The future of Australian property prices

[luutzu]

In regard to Ayn Rand, I have always found it rather bemusing and a tad contradictory that at the end of her life she received assistance from Social Security benefits and the American form of Medicare.

I didn't know that, that's pretty funny.

Also funny that American politicians are all saying how Medicare and medicaid is socialism, are bad and horrible and inefficient... and yet they're all on it and it works great - for them.

Then there's the hundreds of billions bailing out the banks in hope that they would use that to stay afloat and lend to the economy to get it moving again... but they figured since they got the loan from the gov't for next to nothing, the economy is in a bad shape and too risky to lend so decided it's better to lend it to the Chinese or elsewhere and to also buy US gov't bond that pay a higher rate than the rate the gov't lend to them at.

You really can't make these stuff up.

 

[luutzu]

Looking at the overall economic changes over the past 35 or so years, the net effect is basically to produce a one-off spending spree by means of running down capital.

There's plenty of real life analogies, but the basic concept is that if you stop worrying about the future then you can certainly ramp up spending, production, enjoyment or whatever today. It works just fine until tomorrow comes.

Australia's economy circa 1980 and in the decades prior was basically about making stuff. Manufacturing was huge and everything else, that is mining, administration, retail, banking and so on, basically existed to either supply the factories and other "real" industries (eg agriculture, traditional service industries), distribute the products or administer the whole thing.

What we've got now is basically the liquidation of capital in order to produce a one-off boom. Manufacturing has been largely wiped out, we're running down infrastructure, we're running down natural capital at an alarming rate and so on. Meanwhile we're borrowing to fund consumption as well.

In broad terms, we've shifted from sustainable to unsustainable. We had something that could have continued on an ongoing basis but now we've got something that is very much finite in its nature - there's only so much iron ore, coal and gas in the ground and we're hell bent on making damn sure that the whole lot is gone well within the lifetime of a child born today. Meanwhile we're gotten rid of manufacturing etc and run up huge debts.

Like anything, you can have a lot more of it in the short term if you don't worry about tomorrow. There's plenty of money if you just borrow it. There's plenty of water if you don't mind the dams running completely dry. You can have one almighty party if you're not worried about a hangover tomorrow. Any job is faster if you don't worry about health and safety. And just think how much time you could free up by not exercising and just eating take away food. All completely unsustainable of course and not something that's wise to do but as a nation it's pretty much what we've actually done. Now we're starting to suffer the consequences with house prices being just one of the myriad of problems we face.

Was watching Joe Stiglitz lecture at UNSW and, repeating what he said of Australia (my opinion wouldn't be worth two cents anyway)...

That like any resource rich countries, we really got to think and reinvest for the future because those mines and reserves aren't going to be there forever. When it runs out and we haven't been investing in infrastructure, investing in education and training to bring the workforce into the service industry and modernise our workforce... we're going to be in a lot of trouble.

So at the moment when interests rate is extremely low, when our debt level is relatively low, if not the lowest of any developed economies, when the economy is in a recession... the return on investment in infrastructure and all that is just amazing - not just the percentage return but the employment and wage increases and increase demand etc. That it'd be crazy not to invest.

But we're too focused on the deficit and we all see spending as expenditure and not as investment.

But with the recent changes, hopefully, we see in investment in the NT, the continuous ship building promise to SA and other infrastructure programmes... That and joining the China-led Infrastructure Bank... maybe there's hope that we have tried some sort of austerity and Abbott is starting to think maybe it's not working so well.

 

[awg]

I apologise if posting this here is inappropriate, but an unusual thing popped up today, and despite having some experience, I am not on any property forums. There would be much wisdom here no doubt

Have to get onto the matter on Monday morning

So i have been informed of a property that the vendor is desperate to sell urgently, but is not officially on the market, they are secretive, dont want an agent, seeking a quick settlement...and especially a quick deposit

The house is not occupied and needs some work,(apparently).. but is a conservative 25% discount imo,
unless it has worse internal damage than I have been led to believe.

I am of the opinion I could lower the mentioned asking price.


Good: large block, 20min from centre of Newcastle and University, asking $130K

Bad: right on the highway, noisy and undesirable suburb, house and yard is run down.

I expect rates are unpaid, but I dont think it is in a flood zone, will do a "walk outside" inspection asap.

Any tips on research, things to be wary of etc...any comments at all would be welcome (even negative ones),
especially prior to speaking to my solicitor about this

This is a strange & unusual situation, of course I would not buy without an internal and structural inspection.

A friend of mine got a bargain in a similar fashion a few years ago

 

[trainspotter]

I apologise if posting this here is inappropriate, but an unusual thing popped up today, and despite having some experience, I am not on any property forums. There would be much wisdom here no doubt

Have to get onto the matter on Monday morning

So i have been informed of a property that the vendor is desperate to sell urgently, but is not officially on the market, they are secretive, dont want an agent, seeking a quick settlement...and especially a quick deposit

The house is not occupied and needs some work,(apparently).. but is a conservative 25% discount imo,
unless it has worse internal damage than I have been led to believe.

