The future of Australian property prices

Might need to refresh your collective memories me thinks.

http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/bankruptcy-%3

The Australian Taxation Office (ATO) may keep your tax refund and offset it against any debt you owe the Commonwealth (eg ATO, Child Support Agency).

Nothing wrong with Bankruptcy people did it in the 80 and moved in to a caravan at some ones place, once House prices start to tumble there will be no point in owning a home and if you are b/rupt just sit out both by the time the bottom is reached in housing tmarket the bank will have long forgotten about your problem.
We have gone from a 2 speed economy to multi speed so the rules are out the window until some direction is found.

Glen48 said:

Nothing wrong with Bankruptcy people did it in the 80 and moved in to a caravan at some ones place, once House prices start to tumble there will be no point in owning a home and if you are b/rupt just sit out both by the time the bottom is reached in housing tmarket the bank will have long forgotten about your problem.
We have gone from a 2 speed economy to multi speed so the rules are out the window until some direction is found.

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Ive read some rubbish in my time but this is top of the pile.

tech/a said:

Ive read some rubbish in my time but this is top of the pile.

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It did happen and I know of many cases back then too. And for the now, a mate who is a removalist speaks of some heartbreaking walk outs in the Mornington area.

Rubbish is however an interesting if not revealing description of it.

On top of the pile in this thread's a big call too

I'm still laughing at the defeatist attitude of decalaring yourself bankrupt. It aint as easy as it was in the 80's. Rules have changed.

Surely if your home is on the line you guys/gals/whatever would TRADE your way out of it.

Another thing ... most of the homes would be held in JOINT NAMES ie husband and wife, boy and girl , partner and partner, whatever, meaning BOTH are responsible for the home mortgage as BOTH Names are on the title which means BOTH people are responsible for the debt.

Bankruptcy is not the answer. Having an exit strategy is the golden rule. How about paying your mortgage in advance so that when times are tough you have the ability to redraw on the facility? Or what about going to the bank and explaining the situation and seeing if debt consolidation or term extensions can be agreed to?? Could you not possibly sell some assets (cars, boats, shares) to assist? What about selling the house ??? OMFG ......... Multitudes of possibles.

If you honestly were placed in this situation would you not have seen the train smash coming a LOT earlier?? As in the mortgage needs to be paid ........ DERRRRRRRRRRRR! Why would you let it go so far to have to go to bankruptcy? If you were on a stock and you put a large chunk of money on it to win and it starts sliding backwards faster than a speeding bullet do you hold onto this burning asset?

NOPE ......... declare yaself bankrupt. That's the way

P.S. How is silver going now?? Let me tell you - Silver has now lost 30 per cent this week. Spot silver fell yesterday as much as 11 per cent to a six-week low of $34.58 an ounce. The metal is also heading for its biggest weekly loss since at least 1983.

explod said:

It did happen and I know of many cases back then too. And for the now, a mate who is a removalist speaks of some heartbreaking walk outs in the Mornington area.

Rubbish is however an interesting if not revealing description of it.

On top of the pile in this thread's a big call too

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I have family and friends that have gone bankrupt. Worst idea ever in this country imo (I'm self employed).
It would never happen on the scale it did in the US in Australia. Simply because you become so toxic after pulling the pin here.
Might be ok for low wage earners that managed to get a loan.

trainspotter said:

P.S. How is silver going now?? Let me tell you - Silver has now lost 30 per cent this week. Spot silver fell yesterday as much as 11 per cent to a six-week low of $34.58 an ounce. The metal is also heading for its biggest weekly loss since at least 1983.

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And yet it is still 100% YOY

If you play with silver you get used to this sort of thing. This ain't over but please do hang on for the ride, you will need too. :

"Yes we may see more selling by those FHB in Australia but it's not the precurser to the same crash in the US. In the US you could walk away from your debt - that is the key difference and why they can't be directly compared."

Politely disagree. Not sure if the recourse v non-recourse debate mentioned this but most states in America are full-recourse. About 20 aren't. The list of non-recourse states is:

Alaska
Arizona
Arkansas
California
Colorado
District of Columbia (Washington DC)
Georgia
Hawaii
Idaho
Mississippi
Missouri
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment
New Hampshire
Oregon
Tennessee
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
Virginia
Washington
West Virginia

Notice how Florida, one of the epicentres of the US house price crash, is a full recourse state. I think Florida is an excellent comparison of what could happen in a state like Queensland.

