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House prices to keep falling for years

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You forgot to mention that we don't actually produce anything anymore we are no better than a banana republic until we start to produce something again, but then again the housing bulls don't seem to worry about no production and high debt. It has always ended badly can't see why this time will be any different I'm just amazed it has held up so long. But it is not going to happen overnight could take best part of 10 years or so. when you read financial history and step outside of housing prices to look at how stupid they have become compared to our wages (and how low rent has become compared to price of house) either rents double (the old formula was for every $16000 a house or unit cost you should get $40 a week) or prices half roughly to get back to some sort of real value because we certainly don't have inflation at the moment

Utter rubbish! For a start, $40/week for every $16k of purchase price (don't where you got that from!) = 13% gross rental return! Holy crap if I could get that steady cash return from ANY investment I, and every other person with access to ANY capital, would be there in a flash? Especially with access to borrowed capital @ under 6%..... Free money yeah!

As for Australia producing nothing, hmmmmm - I look at my career of 20+ years where I have pretty much earned all my income from activities that generated export income, I suppose myself, all the people I worked with, the businesses I worked for etc don't actually do anything after all?? Who would of thunk it? Not mention (as Nun did) the resources sector? Or the farming sector? Or the manufacturing sector? Or the tourism sector? Of the financial services sector? I could go on.......and on.......

Cheers,

Beej
 

explod

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A request for clarification:

Are you suggesting that people like Robots, myself and others are actually responsible for house prices rising? Ie our actions have "supported" prices in the way say low interest rates or the FHB grant boost have?

Or do you mean that Robot's et al "support" house prices, as in they/we have always argued here over the past 2 years that nominal prices would not fall significantly despite all the endless bearish arguments, predictions, statements of absolutely certain outcomes and so forth that turned out to be completely wrong, and that we have turned out to be correct so far?

If the former then I am truly humbled that you see such market power being held by little old us!

If the latter then I can certainly see how house price "supporters" are worthy of derision and ridicule! ;)

Cheers,

Beej

First of all apologies as have just noticed your post from yesterday.

Yes a great run for property over the last two years and those skilled will always do well.

However there are many not so skilled who take notice of the rhetoric and are getting into property like it is a teller machine and way over their heads. The best evidence comes from talking to people and being involved with the family. And part of my employ years ago was as OIC to directly analyse demographics for government planning on resource allocation.

Stick in the muds like myself try to provide some ballance so that the unfortunates that cannot realy afford it in the long term do not get caught. It is because some of us are Grandparents heading towards Great Grandparents that not only try to advise our own of the right path but also to provide some wisdom by whatever means to the average Joe Blow (no offence intended to our esteemed ASF leader).

I am not that one sided Beej, have done very well out of property and will no doubt do it again . But your very narrow and one sided view needs to be tempered with some wisdom (IMHO only) for the vulnerable.
 
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Utter rubbish! For a start, $40/week for every $16k of purchase price (don't where you got that from!) = 13% gross rental return! Holy crap if I could get that steady cash return from ANY investment I, and every other person with access to ANY capital, would be there in a flash? Especially with access to borrowed capital @ under 6%..... Free money yeah!

Beej

Guess you weren't around in the good old days when housing wasn't in a bubble.

I have purchased properties for $100k and rented them out for $200 per week. Interest rates were only around 8% as well ( not that I borrowed for any of them, too old for that ) The same box of rubbish is apparently worth around $400k now and rents for $350 per week.

Not too far off those figures, and that was only 10 years ago. It just goes to show that properties are not only overvalued, but returns are too reliant on capital growth, from a historical perspective.
 
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It just goes to show that properties are not only overvalued, but returns are too reliant on capital growth, from a historical perspective.

Bang! You just hit the nail on the head - and exactly why I, like many others are on the sidelines - it's all about being in the best asset class - and for now, my $ are not sitting idle in the housing market at these prices.

I could be wrong - property may still go up, but will it go up as much as other investments...I don't think so.

As a 30 year old, I am seeing many of my friends be that 'greater fool' that is referred to - they are 90% leveraged and assume the capital gain will outstrip the interest payments...big call, I say - but good luck to them.
 
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Bang! You just hit the nail on the head - and exactly why I, like many others are on the sidelines - it's all about being in the best asset class - and for now, my $ are not sitting idle in the housing market at these prices.

I could be wrong - property may still go up, but will it go up as much as other investments...I don't think so.

