The future of Australian property prices

[IB12]

Residential property prices aren't going anywhere in the next 1-3 years.
I can only see flat or negative growth.
Interest rates are heading to 7-10% in the next 1-5 years.
First home owners who bought into Rudd's stimulus should be mad and rightly so, as they have been duped into buying at artificially inflated prices.

According to recent numbers, bank lending growth has been the slowest in 30 years.

 

[Mrs P]

Residential property prices aren't going anywhere in the next 1-3 years.
I can only see flat or negative growth.
Interest rates are heading to 7-10% in the next 1-5 years.
First home owners who bought into Rudd's stimulus should be mad and rightly so, as they have been duped into buying at artificially inflated prices.

According to recent numbers, bank lending growth has been the slowest in 30 years.

I could not agree more....
I have just gained PR status and moved here with family 4 years ago on a business Visa ( now looking for a new challenge as i have NO interest in continuing the business that gained us the Visa but thats another topic...)
We have rented since arriving, "Just In Case" we didn't get the visa.. also cos it took 3.5 years for my other half to get a job and now find ourselves with a bit of cash in the bank by way of a deposit.
However.... with a 3 bed "cupboard" here on the Northern Beaches costing around 1.4m and interest rates only heading (IMO) one way, we find ourselves caught between wanting to put down "roots" but NOT wanting to be pulled in by the RE agents blurb of "The beaches prices only ever go up..... you better get in now"



Gut instinct says sit tight for 12 mths or so and wait...

welcome others views on this

 

[explod]

I could not agree more....
I have just gained PR status and moved here with family 4 years ago on a business Visa ( now looking for a new challenge as i have NO interest in continuing the business that gained us the Visa but thats another topic...)
We have rented since arriving, "Just In Case" we didn't get the visa.. also cos it took 3.5 years for my other half to get a job and now find ourselves with a bit of cash in the bank by way of a deposit.
However.... with a 3 bed "cupboard" here on the Northern Beaches costing around 1.4m and interest rates only heading (IMO) one way, we find ourselves caught between wanting to put down "roots" but NOT wanting to be pulled in by the RE agents blurb of "The beaches prices only ever go up..... you better get in now"



Gut instinct says sit tight for 12 mths or so and wait...

welcome others views on this

Agree, and with our aussie dollar appreciating my view is that tourism will contine to deteriorate and exports under continued pressure will translate to increased unemployment, and as you say, add an interest rate rise,,, and yes.

Sit tight and watch.

 

[investorpaul]

However.... with a 3 bed "cupboard" here on the Northern Beaches costing around 1.4m and interest rates only heading (IMO) one way, we find ourselves caught between wanting to put down "roots" but NOT wanting to be pulled in by the RE agents blurb of "The beaches prices only ever go up..... you better get in now"

welcome others views on this

I live on the Northern Beaches too and have worked in real estate (sales and property development) for the past 4 years. Don't worry Im out of the industry now

Anyway what you say about Northern Beaches agents is true, they will be the last one to see the crash coming and it will prob happen when their BMW is towed because they missed their repayments.

Over the last 6 months I have seen alot of property that has come onto the market at or below its previous sale price (I have access to RP data). One particular property is in Newport and it sold 7 years ago for $1.2m. It was bought on the market about 18 months ago with an asking price of $1.6m, it went to auction and didnt sell. It then relisted at 1.45m, it went to auction and didnt sell. It then relisted again at 1.3m and stayed on the market for ages. Eventually they relisted with another agent and attempted a third auction campain at 1.2m. It didnt sell and is currently listed for under $1.2m

There was another property along Hudson parade that was on the market for 3 years at 1.2m, it sold about 3 months ago for approx $900k. The family had originally bought it for about $1m and spent a few hundred K on renos.

Just goes to show property does go down and you dont always win

 

[cutz]

Just goes to show property does go down and you dont always win

Hopefully this property monster does not drag down the banks with it, wishful thinking perhaps considering the big 4 have been taking a beating lately.

 

[investorpaul]

Hopefully this property monster does not drag down the banks with it, wishful thinking perhaps considering the big 4 have been taking a beating lately.

Unfortunately they are just as leveraged to Aust property prices as most home owners.

If anything they have been pushing more debt onto their customers with credit cards, personal loans, car loans, etc. All packages together so you "save on bank fees".

They dont just have to worry about losing out on the home loan but also need to consider all the credit cards and personal loans they have given these homeowners over the years.

