The future of Australian property prices

trainspotter · 24 March 2011

medicowallet said:
Well

1. Shows that the banks are seeing it as a riskier proposition going forward.

2. 40% equity gets chewed up pretty fast during a correction.

3. Have you sold out yet?

Mazzatelli has already provided the correct response. Over and out.

white_goodman · 25 March 2011

http://macrobusiness.com.au/2011/03/is-the-first-home-buyer-pool-running-dry/

interesting read, take it how you wish

trainspotter · 25 March 2011

white_goodman said:
http://macrobusiness.com.au/2011/03/is-the-first-home-buyer-pool-running-dry/

interesting read, take it how you wish

Best response by far:-

"This is true. I regular read very aggressive posts from young bears and shortage-deniers proclaiming a house price crash is starting. They often use some vacancy rate number, or some unsold development, or some census figures as their “proof”. They claim that no better data exists. Some of them are quite abusive when I urge a little caution and when I suggest they delay their celebration until prices and rents have actually fallen.
Year after year their predictions are shown to be wrong, but they usually just disappear, and never apologise. These type of people harm their own cause."

10 out of 10

OF COURSE THE FHB MARKET IS DRYING UP !!!!!!!!!!!! That is the whole point of the banks making it harder to get credit. DERRRR. Also stops inflationary pressures on prices. DERRRRRR Interest ratres increasing also slows down the market as well. DERRRRR

Hello?

white_goodman · 25 March 2011

trainspotter said:
View attachment 42064

Best response by far:-

"This is true. I regular read very aggressive posts from young bears and shortage-deniers proclaiming a house price crash is starting. They often use some vacancy rate number, or some unsold development, or some census figures as their “proof”. They claim that no better data exists. Some of them are quite abusive when I urge a little caution and when I suggest they delay their celebration until prices and rents have actually fallen.
Year after year their predictions are shown to be wrong, but they usually just disappear, and never apologise. These type of people harm their own cause."

10 out of 10

OF COURSE THE FHB MARKET IS DRYING UP !!!!!!!!!!!! That is the whole point of the banks making it harder to get credit. DERRRR. Also stops inflationary pressures on prices. DERRRRRR Interest ratres increasing also slows down the market as well. DERRRRR

Hello?

so your argument against a market slow down is that the market is slowing down?

im not in the crash group of thinkers, id say more the realist camp.

Also the banks arent loosening LVR requirements cos they want to make it harder to get credit...

also its easier for the oldies to be more bullish, the ones that are risking the most are FHB's levering up at a market top, I dare say many knowledgeable traders wouldnt advise to lever up at a market top which one has no prior position.

trainspotter · 25 March 2011

white_goodman said:
so your argument against a market slow down is that the market is slowing down?

im not in the crash group of thinkers, id say more the realist camp.

Also the banks arent loosening LVR requirements cos they want to make it harder to get credit...

also its easier for the oldies to be more bullish, the ones that are risking the most are FHB's levering up at a market top, I dare say many knowledgeable traders wouldnt advise to lever up at a market top which one has no prior position.

1) When have I not said the market is slowing down? I have repeatedly said it is trancing sideways? I have also said certain areas will fall and some areas will rise but overall the conditions are for a cooling period ???

2) Realist or not you have been pretty vocal AGAINST home ownership citing obscure blogs written by some dude named Leith calling himself an "unconventional economist".

3) Banks are not loosening criteria at all. I have posted the criteria a couple posts ago for all to see.

4) Oldies are far from being bullish in the current market white_goodman. They are being cautious and have consistently advised people to perform DUE DILLIGENCE prior to purchasing. They also have the benefit of actually owning property. It is called experience.

