The future of Australian property prices

[greebly24]

WOW !!!!!!!!!!!! That didn't take very long now did it? Bung on a few home improvement programs on the telly and WHAMMO !!! The fish are biting hard.

Early days but ratings ain't good.

THE BLOCK 2011 got 84,000 viewers in Adelaide on Tuesday. Home & Away, in same timeslot, got 148,000. Must have been a good soap episode.

Nationally, THE BLOCK 2011 dropped 18% Mon to Tues. D'oh.

 

[investorpaul]

I didnt even know it had started again.

 

[explod]

In our local Leader Newspaper yesterday they are saying the prices of new units are down 21% at Mornington.

This area has been regarded as bullet proof for years but not looking too good at the moment. The contagion now seems to be moving south.

 

[Glen48]

This is good news it means the fed Will soon only need to pay 2 shillings and Sixpence for the First home owners bribe

 

[trainspotter]

Lets try some more accurate statistics shall we?

 

[KurwaJegoMac]

Lets try some more accurate statistics shall we?

View attachment 43373

Forgive my ignorance, what does LGA stand for?

Seems that apart from Gold Coast, most entries in that list are outside of the 'normal' metropolitan area. Even so, considering the number of suburbs in Australia there are very few which have fallen >6%, barely any in fact if you look at metropolitan suburbs. Thanks for sharing - any similar tables restricted to metropolitan areas?

 

[moXJO]

houses up 11.3% where I am damn it. Why won't it pop

 

[trainspotter]

Forgive my ignorance, what does LGA stand for?

Seems that apart from Gold Coast, most entries in that list are outside of the 'normal' metropolitan area. Even so, considering the number of suburbs in Australia there are very few which have fallen >6%, barely any in fact if you look at metropolitan suburbs. Thanks for sharing - any similar tables restricted to metropolitan areas?

LGA = Local Government Areas

I posted this to evidence that certain "regional" areas are doing it tough. *cough*

The average median price for "regional" LGA has collectively dropped 6% in a 12 month period in these certain areas.

There are certain regional areas that are holding their own as well.



I will post "metropolitan" suburbs as the info comes to hand.

 

[KurwaJegoMac]

LGA = Local Government Areas

I posted this to evidence that certain "regional" areas are doing it tough. *cough*

The average median price for "regional" LGA has collectively dropped 6% in a 12 month period in these certain areas.

There are certain regional areas that are holding their own as well.

View attachment 43375

I will post "metropolitan" suburbs as the info comes to hand.

Thanks for the explanation. Same thing as stocks really - certain stocks may perform worse than the general market. But that was interesting data, cheers.

Personally im surprised they're doing that well! I was expecting worse figures for those sorts of areas.

 

[stacks]

LGA = Local Government Areas

I posted this to evidence that certain "regional" areas are doing it tough. *cough*

The average median price for "regional" LGA has collectively dropped 6% in a 12 month period in these certain areas.

There are certain regional areas that are holding their own as well.

View attachment 43375


I will post "metropolitan" suburbs as the info comes to hand.

Really Interesting figures trainspotter. May I ask how you obtain these? interested in other areas

 

[Aussiejeff]

Ok. I'll bite..... here's this last weekend's "official" REIV clearance rate fudge.

Total Auctions

This week: 611
Last week: 684
This time last year: 890

S Sold at auction: 310
SB Sold before auction: 44
SA Sold after auction: 1

Passed in: 256
Passed in on vendor's bid: 154

Clearance rate: 58%

Postponed: 3
Withdrawn: 2
Auctions with no result: 79

PS Private sales: 511

Total Volume (Auctions): $283.52mil
Total Volume (Private Sales): $240.91mil

Total Auctions Houses: 394
Clearance Rate: 56%
Median Price: $805,000
Total Value: $202,368,000

Total Auctions Flats/Apartments: 200
Clearance Rate: 63%
Median Price: $520,000
Total Value: $74,702,100

Total Auctions Vacant Land: 13
Clearance Rate: 46%
Median Price: $561,250
Total Value: $4,804,500

56% for houses - without factoring in "unreported" failures.