I saw one property for sale on the Gold Coast that had dropped from $1.8m to $1.4m (a 24% drop) and even then the rental yield (before interest payments on mortgage) was a ridiculously low 2.4%. I doubt even the cashed-up Chinese investors are looking for negatively-geared, negative capital growth investments!?!

Queensland is in a recession (although the figures won't be out on that for a few months yet). I spent six weeks recently. Brisbane was quiet, although it had been flooded a few weeks earlier. Mooloolaba on the Sunshine Coast was like a ghost town. There was just no-one around. Cairns was dead too. The hotel I stayed at was excited that they were 30% full, after getting down to as little as 8%. And that's before the Japanese, who represent 20% of Queensland international tourists, had their disasters.

Should point out that I had a great time in Queensland, helped considerably by the massive discounting going on amongst the tourism operators. Good time to visit Queensland (and help their economy too).

I have since read that the median price drop in Queensland in the March quarter was 4.6%. That's an annual rate of 18.4%!!!!! They sure better hope it turns round soon. The thing about even a small drop, as was the case outside WA and QLD, is that people aren't having this magical equity appearing in their home, and therefore they aren't withdrawing that equity to buy second cars, boats, holiday homes (etc etc), and therefore the economy outside mining, especially retail, is struggling.

I think the entire Western world has been living this fantasy of getting rich by selling homes back and forth to each other, then withdrawing the equity from the rapidly appreciating properties, in order to maintain millionaire lifestyles. Now that this equity isn't booming, and in some cases is even shrinking, Australia's economy is about to be exposed as a big mine for China with little else.

It's kind of like Britain, under the Blair/Brown so-called boom years. Every single industry there shrunk (ie manufacturing, mining, farming, fishing), except for Finance, Insurance and Real Estate. It became a "FIRE" economy. But the massive boom of those three sectors surpassed the losses in all other sectors and so everyone felt rich. Then the GFC hit and those three sectors got hit hard. Now we've seen massive deficit reductions in the UK which were the only way of ensuring interest rates didn't explode and their bonds weren't reduced to junk status. A very similar thing happened in Ireland. The same thing could happen here if mining goes under.

I should mention at this point that I had invested some of my portfolio in silver ETF and was dismayed by the recent price crash. I was sitting on an 18-month 110% profit but now it is only an 80% profit. Bugger. The real reason I am mentioning this is because did anyone else notice that all the other commodities, including Australia's biggest exports, dropped too? Coal, oil, iron ore, copper all dropped. Its all to do with the liquidity leaving the system, and the end of money printing in the US and China (in order to reign in inflation), but that's for another thread on this forum.

Couple of anecdotes. Mate in Whyalla, a supposedly booming mining town, couldn't move interstate because he can't sell his three properties there. If he'd drop the price they'd sell, but he's resisting, claiming thats what they're worth. I am still not sure how something can be worth a certain amount, if no-one is willing to buy it at that price? Bizarre.

And a friend in Perth claims he can't sell either. He got in early on a big development a few years ago. Now other parts of the development are opening up, there are identical properties being built just down the road with brand new homes and more incentives for buyers, like cash bonuses and mod-cons like r/c air con and italian kitchen/bathroom fittings. These new places are selling for less than my mate bought his for and much less than he wants for his slightly-older, less flashy home. Ain't going to happen.

As for me, I live in Adelaide and am saving a deposit for my first home. I don't want an investment, I just want my own place (although currently only pay 12% of my income on rent). I had been told that I should leverage up and buy immediately, because house prices would increase faster than I could save. To me that just seemed insane, and the recent median price drops seem to validate that insanity.

When I looked at the real estate pages I used to be shocked at the ridiculous prices being asked. Now, when I look, a lot more properties seem a lot more reasonable in their asking prices. And there is hell of a lot more properties out there to choose from now. Gonna give it a couple more years though.

And if you want to see a housing crash in Australia outside of QLD, just check out the New Port development at Port Adelaide. Shocking price drops. They're million dollar apartments in a rough depressed neighbourhoood.

Any thoughts on QLD/Florida?

All I can really comment on is what I have seen first hand by looking at houses in a particular suburb in Brisbane and for the price range I have been searching with there has been a dramatic increase in the number of houses available. Approx 8 months ago there might have been 3-4 maybe, now it's more like 15.

I'm still below the 20% deposit i'm aiming for but i'm hoping that prices will pull back a bit further by the end of the year i'm ready to buy.