5) I was a FHB and leveraged in on a 2% deposit when interest rates were at 17% and falling. Spuds of steel. A lot and I mean a LOT of oldies told me not to buy. All my mates said I was madder than a cut snake to put this MASSIVE DEBT over my head *insert rambling vitriol here* of WHY YOU SHOULD NOT BUY.

white_goodman · 25 March 2011

trainspotter said:
2) Realist or not you have been pretty vocal AGAINST home ownership citing obscure blogs written by some dude named Leith calling himself an "unconventional economist".

as a PPOR and FHB yes, as you say its trending sideways or down, why would I or someone like me lever up pay more interest (dead money) and save/build less equity with a PPOR than renting, is that a totally unwise decision?

investment property is a different kettle of fish

Bill M · 25 March 2011

white_goodman said:
also its easier for the oldies to be more bullish, the ones that are risking the most are FHB's levering up at a market top, I dare say many knowledgeable traders wouldnt advise to lever up at a market top which one has no prior position.

The oldies have seen it all before, the 70's, 80's, 90's and the noughties.....They were calling doom and gloom then and now they are calling doom and gloom again. But nothing changes, the price just keeps going up. Look at it this way, a 2 bedroom unit in say COLLAROY will cost you 500k today. Do you really think that this unit will be cheaper in 5 years time? NEVER! As my long standing signature says..... we never learn from history.

There were people calling an imminent crash of Sydney Real Estate in 2007 when sub prime first surfaced in the USA, 4 years later and we are still waiting........ and waiting....and waiting....... ld:

white_goodman · 25 March 2011

Bill M said:
The oldies have seen it all before, the 70's, 80's, 90's and the noughties.....They were calling doom and gloom then and now they are calling doom and gloom again. But nothing changes, the price just keeps going up. Look at it this way, a 2 bedroom unit in say COLLAROY will cost you 500k today. Do you really think that this unit will be cheaper in 5 years time? NEVER! As my long standing signature says..... we never learn from history.

There were people calling an imminent crash of Sydney Real Estate in 2007 when sub prime first surfaced in the USA, 4 years later and we are still waiting........ and waiting....and waiting....... ld:

strong analysis is strong...

im making a point not to listen to posters who recite previous decades as evidence of ftuure growth with no understanding of the drivers of the market, and adhere to the buy now, buy at any price without analysis it must go up.

I will continue to listen to trainspotter as we agree on some and disagree on other points, but mainly because he generally backs it up with some sort of evidence or valid argument.

trainspotter · 25 March 2011

white_goodman said:
as a PPOR and FHB yes, as you say its trending sideways or down, why would I or someone like me lever up pay more interest (dead money) and save/build less equity with a PPOR than renting, is that a totally unwise decision?

investment property is a different kettle of fish

Once again for comedy purposes only. In "certain" areas there is a rising trend. "Overall" their will be a softening in the amount that houses will rise. Instead of a ridiculous 20% in one year rises it would be more than likely to be around 5 to 7 percent. (Capital cities data taken only) SOME Regional areas will suffer further losses.

If you are saving $1000 per week that could be paying a mortgage you could do this:-

Purchase property for 600k minus 100k deposit = loan amount of 500k. 83% LVR or thereabouts. (specific numbers here mind you)

Repay at $4333 per month = loan term of 17 years assuming todays values. Saving 8 years and $220,000 in interest.

As the average housing loan lasts for 7 years in OZ then it is more than likely you have either paid off the house or sold to another victim ....... ahem ......... astute purchaser.

(above is representative of a misguided attempt to justify my position and should not be taken as advice nor deemed to constitute any way shape or form of making sense)

Anyways ......... it is not for everyone to own a home then it would stuff people like me with IP's. No one to rent is not a good thing.

P.S. interest is "dead money" ? Is this the same as renting?

P.P.S. I have used monthly calculations. If you pay fornightly you will save a further 9 years 3 months and $250,000 in interest

white_goodman · 25 March 2011

trainspotter said:
P.S. interest is "dead money" ? Is this the same as renting?

yes my point was that they are both dead money, and for a considerable amount of time you would be better off renting as less dead money will be being paid, these are my thoughts especially in this market.

also what would be a more preferable route...

a) buying a PPOR, paying off interest and principal over long time and having minimal savings for other investment.
b) renting, having significantly more savings, using that to invest in passive cash flow investments, using investments to pay of future PPOR?

i guess it depends on view of the market direction and how much it will cost in dollars to get enough passive CF for PPOR...

medicowallet · 25 March 2011

trainspotter said:
Instead of a ridiculous 20% in one year rises it would be more than likely to be around 5 to 7 percent. (Capital cities data taken only) SOME Regional areas will suffer further losses.

