The future of Australian property prices

[Tysonboss1]

are you saying you would be happy with an 'investment' of 250k that lost 25% in a few weeks? if hes coming from a working class background money is most likely scarce, and the extra repayments he would have saved would most likely have gone a long way.

the way I read it was he was buying it for himself and his future wife to live in, All the features he was happy paying for are still there, he can still build a life with his partner, Nothing has changed.

If I bought an investment and a week later i realised I had over paid, I would be be upset with myself and be searching for lessons I can draw from the experiance,

 

[maffu]

A few interesting articles on SMH today that are very negative in regards to property, which is unusual.

Rising property values have been an article of faith in the housing market for a generation of Australians who borrowed big as real estate prices marched ever upward.

Now, though, some buyers are finding that their homes are worth less than the size of mortgages taken out to acquire the proverbial roof over their heads.

While the percentage of home owners with so-called negative equity remains tiny - about one in fifty of the 3 million households with mortgages - the number may well swell in 2012 if home prices extend their declines as some analysts expect.

The emergence of a sector of the housing market ‘‘under water’’ on their mortgages may hurt an already fragile real estate market. Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties.

Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity.

"The prospect of negative returns will certainly detract from sentiment through 2012," said NATSEM’s Mr Phillips.

Read more: http://www.smh.com.au/business/new-reality-owing-more-than-you-own-20111221-1p4l2.html#ixzz1h8IpXGh7

2% of homes have negative equity, hard to tell if that is a meaningful statistic without knowing any historic trends, but it doesn't sound good.

SYDNEY'S housing market ran out of steam at the weekend with buying activity in full retreat over the past month, and the clearance rate hitting a record low for the year.

Tellingly, the median price of houses sold at the weekend collapsed to the lowest recorded for the year. This result reflects the surge in first home buyers and the continued stagnant nature of the prestige property market.

A relatively large number of 466 properties were up for auction on the final selling weekend of the year. That number was 11 per cent higher than the 420 properties auctioned on the same weekend last year.

Of the 349 properties reported auctioned, 209 sold and 68 were withdrawn for a year-low clearance rate of 50.1 per cent.

The total value of properties sold was $128.1 million, at an average value of $612,919 per property.

209/466 so a 44% clearance rate for the auctions, and the Real Estate agents were talking up a big boom to end the year in NSW due to the stamp duty concessions changing. It seems as though that didn't happen as predicted.

FOREIGN developers have grabbed a 30 per cent share of Australia's apartment market, a trend not repeated since the Japanese office and hotel development boom in the late 1980s.

Overseas investors are behind 13,000 apartments in 37 projects in Australia. Based on the average number of apartments completed in 2011, that represents a market share of as much as 32 per cent, research by the property group CBRE finds.

....

The sheer number of apartments being built has prompted concerns about oversupply.
http://smh.domain.com.au/real-estate-news/asian-money-pours-into-city-apartments-20111221-1p4in.html

I think this is the first time I have ever heard anyone talk about possible oversupply in the Australian market. We are constantly bombarded with the under supply argument, that to see a journalist discuss oversupply after many massive apartment blocks are underway is very different.


It took me by surprise seeing 3 negative articles on the same day.

 

[young-gun]

the way I read it was he was buying it for himself and his future wife to live in, All the features he was happy paying for are still there, he can still build a life with his partner, Nothing has changed.

If I bought an investment and a week later i realised I had over paid, I would be be upset with myself and be searching for lessons I can draw from the experiance,

you're missing a very important point...people dont think like this. alot are negative and fail to see the bigger picture. and what lessons can be drawn from this tyson? dont listen to spruikers developers and RE agents?

you may be of the opinion i am negative what with my bearish outlook, but for things to crash is a positive for me. so long as i have work.

 

[young-gun]

A few interesting articles on SMH today that are very negative in regards to property, which is unusual.



2% of homes have negative equity, hard to tell if that is a meaningful statistic without knowing any historic trends, but it doesn't sound good.



