House prices to keep falling for years

pepperoni · 3 September 2008

WOW .. GREAT NEWS!

THE dilapidated housing industry will continue its slow demise despite yesterday's cut in interest rates, leading economists believe.

"These latest figures point to continuing softness in the housing sector, but it is not the same sort of downturn that has occurred during previous periods of high interest rates," he said.

"Housing has been slowing, but not collapsing and these figures are just consistent with that trend.

TOPPED OFF WITH A LIE!

"Even in the worst affected areas, places like western Sydney, house prices are not falling like they are in the US or Britain and we won't see that unless there is a big rise in unemployment," he said.

The worst affected areas are down 20% alread ... 40% in some parts of west penant hills etc.

Happy · 3 September 2008

pepperoni said:
WOW .. GREAT NEWS!

"Even in the worst affected areas, places like western Sydney, house prices are not falling like they are in the US or Britain and we won't see that unless there is a big rise in unemployment," he said.

The worst affected areas are down 20% alread ... 40% in some parts of west penant hills etc.

I think that Xmas or what some call now Festive Season will bring retrenchments.

Is it going to tip the scales don't know, but as soon as people will try to sell property quickly is when brown matter will hit the fan.

xoa · 3 September 2008

Beej said:
ANZ Chief Economist says current housing slowdown "not a crisis", and tips no wide-spread housing price value falls for AU like in US or the UK. Backed up by some interesting data and analysis of housing approval figures etc as well:

http://www.news.com.au/business/money/story/0,25479,24286433-5013951,00.html

Cheers,

Beej

Permabulls spin building approval data any way they want. When approvals are high, they use it as evidence of a "strong and robust" market. When approvals are low, they claim it's setting us up for a "housing shortage'. Either way, their self-serving conclusion is that the bubble will last forever.

KIWIKARLOS · 3 September 2008

it wll take economic mismanagement to turn this into a housing crash. If house prices tank there will be high unemployment and low interest rates. We still have positive growth when most of the OECD has been negative for at least 2 quarters. I still think it will get worse globally and sure we may have a mild recession but when the act balances out and we enter the next up cycle people buying up now and in the next 12 months will be laughing.

KIWIKARLOS · 3 September 2008

CamKawa said:
Wow, how about that. A banks economist doesn't think house prices will crash. Is that news?

to be fair there are plenty of economists and politicians saying things are bad as well. In england the central bank says worst in 60 years, warren buffet and many analyists saying fannie and freddie cactus.

There are two sides to every coin and sure there are downsides, big ones but we have many more positives than those countries currently having problems. Our terms of trade are skyrocketing and they have only just begun the contracts RIO BHP etc etc just signed last for 1-3 years a decrease in commoditiy prices wont effect them as much and the huge volumes of long term contracts acts to buoy the commodity prices anyway

dhukka · 3 September 2008

KIWIKARLOS said:
We still have positive growth when most of the OECD has been negative for at least 2 quarters.

Actually I don't thnk that's correct, could you point out the OECD countries that have had 2 consecutive negative quarters of growth?

dhukka · 3 September 2008

KIWIKARLOS said:
Our terms of trade are skyrocketing and they have only just begun the contracts RIO BHP etc etc just signed last for 1-3 years a decrease in commoditiy prices wont effect them as much and the huge volumes of long term contracts acts to buoy the commodity prices anyway

Actually from the latest GDP report, trade was a real fizzer.

Trade continued to be a drag on growth even with soaring coal and iron-ore prices propelling the terms of trade 13.1% higher. (The terms of trade measure relative prices for exports versus imports).

Imports knocked off 0.6 percentage points of growth, while exports only added half a percentage point, leaving net-exports in negative territory for the quarter.

pepperoni · 3 September 2008

And while we are at it ...

KIWIKARLOS said:
We still have positive growth

Id hardly see .3% growth as the basis for great news to come ... being .4% off recession levels of growth and all.

Beej · 3 September 2008

pepperoni said:
And while we are at it ...

Id hardly see .3% growth as the basis for great news to come ... being .4% off recession levels of growth and all.

Well I think the fact the economy actually grew when many here have been predicting doomsday is actually EXCELLENT and POSITIVE news. Of course if the figure had been + another .4%, we would be shouting boom times! So really the figure we got puts us about halfway between booming and stagnating, which under the current global circumstances is not so bad at all.

If things pan out well from here (primarily dependent on ongoing Chinese resources demand), Australia *could* well avoid recession altogether, which will mean no massive increase in unemployment (even 100,000 job losses = "only" a 1% increase in unemployment, which would therefore remain at historically low levels). That will in turn mean the property market, particularly in well located sought after areas, should remain robust and certainly may avoid any prolonged downturn or crash in prices as being predicted here, IMO.

Additionally the fact that interest rates are now coming down means predictions of mass mortage defaults etc are looking less and less likely as well, when coupled with a possible positive (or should I say not doomsday) ongoing economic growth outcome.

Cheers,

Beej

dhukka · 3 September 2008

Beej said:
Well I think the fact the economy actually grew when many here have been predicting doomsday is actually EXCELLENT and POSITIVE news. Of course if the figure had been + another .4%, we would be shouting boom times! So really the figure we got puts us about halfway between booming and stagnating, which under the current global circumstances is not so bad at all.

