The future of Australian property prices

Knobby22 · 14 March 2012

Starcraftmazter said:
Second of all, the current bubble is literally orders of magnitude anything that has happened recently, and is not a good comparison. The best historical comparison is the 1890s housing bubble in Australia which overshot. This bubble will also overshoot.

There are just too many things you aren't taking into account (demographics, commodities & China bubbles, over-indebtedness to name a few), and you have fallen into the fallacy of predicting the future based on the most recent experiences.

You mention the 1890s experience but the world is different from then too so basing the fall on that is also a fallacy!

Firstly, we need a trigger, where is it?

I personally think baby-swallow is correct, this won't be the full fall, more of a retracement by maybe 20%. There is too much cash floating about from foreigners, miners, public servants you name it and negative gearing still exists as does easy credit that didn't exist previously before we floated the dollar.

The government will also act to keep the bubble going using 1st home owner grants and increasing immigration.

Glen48 · 14 March 2012

and when that fails whats next?

wayneL · 14 March 2012

Knobby22 said:
You mention the 1890s experience but the world is different from then too so basing the fall on that is also a fallacy!

Firstly, we need a trigger, where is it?

I personally think baby-swallow is correct, this won't be the full fall, more of a retracement by maybe 20%. There is too much cash floating about from foreigners, miners, public servants you name it and negative gearing still exists as does easy credit that didn't exist previously before we floated the dollar.

The government will also act to keep the bubble going using 1st home owner grants and increasing immigration.

In addition, western economies have become highly dependent on rising house prices, as have the investment portfolios of key politicians.

Propping the bubble is paramount.

Klogg · 14 March 2012

desolator said:
yeah and if you did that on your own Klogg, im sure you wouldnt be saying that if mummy and daddy didnt help.

Not only did I do that on my own, I know have a share portfolio of about 35k too.

And my aim here is not to brag, but I take offense to the ageist remarks being made.

young-gun · 14 March 2012

Klogg said:
Not only did I do that on my own, I know have a share portfolio of about 35k too.

And my aim here is not to brag, but I take offense to the ageist remarks being made.

firstly - what is your 450k house(assuming you are around 90-95 LVR if not 100%) worth today?

secondly - i wouldnt go speaking of a 450k house in this forum at the age of 22, the boomers will shoot you down in flames for not living more sustainable and being too greedy for your age even though a few years back 450k didnt get much.

Klogg · 14 March 2012

young-gun said:
firstly - what is your 450k house(assuming you are around 90-95 LVR if not 100%) worth today?

secondly - i wouldnt go speaking of a 450k house in this forum at the age of 22, the boomers will shoot you down in flames for not living more sustainable and being too greedy for your age even though a few years back 450k didnt get much.

I'm @ 80% LVR now, was @ 90% when I first bought (after the boom, refinanced it to less than 80% and got 60% of my LMI back)
As for value, the last bank valuation was 2years ago and that came in at just under 750k. Given the price drop of about 5-10% in the area (going by median), it's now around 680-700k.

And I'm not greedy in the slightest. My income easily supports the loan, and I did it with no help. I'm just making the point that the assumptions that anyone in their early 20s can't afford a home are not always true.

Dowdy · 14 March 2012

Klogg said:
I'm @ 80% LVR now, was @ 90% when I first bought (after the boom, refinanced it to less than 80% and got 60% of my LMI back)
As for value, the last bank valuation was 2years ago and that came in at just under 750k. Given the price drop of about 5-10% in the area (going by median), it's now around 680-700k.

And I'm not greedy in the slightest. My income easily supports the loan, and I did it with no help. I'm just making the point that the assumptions that anyone in their early 20s can't afford a home are not always true.

So you're telling me that the price went up 50%+ in two years.......and you're not selling!

Are you mad, you should cash in on the bubble while there's still suckers out there. I'm guessing it's the eastern suburbs, right, then there's no shortage of suckers there.....

Bill M · 14 March 2012

Klogg said:
I'm @ 80% LVR now, was @ 90% when I first bought (after the boom, refinanced it to less than 80% and got 60% of my LMI back)
As for value, the last bank valuation was 2years ago and that came in at just under 750k. Given the price drop of about 5-10% in the area (going by median), it's now around 680-700k.

And I'm not greedy in the slightest. My income easily supports the loan, and I did it with no help. I'm just making the point that the assumptions that anyone in their early 20s can't afford a home are not always true.

