The future of Australian property prices

Gerkin · 9 December 2011

young gun what do you live in?

in this market im able to find properties that i can purchase that the mortgage repayments are only slightly higher than the rent i would pay....i think it may be a good time to buy for you especially if you can lock in 5.99% for 3 years.

medicowallet · 9 December 2011

kincella said:
the saying goes, you cannot teach an old dog new tricks.....

but here is an old dog, who knows all the tricks

I have over 40 years experience in property, purchased my first home at age 21 years...
I have been there all the time....interest rates at 18%, or 6%....I bought property and made great gains everytime

when people like you were saying ...wait for it to come down.....I was out there buying

I am a contrarian investor....when the mob says buy...I sell at a huge profit....
when the mob says sell....I buy , for my huge future profits...

I am not hocked to the hilt....

due to my property investments, I was able to retire early
and now I just sit back, and watch it all grow, the money rolls in....its all good fun
and probably unlike you, who may have a problem , gaining finance....for your first home
it is easy peasy for me....
I have a huge amount of equity and assets...which the banks just love...
together with a regular income from property...which usually seals the deal with the banks
I use OPM (other peoples money) to fund my acquistions....
I have a huge bank of knowledge and research at my disposal...
I would never ever sell in a down market.....how stupid is that policy
If I decide to sell, for whatever reason....it is only ever in a HOT market...
I can wait for the best deals....not necessarily waiting for the market to bottom.....
but looking at one particluar property or location to purchase....

plus , there are plenty of cashed up investors like myself out there in the market....competing against people like you....who in the current market, are simply tyre kickers....
but we nab the properties....you do not...
lately, I find the best deals are in commercial properties...I doubt that you are in that market
but pulease..
have a great day anyway

I know many people who had much more money than you have now, and are now bankrupt.

I have also found in business that surrounding yourself with people who you empower and support gives you support networks when you come down a notch... I hope that you do the same, for when you come down a notch or two.

young-gun · 10 December 2011

kincella said:
the saying goes, you cannot teach an old dog new tricks.....

but here is an old dog, who knows all the tricks

I have over 40 years experience in property, purchased my first home at age 21 years...
I have been there all the time....interest rates at 18%, or 6%....I bought property and made great gains everytime

when people like you were saying ...wait for it to come down.....I was out there buying

I am a contrarian investor....when the mob says buy...I sell at a huge profit....
when the mob says sell....I buy , for my huge future profits...

I am not hocked to the hilt....

due to my property investments, I was able to retire early
and now I just sit back, and watch it all grow, the money rolls in....its all good fun
and probably unlike you, who may have a problem , gaining finance....for your first home
it is easy peasy for me....
I have a huge amount of equity and assets...which the banks just love...
together with a regular income from property...which usually seals the deal with the banks
I use OPM (other peoples money) to fund my acquistions....
I have a huge bank of knowledge and research at my disposal...
I would never ever sell in a down market.....how stupid is that policy
If I decide to sell, for whatever reason....it is only ever in a HOT market...
I can wait for the best deals....not necessarily waiting for the market to bottom.....
but looking at one particluar property or location to purchase....

plus , there are plenty of cashed up investors like myself out there in the market....competing against people like you....who in the current market, are simply tyre kickers....
but we nab the properties....you do not...
lately, I find the best deals are in commercial properties...I doubt that you are in that market
but pulease..
have a great day anyway

it appears your head is stuck in the same bubble as your property portfolio.

there is one word for you, lucky. lucky that you were born at a the right time.

its too bad you cant learn new tricks, your gonna need them, as mr z has pointed out. the only reason you may get through this crash is because of your 40 years of investing without really experiencing an actual crash(none of which will come close to the magnitude of what you're about to experience anyway) which has enabled you to create enough wealth that could potentially see you to the other side.

in the mean time given that we're all calling down you better get into the market(i believe this is your signal?), what with all your equity etc etc, i hear now is the time to buy!(prices never go down)

all the best

oh and ps gerkin, im currently renting north brisbane, im aware of the areas that you are referring to, but i dont see the point in buying and paying slightly more than i could rent for, on a currently depreciating asset, not to mention that if the 2 are as close as you say, owning your home will shortly become cheaper than renting will it not(if the market continues its 'moderate downtrend')?

people keep saying, oh but if you buy and hold it doesnt matter if it goes down, long term you will prosper. correct, but if it crashes, and then i buy and hold, i will be far better off. the odds of the market crashing far outweigh those of it taking off in the next 12 months, sitting tight is a win win for me as i see it. i can assure you patience will be rewarded. oh and i would never lock in, im fairly sure the banks have a siren that goes off when people lock in, and they have a quick giggle, before returning to work....most of the time

indeck · 10 December 2011

kincella said:
the saying goes, you cannot teach an old dog new tricks.....

i cant read past the not so thinly veiled, look at me im awesome at everything and you're not undertone which makes me take what you're saying with a grain of salt. thanks for the info awesome mc cool.