I am of the opinion I could lower the mentioned asking price.


Good: large block, 20min from centre of Newcastle and University, asking $130K

Bad: right on the highway, noisy and undesirable suburb, house and yard is run down.

I expect rates are unpaid, but I dont think it is in a flood zone, will do a "walk outside" inspection asap.

Any tips on research, things to be wary of etc...any comments at all would be welcome (even negative ones),
especially prior to speaking to my solicitor about this

This is a strange & unusual situation, of course I would not buy without an internal and structural inspection.

A friend of mine got a bargain in a similar fashion a few years ago

Ermmmmmmm .... are you asking for an opinion? This is a no brainer IMO

Q: What is the block worth ?

 

[satanoperca]

Q: What is the block worth ?

Interested Trainspotter. It is 25% off market, sounds to go to be true.

I am always dubious of a bargain. Nothing is cheap for no reason.

Cheero

 

[sydboy007]

That is very true, the difference is, the banks wear the loss in the U.S, the vendor wears the loss in Australia.

It is a small but pertinent point.IMO

The non recourse issues is more a media beat up than reality

The claim that all mortgages in the United States are nonrecourse is wrong. Only eleven states constrain the recourse that lenders hold over delinquent mortgage borrowers. The other 39 states place no limits on the ability of lenders to recover what they are owed by getting deficiency judgments, which are legal claims to any and all of the borrower's assets to cover the deficiency, or the difference between what the lender recovers from foreclosure and what the borrower owes. Of the 11 states that limit””but do not forbid””recourse, California, for example, prohibits deficiency judgments only if the loan is a purchase mortgage and the lender wants to pursue "fast-track," nonjudicial foreclosure. If the loan is a refinance or the lender wants to pursue a judicial foreclosure, California offers no protection from recourse.

One obvious question is that if lenders can chase down borrowers to recover unpaid debts, why did they lose so much money? The answer is pretty simple. Most borrowers who default on their mortgages probably have no assets to go after. The reason that the borrower defaulted on the mortgage was that they had run out of money. One important point to note is that the deficiency judgment is treated as an unsecured debt of the borrower's, and the borrower can extinguish that debt by filing for bankruptcy. And this complicates the whole argument, because it means that borrowers can walk away from their mortgage if either the loan is nonrecourse or bankruptcy laws are generous.

 

[awg]

Interested Trainspotter. It is 25% off market, sounds to go to be true.

I am always dubious of a bargain. Nothing is cheap for no reason.

Cheero

Well one problem is I cant really evaluate the blocks worth to my satisfaction.

Other sales are in the 180-200 range but with nicer houses, same block size.

The block is fairly large being ~ 20m x ~60m

There are not many houses/sales in the area.

It is zoned Environmental 2, and is in flood zone, but flooding is very rare according to council

It is swampy and noisy.

However the vendor is desperate for a quick sale, and has offered a reduction, I intend to try and inspect inside tommorow.

Apparently it has 3 bedrooms, and I am thinking I can put 3 uni students in it, for cashflow + from day 1,
and flip it for 30K+ profit in a year or so, if I dont want to be bothered anymore.

Yes, it sounds like a no brainer, but it flies in the face of RE advice to buy the worst house in the best suburb, this is the worst in the worst.

An obvious complication is the vendor is not very stable, and also that their solicitor may advise them not to accept my offer, and in fact "cheat" me, by advising them to sell to one of their wealthy cronies at a higher price

 

[qldfrog]

the vendor is not very stable,
AND
advising them to sell to one of their wealthy cronies at a higher price

is it a kind of deal you celebrate with a magnum . but not of the vineyard variety: this rings far too many alarm bell to be worse the potential trouble risk:
we do not want to discover you again when next derdging the port

 

[rimtas]

Any tips on research, things to be wary of etc...any comments at all would be welcome (even negative ones),
especially prior to speaking to my solicitor about this

If you do not have where to live, price is irrelevant as long as you have money and do not need to take a loan.

But if property is for investment purposes and financed through bank, then it is a subject to market fluctuations.
If market tanks in the years to come, all real estate will follow, and the price paid today will look really expesive two years later. You will be paying off $130K for the property that will be worth $70K (as an example).
Keeping cash tight those times is the best decision, as you can get caught on the top of the bubble, with an asset that will be impossible to sell due to liquidity problems at the worst time.

 

[Ald123]

The only reason there is a crisis in property prices in Australia today is because Of Australians. It is Australians who want it to be that way and only Australians who have caused it and only Australians that are ensuring that it continues. It's nobody else. The young Australians want to pay crazy prices for property and the old Australians want to sell the property to the young at the crazy prices. The Australian government also wants the property prices in Australia to be high, as does every single Australian Workers Union. Every single one of the Australian banks also wants the property prices in Australia to be crazy high.

