The future of Australian property prices

[choofer]

There is allot of bearish sentiment around at the moment, but don't get too excited, property markets are still at very high price levels and not exactly "crashing" down in a traditional way.

The heat is leaving the markets but sadly if you look at the markets technically it looks more like a consolidation than a correction!

Real Estate is certainly set to have a flat nominal and negative real period and I will be watching for bargains on the way down, however most likely there are allot of people ahead in the queue willing to buy at higher prices than me!

LOL Wata a ripper

 

[trainspotter]

Totally agree with you, the housing market in Australia is a ponzi scheme that has gone on for far too long. Sometimes it’s hard to believe this ponzi kept going for as long as it did. It should have popped last time but a round of unprecedented stimulus forced a last gasp of air into the bubble.

All they did was kick the can down the road and now the collapse will be even worse. Posters on www.AustralianPropertyForum.com have been predicting this outcome for some time, and now the scale of this coming collapse will surprise the majority of commentators, in the same way the GFC surprised most economists.

Of course, there will be revisionists who will claim they predicted it all along but the truth is the majority of economists are blind optimists who couldn't see a coming train before it plows into them!

Awareness of the bubble is really seeping into the brains of the masses. IMO the biggest driver of house prices is sentiment, when consumers are confident they’ll bid up prices to crazy levels irrespective of fundamentals, but now the tides turning, panic is setting in and they’ll all run for the exits at the same time, especially the overleveraged speculators holding multiple “investment” properties.

I can smell the fear. It’s palpable on all the property forums where the desperate bulls and spruikers are frantically posting threads trying to disparage the bearish sentiment and message. For example...

APF threads - look how bearish the sentiment is right now

Well, I'm sorry bulls and spruikers but the party is over and you know it. No more endless capital gains, no more rents through the roof, no more easy credit, no more lo w interest rates, no more mass immigration. No more stimulus. Nothing left to keep in air in the bubble. The govt is out of ammo. The RBA wants the bubble to deflate. Bulls… you’re on your own.

If you sell now, you just might get out of this with your shirt!

PONZI PONZI SCARE DOOM CRASH PONZI LOSE YOUR SHIRT PARTY IS OVER PONZI SELLL PONZI

Man are you for real? Go and commit suicide now and avoid the rush for Chrissake. You sound just like all those people who lose money in shares. Henny Penny the sky is falling. What utter rubbish I have never read before in my life.

Yes yes yes the property train has slowed and in CERTAIN areas it has gone backwards. BIG DEAL !!! It has happened before and it will happen again. Too bad that Brisbane got wiped out with floods effecting property prices there. LOL.

March 2010 to March 2011 Capital Cities house prices have changed by ................ wait for it .......................... wait for it ................................ wait for it .....................

0.2%

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0

Whooopppeeeeeeeeeeeeeeeeeeeeee !

 

[trainspotter]

I have owned 9 houses over 30 yrs and only made money on 1 when the easy money came around one went no where for 10 yrs and cost me $1500 a yr in rates etc, it was on the beach.

Hahaha hhah aha ha ahhaaaaaaaaa A house every 3.33333 years???? Who the hell does that unless you are flipping them? Or did you buy a house for every ex wife?

In case anyone is interested there is more to property then RESIDENTIAL houses and mortgage stress. Anyone here own COMMERCIAL property? Like the big warehouse type with a secure term lease agreement to some multi national company ??? Hmmmmmmm .... I can smell the money pouring in .......

 

[medicowallet]

Real Estate is certainly set to have a flat nominal and negative real period and I will be watching for bargains on the way down, however most likely there are allot of people ahead in the queue willing to buy at higher prices than me!

With what money dear liza?