Regardless of the dodginess of REIV's data, their own graph showing the clearance rate TREND since Jul 2006 clearly suggests the same level and rate of fall off as was occuring during the GFC until the FHOG "boost" put a huge rocket under the clearance rates from Oct 2008!

Insignificant coincidence in the declining rate? I don't think so. Given that "official unemployment" has supposedly fallen so much since the "end" of the GFC and that so much $$$ has been thrown at the housing industry by the gummint in the same time, wouldn't you have expected the graph to show RISING clearance rates? The current trend (since Apr 09) of rising auction volumes with falling clearance rates does not bode well IMHO.

Perhaps falling immigration, falling birth rate, rising interest rates, reduced FHOGS, rising property listings, real rising costs of living (NOT reflected in artificially contrived "official CPI" data IMO), are biting into RE harder than some would admit?

aj

 

[trainspotter]

Great post Aussiejeff. No doubt REIV has a few issues on credibillity on it's statistical range. Has been proven previously.

My thoughts are along the lines that people are NOT buying at auction (well, not as much) and are waiting for a private treaty once auction is over to try and obtain a better price (and also to avoid paying RE fees) Would be interesting to see if there are any figures on SETTLEMENTS of properties rather than AUCTION clearance rates.

The other thing Aussiejeff is that the interest rate hikes and the other factors you mentioned have taken the sting out of the market. Better to gently deflate the balloon rather than have a loud "POP" IMO.

It also means that RE Agents are doing their job very well. You have to list the property first to get it to auction. So I reckon RE Agents are "buying" listings and talking the price down at a later date. This has happened previously and no doubt will happen again.

Notice on the TV there are no "Hot Auctions" or such like shows anymore? FOOD is the new black. Yes yes yes there are some shows like The BLOCK back on TV but these are aimed at RENOVATIONS of said home rather than achieving an instant sale. Guess what has happened to the finance figures from the banks for renovating your home? *GOSH* we are sheep !

 

[trainspotter]

Really Interesting figures trainspotter. May I ask how you obtain these? interested in other areas

Google is my friend. I also pay to get the info emailed to me from several sources.

RP Data and REIA have terrific information (for a fee). ABS has many statistics embedded in their website but takes ages to work your way through the palava.

 

[medicowallet]

Ok. I'll bite..... here's this last weekend's "official" REIV clearance rate fudge.



56% for houses - without factoring in "unreported" failures.

Regardless of the dodginess of REIV's data, their own graph showing the clearance rate TREND since Jul 2006 clearly suggests the same level and rate of fall off as was occuring during the GFC until the FHOG "boost" put a huge rocket under the clearance rates from Oct 2008!

Insignificant coincidence in the declining rate? I don't think so. Given that "official unemployment" has supposedly fallen so much since the "end" of the GFC and that so much $$$ has been thrown at the housing industry by the gummint in the same time, wouldn't you have expected the graph to show RISING clearance rates? The current trend (since Apr 09) of rising auction volumes with falling clearance rates does not bode well IMHO.

Perhaps falling immigration, falling birth rate, rising interest rates, reduced FHOGS, rising property listings, real rising costs of living (NOT reflected in artificially contrived "official CPI" data IMO), are biting into RE harder than some would admit?

aj

The major flaw with your logical explanation is that

we are DIFFERENT here.

If PIGS go down, we will be ok
As America's stimulis goes away, we are ok
As China starts to come back to reality, we are ok
As our inept government squanders our taxes, we are ok
As inflation starts to bite, we will be ok

You do realise we are DIFFERENT here, don't you ??


Still going for a short-medium term 20% drop and quite a few years of stagnant prices after that.


I have some solutions for the many who purchased within the last few years

1. Take on an extra job
2. Don't eat out
3. Cut off your internet
4. Stop using the train and walk more
5. Work overtime
6. Grow your hair long
7. Grow a veggie patch
8. Use the REIV reports as fertiliser for your veggie patch.

