The future of Australian property prices

[luutzu]

I now have visions of houses physically falling over, not just in terms of price.

As for prices, well I had no trouble selling my house for the exact price I was expecting but I do see a lot of signs that the market is slowing (indeed the agent I'm using confirmed this).

Quite a few of the million dollar home I see will probably fall over too.

Weren't long ago that a million-dollar house actually do look and feel like a million buck. Nowadays... jeez man, am I getting older and poorer or what.

 

[DNA2013]

I just feel sorry for those who purchase a property in the last 2-3 years....seems to be going negative equity for those putting hard earned cash into properties.

However, it's not just the banks, personal responsibilities need to taken into factor as well. Just because you can borrow X max amount doesn't mean you need to gear to the tilt.

https://mywealthforlife.com/the-australian-debt-bubble/

 

[luutzu]

I just feel sorry for those who purchase a property in the last 2-3 years....seems to be going negative equity for those putting hard earned cash into properties.

However, it's not just the banks, personal responsibilities need to taken into factor as well. Just because you can borrow X max amount doesn't mean you need to gear to the tilt.

https://mywealthforlife.com/the-australian-debt-bubble/

But if you don't gear to the tilt, how will you get to the very last dime of that juicy negative gearing subsidy pie. Buy stocks and purposely lose it all, for real?

The state treasury will have a fun time following this coming collapse. Lots of people are not going to be paying income taxes for a quite a while.

So much for the "free market".

 

[DNA2013]

Credit growth doesn’t just happen. It needs people who want to borrow and people who are willing to lend. There are no shortage of people with superficially plausible schemes who are willing to lend to whom would borrow.

Sadly, there are too many lenders willing to lend – attracted by some mix of the high fees, high credit spreads (such as some payday or fintech lenders), the mood the times, expectations of shareholders’ (everyone else is booking high profits, why not you?) and very few people willing to say no.

 

[Smurf1976]

Sadly, there are too many lenders willing to lend – attracted by some mix of the high fees, high credit spreads (such as some payday or fintech lenders), the mood the times, expectations of shareholders’ (everyone else is booking high profits, why not you?) and very few people willing to say no.

Very true and from an investment perspective it's always wise to consider that the herd is usually going in the wrong direction.

 

[sptrawler]

It will certainly be interesting, if all the stars line up, U.S stock market correction, interest rate rises and tighter lending requirements.
Hopefully it lands gently, but it is starting to look like that won't happen.
U.S growth over 4%, our $ heading under 70c, can't see interest rates sitting still.

 

[sptrawler]

I just feel sorry for those who purchase a property in the last 2-3 years....seems to be going negative equity for those putting hard earned cash into properties.

However, it's not just the banks, personal responsibilities need to taken into factor as well. Just because you can borrow X max amount doesn't mean you need to gear to the tilt.

https://mywealthforlife.com/the-australian-debt-bubble/

Yes, if you read through the thread, everyone felt sorry for those who couldn't buy a property.

Now we will hear people feeling sorry, for those that did buy a property, and now can't afford it.

Then we will hear about the selfish, lucky people who didn't buy in the boom, and now are buying someone else's loss.
They are tomorrow's recipients of adverse newspaper coverage, so I hope they enjoy what they can now, because they will be demonised in the future as lucky fat cats.

And the cycle keeps turning.

 

[Smurf1976]

U.S growth over 4%, our $ heading under 70c, can't see interest rates sitting still.

If I could pick one potential external trigger that would bring chaos to Australia financially it would be an oil price shock.

To have a surge in the oil price when the AUD is falling, at a time when we've recently partially linked our domestic gas and electricity prices to international oil prices too which wasn't the case previously, whilst our net oil imports at 75% of consumption are the highest since the 1960's, would bring the house of cards down rather spectacularly I expect.

That's an observation of a risk not a prediction that it will happen although the probability isn't zero.

Edit: One aspect of that scenario is that it conveniently provides someone to blame. That the "someone" just happens to be an assortment of countries centered on the Middle East adds an entire new dimension to it all politically. Never mind the truth that we got ourselves into the situation in the first place.