There's a crash on the horizon, dear Jockey, dear Jockey,
There's a crash on the horizon, dear Jockey, a crash
Then fix it, Ken Henry, Ken Henry, Ken Henry,
Then fix it, Ken Henry, Ken Henry, fix it.
With what shall I fix it, dear Jockey, dear Jockey?
With what shall I fix it, dear Jockey, with what?
With a Stim-u-lus package, Ken Henry, Ken Henry,
With a Stim-u-lus package, Ken Henry, FIX IT!,
But we've done that already, dear Jockey, dear Jockey,
But we've done that already, dear Jockey, been there,

Then cut Interest rates, Glenn Stevens, Glenn Stevens,
Then cut Interest rates, Glenn Stevens, cut them.
But Inflation's a bitch, dear Jockey, dear Jockey
But inflation's a bitch, dear Jockey, a bitch
Why is that?, Glenn Stevens, Glenn Stevens, Glenn Stevens
Why is that?, Glenn Steven, Why is that the case?
Stop spending you morons, you morons, you morons,
Stop spending you morons, and then I just might.

Then increase our employment, Ms Gillard, Ms Gillard
Then increase our employment, Ms Gillard, help us.
But how can I do that dear Jockey, dear Jockey
But how can I do that dear Jockey, help me
With super fast downloads Ms Gillard, Ms Gillard
With super fast downloads Ms Gillard, that's how!
But that's just for pr0n dear Jockey, dear Jockey,
And for extra consumption and more G-S-T,

Then improve all our incomes Mr Swann, Mr Swann,
Then improve all our incomes Mr Swann, help us.
I've got some ideas, Mr Jockey, Mr Jockey,
I've got some ideas Mr Jockey, here goes!
A tax on C-O-2, C-O-2, C-O-2
A tax on C-O-2, improves revenue,
But that will cost jobs, Mr Swann, Mr Swann
But that will cost jobs Mr Swann, maybe yours too,
Then let's tax the miners Mr Jockey Mr Jockey,
Then let's tax the miners Mr Jockey, how's that!
That's a lot of new taxes Mr Swann, Mr Swann
That's a lot of new taxes Mr Swann, a lot
Then we'll call it a levy a levy a levy,
Then we'll call it a levy, wink, wink, wink nod nod!

But that still doesn't help me Mr Swann, Mr Swann,
But that still doesn't help me Mr Swan does it!
Then draw off home equity, home equity, home equity,
Then draw off home equity, home equity, try it!
But there's a crash on the horizon, Mr Swann, Mr Swann,
There's a crash on the horizon, Mr Swann, a crash,

Well I've got no ideas Mr Jockey, Mr Jockey,
I have no ideas Mr Jockey, how's that,
Well who is in charge there, Mr Swann, Mr Swann,
Well who is in charge there, Mr Swann, who is?
Why it's Bob Brown, Rob Oakshott and of course Tony Windsor,
It's Bob Brown, Rob Oakhott and Tony Wind-sor too,
Then Shoot me Mr Swann, Mr Swann, Mr Swann,
Then shoot me Mr Swann, oh what can I do!
But we have no more guns John Howard took them toooooo!

 

[mazzatelli]

In case anyone is interested there is more to property then RESIDENTIAL houses and mortgage stress. Anyone here own COMMERCIAL property? Like the big warehouse type with a secure term lease agreement to some multi national company ??? Hmmmmmmm .... I can smell the money pouring in .......

Yeah, best when the type of business in it doesn't have much scope to relocate

 

[trainspotter]

Yeah, best when the type of business in it doesn't have much scope to move

Exclamation mark ! Keep them entrenched and they pay forever. Or construct the facility to be specific to their industry. I love it when they advertise their location which brands people to your property. Makes it harder for them to move as well.

 

[Glen48]

I will be watching for bargains on the way down, however most likely there are allot of people ahead in the queue willing to buy at higher prices than me!

Good move as long as you know where the bottom is it is still coming in USA after 4 years and only just starting here now.

 

[TabJockey]

This thread attracts all types. PermaBulls and PermaBears abound plus a few travelling minstrels to mix it up.

The US situation is not something that you can point at and say "that's where we are headed".

Australian residential property is overvalued on almost any metric, but you have to remember why it is so. Property is not some electronic financial contract out there in the ether with a certain investment profile, property is something that 95% of the population wants to own because they need a place to live.

