The future of Australian property prices

[luutzu]

The thing is, if people took an interest only loan, they either couldn't afford it, or they were just gambling on a capital gain.

Most couldn't afford a deposit I reckon. I know a few who could only because they borrow from family or relatives.

After stamp duty, deposit and other fees... Jeez man, that's anywhere from $100K to $250K in savings. For most people, it takes a lot of hardwork to have that kind of cash sitting in the bank.

I actually heard of shady loan sharks lending to property investor/buyer for a deposit. At a bargain 2% a month or so.

 

[sptrawler]

Or rather than paying principle and earning an after tax return of approx 4% (today's rates) they took the principle part of the payment and invested it elsewhere for a higher expected return.

That's a small scale ponzi scheme, with yourself and your banker.
If it works out well, that's great everyone's a winner, if it goes bad everyone is looking for someone to blame.

 

[willy1111]

They might know that they wouldn't be able to pay both the interest and the principle now..

The bank calculates that they can afford to pay principle now, but allows them the flexibility/choice not to.

 

[willy1111]

That's a small scale ponzi scheme, with yourself and your banker.
If it works out well, that's great everyone's a winner, if it goes bad everyone is looking for someone to blame.

One could argue the whole financial system is a big ponzi scheme

Who really cares...as long as we find a way to use it to our advantage and manage risk accordingly.

I guess you are trying to say that if they aren't paying principle then they are not managing risk well.

But how far do you take it, should they be debt free before investing elsewhere.

Everybody has a different risk tolerance.

 

[luutzu]

The bank calculates that they can afford to pay principle now, but allows them the flexibility/choice not to.

Yes, that's what they told ASIC, APRA and the Royal Commission too.

Soon they'll pull an Alan Greenspan and tell the Senate hearing that they thought it was a good idea at the time to help the struggling aussie battlers out.

 

[luutzu]

One could argue the whole financial system is a big ponzi scheme

Who really cares...as long as we find a way to use it to our advantage and manage risk accordingly.

I guess you are trying to say that if they aren't paying principle then they are not managing risk well.

But how far do you take it, should they be debt free before investing elsewhere.

Everybody has a different risk tolerance.

Property prices beyond the rental yield and generous tax allowances is pretty much a ponzi. Especially when it comes to residential property.

Well, unless you get creative, break a few council code and build, partition your rental however you like... to get the extra income.

That's not saying the ponzi will just collapse or wouldn't be profitable. Just investors or homeowner lucky enough to get in early, or get in late but managed to hang on through the bad years... it will work out because live do go on and population and economic growth do make property more valuable, eventually.

 

[Smurf1976]

As long as it holds up a few more days......

Just signed the contract accepting an offer to buy my place half an hour ago. Now just hoping the buyer doesn’t cool off and does get their finance approved.

 

[sptrawler]

As long as it holds up a few more days......

Just signed the contract accepting an offer to buy my place half an hour ago. Now just hoping the buyer doesn’t cool off and does get their finance approved.

That didn't take long Smurph, you must have priced it right.

 

[luutzu]

As long as it holds up a few more days......

Just signed the contract accepting an offer to buy my place half an hour ago. Now just hoping the buyer doesn’t cool off and does get their finance approved.

Good luck Smurf.

There goes the stock market then.

 

[Smurf1976]

That didn't take long Smurph, you must have priced it right.

Put it online last week, first open home on Saturday, received an offer that was decent but a bit low, negotiated it up a bit and effectively sold that afternoon apart from the paperwork.

Which makes now a good a time as any to post on ASF that I'm doing something very different both for work and life and won't be living in Tas or keeping the lights on any more. Some sadness in some ways, excitement in others, but everything has a time and quite simply everything just aligned and it all made sense.

South Australia here we come.......

 

[sptrawler]

Put it online last week, first open home on Saturday, received an offer that was decent but a bit low, negotiated it up a bit and effectively sold that afternoon apart from the paperwork.

Which makes now a good a time as any to post on ASF that I'm doing something very different both for work and life and won't be living in Tas or keeping the lights on any more. Some sadness in some ways, excitement in others, but everything has a time and quite simply everything just aligned and it all made sense.

South Australia here we come.......

All the best Smurph, hope you have enough time to put a few posts on the forum.

We will miss the state of the system updates, you were good enough to post, many thanks. The new job must be something special, congratulations.

 

[willy1111]

Yes, that's what they told ASIC, APRA and the Royal Commission too.

Soon they'll pull an Alan Greenspan and tell the Senate hearing that they thought it was a good idea at the time to help the struggling aussie battlers out.

And when they stop lending to the battlers...they will also be the villains as the battlers won't be able to get finance to buy a home.

People need to stop being victims and take personal responsibility. Maybe they should be required to undergo some financial literacy education prior to taking on financial products such as a mortgage.

At the end of the day it is just a product, it is up to the user to determine if it will be used for their benefit or not.

 

[willy1111]

Property prices beyond the rental yield and generous tax allowances is pretty much a ponzi. Especially when it comes to residential property.

Well, unless you get creative, break a few council code and build, partition your rental however you like... to get the extra income.