209/466 so a 44% clearance rate for the auctions, and the Real Estate agents were talking up a big boom to end the year in NSW due to the stamp duty concessions changing. It seems as though that didn't happen as predicted.



I think this is the first time I have ever heard anyone talk about possible oversupply in the Australian market. We are constantly bombarded with the under supply argument, that to see a journalist discuss oversupply after many massive apartment blocks are underway is very different.


It took me by surprise seeing 3 negative articles on the same day.

everything is fine maffu. theres no bubble, and there definitely will be no crash here.

thanks for the articles. good to see its finally filtering through!

 

[Whiskers]

...and the Real Estate agents were talking up a big boom to end the year in NSW due to the stamp duty concessions changing. It seems as though that didn't happen as predicted.

Another stastitic I read a couple of weeks ago was (I think) an aggregate capitol city annual price drop to Oct of abt 4%.

I've been watching a few properties here in Qld for some months that have not sold for the asking price. It's a bit unreliable to put too much weight on big spending items during the holiday season, but I'm wondering if the market is still sliding quite significantly while those substantial new home and first home buyer grants from the gov are available, whether there will be dumping of property toward the end of January when the new home grant finishes and continuing into 2012.

The other issue is, can and will the gov extend the schemes to try to pump the economy via the housing industry when most people seem set on reducing debt and increasing savings.

I have a bit of an intuitional thing, based on mob psychology, that people may be inclined to put a bit more money into more liquid investments like the share market in the short term while they wait out the property cycle.

A good part of the rationale for that is that a lot of people will see the relatively rare decision of the RBA to cut rates too months in a row and the anticipated likely further reductions in 2012 as the economy slows further as the right time to hold off first home and investment decisions and build up their savings for a few months to Feb at least.

 

[Tysonboss1]

1, and what lessons can be drawn from this tyson? dont listen to spruikers developers and RE agents?

2, you may be of the opinion i am negative what with my bearish outlook, but for things to crash is a positive for me. so long as i have work.

1, Offcourse, that is always a big lesson, just as you should never ask a barber if you need a hair cut,

2, Offcourse lower prices are good for anybody who is a net buyer, myself included. I like lower asset prices not matter whether it be property or shares, But the market the market doesn't care what you or I think or hope, it is what it is, So I have set my self up to be in a postion to benefit not matter what happens.

Putting property aside, My personal belief is that you are far to bearish and don't have enough exposure to the upside, But each to his own, I am either right or wrong.

 

[young-gun]

1, Offcourse, that is always a big lesson, just as you should never ask a barber if you need a hair cut,

2, Offcourse lower prices are good for anybody who is a net buyer, myself included. I like lower asset prices not matter whether it be property or shares, But the market the market doesn't care what you or I think or hope, it is what it is, So I have set my self up to be in a postion to benefit not matter what happens.

Putting property aside, My personal belief is that you are far to bearish and don't have enough exposure to the upside, But each to his own, I am either right or wrong.

since the time i established such bearish views, i would have done nothing but lose money if i had of invested anywhere in anything. yes, there are a few guys out there(maybe even yourself) that have enough knowledge, and a bit of luck, to make money in crazy markets rife with insane volatility, or even flip a property for a measly profit in the past 6 months. my attitude and views merely reflect what i read and see occurring in day to day life(and throughout the world).

once things turn, thats when ill get in, i can handle paying a bit more for something when things are on the up and up, what i will not handle is paying for something that is overpriced and i could potentially lose 30% or more of its value in a short period of time.

im happy to admit i may be wrong also, but the outcome of being correct, but still buying a house, is far worse than being wrong, and having to buy a house a little off the bottom of the trough.

 

[sptrawler]

In my opinion, for what it is worth, don't set your property price barometer on prices in 2005.
Since the gfc in 2008 everyone has been in a frozen state. IMO
However wage rises have been happening and everything will return to equilibrium. Therefore a state of the 'average' house being worth 3 times the 'average' wage will return.
The trick is knowing when the two align.