As a 30 year old, I am seeing many of my friends be that 'greater fool' that is referred to - they are 90% leveraged and assume the capital gain will outstrip the interest payments...big call, I say - but good luck to them.

You forget one thing. If rates go up so too will property. Also many other things a foot. perhaps your mates might cut back on luxuries to afford their 90% leverage.

Good luck.
 
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You forget one thing. If rates go up so too will property. Also many other things a foot. perhaps your mates might cut back on luxuries to afford their 90% leverage.

Good luck.

Not necessarily. House prices increases as rates rise assumes inflation rises and houses keeping pace with inflation. This is a good assumption when gearing is low to start with and banks have low risks of default and are prepared to lend even as rates increase.

Now it is different, with record gearing in a record bubble.

And even if they do, they need to increase at a rate faster than the loss incurred by the increase. A bit of a gamble at the moment.

I bet the mates have already cut back on many luxuries, something I did not have to do in my time. I feel sorry for them actually.
 
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First of all apologies as have just noticed your post from yesterday.

Yes a great run for property over the last two years and those skilled will always do well.

However there are many not so skilled who take notice of the rhetoric and are getting into property like it is a teller machine and way over their heads. The best evidence comes from talking to people and being involved with the family. And part of my employ years ago was as OIC to directly analyse demographics for government planning on resource allocation.

Stick in the muds like myself try to provide some ballance so that the unfortunates that cannot realy afford it in the long term do not get caught. It is because some of us are Grandparents heading towards Great Grandparents that not only try to advise our own of the right path but also to provide some wisdom by whatever means to the average Joe Blow (no offence intended to our esteemed ASF leader).

I am not that one sided Beej, have done very well out of property and will no doubt do it again . But your very narrow and one sided view needs to be tempered with some wisdom (IMHO only) for the vulnerable.

All fair comments - all should be very wary of borrowing too much money in this environment and be expecting/planning for significant interest rate rises in the years ahead, and only *limited* capital growth in property IMO (we won't see a repeat of the last 10 years in Brisbane or Melbourne or Perth for example).

Guess you weren't around in the good old days when housing wasn't in a bubble.

You mean before WWII??? :D

I have purchased properties for $100k and rented them out for $200 per week. Interest rates were only around 8% as well ( not that I borrowed for any of them, too old for that ) The same box of rubbish is apparently worth around $400k now and rents for $350 per week.

Not too far off those figures, and that was only 10 years ago. It just goes to show that properties are not only overvalued, but returns are too reliant on capital growth, from a historical perspective.

For a start, in your example you were getting a 10% gross return, not 13% - quite a difference. If the values/rent for today are as you say, then the return now is 4.5% gross which sounds about right in the current market.

I would suggest that you bought well, not because houses are necessarily massively over-valued now, (although they are certainly not cheap), but because they were by historical terms very under-valued in the area you bought in at the time you bought - no wonder they went up so much as that sort of return if capital is available at < 8% is very very good - I doubt many even on this thread would argue NOT to buy if that sort of property opportunity arose. What I am saying is that sort of return, matched with low interest rates and low inflation, would be the exception, not the norm, whereas many here would seem to believe it's the other way around. Do you think that it is "normal" to be easy or hard to make money with low risk? A rental return greater than the cost of money over a period of time is essentially "free" money; that sort of market condition cannot exist for long IMO.

PS: Where was this? Major city or regional centre? In 20 years or property ownership/investing in Sydney I have never seen a 10%+ gross rental return residential property (at it's current market value) other than studios etc where the capital gain potential is very low.

Cheers,

Beej
 
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You mean before WWII??? :D

For a start, in your example you were getting a 10% gross return, not 13% - quite a difference. If the values/rent for today are as you say, then the return now is 4.5% gross which sounds about right in the current market.

I would suggest that you bought well, not because houses are necessarily massively over-valued now, (although they are certainly not cheap), but because they were by historical terms very under-valued in the area you bought in at the time you bought - no wonder they went up so much as that sort of return if capital is available at < 8% is very very good - I doubt many even on this thread would argue NOT to buy if that sort of property opportunity arose. What I am saying is that sort of return, matched with low interest rates and low inflation, would be the exception, not the norm, whereas many here would seem to believe it's the other way around. Do you think that it is "normal" to be easy or hard to make money with low risk? A rental return greater than the cost of money over a period of time is essentially "free" money; that sort of market condition cannot exist for long IMO.