I am going to come out strong here, for the record:

TabJockey predicts that Australian residential property will not have a decline of greater than 15% from peak to trough in the next two years

That's my prediction and we will see if it gives you wallies something to laugh over in 6 months, but its good to take a solid viewpoint, not a wishy washy one or an apocalyptic one.

 

[mazzatelli]

Exclamation mark ! Keep them entrenched and they pay forever. Or construct the facility to be specific to their industry. I love it when they advertise their location which brands people to your property. Makes it harder for them to move as well.

Agreed. Heavy Machinery, close to their suppliers of materials (raw or processed), close to their vendors - ease of distribution etc. Because most of my family have businesses that operate from factories/warehouses, I have a bit of insight. However I am still always surprised by the number of factories, that while from the outside, look dead - in fact are generating a turnover, most can only dream of.

Like you and tech/a say, the opportunities are there.

 

[medicowallet]

This thread attracts all types. PermaBulls and PermaBears abound plus a few travelling minstrels to mix it up.

The US situation is not something that you can point at and say "that's where we are headed".

Australian residential property is overvalued on almost any metric, but you have to remember why it is so. Property is not some electronic financial contract out there in the ether with a certain investment profile, property is something that 95% of the population wants to own because they need a place to live.

I am going to come out strong here, for the record:

TabJockey predicts that Australian residential property will not have a decline of greater than 15% from peak to trough in the next two years

That's my prediction and we will see if it gives you wallies something to laugh over in 6 months, but its good to take a solid viewpoint, not a wishy washy one or an apocalyptic one.

good one!!

I PREDICT 20% falls within the next 5 years.

This is likely to be in real terms, but may be loss to inflation. ie I expect 20% loss in real terms.
(but hope they keep rising )

 

[trainspotter]

Here is a scenario for commercial sheds that can turn $185,000 into a nice little earner.

Purchase 2000m2 industrial land for 300k. Add settle costs of 15k. Build 2 x 325m2 sheds for 150k. Add concrete and bitumen for 55k. Add plumbing and electrical for 30k. Add fencing and internal improvements for another 20k. Total spend $570,000.

Rent sheds for $100m2 + all outgoings = $65,000 income

$570,000 - $185,000 capital introduction = Loan amount of $385,000 at 7.75% IR = $29,837.50 per annum. LVR = 67.54%

Upon completion valuation once leases are in place is approx 650k. 80k more equity

Positively geared to the tune of $35,000 per year and 18.9% RoR.

Nope ......... no money in property.

(The figures are based on a recent development I have completed in my area but DYOR)

 

[Glen48]

Come back in 5 yrs with an up date after the depression is getting under way and the tenants have closed shop.

 

[medicowallet]

Here is a scenario for commercial sheds that can turn $185,000 into a nice little earner.

Purchase 2000m2 industrial land for 300k. Add settle costs of 15k. Build 2 x 325m2 sheds for 150k. Add concrete and bitumen for 55k. Add plumbing and electrical for 30k. Add fencing and internal improvements for another 20k. Total spend $570,000.

Rent sheds for $100m2 + all outgoings = $65,000 income

$570,000 - $185,000 capital introduction = Loan amount of $385,000 at 7.75% IR = $29,837.50 per annum. LVR = 67.54%

Upon completion valuation once leases are in place is approx 650k. 80k more equity

Positively geared to the tune of $35,000 per year and 18.9% RoR.

Nope ......... no money in property.

(The figures are based on a recent development I have completed in my area but DYOR)

Assumptions

1. The bank will lend the money
2. There are people leasing your sheds
3. There is capital growth.

Yep, there may be no money in property.


Just like you would recall from the early 90s hey Trainspotter????

 

[mazzatelli]

Assumptions

1. The bank will lend the money
2. There are people leasing your sheds
3. There is capital growth.

Yep, there may be no money in property.

Going by your general criteria, might as well not open a business either. No money in it.

 

[trainspotter]

Assumptions

1. The bank will lend the money
2. There are people leasing your sheds
3. There is capital growth.

Yep, there may be no money in property.

Just like you would recall from the early 90s hey Trainspotter????

1) Any of the Big 4 would gobble this one up as it is a walk up start. Ticks all the boxes.
2) You would not build it UNLESS you had the tenants in place FIRST.
3) Why does it need capital growth when you are taking 35k in the hand / annum?

