The future of Australian property prices

[trainspotter]

ROVE McManus sold his Melbourne mansion for $3.4 million yesterday in a private auction that included a handful of pre-approved bidders.

LA-based McManus was not on hand for the auction of the five-bedroom, three-bathroom property he bought in late 2003 for $1.9 million.

http://www.heraldsun.com.au/money/r...n-for-34-million/story-e6frfh5f-1226028707677

Works out to compound gross 7.83% RoR over a 90 month period paid annually.

Or is it that Australian properties double in price every 10 years?

 

[wayneL]

ROVE McManus sold his Melbourne mansion for $3.4 million yesterday in a private auction that included a handful of pre-approved bidders.

LA-based McManus was not on hand for the auction of the five-bedroom, three-bathroom property he bought in late 2003 for $1.9 million.

http://www.heraldsun.com.au/money/r...n-for-34-million/story-e6frfh5f-1226028707677

Works out to compound gross 7.83% RoR over a 90 month period paid annually.

Or is it that Australian properties double in price every 10 years?

Less transaction costs, both in and out... and of course we don't know about capital expenditure; renos etc.

All in a period of rapidly expanding credit.

A profit is a profit, but not a lot to boast about really.

 

[trainspotter]

Interest and inflation would also be required to be factored in plus a plethora of other factors. Prolly why I wrote it was 7.83% gross

If Rove McManus is selling up his property in Oz then it is definitley time to get out of Dodge.

 

[trainspotter]

Then there is this:- Terri Irwin sells properties as Australia Zoo struggles

Ms Irwin has also sold a $1.3 million luxury property, at a $380,000 loss, next to the family's $3.22 million home at Minyama, the Sunshine Coast's millionaire's row.

Read more: http://www.news.com.au/business/ter...es/story-e6frfm1i-1226029144883#ixzz0jSPZq0W2

When Terri Irwin starts to secretly sell property it is DEFINITELY time to get out of Dodge. Or the Australian Zoo is making an horrendous loss.

 

[Craglet]

I don't know if anybody here already knows about this but I thought this might be or interest. Apparently a tax reform organisation has called for FHB strike and the idea has been put up on Getup.org.au

http://suggest.getup.org.au/forums/60819-campaign-ideas/suggestions/1595687-first-home-buyers-property-buyers-strike

There's also another one on the site for the removal of negative gearing.

 

[ZSlaveski]

I don't know if anybody here already knows about this but I thought this might be or interest. Apparently a tax reform organisation has called for FHB strike and the idea has been put up on Getup.org.au

http://suggest.getup.org.au/forums/60819-campaign-ideas/suggestions/1595687-first-home-buyers-property-buyers-strike

There's also another one on the site for the removal of negative gearing.

More information about them is gleaned here too... FHB Strike and End Negative Gearing Campaigns

Going by the comments, lot of angry people will be kicking down doors at Canberra if this govt does not do something, fast!

 

[sinner]

When Terri Irwin starts to secretly sell property it is DEFINITELY time to get out of Dodge. Or the Australian Zoo is making an horrendous loss.

Maybe you missed it but they are...it was in the news a couple of weeks ago. Poor management, etc.

 

[satanoperca]

Question:-

Which is the most likely outcome :

1) Unemployment rises and then house prices fall or
2) House prices fall and then unemployment rises.

On another note :

Shock rise in mortgage default cases

http://www.news.com.au/money/property/shock-rise-in-mortgage-default-cases/story-e6frfmd0-1226029350473#ixzz1HrcTtOFC

We may have low default rates but is this the start.

Cheers

 

[sinner]

Question:-

Which is the most likely outcome :

1) Unemployment rises and then house prices fall or
2) House prices fall and then unemployment rises.

On another note :


http://www.news.com.au/money/property/shock-rise-in-mortgage-default-cases/story-e6frfmd0-1226029350473#ixzz1HrcTtOFC

We may have low default rates but is this the start.

Cheers

It's all so shocking and unexpected! Who could have ever thought it! Gobsmacked!

I love how in this article, Resi Home Loans chief executive Lisa Montgomery, suggests that people under mortgage stress switch their loans to "interest only repayments to prevent financial hardship" hahahahaha.