"The clearance rate this weekend is 60 per cent from the 546 results reported. Of those a total of 328 sold and 218 were passed in, 128 of those on a vendors bid.

This weekend last year saw a total of 887 auctions and a clearance rate of 76 per cent.

The REIV expects around 600 auctions next weekend and then 800 on the following weekend
"

Don't know what this means.

Prices down a few percent last quarter and clearance rates not moving up.

Anyone have any ideas?

Keeping it real for the true believers.

Sunshine and cocopops

MW

http://www.dailytelegraph.com.au/ne...cks-middle-class/story-e6frevp9-1226053615460

Typical media beat up, but the number of news stories talking about the over-extended getting into trouble is increasing. I don't know what that means. It is certainly a change from the boom time articles of the renovate and flip crowd, "I painted the kitchen and now I am a millionaire".

trainspotter said:

I'm still laughing at the defeatist attitude of decalaring yourself bankrupt. It aint as easy as it was in the 80's. Rules have changed.

Surely if your home is on the line you guys/gals/whatever would TRADE your way out of it.

Another thing ... most of the homes would be held in JOINT NAMES ie husband and wife, boy and girl , partner and partner, whatever, meaning BOTH are responsible for the home mortgage as BOTH Names are on the title which means BOTH people are responsible for the debt.

Bankruptcy is not the answer. Having an exit strategy is the golden rule. How about paying your mortgage in advance so that when times are tough you have the ability to redraw on the facility? Or what about going to the bank and explaining the situation and seeing if debt consolidation or term extensions can be agreed to?? Could you not possibly sell some assets (cars, boats, shares) to assist? What about selling the house ??? OMFG ......... Multitudes of possibles.

If you honestly were placed in this situation would you not have seen the train smash coming a LOT earlier?? As in the mortgage needs to be paid ........ DERRRRRRRRRRRR! Why would you let it go so far to have to go to bankruptcy? If you were on a stock and you put a large chunk of money on it to win and it starts sliding backwards faster than a speeding bullet do you hold onto this burning asset?

NOPE ......... declare yaself bankrupt. That's the way

P.S. How is silver going now?? Let me tell you - Silver has now lost 30 per cent this week. Spot silver fell yesterday as much as 11 per cent to a six-week low of $34.58 an ounce. The metal is also heading for its biggest weekly loss since at least 1983.

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Do you not know anyone who has gone through any sort of insolvency? It happens for various reasons. Poor investment decisions, redundancy, gambling problem, spending problems, small business failure, natural disaster, marriage breakdown, mental health problems. Any combination of these issues to lead to having a solvency issue. And often, bankruptcy is the least painful or only answer.

If house prices experience a decent fall in Australia it should be expected that a large number of individuals will be forced into bankruptcy or personal debt agreements. What about all those 'investors' that leverage off existing property over and over using equity that comes about from seemingly neverending capital growth of 10-15% pa? All it would take is to lose your job, interest rate rises, can't find tenants etc. and all of a sudden the debt can't be serviced.

In Las Vegas 85% of homeowners with a mortgage are in negative equity. In that situation, if you are well under water and can't service the debt even at a low rate..you would be better off as a bankrupt. It's not necessarily a cop out, the bank shouldn't have extended that much credit in the first place, and, when they did, they would have known there's a chance it won't be repaid in full.

I'm not sure of the point of my post...maybe trying to point out that bankruptcy is a reality of our financial system, and with so much easy credit at the moment, someone who ends up insolvent shouldn't be necessarily looked down upon. There are a range of circumstances that can place an individual into a difficult financial situation.

Junior said:

Do you not know anyone who has gone through any sort of insolvency? It happens for various reasons. Poor investment decisions, redundancy, gambling problem, spending problems, small business failure, natural disaster, marriage breakdown, mental health problems. Any combination of these issues to lead to having a solvency issue. And often, bankruptcy is the least painful or only answer.

If house prices experience a decent fall in Australia it should be expected that a large number of individuals will be forced into bankruptcy or personal debt agreements. What about all those 'investors' that leverage off existing property over and over using equity that comes about from seemingly neverending capital growth of 10-15% pa? All it would take is to lose your job, interest rate rises, can't find tenants etc. and all of a sudden the debt can't be serviced.

In Las Vegas 85% of homeowners with a mortgage are in negative equity. In that situation, if you are well under water and can't service the debt even at a low rate..you would be better off as a bankrupt. It's not necessarily a cop out, the bank shouldn't have extended that much credit in the first place, and, when they did, they would have known there's a chance it won't be repaid in full.