 

[maffu]

Todays top two property articles on the Sydney Morning Herald
#1 Property oversupply
#2 Property under supply


One author is claiming 120,000 empty properties in Sydney, and the other is claiming a housing shortage of 80,000 in Sydney...
Interesting strategy of 'land banking', I have seen plenty of long term empty buildings around the place, and always wondered why the owners don't lower rents to try and get some cash flow. It seems they are not too worried by it all.

'Land bankers': Sydney's empty property magnates

The Wakils, of Bellevue Hill, are directors of Citilease Property Group and own many empty properties, including the Griffith's Tea building in Surry Hills and two multi-storey buildings in the CBD.

According to sales records, some of the larger buildings were bought for more than $7 million in 2003 and the total value of their properties has been valued at around $75 million.

Their collection of empty warehouses, buildings and the pub are among the startling figure of 122,211 empty Sydney residential dwellings counted by census workers in 2006.

Some of these mysterious, empty buildings dotted around the city act as temporary homes for groups of squatters.

...
Real Estate Institute NSW chief executive Tim McKibbin said "land banking" - or leaving land vacant and watching it increase in value - was a common investment method used by developers.

But Mr McKibbin said it was unusual to do the same with commercials properties, which could attract an even greater profit.

"It is a perplexing question and I'm afraid one I can't give any clarity to," he said.

"That seems to be their investment strategy.

Then it is followed by the undersupply issue.

Housing shortfall blows out
A CURRENT shortfall of 215,000 homes Australia-wide has prompted calls to reform land and sales taxes to cater to the growing demand for rental accommodation.

Despite the slowdown in building demand and house prices, the 2011 State of Supply report from the National Housing Supply Council found that the gap between housing supply and population demand increased by 28,000 over the past financial year.

At current population growth, Australia's housing shortfall is expected to blow out by more than 640,000 over the next two decades.
Advertisement: Story continues below

The council's formula for calculating the shortfall incorporates building trends such as affordability, demolitions and approvals, and population trends such as migrant intake, homelessness and household transitions.

The ambitious land release programs on Melbourne's urban fringe in the past year have ensured that Victoria's housing shortfall (17,600) is significantly smaller than either NSW (73,700) or Queensland (61,900). About 14,000 lots were released in greenfield sites in Victoria this year, with a further 37,000 to be made available early next year.

However, greenfield development will not supply the 630,000 to 930,000 extra homes the state will need in the next 20 years, warns the council's chairman, Dr Owen Donald.

 

[young-gun]

Todays top two property articles on the Sydney Morning Herald
#1 Property oversupply
#2 Property under supply


One author is claiming 120,000 empty properties in Sydney, and the other is claiming a housing shortage of 80,000 in Sydney...
Interesting strategy of 'land banking', I have seen plenty of long term empty buildings around the place, and always wondered why the owners don't lower rents to try and get some cash flow. It seems they are not too worried by it all.



Then it is followed by the undersupply issue.

Ahh good old nhsc.. Please see the link below to reassure yourself. Nhsc are a joke.

www.moneymorning.com.au/

The articles are on the left of the main page, and talk about the report your article references.

 

[young-gun]

Todays top two property articles on the Sydney Morning Herald
#1 Property oversupply
#2 Property under supply


One author is claiming 120,000 empty properties in Sydney, and the other is claiming a housing shortage of 80,000 in Sydney...
Interesting strategy of 'land banking', I have seen plenty of long term empty buildings around the place, and always wondered why the owners don't lower rents to try and get some cash flow. It seems they are not too worried by it all.



Then it is followed by the undersupply issue.

My apologies..nhsc do in fact have it right. I didn't read about the squatters. Surely once they're kicked out they will be looking for a place to buy in the burbs and start a family, this will most certainly create even more of a housing shortage

 

[Temjin]

My apologies..nhsc do in fact have it right. I didn't read about the squatters. Surely once they're kicked out they will be looking for a place to buy in the burbs and start a family, this will most certainly create even more of a housing shortage

You meant nhsc got it wrong?