Beej · 10 December 2011

young-gun said:
real estate will move by enough in all property brackets that it wont matter whether they bought in low- mid or mid to high. fact is if people lose their jobs it doesnt take long for that 'buffer' to disappear.

For someone who has so many facts completely wrong, you seem very certain of the future?

glad u raised the point about investors, as these guys are going to have a huge part in the crash. every third person these days has an investment property(i dont know the exact %), most owning more than one. as you said they're leveraged to the hilt, negative gearing everything and have taken on crazy amounts of debt. when these guys lose their jobs and their assests start going under water there is going to be a flood of houses on the market in a very short period of time.

Wrong on all counts - % of taxpayers that declare investment property rental income is 10%. % of PIs with multiple properties is a very small proportion of those (something like a few%), certainly not the majority as you seem to think.

As for flooding the market etc, you have to consider that the vast majority of those PIs bought many years ago and both prices and rents have increased significantly in that time. Very few will become forced sellers even in the doomsday scenario you outline.

kincella, steve keen is right, and there is no way if he sold in 07-08 that his house wouldve increased 25% between then and now

Steve Keen was wrong, and proven so - he even had to walk from Canberra to a certain tallest mountain in oz as a result of his being proven wrong. He also sold his Surry Hills unit at almost the exact bottom of the market in late 2008, and started renting. As others have shown, prices today are still +20% higher or more in Surry Hills today than they were then. Sydney rents have also increased by about nearly 20% in the same period as well.

As an aside, does everyone here realise that Sydney UNIT prices, according to RP-Data and Residex stats, are higher now than they have ever been? They have not fallen at all in the past 12-18 months.

Aussiejeff · 11 December 2011

Hmm. Something doesn't quite add up here...

Wednesday, 7 December 2011 - Auction preview 10 and 11 December
The REIV expects around 900 auctions this weekend.

Sat 10 Dec reported auctions -

The clearance rate this weekend is 55 per cent compared to 53 per cent last weekend and 57 per cent this weekend last year.

There is only one more normal weekend of auctions this year and it appears that the overall clearance rate in 2011 will be 56 per cent.

There has been a total of 741 auctions reported this weekend of which 408 sold and 333 were passed in, 209 of those on a vendors bid.

Next weekend the REIV expects 615 auctions.

Enzo Raimondo
CEO REIV

Huh? So, ONLY 741 auctions were "reported" out of the REIV's own prediction of 900??? (yes, yes, I know there is a handful to go on Sun yet - but around 95% go on Sat don't they...?) FYI there were around 1200 reported auctions this weekend last year... a drop of around 48% in "reported" auctions since then!

So, IN REALITY, only 408 properties were sold yesterday at auction out of the predicted 900 auctions? After an interest rate cut?

Well, I make that a 45% clearance rate, Enzo. NOT 55%! Saturday's figure is not likely to improve more than a couple of percent with today's handful of auctions - maybe it will get to 48% or so this weekend total. I guess Enzo will tweak it to 55% or so with his Magic Calculator.

Not only do Enzo's maths for this weekend smell extremely fishy, just check out his own clearance rate graphs... http://www.reiv.com.au/Property-Research/Housing-Indicators.aspx?period1=2 Remember, the graphs only show REIV reported auction stats. The "real" graphs would look undoubtedly worse.

It's not hard to see the overall trend from the 3 year graph - ie: INCREASING reported auctions vs DECREASING clearance rates. The unspoken result is a significant increase in the pool of unaffordable, unsold houses that must drop substantially in price if they have any hope to sell within a reasonable time frame. Even more clear is when the FHB "artificially" boosted RE prices through rapid increase in demand (see 5 year graph - huge kick up from Nov 2008 to March 2010 in the clearance rate). However, after that initial flood of buyers had been sated, not even ongoing state funded FHB schemes have been able to maintain the growth curve today.

Yet Enzo's spruiking remains all positive. Very funny!

Good luck.

kincella · 11 December 2011

the age newspaper, ordered this inquiry into melb housing affordability....what they found was that, apart from being grossly unaffordable for most fhb, the cheaper suburbs house prices, held firm or had increased in 115 of 139 suburbs

I doubt Qld, WA or NSW is much different
and qld has mining, coming to a town near you, soon...

extract...........