PM for any other helpful tips.

Life..... a pleasure. Living from paycheck to paycheck, or handout to handout...

MW

 

[KurwaJegoMac]

The major flaw with your logical explanation is that

we are DIFFERENT here.

If PIGS go down, we will be ok
As America's stimulis goes away, we are ok
As China starts to come back to reality, we are ok
As our inept government squanders our taxes, we are ok
As inflation starts to bite, we will be ok

You do realise we are DIFFERENT here, don't you ??


Still going for a short-medium term 20% drop and quite a few years of stagnant prices after that.


I have some solutions for the many who purchased within the last few years

1. Take on an extra job
2. Don't eat out
3. Cut off your internet
4. Stop using the train and walk more
5. Work overtime
6. Grow your hair long
7. Grow a veggie patch
8. Use the REIV reports as fertiliser for your veggie patch.

PM for any other helpful tips.

Life..... a pleasure. Living from paycheck to paycheck, or handout to handout...

MW

The major flaw with your solutions is that

every investor is DIFFERENT here.

If they don't overleverage, they will be ok
As some don't rely on a stimulus package for incentive, they will be ok
As some purchase based on sound principals and not over-inflated prices, they will be ok
As some use government tax incentives effectively, they will be ok
As housing serves as a good long term inflation hedge, they will be ok

You do realise all investors are DIFFERENT, don't you ??

Still going for property to be up in the long term, history does repeat itself. Better than 'out of thin air' forecasting.

I have some solutions for the many who purchased within the last few years

1. Ensure you have contingencies in place for higher interest rates
2. Don't pig out on debt
3. Cut out the friends that hold you back
4. Stop using the train and walk more
5. Work less overtime as you have an income producing asset
6. Grow your hair to whatever length you desire
7. Grow your financial knowledge
8. Use the REIV reports as toilet paper.

PM for any other helpful tips.

Life..... a pleasure. Having the taxman and renters pay off your appreciating assets.

KJM

 

[medicowallet]

The major flaw with your solutions is that

every investor is DIFFERENT here.

If they don't overleverage, they will be ok
As some don't rely on a stimulus package for incentive, they will be ok
As some purchase based on sound principals and not over-inflated prices, they will be ok
As some use government tax incentives effectively, they will be ok
As housing serves as a good long term inflation hedge, they will be ok

You do realise all investors are DIFFERENT, don't you ??

Still going for property to be up in the long term, history does repeat itself. Better than 'out of thin air' forecasting.

I have some solutions for the many who purchased within the last few years

1. Ensure you have contingencies in place for higher interest rates
2. Don't pig out on debt
3. Cut out the friends that hold you back
4. Stop using the train and walk more
5. Work less overtime as you have an income producing asset
6. Grow your hair to whatever length you desire
7. Grow your financial knowledge
8. Use the REIV reports as toilet paper.

PM for any other helpful tips.

Life..... a pleasure. Having the taxman and renters pay off your appreciating assets.

KJM

Some property investors in Brisbane have gone bust over the past 12 months.

on average, ALL investors lost money.

So even though all investors are DIFFERENT, they ALL lost money.

Perhaps this was lost to you in translation.

I hope you haven't recently overgeared KJM, it might be painful going forward.... OUCH!!

Just remember, a few % fall is very destructive if you are highly geared... you are aware of this aren't you?


PS. Oh, and take comfort that even if you lose heaps of money in a property crash, so will I, and probably more than you

 

[KurwaJegoMac]

Some property investors in Brisbane have gone bust over the past 12 months.

on average, ALL investors lost money.

So even though all investors are DIFFERENT, they ALL lost money.

Perhaps this was lost to you in translation.

Some property investors in other states have not gone bust and on average all have made money. Does it matter? No.