I recall in February 1991 I bought a block of land for 20k and built a house for 50k on it and interest rates were at 14.25%. I was earning 25k a year as well. Man was that was a good deal. I just wish I had bought more

 

[medicowallet]

1) Any of the Big 4 would gobble this one up as it is a walk up start. Ticks all the boxes.
2) You would not build it UNLESS you had the tenants in place FIRST.
3) Why does it need capital growth when you are taking 35k in the hand / annum?

I recall in February 1991 I bought a block of land for 20k and built a house for 50k on it and interest rates were at 14.25%. I was earning 25k a year as well. Man was that was a good deal. I just wish I had bought more

1. At the moment yes, in the next few years, who knows. It depends upon how geared your portfolio is (ie how much you have lost over that time)

2. So you make 2 assumptions, first that you can get tennants, well in times of negative growth in industry, that is really really hard. Secondly you assume that the business remains viable.

3. You said that you got capital growth from having leases in place, not me.

"Past returns are no guarantee of future performance, and investment returns of less than one year should not be relied upon as any guide to future performance."

PS Probably should have purchased 2 of them for the same price in 1992 hey?

 

[medicowallet]

Going by your general criteria, might as well not open a business either. No money in it.

I would be reluctant to open up a business at the moment.

Some cowboys might, but I have seen many come and go.

Of course there are options/niches, but commercial property is not a good option for many because, as you may not have heard, the non-mining economy is in a spot of bother.

 

[mazzatelli]

Of course there are options/niches, but commercial property is not a good option for many because, as you may not have heard, the non-mining economy is in a spot of bother.

No, its not a good option for many, because most don't know what they are talking about.

 

[trainspotter]

1. At the moment yes, in the next few years, who knows. It depends upon how geared your portfolio is (ie how much you have lost over that time)

2. So you make 2 assumptions, first that you can get tennants, well in times of negative growth in industry, that is really really hard. Secondly you assume that the business remains viable.

3. You said that you got capital growth from having leases in place, not me.

"Past returns are no guarantee of future performance, and investment returns of less than one year should not be relied upon as any guide to future performance."

PS Probably should have purchased 2 of them for the same price in 1992 hey?

1) Crystal ball gazing is not my thing. I prefer the glass is half full approach myself. Banks could also go the other way and increase lending to prop up their profit making core business of lending money and paying divvys to shareholders. DOH !

2) You would not rent them out to some fledgling business in the first place. Read my earlier post about multi national companies ......... manufacturing companies are full steam ahead or what about mining companies and the peripheral business's that tool up to service this industry? Investment at 173 billion eh? http://www.theaustralian.com.au/bus...nt-hitting-173bn/story-e6frg8zx-1226063716021

3) Capital growth due to solid leases in place for 5 x 5 terms which makes it attractive for investors looking for income. But they don't exist in your world so that's OK with me.

"You cannot cross a chasm in two jumps" and why the hell are you quoting Gross Perfomance statements?? If you have no historical data how do you forecast future profit? What do you base your assumptions on then? A goats entrails?

PS. Funnily enough the subdivision doubled in price and the house price stayed the same in a 12 month period thereafter. It wasnt until 1994 that building costs started to escalate as it turned around again.

PPS. Retail is floundering ... manufacturing and engineering is still doing well.

 

[trainspotter]

The Australian Bureau of Statistics (ABS) released data on the value of construction work completed across Australia over the March 2011 quarter. The total value of construction work increased by 0.7% and year on year the value of construction increased by 4.9%. Engineering work has been the standout performer, up 4.6% for the quarter and 15.5% year on year. Building construction (which is broken down into residential and non-residential) has lagged considerably, down -3.4% for the quarter and -4.8% year on year. Non residential building was particularly weak, down -10.2% over the quarter and -16.6% year on year. Residential building increased by 1.9% over the quarter and year on year it rose by 5.4%. Overall the data shows that engineering construction is driving activity with non-residential building activity in particular, extremely weak.

Thanks to RP Data for the info.