So how would long would a 6% rise per year take to come back to the long term trend and fundamentals?

I think that zero growth for an extended period is more likely

medicowallet · 25 March 2011

Bill M said:
The oldies have seen it all before, the 70's, 80's, 90's and the noughties.....They were calling doom and gloom then and now they are calling doom and gloom again.

Are you serious?

Us "oldies" remember realestate falls and stagnation.

I think you need to check your history.

Whilst you are at it check the fundamentals, any shock we experience in Australia = end of property bubble.

Bill M · 25 March 2011

medicowallet said:
Are you serious?

Us "oldies" remember realestate falls and stagnation.

I think you need to check your history.

Whilst you are at it check the fundamentals, any shock we experience in Australia = end of property bubble.

No, I'm not kidding. Looks like I have to re post an old article. Yes we had falls but in 5 years we were all well ahead again. Here we go...

medicowallet · 25 March 2011

Bill M said:
No, I'm not kidding. Looks like I have to re post an old article. Yes we had falls but in 5 years we were all well ahead again. Here we go...

As long as you acknowledge that realestate does have ups and downs.

Like other investments, like the sharemarket etc.

Your statement infers that the 70's onwards was risk free, and believe me I know a few "property investors" who went belly up.

Can sort of see the writing on the wall again, but not many believe it, bit like back then.

trainspotter · 26 March 2011

The bank bosses were questioned by international fund managers at the conference about the risk of a housing bubble in Australia and the future direction of property prices.

Mr Norris said there was pronounced weakness in some commercial property sectors, especially in the development of large-scale residential apartment projects.

"There are some areas of property development that are having problems," he said.

"Some are developers that are finding it very hard in the current environment. Look at the Gold Coast: there is a large oversupply of apartments, which has led to a rerating in valuations."

http://www.theaustralian.com.au/bus...ti-speed-economy/story-e6frg8zx-1226028349160

Talk about stating the bleeding obvious.

The strength of Australia’s housing market has amazed observers, who had predicted that Australia would suffer one of the worst housing market crashes, because of a perceived house price overvaluation.

http://www.globalpropertyguide.com/Pacific/Australia/Price-History

Woooooooooooopssssssssssss

Average increase over last 50 years has been 8.6% so my prediction of 5 - 6 percentile for the next 10 years should be about average then.

One difficulty with long-run property price data is that fact that observations are typically based on median house prices, which does not take into account changes in the quality of houses. The median house in 2009 may be “better” than the median house in 1955 and changes in price may reflect this change in quality as well as price appreciation. Stapledon has attempted to take this into account by constructing an index for Australian house prices (six capital cities) that is adjusted for both inflation and standardised to “constant quality”. The trend in real prices, adjusted for quality over the period 1955-2009 has been an increase of 2.1% per annum over inflation.

Reasons · 26 March 2011

An interesting thread to read, bringing out all the emotions that can come with property ownership and investment.

I do not pretend to know whether housing will go up or down, but have applied the return on capital and some risk/reward assumptions going forward to make my own investment decision.

I have done some minor subdivision work over recent times and have now sold all the blocks. My decision was whether to reinvest into residential property or something else.

To invest into residential property (not subdivision) I needed to get an acceptable rate of return compared to equity or money market options. Getting 0 to 2% net on rent once you also take into account the lost opportunity cost of the sunk capital in most residential instances, was risky business from my perspective.

To make money I was relying on capital gains, and if I was, then so are most others who are property investing using loans. In my analysis, this put the risk/reward ratio of property at much higher risk based on the following simple assumptions:

1. Property is now seen as the no-risk bet by the majority of the population.
2. The property market has generally been going up since the 40’s as credit increased manifold.
3. No-one knows they are in a bubble until it pops. If other assets can have serious corrections every few years, that risk is a much higher probability than not after ~70.
4. If the market tanked my capital is trapped in the same illiquid exit as too many others.
5. The return on equity is extremely low and probably negative if I am forced to hold.
6. I would have reduced equity to put into buying cheap assets should they exist as the LVR will be reduced and banks likely property-shy.
7. I am left with an asset of unknown lower value for ‘x’ time.