 

[luutzu]

If I could pick one potential external trigger that would bring chaos to Australia financially it would be an oil price shock.

To have a surge in the oil price when the AUD is falling, at a time when we've recently partially linked our domestic gas and electricity prices to international oil prices too which wasn't the case previously, would bring the house of cards down rather spectacularly I expect.

That's an observation of a risk not a prediction that it will happen although the probability isn't zero.

Heard some pundit saying that if the US/Israel goes to war with Iran, and Iran choke off the Strait of Hormuz [?] or make it difficult for oil export out of the Persian Gulf... oil could easily hit US$250/bbl.

Hoping that doesn't happen. But today's news show Trump is heading a UN meeting on Iran.... Venezuela is being softened, it's almost ready too.

But assuming sanity prevail and no direct war come, there's the supply side issue.

Three or so years without much replacement, particularly the offshore fields... will naturally see supply going down pretty soon.

Add to that oil service companies needing to demand higher fees to make up for their cuts and belt tightening during the previous/current decline.

Then there's the neglect in investment in alternatives when oil was so cheap.

There's also China making a more serious switch to replace their coal with cleaner LNG. They've been transitioning towards LNG, renewables past decade, but the switch as ordered from the top is going to kick into high gear soon.

Historical level of both national and personal debt all over the world; the masters of the universe playing financial games more than actual investment in business or job creation...

 

[moXJO]

If I could pick one potential external trigger that would bring chaos to Australia financially it would be an oil price shock.

To have a surge in the oil price when the AUD is falling, at a time when we've recently partially linked our domestic gas and electricity prices to international oil prices too which wasn't the case previously, whilst our net oil imports at 75% of consumption are the highest since the 1960's, would bring the house of cards down rather spectacularly I expect.

That's an observation of a risk not a prediction that it will happen although the probability isn't zero.

Edit: One aspect of that scenario is that it conveniently provides someone to blame. That the "someone" just happens to be an assortment of countries centered on the Middle East adds an entire new dimension to it all politically. Never mind the truth that we got ourselves into the situation in the first place.

I think we have a "perfect storm" brewing. Drought, dollar falling, US trade tariffs, high debt, the expectation that wages can keep going up, energy prices. I could keep going on with that list and thats on top of oil.

I don't see things getting better anytime soon.

 

[DNA2013]

Reminds me of Paul Keating's famous saying "the recession we had to have"

 

[sptrawler]

Come on Billy. lol
http://www.abc.net.au/news/2018-09-...-may-be-about-to-hit-by-sledgehammer/10210876

 

[sptrawler]

Things seem to be struggling in W.A, but having said that, the amount of new building going on is amazing if somewhat confusing.
http://www.abc.net.au/news/2018-09-...who-has-sold-out-of-the-perth-market/10247652

 

[luutzu]

Things seem to be struggling in W.A, but having said that, the amount of new building going on is amazing if somewhat confusing.
http://www.abc.net.au/news/2018-09-...who-has-sold-out-of-the-perth-market/10247652

There's about 4 or 5 new cranes popping up around Bankstown just couple months I drove by. They're all within a couple block of each other.

There's one massive block with a massive crane that's been sitting idle for at least 6 months nearby too. Just one massive crane rising from a massive hole where the underground carpark is going to be.

A typical 60 year old 33 bedder is down, but still around $1M. Ones in better condition in a nicer suburb... still in the inner West... still asking for $2 to $2.5M.


Part 2 of 2 from 60 Minutes.

40% crash could happen, soon.

 

[Smurf1976]

A typical 60 year old 33 bedder

33 bedrooms?

That’s either a rather massive house, a hotel, or a typo.

 

[luutzu]

33 bedrooms?

That’s either a rather massive house, a hotel, or a typo.

Typo

new wi-fi keyboard doesn't work very well. It need a bit of persuasion to get going.

 

[IFocus]

Things seem to be struggling in W.A, but having said that, the amount of new building going on is amazing if somewhat confusing.
http://www.abc.net.au/news/2018-09-...who-has-sold-out-of-the-perth-market/10247652

I am looking at down sizing so looking to buy in the Mandurah southern suburbs, just about all the home opens its just me and the wife no one else around agents say the market is dead

 

[sptrawler]

I am looking at down sizing so looking to buy in the Mandurah southern suburbs, just about all the home opens its just me and the wife no one else around agents say the market is dead

There is some amazing value around Mandurah, you should do well.

