This sell off should drop the price of houses

[bingk6]

Re: this sell off should drop the prices of houses

It used to be the case, a la the economic clock.

But Greedscam through pebbles into the cogs after 911. The clock's now broken and everything will tank together.

Wayne,

If the sharemarket jitters continue for much longer then more and more funds from the sharemarket will be pulled out and these funds will need to find a home. In the case of the 87 crash, which is significantly bigger than what we are seeing at the moment, the funds from that crash essentially powered the property boom for the 3 years after the crash.

I don't recall how high the interest rates were at the time of the crash or shortly thereafter when the property boom took hold, but if they were at the reported 18%, then it reinforces the point that people who bailed out of the stockmarket would not be happy with ther funds in the bank. One can talk about liquidity squeeze affecting property prices today, but 18% at the time would have been one hell of a squeeze as well.

Mr point is that funds withdrawn from the stockmarket has to find a home, and I'am pretty sure that the home is not in a bank. If that is the case, and if the funds are not to go to property then where will they go ?? My point is that they can't all tank together.

 

[numbercruncher]

Re: this sell off should drop the prices of houses

My point is that they can't all tank together.

Try telling that to the good citizens of the old U S of A

 

[nizar]

I am only talking about very selected properties for investment only. They should be within 5 km of CBD. In Vic. that restricts to Carlton, Fitzroy, South Melbourne, Richmond etc. The reason being the restricted number and the style/period of these houses will not be repeated. Also, furthering the distance will decrease the exclusivity by a factor of the square of the distance. It works for all parts of the world, why not here? These are not the first home buyers' choices because they are too small for the price, first home buyers like a bit of comfort value. These are for rental purposes for the pre-first-home-buyers who like to be near action areas.

The yield on residential property isnt much these days at about
3-4% nett.

Carlton is pretty good for growth though, i heard around 12%pa historically.

 

[numbercruncher]

CAPE CORAL, Florida (Reuters) - Phone books that were delivered but never opened rot away next to empty driveways and overgrown lawns, telltale signs that once-booming southwest Florida is now the center of the U.S. housing storm.

Until two years ago, middle-class retirees vied with property speculators for houses and apartments in Cape Coral, a town near Fort Myers on Florida's sun-drenched Gulf Coast. Now almost every other house on some of its streets has a for-sale sign outside.

With a bloated inventory of unsold homes and a growing number of homeowners forced by mortgage delinquencies to sell -- thanks to the subprime crisis and ensuing credit crunch -- southwest Florida's once warm clime for property has turned stone-cold.

Linda Setterlund, 61, owns a pristine three-bedroom, two-bath, Cape Coral house that has been on the market for about a year.

At a reduced asking price of $183,900, she said the house had been priced to match what she and her husband owed on it, after moving in three years ago with a 30-year fixed mortgage.

http://www.reuters.com/article/newsOne/idUSN1230248820070814


Stories like this all over the States at the moment, I wish you all the very best of luck in your realestate investments at the peak of the cycle, I just cant see for the life of me how realestate is currently a sure fire/sky is the limit investment as many would like to tout.

 

[jammin]

Speaking for the Sydney residential market only and drawing on the following points made above namely: Higher interest rates to come, cash being pulled out of the Stock market and looking for a new home.
I see the 2 speed Sydney market expanding in disparity even further. Residential property in the outer west and South west will continue to fall/ remain weak due to the impact of interest rates (and no demand) whist the remainder of the market will continue to rise as cashed up buyers, (not as impacted by interest rates) find new "homes" for their ex stock market cash.
Simplistic view.. Yes, but it is a possible explanation of what I am seeing in the property market in Sydney.

 

[wbooo]

If you look at property crashes throughout history they are 99% of the time International, due to the domino effect.

I shall explain this in greater detail

If there is a property crash in the US, due to it being the largest consumer market in the world, Americans personal wealth and confidence are hit, as we all know consumer confidence is important for general spending, if Americans spend less in the shops, retail business is hit, this includes imported goods, since the US is one of our largest customers, in addition to other countries in the worlrd, our export market will suffer, thus ozzie jobs will be cut, which will in turn effect our economy, (it is a double whammy effect because Europes exports and Chinas exports also get hit, as their economy and consumers are effected, our exports and tourism industry are effected further) as unemployment rises throughout the world, we have a situation of unaffordable housing, rising unemployment and falling stockmarkets, since manufacturers and the service industries suffer from falling sales.

All is not doom and gloom, some people will continue to prosper those in industries less reliable on the global economy and lower end stores/discount stores, lower end service sector eg Mcdonalds etc. People will start to trade down, eg instead of buying clothes from Myers and David Jones, they will buy from less expensive stores, instead of fine dining they will eat burgers and take aways.

The staple industries should be o.k wg, Woolworths, since we still need to eat, also utilities will be o.k since we still need electricity.

 

[Kathmandu]

http://www.reuters.com/article/newsOne/idUSN1230248820070814


Stories like this all over the States at the moment, I wish you all the very best of luck in your realestate investments at the peak of the cycle, I just cant see for the life of me how realestate is currently a sure fire/sky is the limit investment as many would like to tout.

Who said anything was sure fire and why do you think everything is at the top of the market ?

Sydney has been flat for a while and could be on it's way back in selected areas, I hold no stock,and have no intention of, but know people that have been getting some over the last 18 mths and some getting developments off the ground now, after land banking for a while.

Adelaide is doing it's thing at the moment, some good stuff there.

Most of the east coast of QLD is on it's way and most of the big regionals have been going gangbusters for a while with no real sign of letting up.