Can we start from the beginning please?

1. When exactly did you buy your house?

2. Where did you buy your house, what suburb/city?

3. If you borrowed 90% that makes it a $405,000 loan, is that right? On the standard variable rate mortgage that is $700 per week in repayments. Is that right? Did you afford that ok with your salary?

Just wondering as I can't find the original posts.

Miss Hale · 17 March 2012

National survey reveals buyer caution in 2012

Here is an article about a survey on people's attitude to buying real estate. I'm not sure how reliable/accurate it is (I don't know who realestateVIEW.com are exactly) but some interesting points including the following:

- Buyers are more cautious about entering the market at present

- Factors affecting this are include interest rates, housing affordability and increasing household expenses

- buyer confidence was not improved by the November and December interest rate cuts

- More than a fifth of participants claimed they had plans to buy this year until last month’s shock decision by the big four to raise interest rates

See the full article here:

http://www.bigpondmoney.com.au/nati...er-caution-in-2012?cid=ZBP_MON_headline_1503A

Glen48 · 17 March 2012

From Steve Keen and Money Morning:

Starcraftmazter · 17 March 2012

Glen48 said:
From Steve Keen and Money Morning:

View attachment 46457

Excellent chart - our crash is looking exactly like Japan. Given we have the same demographic problems going ahead, it's quite likely that we will also get falls over the next 20 years with no letting up.

Glen48 · 17 March 2012

From what I have been reading the news needs to catch up to the falls I think the smart victims are deciding to try and get out while there is still money around and suckers buying.
Soon we will see another vendors grant to help the market along.
Housing market is like the woman and the drunk were the woman tells the man your drunk to which he replies and your ugly but at least I will be sober in the morning, the housing market is hoping to wake up pretty in the morning.

rryall · 17 March 2012

Glen48 said:
From what I have been reading the news needs to catch up to the falls I think the smart victims are deciding to try and get out while there is still money around and suckers buying.
Soon we will see another vendors grant to help the market along.
Housing market is like the woman and the drunk were the woman tells the man your drunk to which he replies and your ugly but at least I will be sober in the morning, the housing market is hoping to wake up pretty in the morning.

There is a reason the news hasn't caught up to the falls. There are obvious incentives (advertising revenue) for newspapers to maintain a biased perspective regarding house prices. This is a massive conflict of interest. However, they will make sure the publish a small percentage of articles from a bearish perspective to show they were not misleading the public. Unfortunately (or fortunately) people take everything they hear in the news as gospel.

Beej · 18 March 2012

Glen48 said:
From Steve Keen and Money Morning:

View attachment 46457

Starcraftmazter said:
Excellent chart - our crash is looking exactly like Japan. Given we have the same demographic problems going ahead, it's quite likely that we will also get falls over the next 20 years with no letting up.

You guys just take in all this bearish outlook stuff without any real thought or analysis don't you? Two problems:

1) The data on that chart looks suspect to me, and I notice it doesn't cite a source? From the ABS here: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6416.0Dec 2011?OpenDocument you can see that the national house price index has fallen from it's last peak of 149.8 in the June 1/4 2010 to 141.6 in the Dec 1/4 of 2011 - so 18 months, the period implied on Keen's chart. By my reckoning, that's a fall of 5.5% -whereas Keen's chart implies Oz is 9% down after 18 months, which is factually wrong based on ABS data.

2) All this chart is really saying is that every time property prices have fallen 5% in 12 months, that "this is what the start of a crash" looks like. Australian property prices on average have fallen more than 5% on several other occasions in the past 20 years, and yet there was no subsequent large or ongoing crash, so this line of reasoning proves nothing about what the future holds from this point on really. But I am sure that chart has helped generate traffic for Money Morning and Keen's websites! ;-)

Glen48 · 18 March 2012

Robots err sorry Beej doesn't matter if house prices are going down 5% or 7.940685% the fact is they are going down.

I would suspect the ABS figures are about 3 months behind the times.

A hand grenade with the pin out is the same as owning a house both will explode and I guess a few home owners sadly will use the hand grenade option once it is clear the market has died.
Money Morning is fee you should join up and get with the programme.

moXJO · 18 March 2012

Starcraftmazter said:
Excellent chart - our crash is looking exactly like Japan. Given we have the same demographic problems going ahead, it's quite likely that we will also get falls over the next 20 years with no letting up.