So please stop complaining about it, turning it into some mysterious phenomenon, or blaming the Chinese when the Australians in China are promising Chinese families that they can become permanent residents just by buying property. It is the Australian government that wants the high prices to attract the foreign capital it needs to bring into its economy and which ensures there are methods to be able to do this. It is the Australian government that wanted the tidal wave of printed money to arrive via Australian banks and be distributed amongst Australians. This tidal wave of free printed American money that caused this massive amount of debt that private Australians have accumulated was allowed by the Australian people, banks and government and businesses. It is the Australians, Australian business and Australian government that wanted endless credit cards and finance plans so that everything could be bought. It is the Australian state governments that are being fully supported by the Australian people to take on massive debts in the billions to build footy stadiums and pubs. It is the Australians who are selling their land and resources to foreigners and foreign companies.

When the Americans and Europeans printed this fantastical amount of money and handed it out to Australians the Australians took it by the bucket loads. When the Americans and Europeans stopped giving it for a little while, the Australian government got it from other sources and handed it to you as increased first home owners grants, roofing insulation and solar panel subsidies and tax rebates or for your businesses to spend with.

So stop blaming everyone else, blame yourselves.
It's your country, it's the house that Bruce and Shazza built and that's exactly how you wanted it.

If you don't like it change it but stop complaining to your government , they read you better then you can read yourselves and they give you exactly what your hearts desire.
Enjoy the beaches and the sunshine and accept what you have built.

 

[moXJO]

If you do not have where to live, price is irrelevant as long as you have money and do not need to take a loan.

But if property is for investment purposes and financed through bank, then it is a subject to market fluctuations.
If market tanks in the years to come, all real estate will follow, and the price paid today will look really expesive two years later. You will be paying off $130K for the property that will be worth $70K (as an example).
Keeping cash tight those times is the best decision, as you can get caught on the top of the bubble, with an asset that will be impossible to sell due to liquidity problems at the worst time.

You think real estate will almost halve?
Good luck with that.

 

[CanOz]

You think real estate will almost halve?
Good luck with that.

Totally agree, there's a million Asian investors ready to pick the bottom...

 

[Macquack]

Totally agree, there's a million Asian investors ready to pick the bottom...

They think it is the bottom NOW.

Where is Noco when you need him? We are allowing a "Commo" government to use their "freshly printed up out of thin air" money to buy out our country from underneath us.

The problem is, no politician today has a brain and the concept of educating the public to how the international financial system actually works is considered to be a scare campaign.

 

[sydboy007]

from the AFR

One of the country’s biggest mortgage brokers, Mortgage Choice, says the clampdown on lending to landlords has dragged property investors’ share of its loan approvals to a 20-month low.

In a sign banks’ tighter credit standards are having some impact, Mortgage Choice says the proportion of its loan approvals going to property investors fell from 34 per cent in May to 30 per cent in June, the lowest share since late 2013.

“It’s a 12 per cent reduction in investor loans in a very, very short period of time,” chief executive John Flavell said.

While there have not been official figures yet confirming this trend, Mr Flavell said it was the first data pointing to a slowdown in investor lending triggered by banks’ tougher credit policies.

…In particular, he said some first-home buyers trying to enter the market as property investors were finding it harder to get credit from banks under the new lending criteria.

 

[sydboy007]

quite an interesting read that pulls apart the propaganda being produced to con the public on NG

http://blog.lvrg.org.au/2015/07/con...t-limiting-negative-gearing-to-new-homes.html

 

[sptrawler]

I am noticing a lot of homes in my area, have sea containers, on the front lawns.

It could be "hi ho silver aaaway", for many.

House building is still galloping away, my guess is an oversupply of some magnitude, in 12 months.

 

[waterbottle]

I am noticing a lot of homes in my area, have sea containers, on the front lawns.

It could be "hi ho silver aaaway", for many.

House building is still galloping away, my guess is an oversupply of some magnitude, in 12 months.

Yes, I'm noticing this alot in Sydney's Inner West - you could probably find an apartment block being constructed on every road!

 

[Wysiwyg]

A Re-Max ad. has just reminded me that when buying a house you don't act on first impressions.

 

[sptrawler]

Further confirmation of Perth's housing woes.

http://www.abc.net.au/news/2015-07-09/perth-rental-prices-drop/6605778

 

[Smurf1976]

The situation looks pretty grim in SA with unemployment now at 8.2% and rising sharply.

There's more "big ones" come too with Holden and the Port Augusta power stations (and associated Leigh Creek mine) still to close. In the case of Leigh Creek, that pretty much wipes the whole town off the map economically.

I can't see this being good for house prices in SA. It's not a bad place in many ways, but nobody needing a job would likely consider moving there anytime soon and some will no doubt end up leaving to pursue jobs elsewhere.

http://www.adelaidenow.com.au/news/...7435004822?sv=bf33fe66c255de5aef249e8dccb7920