Where do these squatters find the money to buy new houses to move in anyway? And why they don't do so now even if they can already afford it? Is it because there are absolutely no houses on sell? (shortage) Or there is a shortage of houses at an affordable price?

 

[young-gun]

You meant nhsc got it wrong?

Where do these squatters find the money to buy new houses to move in anyway? And why they don't do so now even if they can already afford it? Is it because there are absolutely no houses on sell? (shortage) Or there is a shortage of houses at an affordable price?

sorry temjin,

i was being very sarcastic with that post. of course squatters getting kicked out wont have an impact on anything(except maybe the crime rate), and naturally if they are squatting they would never be able to afford a house, and im sure the last thing on their mind is starting a family.

there is no shortage of housing, a shortage of affordable housing yes, but this simply means that prices need to come down a hell of alot before alot of people are able to consider buying in, if they currently cant afford to get in, then there is no demand from this group until prices are low enough for them to create demand.

 

[medicowallet]

WOW

The clearance results for the 24/12-25/12 weekend FINALLY seem accurate!!

Well done Enzo and the rest of the misleading industry!

 

[Aussiejeff]

From RPData latest annual report....

"Melbourne house and unit prices fell by 5.7 per cent, making it the second worst performing city in Australia.

Mr Kusher says prices have been sliding for four years and there is an oversupply of new housing on the Melbourne market.

"That could make any recovery further away because there is ample supply," Mr Kusher said.

"When we look at markets like Sydney, and then to a lesser degree Brisbane and Perth, the housing supply hasn't kept pace, so that's supporting the market somewhat.

"But Melbourne's had very sufficient supply and it's had very strong growth in property prices, and now affordability is really hampering that market."

http://www.abc.net.au/news/2011-12-27/property-prices/3748490

From REIV EOY report...

The total value of auction sales was $11.6 billion compared to $16.8b in 2010,..

http://www.reiv.com.au/~/link.aspx?_id=F86BFA7729DF4E22B9FB036CD6EFD36F&_z=z

Wow. So, according to REIV there's been a whopping 21% fall in total value of reported auction sales for 2011, yet the average property value fall according to the RPData was "only" 5.7% across the board. Perhaps this indicates there has been a very big drop in the high end property market values causing the huge drop in overall annual reported auction values? Admittedly, there were 11% fewer auctions in 2011 compared to 2010, but that still doesn't account for the huge drop.

Oh well, Happy New Year, Melburnians?

 

[trainspotter]

Off to London tomorrow (28th Dec 2011) to see first hand the devastation of the falling house prices throughout Europe and the impact it has had on the proletariat. Bon Voyage ........... Oh yeah .... almost forgot ...... to stand underneath Big Ben when it chimes 12 times to ring in the New Year known as 2012.

 

[McLovin]

Off to London tomorrow (28th Dec 2011) to see first hand the devastation of the falling house prices throughout Europe and the impact it has had on the proletariat. Bon Voyage ........... Oh yeah .... almost forgot ...... to stand underneath Big Ben when it chimes 12 times to ring in the New Year known as 2012.

I don't think you'll find much "devastation" there.

 

[McLovin]

I don't think you'll find much "devastation" there.

To expand a bit on that. I was in London last week (I'm in Italy now and the mood is much more depressing here). In London I noticed that the high end retailers were very busy (Selfridges/Harvey Nick's/Fortnum and Mason) The shops on the Kings Road were fairly busy. Oxford/Regent Street was much quieter though (for those unfamiliar with London that is where a lot of the middle of the road retailers are).

Central London property is still expensive and has held up well. I guess that is the nature of the market there though, very different to anything in Australia. I actually had a meeting with a bank manager about buying a couple of apartments over there. Rental yields are ~6% and 5 year fixed mortgages can be done for under 4%.

The economy is still pretty bad -- not quite devastation though -- and that was certainly the sentiment I got from the ex-colleagues I met up with.

