The future of Australian property prices

[Mofra]

I made no mention of the FHB market. It was a simple observation using the graph.

It sounded like it was implied as median house prices are being discussed in conjunction with median salary and no proceeds of sale (released equity) used to finance.

 

[Mofra]

Thought this was an interesting article, shows that irrespective of asset class buying poorly is still buying poorly:

http://www.theage.com.au/business/w...have-an-unplanned-downside-20100207-nktw.html

When buying off the plan turns out to have an unplanned downside MARIKA DOBBIN

Beware the many pitfalls that come with purchasing property before it is built.

YOU'D never buy a pair of expensive jeans without trying them on first. After all, the cut could be unflattering and sizes are not what they used to be.

But somehow, property investors feel comfortable risking a lot more than the cost of designer clothes when they buy an apartment without having stepped inside.

 

[tech/a]

The future of Australian property prices

Where there is demand prices will continue to maintain or rise.
Where demand is weak prices will continue to drop.
Where demand dries up prices will fall dramatically.

Increase in interest rates will dampen demand and price rises.
Accelerate weakening in prices where demand is slow or dries up.
Increase in stimulas (packages) will have the opposite effect.
Buy and hold will remain flat for investors.
Developement will remain a viable profit source to satisfy demand.
Follow infastructure.

Austraila does not have a surplus of supply in housing.

 

[satanoperca]

Australia does not have a surplus of supply in housing.

Weren't building approvals up 38% last year. If that be the case, no surplus now but maybe later in the year. A building boom is underway.

Cheers

 

[tech/a]

How does an increase in approvals relate to an increase in supply.

The figures quoted relate to a 38% increase (if thats right) over last years/months approvals.

These approvals are attempting to satisfy demand.

Every year we have a deficit in housing relative to demand for occupancy across the board.
In some areas there is over supply (limited--some inner city high density) and in others dramatic under supply.
5000 allotments were released 12 mths ago South of Adelaide all sold in months.

You wont be seeing a glut in our lifetime.

 

[Trembling Hand]

You wont be seeing a glut in our lifetime.

Is supply/demand related to population or credit though?

I too think that if we have increasing demand through population vs restricted supply that makes sense.

But there is a good argument that that doesn't matter on a leveraged game, which new property property is. The deciding factor is credit supply.

Something that may not come into most thinking? (See discussion about the colour of swans or something like that )

 

[tech/a]

Is supply/demand related to population or credit though?

I too think that if we have increasing demand through population vs restricted supply that makes sense.

But there is a good argument that that doesn't matter on a leveraged game, which new property property is. The deciding factor is credit supply.

Something that may not come into most thinking? (See discussion about the colour of swans or something like that )

Yes true.
Demand population growth and while this will slow possibly ---supply will indeed be limited to some extent by available credit and terms of that credit.

Developement in my view is the focus for those wishing to make a few $$s from property with minimum risk---if you have enough capital and accumin.

 

[satanoperca]

How does an increase in approvals relate to an increase in supply.

Increase in approvals for builds would mean an increase in supply. Whether this supply will meet demand I did not say, just we will have to what until later in the year.

Credit is the key to house prices, but my opinion may be bias.

Cheers

 

[Dowdy]

Increase in interest rates will dampen demand and price rises.

A house will only sell as much as someone can afford to pay off.

How would prices rise if people will have a harder time paying it off?

Show me a graph where interest rate have risen and it's lead to a price rise in houses?

 

[tech/a]

Increase in approvals for builds would mean an increase in supply. Whether this supply will meet demand I did not say, just we will have to what until later in the year.

Credit is the key to house prices, but my opinion may be bias.

Cheers

Yes sorry, of course there will be an increase in supply.
But not a guarentee of an over supply or a meeting of demand.

 

[Trembling Hand]

Show me a graph where interest rate have risen and it's lead to a price rise in houses?

At a guess from early 2002 to 2008

 

[tech/a]

At a guess from early 2002 to 2008

Increase in interest rates will dampen demand and price rises.

Read AND dampen price rises at least initially.
Increase in interst rates generally mark an increase in inflation which in turn add to the price of goods which in turn adds to the price of building which leads to increase in the price of housing.

If we get a good dose of inflation in the future you dont want to be a renter holding cash waiting for housing to fall through the floor.

 

[Beej]

I know it's looking in the rear-view mirror, but here is an interesting article summarising the performance of the residential housing market in Australia over the past decade, inlcuding price and volume stats: http://www.smartcompany.com.au/prop...-property-market-s-last-decade-in-review.html

Credit is the key to house prices, but my opinion may be bias.
Cheers

On this - credit is a *factor* yes, but without the underlying demand available credit will not be used up - no one holds a gun to people's heads and forces them to borrow as much as they possibly can to buy a house.