''Looking at the median price for the whole city sometimes doesn't give you the full story of what is happening,'' APM economist Andrew Wilson said. ''There's certainly been a softening in the upper part of the market, but the situation can be much different at the lower end.'' House values in 115 of the 139 suburbs still priced below the city's median are either holding firm or increasing.

http://theage.domain.com.au/home-buyers-priced-out-20111210-1ooxm.html

on another forum, the bears are advising a youngun to sell and take a profit of $60,000 odd, the difference between the buying price in 2008, and sold prices in the neighbourhood now....
they are advising him to sell up,then sit it out, wait for the prices to drop and go back in, in a years time.....wow look at the capital costs he would lose, and have to pay all over again, this time without the stamp duty benefits and fhb grants, rebates
one, a former RE agent said he did the same, but after 4 years, he is still waiting to get back into the market
this is great advice on how to lose money
and its based on the assumption prices will fall.....regardless there is no evidence...except the 2% drops at the top of the median market....
which is not the maket the young one is involved in....he is in the market, that is holding form or growing...

its a 'stock day trader mentality,' being applied to the housing market

kincella · 11 December 2011

the new age in property=everyone wants to rent
so based on the research one can gain from this forum, absolutley everyone wants to be a renter..
and not only for one year, but for the next 3-4 years

this is absolutley stunning news for property investors...

no wonder, the astute, and smarts, are buying property
that the 'investors' are shunning'
cheers
and thank you, for supporting the property investors
ps, no wonder property is so reliant,,,with such dedicated and resiliant cuistomers

Starcraftmazter · 11 December 2011

Some people in here (like the above two posters) are absolute nutters. No offence.

So_Cynical · 11 December 2011

kincella said:
the new age in property=everyone wants to rent
so based on the research one can gain from this forum, absolutley everyone wants to be a renter..
and not only for one year, but for the next 3-4 years

this is absolutley stunning news for property investors...

no wonder, the astute, and smarts, are buying property
that the 'investors' are shunning'
cheers
and thank you, for supporting the property investors
ps, no wonder property is so reliant,,,with such dedicated and resiliant cuistomers

I would personally like to go on the record and thank the investment property owners of Sydney...thanks guys

Thanks for buying places so that i have somewhere to live...thanks for putting up with the crappy 2 and 3% yields , thanks for putting your money on the line for such low returns, providing me with some where to live and make 12% > 15%+ returns on my money in the stock market.

Sincerely thank you....oh and while im at it thanks to the person who sold me IIN shares 3 months ago for $2.25 thanks.

Beej · 12 December 2011

So_Cynical said:
I would personally like to go on the record and thank the investment property owners of Sydney...thanks guys

Thanks for buying places so that i have somewhere to live...thanks for putting up with the crappy 2 and 3% yields , thanks for putting your money on the line for such low returns, providing me with some where to live and make 12% > 15%+ returns on my money in the stock market.

Sincerely thank you....oh and while im at it thanks to the person who sold me IIN shares 3 months ago for $2.25 thanks.

Where in Sydney do you live where you think you are paying rent equivelant to a 2-3% yield? You must live in a different Sydney to me?? The average yield on Sydney unts is 5.2% and on houses is 4.5%? (See http://www.rpdata.com/images/storie...pdata_rismark_home_value_index_nov30_2011.pdf). A simple search of available rental properties in just about any area I have ever looked confirms those yields as well?

stacks · 12 December 2011

Beej said:
Where in Sydney do you live where you think you are paying rent equivelant to a 2-3% yield? You must live in a different Sydney to me?? The average yield on Sydney unts is 5.2% and on houses is 4.5%? (See http://www.rpdata.com/images/storie...pdata_rismark_home_value_index_nov30_2011.pdf). A simple search of available rental properties in just about any area I have ever looked confirms those yields as well?

Does anyone know what is included in the rental yield numbers? Is it strictly median rent/median price for a city?

Also as it is a gross yield I'm assuming no allowances for additional costs rates, insurance, RE agent fees etc? Is that correct?

young-gun · 12 December 2011

Beej said:
Wrong on all counts - % of taxpayers that declare investment property rental income is 10%. % of PIs with multiple properties is a very small proportion of those (something like a few%), certainly not the majority as you seem to think.

As for flooding the market etc, you have to consider that the vast majority of those PIs bought many years ago and both prices and rents have increased significantly in that time. Very few will become forced sellers even in the doomsday scenario you outline.

Steve Keen was wrong, and proven so - he even had to walk from Canberra to a certain tallest mountain in oz as a result of his being proven wrong. He also sold his Surry Hills unit at almost the exact bottom of the market in late 2008, and started renting. As others have shown, prices today are still +20% higher or more in Surry Hills today than they were then. Sydney rents have also increased by about nearly 20% in the same period as well.