After seeing that line, I just had to go see who runs Resi, turns out it is Challenger.

Definitely adding that one to the potential shorts watch list come the next market downcycle.

 

[KurwaJegoMac]

Question:-

Which is the most likely outcome :

1) Unemployment rises and then house prices fall or
2) House prices fall and then unemployment rises.

Generally number 1 - you need a trigger to cause house prices to fall significantly. 2 will be an effect of 1 occuring. A period of stagnant growth or small declines in prices wont change unemployement significantly - perhaps some construction workers might not work every day of the year but they'll hardly become unemployed, most are booked out solidly right now.

If you have a trigger like large unemployment rises or massive oversupply then you'll see a house price fall. Looks like we may be stagnating now, or at least not growing at the rates we've been used to in recent days but this does not equal to a market crash. The property market goes through this sort of period all the time. If prices are stagnant and we get a large trigger then it'll be 'look out below'.

On another note :


http://www.news.com.au/money/property/shock-rise-in-mortgage-default-cases/story-e6frfmd0-1226029350473#ixzz1HrcTtOFC

We may have low default rates but is this the start.

Cheers

Typical sensationalistic journalism. There are lies, damn lies and statistics. They grab 12.5% as a useless statistic (on its own) to scare the masses yet again. Here's why it's useless on it's own:

Lets say there are 1000 mortgages in Australia.

Situation A: Mortgage defaults are at 10 mortgages. 2 more mortgages default in this quarter so we now have 10 mortgage defaults. That's an increase of 20%. Oh my lord! It's the end of the world right?

12 mortgage defaults out of 1000 mortgages equates to 1.2% of mortgages defaulting (from the original 1%). Hardly a scary figure at all.

Situation B: Mortgage defaults are at 300 mortgages. An increase of 20% results in 60 more mortgages defaulting. We now have 36% of mortgages defaulting (from the original 30%). A much more worrying figure yet still the same 20% increase as situation A.

These articles (like most) are just a load of sensationalist drivel a la today tonight/current affair. All too often we see a ton of these sorts of articles quoted on on ASF to support doom & gloom/rosy sunshine and lollipops theories (The REIV figures are a serial offender) - suggest people look at the underlying numbers because these sort of articles mean absolutely squat.

 

[medicowallet]

Question:-

Which is the most likely outcome :

1) Unemployment rises and then house prices fall or
2) House prices fall and then unemployment rises.

Easy

1. Something happens (eg China slows, combination of poor labor policies etc)

2. 1-2-1-2-1-2-1-2-1-2-1-2 in a cyclical fashion, till, as a guestimation 20% fall.

3. then stagnation for a few years.

4. things start creeping up slowly

5. Then BB sell out their investments to fund their lifestyle. - prices stagnate for a few years (wonder if stuff bb want would be a good place to invest for the future, considering we will control the vote )


The people in the know sold out faster than the people who had rose coloured glasses.

Where did they invest? I hope in the same place as I am

I know where I am investing now.. I just hope it is in the right place lol.

 

[KurwaJegoMac]

Easy

1. Something happens (eg China slows, combination of poor labor policies etc)

2. 1-2-1-2-1-2-1-2-1-2-1-2 in a cyclical fashion, till, as a guestimation 20% fall.

3. then stagnation for a few years.

4. things start creeping up slowly

5. Then BB sell out their investments to fund their lifestyle. - prices stagnate for a few years (wonder if stuff bb want would be a good place to invest for the future, considering we will control the vote )


The people in the know sold out faster than the people who had rose coloured glasses.

Where did they invest? I hope in the same place as I am

I know where I am investing now.. I just hope it is in the right place lol.

Pretty good summary of the cycle

 

[satanoperca]

Thanks for the responses.

I asked the question to gain clarity of the USA situation.

It is my understanding that they had low, lower than ours, unemployment. House prices started to collapse and then unemployment rose accordingly.

It seems logical, if house prices decline, consumer sentiment drops and so people hire less.

Cheers

 

[trainspotter]

Thanks for the responses.

I asked the question to gain clarity of the USA situation.

It is my understanding that they had low, lower than ours, unemployment. House prices started to collapse and then unemployment rose accordingly.