 

[sptrawler]

The real estate sector isn't exempt from media distortion, the media is become a journalists fantasy outlet, just work out what you want said then cut and paste until you get it right.

https://www.realestate.com.au/news/...nutes-appearance/?rsf=syn:news:nca:dt:article

From the article:
ONE of Australia’s pioneers in property research has slammed current affairs show 60 Minutes for having “distorted” his views in an interview aired on the program last week.

Housing expert Louis Christopher of SQM Research appeared in the segment Bricks and Slaughter, which aired on Sunday.

The program included forecasts of a 40-45 per cent crash in housing values, along with comments from Mr Christopher about real estate being overvalued.

But Mr Christopher has since written in a post published on web portal Property Observer that he was “disappointed” and “unhappy” with how the segment portrayed his views.

“The interview I conducted with the 60 minutes team spanned approximately 45 minutes, of which approximately one minute was featured in the segment,” he said.

 

[luutzu]

The real estate sector isn't exempt from media distortion, the media is become a journalists fantasy outlet, just work out what you want said then cut and paste until you get it right.

https://www.realestate.com.au/news/...nutes-appearance/?rsf=syn:news:nca:dt:article

From the article:
ONE of Australia’s pioneers in property research has slammed current affairs show 60 Minutes for having “distorted” his views in an interview aired on the program last week.

Housing expert Louis Christopher of SQM Research appeared in the segment Bricks and Slaughter, which aired on Sunday.

The program included forecasts of a 40-45 per cent crash in housing values, along with comments from Mr Christopher about real estate being overvalued.

But Mr Christopher has since written in a post published on web portal Property Observer that he was “disappointed” and “unhappy” with how the segment portrayed his views.

“The interview I conducted with the 60 minutes team spanned approximately 45 minutes, of which approximately one minute was featured in the segment,” he said.

Been watching a few interviews and docos lately on the 10th anniversary of the GFC... from what I gathered were to two possible action a gov't could take in the (very, very likely) event of a crash to prevent homeowners from losing everything... they're not going to do it.

1. George Soros gave an interview where he said he recommended to Larry Sumners - Obama's economic advisor - that while the banks do need a cash injection, the cash should go to the equity side.

i.e. the gov't buy out the banks. Own it. Then as the banks are saved by taxpayers money, when it return to profitability, the taxpayers too will gain as they took the risk, bought at the low, and can refloat the banks again at a profit.

Soros said Sumner goes nah, stuffed that. We're a capitalist country, we don't do socialism.

But, Soros laugh, you're bailing out failed businesses. That's pretty much socialism. You're just doing it to benefit your pals on Wall St and the current shareholders. Doing it at the cost to taxpayers without any benefit to them.

That and by putting cash into the capital/asset side instead of the equity... you'd need to put in a lot more cash to deleverage.

That's where trillions of dollars were spent... giving cash away and taking in [buying] toxic assets.

If Australian lenders were proven to be corrupt and lend to anyone with a pulse... will our gov't let the banks fail or do what Soros suggest or do what Obama's admin did and let some 10M families lose their homes while Wall St get bailed out and big bonuses in a couple years?


2. Economic Professor [can't remember his name] was saying that one or two US lawmakers suggest to let the banks collapse. The gov't take over its ownership.

With that the gov't can then reduce the mortgages to those tens of millions of American families. Bringing to mortgage down to a "reasonable" level, not letting them either drown or quit declaring bankrupt... can never buy a house again if they have money... and just live their life renting.

All that while those who could manage to mortgage are so under the debt that the economy in general goes to sleep for a decade.


So unless Canberra do things like that... Australian who are in debt will go the way of their American friends a decade ago.

Bankers will get bailed out. Maybe one or two mid-level lamb will get slaughtered but yah... It's going to crash and remain, as is still the case in the US, Ireland, Spain etc., for another decade and still not recover.