As an aside, does everyone here realise that Sydney UNIT prices, according to RP-Data and Residex stats, are higher now than they have ever been? They have not fallen at all in the past 12-18 months.

ok so instead of the 1 in 3(which last time i checked 33% isn't a majority) its 1 in 10. and as you said some of these own more than one. im sure i dont need to point out that for u to believe that most investment properties were bought before the boom is a bit far fetched. i know three guys mid 40's that purchased one each in the past 3 weeks.

as i said people that have been lulled into thinking property is such a brilliant idea in the past few years, and are leveraged to the hilt, after all it what does it matter if you're a mill in debt when RE will only ever go up(majority of the time)?

allow me to rephrase on keen - he will be right.(yeah yeah i know he keeps pushing the date further and further back, but its coming to a suburb near you shortly)

the one thing that happened is the one thing no one can predict, and that one thing is when governments will step in to try and prevent natural economic occurrences.

unit prices?? hmmm i wonder who would be buying units in sydney, probably not first home owners that could no way in hell afford a house. if you take a look at most graphs of median unti prices in those areas around sydney

eg paddington and redfern you will notice sharp percentage increases in 09-10.

i wonder if that had anything to do with the governments fhog and new home grants??? probably not, just a coincidence.

carry on, everything is fine in RE.

young-gun · 12 December 2011

kincella said:
the new age in property=everyone wants to rent
so based on the research one can gain from this forum, absolutley everyone wants to be a renter..
and not only for one year, but for the next 3-4 years

this is absolutley stunning news for property investors...

no wonder, the astute, and smarts, are buying property
that the 'investors' are shunning'
cheers
and thank you, for supporting the property investors
ps, no wonder property is so reliant,,,with such dedicated and resiliant cuistomers

oh dear god......................

wayneL · 12 December 2011

young-gun said:
oh dear god......................

Religious irony noted

Disclosure - Not bearish on property and in the market making ludicrous offers.

young-gun · 12 December 2011

wayneL said:
Religious irony noted

Disclosure - Not bearish on property and in the market making ludicrous offers.

perhaps some examples of your "ludicrous offers"? if you dont mind.

wayneL · 12 December 2011

young-gun said:
perhaps some examples of your "ludicrous offers"? if you dont mind.

It's something I'd rather keep to myself, but here is the town I'm focused on (and nearby Palmerston North) http://www.realestate.co.nz/residential/search/suburbs/2604

Shannon has been depressed for some time and at last has a dynamic core of individuals (plus moi hopefully) who will propel the town to better things. Wellingtonians have thus recently "discovered" Shannon as a cool fashion/daytrip destination.

Looking at an acreage space for PPOR and business opportunities as well.

But I want a bargain.

young-gun · 12 December 2011

wayneL said:
It's something I'd rather keep to myself, but here is the town I'm focused on (and nearby Palmerston North) http://www.realestate.co.nz/residential/search/suburbs/2604

Shannon has been depressed for some time and at last has a dynamic core of individuals (plus moi hopefully) who will propel the town to better things. Wellingtonians have thus recently "discovered" Shannon as a cool fashion/daytrip destination.

Looking at an acreage space for PPOR and business opportunities as well.

But I want a bargain.

i can honestly say i know absolutely nothing about NZ RE.

I can however note that there isnt much sunshine to be had in Shannon, judging by the large majority of photos on that page

Beej · 12 December 2011

stacks said:
Does anyone know what is included in the rental yield numbers? Is it strictly median rent/median price for a city?

Also as it is a gross yield I'm assuming no allowances for additional costs rates, insurance, RE agent fees etc? Is that correct?

Certainly correct on the 2nd point.

The first I am not certain about - I think though it's a little more sophisticated than just "median rent / median dwelling price", as that would actually give artificially low estimated yields due to the fact rental properties in a given area usually over-represent the lower end and under represent the higher end (where PPOR owners tend to dominate). I suspect they look at recently sold and then rented properties in particular areas (lot's of hard data there) and determine the average rental yield that way?

So_Cynical · 12 December 2011

Beej said:
Where in Sydney do you live where you think you are paying rent equivelant to a 2-3% yield? You must live in a different Sydney to me?? The average yield on Sydney unts is 5.2% and on houses is 4.5%? (See http://www.rpdata.com/images/storie...pdata_rismark_home_value_index_nov30_2011.pdf). A simple search of available rental properties in just about any area I have ever looked confirms those yields as well?

The figure works out the same for all of Sydney as you well know...i pay approximately 4.8% PA rent on the Approximate value of the property i live in.

4.5 to 5% gross yield less agents fees, insurance, water, rates, upkeep, repairs, and vacant periods etc. = 2.5 > 3% gross.... that's standard from Penrith to Potts point.

The future of Australian property prices

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