It could get very messy.

 

[medicowallet]

hello,

oh gidday everybody,

another 3 day weekend medicowallet, check out the cfmeu website for a run down on my schedule as you so interested in it

my apologies to everyone as i dont have a computer at my st kilda residence

which suburbs do you own property in medicowallet?

top posts trainspotter, yeah plenty of trees to plant and birds to watch

thankyou
professor robots

Hi Professor,

I hope that your 3 day weekend was voluntary and not "downsizing"

As I have said before, I do not own property in Melbourne. I love to visit the place, but could not live there.


Sad to hear that you don't come on much anymore. I used to love reading your Auction clearance rate reports, and also how you liked to say how property prices in Melbourne had been increasing..

How is that going for you Professor? Taking on any extra shifts to cover your negatively geared and declining property investments?

 

[Glen48]

The little 4 banks don't have any worries at all, the Office of mis-management has tipped a lot of your loot in to them and the feds will continue to do so until the wells dry so they know they can do anything and you will bail the out just like USA is doing and will continue to do.
You won't even get a thank you just loose your house.
Robot is on th right track working a new job.

 

[Junior]

Hi Professor,

I hope that your 3 day weekend was voluntary and not "downsizing"

As I have said before, I do not own property in Melbourne. I love to visit the place, but could not live there.


Sad to hear that you don't come on much anymore. I used to love reading your Auction clearance rate reports, and also how you liked to say how property prices in Melbourne had been increasing..

How is that going for you Professor? Taking on any extra shifts to cover your negatively geared and declining property investments?

Sunshine and lollipops!!

 

[robots]

Hi Professor,

I hope that your 3 day weekend was voluntary and not "downsizing"

As I have said before, I do not own property in Melbourne. I love to visit the place, but could not live there.


Sad to hear that you don't come on much anymore. I used to love reading your Auction clearance rate reports, and also how you liked to say how property prices in Melbourne had been increasing..

How is that going for you Professor? Taking on any extra shifts to cover your negatively geared and declining property investments?

Hello,

oh well, the bed pan rounds at the hospital must be over, now the computers getting a go

its called an RDO, rostered day off (the nursing union hasnt organised them for you?), its compulsory and paid for

and soon we going to a four day week to keep inline with other trades and services, sunshine and lollipops brother

sorry, what suburbs do you own your property in?

thankyou
professor robots

 

[robots]

Hello,

oops, medicowallet not online again, must of head out for the rounds again, tidy up before dinner

thankyou
professor robots

 

[medicowallet]

Hello,

oh well, the bed pan rounds at the hospital must be over, now the computers getting a go

its called an RDO, rostered day off (the nursing union hasnt organised them for you?), its compulsory and paid for

and soon we going to a four day week to keep inline with other trades and services, sunshine and lollipops brother

sorry, what suburbs do you own your property in?

thankyou
professor robots

A nurse's job is never done. Great workers the lot of em!! I would never do their job

You sound tired Robots, is it because of those extra nights wondering how the bills will be paid?

Don't worry, send me a message, I'll buy your properties off you for "fair value"

It is easy brother, roll up the sleeves, take on an extra job. Perhaps shining shoes, chimney sweep, pick pocketer. All to live the Australian dream.

Living the dream, for some is now living the nightmare, and I am sorry, but it looks like it might be a while before the sunshine rises again.

MW

P.S. I would never use the computer at work for anything but work, call me old school, but I go to work to work.

P.P.S. Oh don't worry brother, soon some tradies will be having 0 day weeks.

 

[white_goodman]

I live on the Northern Beaches too and have worked in real estate (sales and property development) for the past 4 years. Don't worry Im out of the industry now

Anyway what you say about Northern Beaches agents is true, they will be the last one to see the crash coming and it will prob happen when their BMW is towed because they missed their repayments.

Over the last 6 months I have seen alot of property that has come onto the market at or below its previous sale price (I have access to RP data). One particular property is in Newport and it sold 7 years ago for $1.2m. It was bought on the market about 18 months ago with an asking price of $1.6m, it went to auction and didnt sell. It then relisted at 1.45m, it went to auction and didnt sell. It then relisted again at 1.3m and stayed on the market for ages. Eventually they relisted with another agent and attempted a third auction campain at 1.2m. It didnt sell and is currently listed for under $1.2m

There was another property along Hudson parade that was on the market for 3 years at 1.2m, it sold about 3 months ago for approx $900k. The family had originally bought it for about $1m and spent a few hundred K on renos.