You and I both know it's useless looking at one market in isolation and attempting to extrapolate its' results to all others. I can show you a ton of results for suburbs and states that have done well just as you can show the same amount for those that have not done so well. Different suburbs with different profiles will perform differently - in boom, bust and sideways markets. Can make a $$ no matter the time, just it's not as easy during the lulls.

I hope you haven't recently overgeared KJM, it might be painful going forward.... OUCH!!

Appreciate the concern and I agree with you - would not want to be overleveraged going forward. Things are not as pretty as they once were.

That being said, my leverage is high - at 80% LVR, but I'm not over leveraged. If I had no tenants and interest rates were at 10% i would have to spend 39% of my disposable income to maintain the property (inclusive of all repayments and costs to maintain the property). Yes I may need to cut back on some luxuries but that's hardly going to kill me. Unlikely that i'd have no tenants for a long time but one must plan for these things, no matter how rare.

Add an even worse scenario of no negative gearing on top of no tenants and 10% interest rates and I have to use 64% of my disposable income. Not pleasant, but still very much achievable.

 

[KurwaJegoMac]

Just remember, a few % fall is very destructive if you are highly geared... you are aware of this aren't you?

Of course - gearing is a double edged sword after all.

PS. Oh, and take comfort that even if you lose heaps of money in a property crash, so will I, and probably more than you

I wouldn't wish a loss on anybody and certainly wouldn't take comfort in you losing money - quite the opposite. You and I have differing opinions about the future and the purpose of this forum is to share such thoughts so that we may both benefit each other to perhaps consider 'all sides of the story' and make informed decisions.

 

[medicowallet]

Some property investors in other states have not gone bust and on average all have made money. Does it matter? No.

You and I both know it's useless looking at one market in isolation and attempting to extrapolate its' results to all others. I can show you a ton of results for suburbs and states that have done well just as you can show the same amount for those that have not done so well. Different suburbs with different profiles will perform differently - in boom, bust and sideways markets. Can make a $$ no matter the time, just it's not as easy during the lulls.



Appreciate the concern and I agree with you - would not want to be overleveraged going forward. Things are not as pretty as they once were.

That being said, my leverage is high - at 80% LVR, but I'm not over leveraged. If I had no tenants and interest rates were at 10% i would have to spend 39% of my disposable income to maintain the property (inclusive of all repayments and costs to maintain the property). Yes I may need to cut back on some luxuries but that's hardly going to kill me. Unlikely that i'd have no tenants for a long time but one must plan for these things, no matter how rare.

Add an even worse scenario of no negative gearing on top of no tenants and 10% interest rates and I have to use 64% of my disposable income. Not pleasant, but still very much achievable.

What happens if the banks start to require lower LVRs and property prices drop?

This could be very interesting indeed, and something that a lot of property "investors" would not have considered.

"margin calls" on property loans would expose many, and put further downward pressure on prices. Just as it was looking bad for property before the FHVB, it seems to be looking bad now.

 

[KurwaJegoMac]

What happens if the banks start to require lower LVRs and property prices drop?

This could be very interesting indeed, and something that a lot of property "investors" would not have considered.

"margin calls" on property loans would expose many, and put further downward pressure on prices. Just as it was looking bad for property before the FHVB, it seems to be looking bad now.

Agree with you there - i need look no further than on of my friends. Same age as me, with 3 investment properties, 2 of which were acquired using equity from the first, all accumulated in 2 years. He just drew out his equity for a new pool and some landscaping. He has no cash and no buffer in the event of a drop in prices - needless to say even the slightest fall could wipe him out and im sure there are many like him. Would really compound any declines in the market for sure.

I hold 15% of the asset value as cash in an offset account, so coupled with my initial 20% deposit there'd need to be a 35% fall for me to be margin called, so i have a reasonable buffer. But i'd rather not have to use it of course

Do you hold similar buffers for your IPs? Although from the sounds of it you've been in the game longer than i have so theyre probably mostly positively by now i imagine? Considering you feel strongly about a 20% fall, have you sold your propertys? If not, may i ask why?