That's not saying the ponzi will just collapse or wouldn't be profitable. Just investors or homeowner lucky enough to get in early, or get in late but managed to hang on through the bad years... it will work out because live do go on and population and economic growth do make property more valuable, eventually.

Is it a Ponzi or a simple case of supply and demand?

Property in mining towns went up as demand increased and supply didn't keep up. Then demand dropped like a rock and so did the prices.

Capital city property seems to always be in demand, as long as demand exceeds supply it will continue to hold up assuming those with the demand have the money or can get the finance.

 

[Smurf1976]

All the best Smurph, hope you have enough time to put a few posts on the forum.

I won't be disappearing from ASF. Temporarily yes but not for long.

I'll have to cut my posts in half though. With the price of electricity in SA being approximately 100% higher than in Tasmania if I use 50% less of it then that should work out just fine.

So i'll just leave every second word out then each post should take half as long. All worked out you see.....

As for property prices, well I'm selling in a boom area and buying in a place that hasn't had a boom so that's worked out rather nicely.

New house is solid but dated to an almost unbelievable extent as though the previous owners had gone out of their way to ensure nothing was modernised. All good, price reflects that so I'm happy. Best way I can describe it = welcome to 1965.

 

[sptrawler]

Is it a Ponzi or a simple case of supply and demand?

Property in mining towns went up as demand increased and supply didn't keep up. Then demand dropped like a rock and so did the prices.

Yes and a woman from Karratha has been busted, for running a ponzi scheme, welcome to the wild,wild west.

 

[luutzu]

And when they stop lending to the battlers...they will also be the villains as the battlers won't be able to get finance to buy a home.

People need to stop being victims and take personal responsibility. Maybe they should be required to undergo some financial literacy education prior to taking on financial products such as a mortgage.

At the end of the day it is just a product, it is up to the user to determine if it will be used for their benefit or not.

There are predators out there ey.

So if the OZ bank goes full blown GFC, will they and their shareholders take "responsibility" or will they go to Canberra for a bail out?

What about the average OZ that were irresponsible and buy a house to live in for some reason? Will they get a bail out too? Or would that be a "moral hazard" seeing how we all should be aware and take personal responsibility?

These free-market line of reasoning are all nice and good, just it always only apply to one group of people. For the rest there's big brother with other people's money to bail them out.

I mean, even the local council have more sense than our great public servants with big titles. See, the council require all pools be fenced. They do spot checks to make sure that fences are up to scratch around the pool.

Why? Because stupid kids seeing water will gravitate towards it and most likely drown. And you can't blame the kid now can you?

But of course when we're over 18, we're all grown up and should know better than to work hard, find ways to pay for that house to start a family. Then get screwed by the broker, the banker, the policy makers. That's just life kids. Now get back to work.

 

[luutzu]

Is it a Ponzi or a simple case of supply and demand?

Property in mining towns went up as demand increased and supply didn't keep up. Then demand dropped like a rock and so did the prices.

Capital city property seems to always be in demand, as long as demand exceeds supply it will continue to hold up assuming those with the demand have the money or can get the finance.

There are some 20,000 empty apartments in Sydney I think. There's another few truckloads coming on line over next couple of years. So much for demand.

There's always demand. Just it's not a real demand unless it's backed up by cold hard cash, or a friendly neighbourhood mortgage broker who know a guy who know another guy who can use Adobe pro.

So if property prices are within people's pocketbook, or their borrowing capacity... then it could be in the millions and still be "cheap". If not enough people are willing or able, it'll be worth under its rental and tax yield... which is somewhere between 40 to 50% their current prices.

But ey, don't take anything from me as financial wisdom,I got like $5 in the bank.

 

[sptrawler]

The problem with Australia is we are bombarded with negative news, how we are always in deep $hit, whether we are or not.
Two years ago, everyone was stressing about getting into the market, the newspapers were full of it, now they are full of talk about bankruptcy and falling house prices.
The whole joint is ridiculous, the sooner the news goes out of business the better, people should stop reading the news or watching it for a while it would reduce their stress levels.

There is an interesting article on the ABC website.

http://www.abc.net.au/news/2018-07-...me-eases-anxiety-us-not-so-australia/10052594

I mean you just have to read this thread to realise the stress involved, everyone was stressing about Sydney house prices going up a couple of years ago, now everyone is stressing about them going down.

 

[Smurf1976]

people should stop reading the news or watching it for a while

Like most people there are relatively few things where I know with absolute certainty what the facts are.

Once I realised that the mainstream media rarely reported on these few subjects with accuracy I have simply assumed that they won't likely be reporting anything else accurately either.

Only reason I've watched TV news in the past 20 or so years is if either myself or someone I know is on it and even then I'm only watching to check the accuracy of how it has been edited etc. Same with newspapers.

 

[lindsayf]

Like most people there are relatively few things where I know with absolute certainty what the facts are.

Once I realised that the mainstream media rarely reported on these few subjects with accuracy I have simply assumed that they won't likely be reporting anything else accurately either.

Only reason I've watched TV news in the past 20 or so years is if either myself or someone I know is on it and even then I'm only watching to check the accuracy of how it has been edited etc. Same with newspapers.

Yes the news industry has become a ridiculous parody of what it could and should be.
Quite crazy.