The returns through share trading, hybrids and the money market and high liquidity, based on my above assumptions, made them the lower risk / likely higher return place to invest.

So I don’t know the future of Australian property prices, or if they fall when that will be, but my investing assumptions say they pose a higher risk than alternatives and therefore not warranted for my purposes at this point in time.

TabJockey · 26 March 2011

Reasons said:
An interesting thread to read, bringing out all the emotions that can come with property ownership and investment.

I do not pretend to know whether housing will go up or down, but have applied the return on capital and some risk/reward assumptions going forward to make my own investment decision.

I have done some minor subdivision work over recent times and have now sold all the blocks. My decision was whether to reinvest into residential property or something else.

To invest into residential property (not subdivision) I needed to get an acceptable rate of return compared to equity or money market options. Getting 0 to 2% net on rent once you also take into account the lost opportunity cost of the sunk capital in most residential instances, was risky business from my perspective.

To make money I was relying on capital gains, and if I was, then so are most others who are property investing using loans. In my analysis, this put the risk/reward ratio of property at much higher risk based on the following simple assumptions:

1. Property is now seen as the no-risk bet by the majority of the population.
2. The property market has generally been going up since the 40’s as credit increased manifold.
3. No-one knows they are in a bubble until it pops. If other assets can have serious corrections every few years, that risk is a much higher probability than not after ~70.
4. If the market tanked my capital is trapped in the same illiquid exit as too many others.
5. The return on equity is extremely low and probably negative if I am forced to hold.
6. I would have reduced equity to put into buying cheap assets should they exist as the LVR will be reduced and banks likely property-shy.
7. I am left with an asset of unknown lower value for ‘x’ time.

The returns through share trading, hybrids and the money market and high liquidity, based on my above assumptions, made them the lower risk / likely higher return place to invest.

So I don’t know the future of Australian property prices, or if they fall when that will be, but my investing assumptions say they pose a higher risk than alternatives and therefore not warranted for my purposes at this point in time.

Well thought out decisions. I followed a similar path, the only upside I can see is the cheap leverage, which is a double edged sword as we all know.

Average property investors out there consider 9:1 lvr the norm.

white_goodman · 26 March 2011

TabJockey said:
Well thought out decisions. I followed a similar path, the only upside I can see is the cheap leverage, which is a double edged sword as we all know.

Average property investors out there consider 9:1 lvr the norm.

if leverage is cheap you are probably not getting a good price

TabJockey · 26 March 2011

white_goodman said:
if leverage is cheap you are probably not getting a good price

I mean the ability to easily get a 90% loan @7%. 90% on equity is unheard of and 50% for retail investors comes with an interest figure similar to your credit card.

medicowallet · 26 March 2011

"Saturday 26th March 2011

With around 2700 auctions expected over the next three weekends conditions shifted slightly in favor of buyers again today with a clearance rate of 61 per cent reached, down from last weekends 63 per cent.

There was a total of 777 auctions reported this weekend of which a total 474 sold and 303 were passed in, 197 of those on a vendors bid.

Further results will be reported tomorrow.

The result contrasts to this weekend last year when there was 1073 auctions and a clearance rate of 85 per cent"

81% last year and 61% this year.

Don't know what this means.

Robots are you ok? Are you needing to work overtime? can't afford the train?

Trainspotter you sold yet?

The future of Australian property prices

trainspotter

white_goodman

BOC

trainspotter

white_goodman

BOC

trainspotter

white_goodman

BOC

Bill M

Self Funded Retiree

white_goodman

BOC

trainspotter

white_goodman

BOC

medicowallet

medicowallet

Bill M

Self Funded Retiree

Attachments

medicowallet

trainspotter

Reasons

TabJockey

white_goodman

BOC

TabJockey

medicowallet

Similar threads

The future of Australian property prices

BOC

BOC

BOC

Self Funded Retiree

BOC

BOC

Self Funded Retiree

Attachments

BOC

Similar threads

Privacy & Transparency

Privacy & Transparency