Sure Perth it could be argued it is at it's peak, but other WA areas are on the charge, it is not all about Perth.

Dave

 

[bingk6]

Speaking for the Sydney residential market only and drawing on the following points made above namely: Higher interest rates to come, cash being pulled out of the Stock market and looking for a new home.
I see the 2 speed Sydney market expanding in disparity even further. Residential property in the outer west and South west will continue to fall/ remain weak due to the impact of interest rates (and no demand) whist the remainder of the market will continue to rise as cashed up buyers, (not as impacted by interest rates) find new "homes" for their ex stock market cash.
Simplistic view.. Yes, but it is a possible explanation of what I am seeing in the property market in Sydney.

I find this explanation highly plausible and it does match closely with my own observations in Sydney. Therefore if these observations are correct then it would appear that in the event of a more prolonged bear stock market, that funds will be withdrawn from the share market and then pumped back into the more affluent areas of Sydney. In that case, the more affluent areas will continue to prosper and will not tank together with the share market. World order will be restored for them.

For the less affuent areas, things will not look as rosy. They will cop a almighty hiding due to interest rates rising and credit crunch. For them, both property and share market will tank. For the folks in the USA that are suffering badly, I suspect most would fall into the latter category.

 

[Ageo]

30 years ago my dad earnt $400p/m and houses around here cost $6000 (so he almost earnt the same amount the house cost him in the 1st yr) and interest rates were high. Even if they were 20% back in the day, 20% on $6000 is better than 10% on $300,000.

With interest rates going up i cant see property going up in the near future. Less people buy which means prices stagnate and or even go lower.

 

[randy86]

1st post!

if you think about it, the economy as a whole hasn't lost any money at all. Some people have lost, some have gained.

Whenever a trade is placed, money is exchanged, its not like money is lost.

 

[Ageo]

1st post!

if you think about it, the economy as a whole hasn't lost any money at all. Some people have lost, some have gained.

Whenever a trade is placed, money is exchanged, its not like money is lost.

Randy if you look at it like that then no one ever loses money its always exchanged

I think the best way to look at it is who is taking the money when someone loses it (Someone in Australia or Overseas?) Of its in Australia then at least the money stays here

 

[algis]

Speaking for the Sydney residential market only and drawing on the following points made above namely: Higher interest rates to come, cash being pulled out of the Stock market and looking for a new home.
I see the 2 speed Sydney market expanding in disparity even further. Residential property in the outer west and South west will continue to fall/ remain weak due to the impact of interest rates (and no demand) whist the remainder of the market will continue to rise as cashed up buyers, (not as impacted by interest rates) find new "homes" for their ex stock market cash.
Simplistic view.. Yes, but it is a possible explanation of what I am seeing in the property market in Sydney.

This logic makes sense to me as well. Unless there are structural changes, I see increasing divergence in suburbs that are gaining in value and suburbs that are dropping in value. For if the 'local inflation' of a suburb is greater than the amount you borrow to purchase your home, well, it remains a good proposition to borrow as much as possible. No point in borrowing or even purchasing debt free if the local inflation of the housing market is below that of the cash rate from a purely capital gain point of view.

 

[toothfairy]

30 years ago my dad earnt $400p/m and houses around here cost $6000 (so he almost earnt the same amount the house cost him in the 1st yr) and interest rates were high. Even if they were 20% back in the day, 20% on $6000 is better than 10% on $300,000.

With interest rates going up i cant see property going up in the near future. Less people buy which means prices stagnate and or even go lower.

One cannot derive a conclusion today based on apparently similar scenario 30 years ago. Things have evolved, which incudude our expectations and ways of life. Figures and %tages meant different things those days & now. ( I was in my 20s 30 years ago).
When you said "less people buy" that to me means "less people wanted to sell at THAT price also". That means people who own prime real estate do not have mortgages, do not want to be forced to sell @ buyers' prices. After all, if they sell, how else will they invest their money? Shaky stock market? Bank deposits?

 

[wayneL]

1st post!

if you think about it, the economy as a whole hasn't lost any money at all. Some people have lost, some have gained.

Whenever a trade is placed, money is exchanged, its not like money is lost.

Randy if you look at it like that then no one ever loses money its always exchanged

I think the best way to look at it is who is taking the money when someone loses it (Someone in Australia or Overseas?) Of its in Australia then at least the money stays here

I would do some more research on this fellas.

That may have been true in the days of the gold standard, but is not correct in a fiat currency system.

 

[tech/a]

The yield on residential property isnt much these days at about
3-4% nett.

Carlton is pretty good for growth though, i heard around 12%pa historically.

People continually forget the principal of leverage.
If I am leveraged 4:1 then growth of funds used is 12-16%.

I just cant see for the life of me how realestate is currently a sure fire/sky is the limit investment as many would like to tout.

Its not just like every approach to the stock market isnt successful.
Right now High Density,low rental/purchase units are impossible to find.
This is what you build.(Have one project in the pipeline myself).
Those who bought at the so called "High" in 2003 in Adelaide inner suburbs are making a killing now.

If your thinking lodoc buy anything anywhere at anytime then sure you'll likely get burnt.
But its no different to me posting on a home buyers website that random buying of shares with no due diligence and proper planning from the investor.

I could well be saying

I just cant see for the life of me how the stock market is currently a sure fire/sky is the limit investment as many would like to tout.

But there are some who see this time as OPPORTUNITY.

 

[Ageo]

I would do some more research on this fellas.

That may have been true in the days of the gold standard, but is not correct in a fiat currency system.

Thats ok Wayne i wasnt actually being serious, just showing him that unfortunately life doesnt run like that.

But thanks for the heads up