Just goes to show property does go down and you dont always win

i agree, our area will be last to be hit, its also amazing how uber bullish the area is as a whole...

 

[ZSlaveski]

Residential property prices aren't going anywhere in the next 1-3 years.
I can only see flat or negative growth.
Interest rates are heading to 7-10% in the next 1-5 years.
First home owners who bought into Rudd's stimulus should be mad and rightly so, as they have been duped into buying at artificially inflated prices.

According to recent numbers, bank lending growth has been the slowest in 30 years.

I think you're on the money my friend. House prices are going nowhere in Oz, but down that is!

Interestingly, Mr David "Kochie" Koch's announced on Sunrise this very morning prices in many parts of Sydney town would be dropping down 20% or more by end of year - he got this info from Mr Louis Christopher from the SQM Research.

However then Louis (he posts on the AustralianPropertyForum.com as the Black_Dragon) reveals that the Kochie had the crash figures all mucked up and wrong. There is more about this here.......

Kochie is the new bear hero...... but he gets his figure wrong on live television!

Allegedly Louis says he is going to publish a correction tomorrow, but this is all a little "embarrassing" for those concerned, I should say.

Zoran.

 

[sptrawler]

If descrectionary spending is drying up and if small business is doing it tough. One would think there will be a lot of panick selling in the upper middle class areas.
These people aren't stupid, if the economy keeps contracting they will have to bail out before there is a foreclosure, and hide the money.
This is the problem with Gillard, she thinks high speed broadband and more debt will be transforming, what a bunch of fools.

 

[tothemax6]

If descrectionary spending is drying up and if small business is doing it tough. One would think there will be a lot of panick selling in the upper middle class areas.
These people aren't stupid, if the economy keeps contracting they will have to bail out before there is a foreclosure, and hide the money.

Selling a house and moving out is a real pain though

 

[nukz]

Hopefully this property monster does not drag down the banks with it, wishful thinking perhaps considering the big 4 have been taking a beating lately.

Interesting point, i believe the big 4 banks exposure to the residential mortgage market is approximatly 1 trillion and when you add non-bank lenders into the mix we could be looking at a figure closer to 1.25 - 1.3 trillion which is more than the country's GDP.

When you add in Credit card & personal loans into the mix it could be somewhat cause for concern.

 

[cutz]

Interesting point, i believe the big 4 banks exposure to the residential mortgage market is approximatly 1 trillion and when you add non-bank lenders into the mix we could be looking at a figure closer to 1.25 - 1.3 trillion which is more than the country's GDP.

When you add in Credit card & personal loans into the mix it could be somewhat cause for concern.

Wow, I didn't realize the numbers were that big,

The risk may be offloaded somewhat via mortgage insurance but one other concern I have is whether negative gearers are able to take out this kind of insurance to protect the banks ?

Can an NG guru enlighten me, do insurers insure high risk investment loans or do they only take on high LVR residential loans ?

 

[trainspotter]

Wow, I didn't realize the numbers were that big,

The risk may be offloaded somewhat via mortgage insurance but one other concern I have is whether negative gearers are able to take out this kind of insurance to protect the banks ?

Can an NG guru enlighten me, do insurers insure high risk investment loans or do they only take on high LVR residential loans ?

LMI is applicable to ALL housing loans with an LVR of greater than 80% irrespective of UCCC. Banks will go to 95% LVR on residential with LMI and up to 90% on investment with LMI.

 

[greebly24]

Regarding the future of Australian property prices, I think everyone should be aware of the secret GREAT GAME currently going on in the international economy, and how it will affect us.

American manufacturers can't compete with cheap Chinese goods. They want the Chinese to revalue their yuan against the greenback. This will make Chinese goods more expensive, and therefore stimulate US manufacturing.

China refuses to revalue it's yuan. A low yuan keeps China's exports cheap, keeps hundreds of millions of Chinese peasants employed in factories making cheap goods, and therefore keeps them happy and unlikely to protest against their communist leaders.

So in response, America, the world's largest economy, is printing money!!!

China then has to print an equal amount of yuan, and use it to buy greenbacks, in order to maintain the currency peg. But this means lots more greenbacks and yuans out there, chasing the same amount of goods. Result is inflation.

