they went secretly to the US Fed and borrowed billions during the GFC, just as many struggling(and ultimately bankrupt) banks did, and as our RBA did also.

Would we have fared so well if they hadn't gone begging for cash?

Cheers

 

[trainspotter]

Come on TS, our banks did shutter, why else did the govnuts have to providing assistance to them. If they we so sound, they wouldn't need help. I sure you will provide some excuse for this action.

Why did the govnuts boost the FHBG, not all is what it seems. To keep the property market going as it is toooooo big to fail.

Cheers and carry on, been a good debate so far, just running out to the shops for some more popcorn and beer.

The Guvmint provided a "guarantee" to the financiers to stop the proletariat from pulling cash out of them in a state of panic. Nothing more and nothing less. I see they are still making billions of dollars profit and setting new records for their profitability.

Yeah sure, the powers that be introduced measures to increase "affordability" for FHB and to no one else. Seeing how FHB made up less than 10% of all housing loans then this would hardly seem such a shot in the arm for the property business?

As you were.

 

[trainspotter]

Yet

The GFC started but has not ended. Trainspotter you have been directed to the real underlying facts many times but some people just do not want to know.

The tremendouse problems coming due to Q/E can be read today (The Busines Age) in the newspapers. In Australia tourism, manufactor and retail sectors for startes.

The pressures on supply, food in particular (real cause of current uprisings) are being felt around the globe now, and Australia will not be immune in my view.

Relying on past performance has been good but one would believe that those who are committed to R/I would be a little nervous and a tad cautious for the moment.

LOLOLLOLL ....... which is why I wrote ....... wait for it ........ "yet".

I am going to start storing tinned food and turn my backyard into a vegetable garden for when the downturn hits. Can't wait.

 

[explod]

LOLOLLOLL ....... which is why I wrote ....... wait for it ........ "yet".

I am going to start storing tinned food and turn my backyard into a vegetable garden for when the downturn hits. Can't wait.

Beat you to it because I reckoned the downturn has already hit but few want to admit it. Built an extended pantry area last year.

Actually you have missed a great year for rain on the vegies.

My Real Estate Agent told me this morning that things are very quiet and he didn't do any good at the Mornington races at the weekend either.

Anyway good to catch up t/s

 

[white_goodman]

Steven Keen right? The guy that said prices will crash 40% right? Yep ... he's an expert alright?

Ummmmmmmm ........ haven't we just been through a GFC and our banks didn't even shudder? Nor did the non performing loans spike? Has something to do with employment I believe?

I REPEAT ...... we are NOT THE UNITED STATES OF AMERICA !!!

YES YES YES we have all the economic indicators and pie charts and pretty graphs BUT BUT BUT ....... IT HAS NOT HAPPENED ??????? ........ yet !

hes still one of our best economists, many who predicted the US crash got the timing wrong, one cos its very hard, but the main reason is its hard to assess what future measures a govt will take to keep the party going... Im not 100% agreeing 40% declines or anything, but his reasoning is pretty solid

 

[trainspotter]

Beat you to it because I reckoned the downturn has already hit but few want to admit it. Built an extended pantry area last year.

Actually you have missed a great year for rain on the vegies.

My Real Estate Agent told me this morning that things are very quiet and he didn't do any good at the Mornington races at the weekend either.

Anyway good to catch up t/s

About 30 to 40 pages ago I suggested that property is on a downward slant. Nunthewiser picked the top to perfection. I just love how these uni students and would be traders who live at home with Mummy and Daddy point to these wonderful graphs by Steven Keen. NONE of them have owned or traded property but are sitting on a whopping 90k in savings. LOLOL.

Anyhoooooooo ........ things are very quiet in the RE world where I am as well. Sporadic would be the word that springs to mind. Possibly occasional as well.

Fortunately we have a fantastic morning market here for fruit and veges. Cheaper for me to buy them there and support local economy then to dig up the concrete in my backyard.

Great chatting to you as well explod. Take care.

 

[trainspotter]

hes still one of our best economists, many who predicted the US crash got the timing wrong, one cos its very hard, but the main reason is its hard to assess what future measures a govt will take to keep the party going... Im not 100% agreeing 40% declines or anything, but his reasoning is pretty solid

Absolutely a great researcher WG. No doubt about it. And yes he did pick the US crash but he did get the 40% drop in OZ wrong. Yes the indicators are there and no doubt we will have to pay the piper at some stage. WE ARE FAR FROM OUT OF THE WOODS YET.

But just like trading you do not go out on a whim and buy a speculative share. RESEARCH is the key. Plus unlike trading owning property is loooooooooooong term UNLESS you are in a rising market and can "flip" whilst the going is good. Not rocket science here. been done to death over 100 or so pages.

The debate goes on.

 

[white_goodman]

ok this is my thoughts and circumstance.

-yes i am young and just finished uni doing property and economics
-yes ive worked/work as a trader and in commercial property and know how markets work (or so I hope)
-no I have not owned property personally, but have been advising my parents on their IP's, and I like to think I have some knowledge to give a good opinion on it. (tho buying in the US soonish)

Basically the argument from those against a correction, is that Australia is different, our economy is much better and we arent as reckless as say the US. (very debateable but anyways)

What I fail to see in the argument is why property should go up. Not the: "i bought in 1990 and it went up THIS much, look how smart I am, do the same now and itll repeat", but what demand drivers will actually push it forward. Pointing at lack of perceived supply is not a reason, and ignoring the amount of baby boomers retiring, or the role of China I feel is also a mistake.

So i put to the property bulls a question...

why would I buy a PPOR when there is no sign for capital gains, and am far worse off then renting financially

or

why would I buy an IP with 70-80% leverage at a gross yield of approx 5-6% when costs, loan repayments etc will make it negative cash flow, yet get none of the benefits of meaningful price appreciation above inflation?

its a big world out there and i dont think if you wanna be a property owner you should be restricted to such a small market that is Australia, anyways my 2cents.

 

[Mr Z]

(tho buying in the US soonish)

Personally I'd be a little gun shy in the US until this lot clears or at least its impact becomes apparent.

 

[white_goodman]

View attachment 41536

Personally I'd be a little gun shy in the US until this lot clears or at least its impact becomes apparent.

not all areas experience booms and bust, those areas with little local/state govt intervention in their markets never had the 'tulip mania' that places like Florida and Vegas had, despite how strong economically they are/were

ie Texas.

The US isnt one market, but yes im well aware itll be hard as **** either way, long term