We have nothing like Japans demographic problems

moXJO · 18 March 2012

Glen48 said:
From Steve Keen and Money Morning:

View attachment 46457

Ahhh Steve keen the man who bet his house and lost then bet a walk up the hill and lost. All his predictions come to nought if the government stimulates again or <insert a thousand other factors here>

young-gun · 18 March 2012

Starcraftmazter said:
Excellent chart - our crash is looking exactly like Japan. Given we have the same demographic problems going ahead, it's quite likely that we will also get falls over the next 20 years with no letting up.

im unsure how closely comparable our demographics are to japans', but keep in mind they have very strict immigration also. ours is simply, well let anyone and everyone in and buy a house(whether you live here or not).

Beej said:
You guys just take in all this bearish outlook stuff without any real thought or analysis don't you? Two problems:

1) The data on that chart looks suspect to me, and I notice it doesn't cite a source? From the ABS here: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6416.0Dec 2011?OpenDocument you can see that the national house price index has fallen from it's last peak of 149.8 in the June 1/4 2010 to 141.6 in the Dec 1/4 of 2011 - so 18 months, the period implied on Keen's chart. By my reckoning, that's a fall of 5.5% -whereas Keen's chart implies Oz is 9% down after 18 months, which is factually wrong based on ABS data.

2) All this chart is really saying is that every time property prices have fallen 5% in 12 months, that "this is what the start of a crash" looks like. Australian property prices on average have fallen more than 5% on several other occasions in the past 20 years, and yet there was no subsequent large or ongoing crash, so this line of reasoning proves nothing about what the future holds from this point on really. But I am sure that chart has helped generate traffic for Money Morning and Keen's websites! ;-)

you must own alot of property at present to have the current view of property that you have.

moXJO said:
Ahhh Steve keen the man who bet his house and lost then bet a walk up the hill and lost. All his predictions come to nought if the government stimulates again or <insert a thousand other factors here>

Along with every other economist/forecaster? do you honestly believe the stimulus didn't affect prices?

if you took out the variable that is the government and their meddling, economics would almost be a science.

Beej · 18 March 2012

young-gun said:
you must own alot of property at present to have the current view of property that you have.

Sorry but I don't see what your comment has to do with what I wrote in the post you responded to? Or is this is a case of not letting facts get in the way of a doom and gloom prediction? Do you think that my point re the actual data on Keen's chart is a valid criticism? Do you have an answer as why every other time property prices have fallen by a few percent over a year or two that they haven't subsequently crashed? Or is it "different this time"?

FYI I only own a PPOR outright, in Sydney, where the ABS index is down 2.9% from the 2010 peak. I've owned property in Sydney continuously since 1992. My spare cash-flow currently channels into other asset classes. My views on the likely direction of the property market are based on my experience, analysis and observations of the market and the data, and thus are not driven by fear of being financially ruined if prices fall (which is what you are implying) - I'll be OK whatever happens. So I am actually probably more objective than the many people who don't own property but want to, and who thus lap up all the doom and gloom stuff that is out there on this topic.

Glen48 said:
Robots err sorry Beej doesn't matter if house prices are going down 5% or 7.940685% the fact is they are going down.

I would suspect the ABS figures are about 3 months behind the times.

Yes ABS data lags. In fact the leading house price indexes produced by Residex and RP-Data are showing rising house prices since February (Australia average) - so they are not actually falling anymore over-all it seems, or at least we are at an inflection point, rather than an acceleration of any crash as Keen's chart implies / predicts. Here's the Residex data for Feb:

PS; Check out the rental increases in the last year.......

Bill M · 18 March 2012

Beej said:
My views on the likely direction of the property market are based on my experience, analysis and observations of the market and the data, and thus are not driven by fear of being financially ruined if prices fall (which is what you are implying) - I'll be OK whatever happens. So I am actually probably more objective than the many people who don't own property but want to, and who thus lap up all the doom and gloom stuff that is out there on this topic.

Same here, I know where my money is coming from. Really doesn't matter to me if prices go up or down.

PS; Check out the rental increases in the last year.......

In 34 years of residential property investing the rent has only gone one way for me..UP.

The future of Australian property prices

Knobby22

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Glen48

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Klogg

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Starcraftmazter

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moXJO

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moXJO

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