America is deliberately creating inflation in order to hurt China. But how will it work?

Well, Americans have a secret weapon! It is the amount spent on food as a percentage of income. Average Americans spend less than 10% of their income on food. If global inflation hits 100% and food prices double, Americans' food cost will hit 20% of their income, and they won't be able to supersize their Big Mac meals. They will whine and whinge and vote for the other political party.

But if food prices in developing economies also double, then people won't be able to afford basics like rice. They will starve, and violently protest, and force government policy change, or even bring down governments altogether.

A brief Google and I was able to find a few stats. The average Indonesian spends 45% of their income on food. The average Indian spends 53%. If global food prices double, then people will starve and you will have anarchy on the streets.

Some examples of this already happening are the Arab uprisings. The Arabs accepted dictatorships for decades. But now that food prices are skyrocketing, we see mass protests and decades-old dictatorships suddenly collapsing overnight.

The same thing could happen in China. The communist leaders know it, and they are scared. They are desperately trying to cool inflation by restricting bank lending and instituting price controls (which are a desperate last stand on any dictatorship).

I found one stat on China, saying it's lowest income earners spend up to 48% of their income on food. That represents many hundreds of millions of peasants. What happens when the price of a basic like rice doubles in price? I saw a story on CNN a while ago where the price of cabbage went from 3 to 4 yuan a kilo, or something like that. It was a ridiculously small move (considering what is to come) but it resulted in massive protests and violent government clampdowns and price controls (cabbage may only be sold for 3 yuan a kilo, the govt ordered, despite what the free market decided).

I understand that there may be doubters as to my theory but ask yourself, what would you do? If you were the world's largest economy, with the world's largest military and intelligence apparatus, and you heard you were going to be overtaken by China in 20 years time, would you sit back and say bugger and do nothing about it?

China's greatest strength is that it has 1.2 billion cheap labourers. But China's biggest weakness is it has 1.2 billion mouths to feed. The idea that China will dominate the planet in 20 years time is wrong. The Western world will starve it into submission long before that, and China may tear itself apart as fertile (but poor and suffering) Western farming provinces break away from it's rich Eastern factory provinces.

Inflation in China is already extremely damaging. Workers are demanding, and receiving wage increases. This is pushing up production costs and reducing profit margins. Marginal producers are shutting up factories, sacking workers and causing more social unrest. In response China lent out money to build empty shopping malls, and empty cities, just to keep workers employed and non-protesting. But how long can you build stuff you don't need?

Despite wage increase demands, China may eventually have to revalue it's yuan upwards. So in effect, China will be forced (by the US money printing) to do what the US wanted it to do in the first place. So America gets to print money to keep living above their means, while ****ing over the commies. But an increased yuan value will make Chinese goods more expensive and reduce their exports (Sri Lanka, Bangladesh, Vietnam etc etc etc will be cheaper for factories) and therefore slow their amazing economic growth. And unemployment there will rise and social unrest increase, and eventually China will be forced to trade internationally on a level-playing field.

This is the GREAT GAME in the world's economy, and will probably define all our lives for the next couple of decades. I just want people to be aware of this global trend, so that they will be armed with the truth in order to make the best investment decisions.

So, if I'm correct, what does it mean for the future of Australian property prices?

Farmland will go up (as food prices go up), so rural towns might do well.

Mining towns will boom, or bust (depending on the price of resources).

Inner-city homes, and especially those along public transport corridors will hold up well (as petrol price goes up).

Holiday homes will drop, particularly the upper end of the market (ie Noosa, Gold Coast, Palm Beach).

Overall, I think Australian property prices will drop over the next few years. I am not sure by how much, but the property around my beachside suburb in Adelaide seems overpriced by about 25%, so a drop of that much is entirely possible within five years.

I think it is obvious, given the media coverage of the effects of inflation on everyday Australians. Seems like you can't turn on the telly without some battlers whingeing about the rising cost of food and electricity and water bills and petrol and private education and health insurance etc etc etc. Hardly a recipe for rising house prices, or people wanting to move up the property ladder. Instead Australians are resorting to credit cards just to stay afloat. And not many people are unleashing equity in their homes for holidays any more. Many Australians are swimming hard against the current, just to stay afloat.

Globally, interest rates are going to have to rise as governments try to contain inflation. The GREAT GAME has only just begun. There will be opportunity, and there will be ruin. Be warned!