I'm not sure of the point of my post...maybe trying to point out that bankruptcy is a reality of our financial system, and with so much easy credit at the moment, someone who ends up insolvent shouldn't be necessarily looked down upon. There are a range of circumstances that can place an individual into a difficult financial situation.

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Good post.

We are no longer in Fairy Land in my view and the Aussie dollars continued strength, among other things, is going to put a very big squeeze on jobs across the board in this Country.

And if the Guvmint think that the China story can continue at the recent level; and, that Japan can even afford to rebuild a lot of what has been lost, then I take it back, perhaps we are still in Fairy Land?

Read this today:

“Figures released last week by SQM Research revealed that residential listings for April 2011 rose by 14,035 to 370,638 nationally – a 3.9% increase from March 2011 and a 68.7% increase when compared to the same month (April) in 2010. This is an increase of 151,000 year-on-year.”

14,000 more homes for sale than one month ago!

151,000 more homes for sale than one year ago!

That means almost 5% more homes for sale per month, for the last 12 months!

Not sure what this means for the "housing shortage" in Australia?

Any thoughts on how this will/won't affect prices? While I remain bearish on house prices here, mainly because I'm saving a deposit for my first, I enjoy the often well-presented arguments of the bull brigade. Not just looking for confirmation bias.

He Greebly24

Thanks for the figures, it is very interesting.

I follow the property market quiet closely in my area (Sydney's Northern Beaches) and know that there is a huge portion of stock (most of it in the 1.4m+ bracket) that has been on the market for an extended period of time.

For whatever reason alot of vendors in these higher priced homes are unwilling to drop their asking price to meet the market. As a result some have been for sale for 12 - 24 months. I know one house that is going through its fourth auction campaign within 18 months and is now at a lower asking price that what it was purchased for 7 yrs ago.

So in regard to the increases you posted I think that a large portion is attributed to stock that simply has not been sold. New properties continue to be bought onto the market with some that are overpriced and they just add to the backlog.

Unfortunately when these vendors finally start adjusting their price to meet the market everyone else will be doing the same and they will still have trouble selling their house IMO.

Junior said:

I'm not sure of the point of my post...maybe trying to point out that bankruptcy is a reality of our financial system, and with so much easy credit at the moment, someone who ends up insolvent shouldn't be necessarily looked down upon. There are a range of circumstances that can place an individual into a difficult financial situation.

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Misinterpreted what I wrote. Not looking down on anyone. Previous posts from "other" ASFers were saying how easy it is to declare yourslef bankrupt instead of facing the music. The rules have changed. You are still liable for the debt. The bank/financier/loan shark will sell everything to recoup their debt. You are left with nothing. Banks take fixed and floating charges over your company as well as your assets. You cannot transfer funds/assets into the partner/wife/superior other/family prior to declaring bankruptcy either. ANY money you earn after the debt has been repaid (if there is a shortfall) will also be taken from you on a percentile ratio to repay funds outstanding.

The point of my post was that it is not that easy anymore to chuck your hands in the air and say "It is all to hard ..... I'm gonna walk". Nothing was mentioned from my quarter about "Poor investment decisions, redundancy, gambling problem, spending problems, small business failure, natural disaster, marriage breakdown, mental health problems."

P.S. Yes I do know several companies and individuals who have gone into receivership/bankruptcy. Not pleasant at all.

Once the depresion ends then look at buying a house as it is just starting you will have a long time to wait. What happens in USA happens here 5 years later, house prices started to tank 2007/08 + 5 depression hasn't started yet

Gonna be some good bargains coming up soon. "The time to buy is when blood is running in the streets," said Nathan Rothschild.

trainspotter said:

Gonna be some good bargains coming up soon. "The time to buy is when blood is running in the streets," said Nathan Rothschild.

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Yes, I wonder how much prices will drop over the next 1-2 years.

trainspotter said:

Gonna be some good bargains coming up soon. "The time to buy is when blood is running in the streets," said Nathan Rothschild.

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already is mate

deceased estate in a overloaded market landed on my porch... 28% OFF the current fallen median which is another 20%-30% below peak.

prime position.

the sellers needed to sell and bugger the pussyfooting around in a falling market.

blessem i say.

more to come up these parts....but hey.. i wouldnt get to carried away.........some sound like they waiting for the 50% overnight drops....

its all about being ready in the right situation...... some watch..... some dont.

for some it will never be the right moment.