 

[kincella]

am positive I heard the bloke from rpdata, on abc24 yesterday....saying Melb prices had risen 50% since 2007.....
so is it more correct now to say...melb prices have risen 45% since 2007.....

extract.......
The rural Victorian town Lismore recorded the highest increase in median property prices, up 50 per cent to $159,000.

The weakest performer was Bowen in Queensland's far north with the media price sliding 48 per cent to $161,250.

http://www.news.com.au/money/austra...ta/story-e6frfmci-1226196669965#ixzz1hiZ8Sn7k

but wait...theres more...

melb prices rose 25-30%, in 2009/10
“In contrast, Brisbane home values have been hit hard and are now off -7.5 per cent while Melbourne dwellings have corrected -5.8 per cent after very strong 25-30 per cent capital growth over 2009-10,” Mr Lawless said.

http://www.heraldsun.com.au/news/mo...rne-house-prices/story-fn7x8me2-1226210215796

but the media are thumping their chests, sprouting any tiniest % falls....as proof they have been vindicated for all the armedgeddon reports they have been making...

'theage' housing journos are the worst...
goodness me....here are two very different props...one is up 50%, one down 48%.....
because not every property fits the median....
they are all very different....from mcmansions, to fibro dog boxes....

now***regarding Bowen qld, price drop....I am wondering, since it is a mining town...what caused the drop....was it after massive rises in the prior years, is there a hiccup with the mines, or are the mining companies buying up big, and demanding a discount...
there is more to this drop, than meets the eye

you can be sure of that
see the price graph here to 2010....
http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=qld&u=bowen

happy new year

 

[greebly24]

"1770 prices step back in time as beach towns await boom" The Australian, Wednesday, Dec 28, 2011
The Queensland coastal property bubble has popped...

"...the price of a penthouse beach unit to crash from $1.5 million to $350,000."
WTF??? That's a 77% drop. That's almost double Steve Keen's prediction. Man, he wasn't even close, hey.

"...the once $1.5m-$1.8m asking prices for beachfront penthouses at Loka Santi have slumped to a more realistic $350,000-$600,000."
In dollar terms that's a loss of $1.15m-$1.2m per penthouse (67%-77%). Wonder if any investors leveraged up and bought more than one?

"28 North Break Drive. Valued at $1.2m in 2008. Sold this year for $350,000."
A 70% loss in three years! Unbelievable!!!

"618 Captain Cook Drive. Sold April last year for $1m. Sold in October this year for $315,000."A 68.5% loss in 18 months. That's 45% annual loss. On property!!! In Australia!!!

Who would've thunk it? Obviously not the local RE agent, Agnes Water property manager Kim Skinner...

"Two years ago she paid $900,000 for a garden unit in the same block..."

Firstly, what was she thinking? Is she educated? How clever do you have to be to work in real estate? Do you even need to finish high school? It's a country town. It doesn't even have a school. And she paid almost a million dollars for a ground floor unit? Mass hysteria during a property bubble must be a powerful thing.

So she paid $900k for a ground floor unit when the penthouse sold for $1.5m. Now the penthouse sold for $350k. Being generous, that means her purchase is now worth $250k, maybe. How much does her property now have to appreciate for it to get back to break even? A total of 360%. Assuming a generous 10% annual growth rate, she's going to break even in about three decades. Until then her repayments are going to be a retirement killer.

But why wouldn't people hang on until the market comes back, like thousands of other Australians are doing? Why would they lock in such a large loss?

"The reality is the banks are dumping their foreclosures."

Okay. So the people didn't become millionaires like they thought they would. They couldn't keep up the interest payments either. So banks are locking in the losses. Guess they are going the full-recourse routes and will pursue the previous owners until death. Wonder how many are already bankrupt?

And here's a question for the property bulls: why wouldn't the banks simply hang on until the market recovers. They claim they have increased deposits from savers, and no problems accessing overseas credit markets for funds. Why would they take such massive losses?

What do the banks know, with their tens of thousands of financial sector employees, about the future of property prices in Australia, that the local dim RE agents don't???