PS: Where was this? Major city or regional centre? In 20 years or property ownership/investing in Sydney I have never seen a 10%+ gross rental return residential property (at it's current market value) other than studios etc where the capital gain potential is very low.

Cheers,

Beej

1. As I said, just 10 years ago. Note that there is a world outside of Sydney :)
2. I stated that the return was not 13%, but as you have acknowledged, it was still very good, and quite frankly readily achievable in the 90s.
3. I flew up to Townsville after some friends told me of some good deals. A Major Australian city ( 13th) and all were in central locations.

Now they are overpriced, but stupid Gen-X and Gen-Y are prepared to pay too much as they have never known housing market slumps, recessions and have too easy access to money, I still say that the next 12 months is going to be very interesting indeed.
 
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Utter rubbish! For a start, $40/week for every $16k of purchase price (don't where you got that from!) = 13% gross rental return! Holy crap if I could get that steady cash return from ANY investment I, and every other person with access to ANY capital, would be there in a flash? Especially with access to borrowed capital @ under 6%..... Free money yeah!

As for Australia producing nothing, hmmmmm - I look at my career of 20+ years where I have pretty much earned all my income from activities that generated export income, I suppose myself, all the people I worked with, the businesses I worked for etc don't actually do anything after all?? Who would of thunk it? Not mention (as Nun did) the resources sector? Or the farming sector? Or the manufacturing sector? Or the tourism sector? Of the financial services sector? I could go on.......and on.......

Cheers,

Beej

$40 for every 16000k invested was common in the 60's and prior. As for not producing anything I didn't realise everyone would take it so literally.
Of course there are the resources we sell but we dont produce them we just mine them. Agriculture is more long term if we look after the soil. but as for producing things we rely on other nations to do that and then import them not sensible especially when we import oranges to Qld and apples to Tassie destroying our own farmers in the process, and I know the arguments about cheaper etc but we really are paying ourselves too much and relying too heavily on the finance industry. Manufacturing sector is continually moving offshore, Tourism is definitely one I had forgotten about but it is in danger of a strong dollar at the moment although I expect that to change rapidly in the next few months but doubt tourism on it's own can support the rest of the economy especially with resource prices now on the downward slope but it still does not change the fact that houses by any reasonable measure in history are way overvalued and potentially about to correct (but not necessarily tomorrow)
I have actually done quite well out of property in the past but feel it is totally out of wack with any reality at the moment
 
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I decided to go to some auctions today to see what the market is doing in Adelaide.

First house was passed in, 2 vendor bids at 850k then 870k - I valued the house at around 750k, thought the vendor bids were way to high, needless to say nobody bid at all except the vendor. Probably around 30-40 people at the auction. Brighton.

Second house was on a big block close to the city - developers dream really at over 900 sqm, nice and flat, ****ty house so good to knock down. Loads of people there, probably over 100, i valued the house at 540k - it sold for around 556k, probably around 4 serious bidders going at it. Plympton

Third house at Marion, nice neat house on 800 sqm, flat well looked after, maybe 30-40 people at the auction, first bid at 250k, then sold for about $415k, I must have been dreaming as I valued at $535k (woops) but i think the bidder did well, not much competition.

Fourth house around Brighton area, 670 sqm, ****ty old had to knock this one down, not a heap of interest, maybe 30 people at the auction, 2 bidders going at it for a bit, sold for approx $430k, I valued at $425k.

So there did seem to be a fair bit of interest at the auctions, so taking a 1 day look at the market, 75% clearance rate - not too bad, and a fair amount of people at each auction.

I still havent decided if I will invest in another property, best to wait until early next year to see what the market will do, it could go either way still i think.
 
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If you want to know quickly and easily what the property markets doing there are three websites you should go to:

The first is for the weekend auction clearance rates http://www.homepriceguide.com.au/auction_results/index.cfm


The second does detailed market analysis of supply and demand fundamentals for that market. I personally dont like the properties they ares selling, but I have used there advice on currently reccomended markets for many years and made great profits from their advice.
www.quartile.com.au and see which markets are currently reccomended and which are not. At present they have been reccomendening Sydney and Brisbane for a while.

The third is Steve McKnights www.propertyinvesting.com.au
Steve has his finger on the pulse, but hes a bit Victoria centric, and melbourne at present still has oversupply issues , particularly in units.

Terry Ryder is another guru.

These guys make a living from detailed market analysis and its information is far more detailed and accurate then that above.
 
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