I don't think credit availability becomes a factor for house price in the upwards direction until basic demand causes people to make use of available credit. And in the downwards direction only when credit availability becomes a restriction; Ie people who can afford to and are happy to borrow larger amounts to get the "better" house cannot because the $$ are not available to them, despite easily meeting serviceability requirements - so they buy cheaper. Over time ( 1 year+) if this situation persists then the market may start to adjust down. Despite some mild tightening of lending criteria etc in Australia in the past 1-2 years, I don't see us as being anywhere near a serious credit rationing scenario at this stage that would switch us to the downwards price pressure situation. There seems to be plenty of money to go around, with raw demand seeming to be winning the price direction struggle once again.

Cheers,

Beej

 

[satanoperca]

If we get a good dose of inflation in the future you dont want to be a renter holding cash waiting for housing to fall through the floor.

This is the bit that makes it tricky. Will govnuts trying erode the debt away with inflation.

If inflation goes up, property debt will be king as long as you can service it as IR's will follow and savings will be eroded.

Strange world we live in.

Cheers

 

[Aussiejeff]

After the new immigration laws come into effect (essentially cutting the intake of "unwanted" skills such as hairdressers, cooks, accountants etc and replacing these with doctors, engineers, scientists etc) I expect the new mix of much wealthier immigrants will significantly pump up house prices across Australia over coming years.

Mr KRudd WILL be pleased!

 

[satanoperca]

I know it's looking in the rear-view mirror, but here is an interesting article summarising the performance of the residential housing market in Australia over the past decade, inlcuding price and volume stats: http://www.smartcompany.com.au/prop...-property-market-s-last-decade-in-review.html

Written by Tim Lawless is the Director of Property Research at RP Data. No vested interest in manipulating stats possible with RPdata.

On this - credit is a *factor* yes, but without the underlying demand available credit will not be used up - no one holds a gun to people's heads and forces them to borrow as much as they possibly can to buy a house.

They don’t need a gun, people are by nature greedy, they, the masses will take the maximum they can get as a rough generalisation. Remove easy and cheap credit and see how prices hold old.
The FHBG is a perfect example of how a little leveraged up can inflate prices. Looking forward to the tripling of the FBHG coming soon.
The most valid statement today was from Tech/A. There is money to be made developing property, value adding to it. This I totally agree with.
Cheers

 

[Calliope]

The tipping point is not far off.

Yet on Wednesday one of the unpalatable and less obvious side-effects of Australia's inflating house prices - now deemed by the Economist magazine to be overvalued by 50 per cent - became clearer. The rise in the number of Australian households who are in so much difficulty with their mortgage repayments that they are facing selling up - or being sold up - is continuing its ascent beyond the 200,000 mark reached in November. By this year's end, some 270,000 Australian households will be in severe mortgage stress.

Defaults on mortgage repayments will rise to 35,500 by December - considerably above the present yearly total of about 28,000 households.

All in all, the report produced by the Sydney consultants Fujitsu predicts that by the end of this year some 637,000 Australian households will be under some form of mortgage stress.

No one knows how Australia's housing asset bubble will end. But new American research points to an unexpected and unnerving phenomenon for banks caused by a wave of more belligerent borrowers caught in a property bubble burst.

http://www.smh.com.au/world/stressed-out-waiting-for-the-bubble-to-burst-20100212-nxjf.html

 

[Bushman]

Prof. Steven Keen has lost the well-publicised bet that house prices in Australia would be higher than their September 2008 level a year later. So now he has to walk from Sydney to Mt. Kosciousko.

He has created a web-site with some interesting housing stats. Second part of his bet is a 40% fall over a 10-15 year period.

www.keenwalk.com.au

 

[satanoperca]

He might have lost the fight but not the war.

It is conceivable that prices could fall up to 40% given their historic rise last year and the momentum to push them higher this year.

So at the end of the year, if they rose 10% a fall of 30-40% would only put prices back to 2007-2008 levels. No biggy really.

Cheers

 

[ROE]

He might have lost the fight but not the war.

It is conceivable that prices could fall up to 40% given their historic rise last year and the momentum to push them higher this year.

So at the end of the year, if they rose 10% a fall of 30-40% would only put prices back to 2007-2008 levels. No biggy really.

Cheers

I cant predict house price or stock price dont know where it end up but
a rise of 30% does not equate to a fall of 30% and you break even

to keep it simple
stock/house decline 50% you need to gain 100% for you to break even.