It seems logical, if house prices decline, consumer sentiment drops and so people hire less.

Cheers

Yes they did have lower unemployment than Oz. 4.8% April 2008. 9.1% April 2009.

House prices began to fall sharply in Jan 2007.

Might have to look at the consumer sentiment index next. *gulp* trending down.

Australalia unemployment rate at 5% February 2011. What will it be in 12 months time?

Yes yes yes it is the perfect storm ...... we are the USA. Sell sell sell and quickly.

 

[trainspotter]

Whats this then? A chance of more easy credit if rates go down? Oh oh !

THE Reserve Bank may start cutting interest rates by mid-year if Australia's economy outside the mining sector does not improve, says Morgan Stanley Smith Barney investment strategy head Malcolm Wood.

Read more: http://www.news.com.au/money/intere...ne/story-e6frfmn0-1226029863080#ixzz0jXxS9dSP

A mining executive on the RBA Board??? Noooooooooooooooooooooooooo way !

A SENIOR mining industry executive, Catherine Tanna, will be appointed to one of two Reserve bank board vacancies today.

It is understood the Gillard Government wants the central bank to have stronger ties with the resource sector, now driving Australia's export prosperity, and with regional Australia.

http://www.adelaidenow.com.au/busin...-australia-board/story-e6frede3-1226030021564

 

[c-unit]

Swan showed how spineless he is by getting rid of McKibbon.

 

[satanoperca]

Yes yes yes it is the perfect storm ...... we are the USA. Sell sell sell and quickly.

So dramatic TH, but thanks for the response anyhow.

I was just curious between the relationship of house prices and unemployment. I was always of the belief that unemployment went up and house prices went down, but it would seem that in the US, it was the opposite.

I'm not saying that we are the US or will follow in the same foot steps.

On another note, I think TH you will find the banks have once again increased their LVR's up to 95% and are desperately trying to give money away at the moment.

On the IR subject, it would seem quite logical the RBA might decrease IR's to take a little wind out of the $AU. We will just have to wait and see.

Cheers

 

[Peak Debt]

Generally number 1 - you need a trigger to cause house prices to fall significantly. 2 will be an effect of 1 occuring. A period of stagnant growth or small declines in prices wont change unemployement significantly - perhaps some construction workers might not work every day of the year but they'll hardly become unemployed, most are booked out solidly right now.

I'm not sure you need a trigger, prices can collapse under their own weight as explained here ... Australian House Price Crash ... and if they do collapse there will be a lot of pain for Australians

If you have a trigger like large unemployment rises or massive oversupply then you'll see a house price fall. Looks like we may be stagnating now, or at least not growing at the rates we've been used to in recent days but this does not equal to a market crash. The property market goes through this sort of period all the time. If prices are stagnant and we get a large trigger then it'll be 'look out below'.

Triggers like that can certainly amplify the crash and bring it forward but a crash is certain whatever happens due to the scale of the bubble

 

[explod]

And of course the growing unnaffordability of property could itself be a contributor perhaps.

In an estate raised over the last five years near to where I live 5% are occupied by tradies and their families. The slowdown has meant they are getting a lot less work so with little margin, tip overs can perhaps come from many angles.

A friend who has a low budget removal business paints a bad anecdotal picture. We shall see. The ending quarterly figures could be interesting one suspects.

Just

 

[trainspotter]

Too late. Certain areas that I have posted several pages ago have dropped by 40% on their price structure. Other areas are still continuing to increase steadily.

Even if prices do drop 40% what then? Here is an interesting article:-

A 40 per cent tumble in house prices and a home loan default rate of 8 per cent would be “manageable” for the nation’s banks and mortgage insurers, Fitch Ratings says.

Commonwealth Bank, which did its own stress test, said last month that under a “high-stress scenario,” with interest rates at 14 per cent, unemployment at 10 per cent and property values down 30 per cent, it would see losses of $740 million, or 0.2 per cent of its total book, not including additional insured losses.

http://www.smh.com.au/business/banks-pass-house-price-stress-test-20101013-16jlf.html

We will have to wait and see for this wholesale destruction of property values in OZ to become crystalline. China downturn? Massive unemployment? Global meltdown? Many triggers and all are possible but unlikely IMO