If things pan out well from here (primarily dependent on ongoing Chinese resources demand), Australia *could* well avoid recession altogether, which will mean no massive increase in unemployment (even 100,000 job losses = "only" a 1% increase in unemployment, which would therefore remain at historically low levels). That will in turn mean the property market, particularly in well located sought after areas, should remain robust and certainly may avoid any prolonged downturn or crash in prices as being predicted here, IMO.

Additionally the fact that interest rates are now coming down means predictions of mass mortage defaults etc are looking less and less likely as well, when coupled with a possible positive (or should I say not doomsday) ongoing economic growth outcome.

Cheers,

Beej

Building straw man arguments does not bolster your case. Where were these doomsday forecasts for second quarter GDP? Can you quote one?

Personally I'm quite surprised at the speed of the slowdown here. It needs to be acknowledged that the mining sector is powering along but that is not enough to keep the economy from slowing significantly.

The real eye opener in today's GDP report was that Household Consumption Expenditures showed negative growth for the first time since 1993.

pepperoni · 3 September 2008

Absolutely.

And in any event it not like a big job loss switch gets hit exactly -.1% growth ... there is potential for job losses in any slowdown, and IMO the job losses announced (eg in the correction thread) are worse than I expected.

Beej · 3 September 2008

dhukka said:
Building straw man arguments does not bolster your case. Where were these doomsday forecasts for second quarter GDP? Can you quote one?

Now who is building the straw man! How about the whole "The Recession has started" thread?? Full of doom and gloom views claiming that we are/were already in the midst of recession. For things to be as bad as suggested there you would have had to have seen a worse Q2 GDP number than we did. There are lenty of other examples of everyone proclaiming that we are in recession, or the US is in recession and we will follow etc etc.

Anyway - you believe what you want to believe. I personally am more optomistic in the ability of Australia as it currently stands to avoid the worst, but having people running around talking everything down is certainly not going to help....it's all glass half full/glass half empty stuff.

PS - re household consumption growth, while yes those numbers are bad in terms of potential GDP figures, isn't that also exactly what you would expect given the recent monetary tightening plus the level of mortgage stress etc? Our interest rate cycle has just peaked remember....

Anyway I'm getting bored with this thread, the same old arguments keep coming up and we go around in circles - I think if anyone could be bothered to read the whole thread they would get all the different perspectives and the arguments in each case.

Cheers,

Beej

wayneL · 3 September 2008

Beej said:
...the same old arguments keep coming up and we go around in circles

That's because we're all pissed when we start writing in here.

pepperoni · 3 September 2008

Beej said:
Anyway - you believe what you want to believe. I personally am more optomistic in the ability of Australia as it currently stands to avoid the worst, but having people running around talking everything down is certainly not going to help....it's all glass half full/glass half empty stuff.

People are trying to spin the half glass when in fact the glass is empty

How much upside can you find in the medium term when "Homeowners in NSW and Queensland are spending more than 40 percent of their income to meet mortgage repayments as housing affordability hits record lows."

Especially with low and slowing growth.

Do the math the average aussie is locked in to 10-30 years of making a pensioner look like lifestyles of the rich and famous.

Our wallets are empty and we are getting by with stop gap financial engineering.

The cupboard is bare.

pepperoni · 3 September 2008

Forgot to mention the sky is falling too.

Beej · 3 September 2008

pepperoni said:
How much upside can you find in the medium term when "Homeowners in NSW and Queensland are spending more than 40 percent of their income to meet mortgage repayments as housing affordability hits record lows."

SOME are paying 40% of their income, at this point right now! How many home owners are in this position? It is NOT the majority. How many will still be in that position in a few years with much lower interest rates? 50% of homeowners in NSW pay 0% of their income towards mortgage payments anyway as they dont have a mortgage! In the long distant past I did commit over 40% of my income to a mortgage - but then over time my income went up and interest rates came down - just like will happen from this point in the cycle. That first mortgage was paid off in 6 years. Gonski.

The glass is far from empty.... but whatever - those who want to rent, rent. no one is going to force anyone to buy a house, either to live in or for investment.

Beej

Beej · 3 September 2008

wayneL said:
That's because we're all pissed when we start writing in here.

That might well true!!

pepperoni · 3 September 2008

Beej said:
SOME are paying 40% of their income, at this point right now! How many home owners are in this position? It is NOT the majority.

Its the average!!!!

IE the bears on this thread are paying 0%, and the property hype victims are living on rice bought in 20kg bags ... and cant afford the bandwidth to out argue us on this thread .

dhukka · 3 September 2008

Beej said:
Now who is building the straw man! How about the whole "The Recession has started" thread?? Full of doom and gloom views claiming that we are/were already in the midst of recession. For things to be as bad as suggested there you would have had to have seen a worse Q2 GDP number than we did. There are lenty of other examples of everyone proclaiming that we are in recession, or the US is in recession and we will follow etc etc.

You must have a big haystack Beej. Maybe that was a slip of the fingers on your last post there Beej? The thread you refer to was actually titled "The Recession has Started?" You see, by adding the question mark it takes on a whole different tone. Reading through that entire thread there is only one person in seven pages actually said they thought the economy was now in recession. Most said things like 'knocking on the door of' others (including myself) said 'just a slowdown'. Quite a few offered opinions as to why they thought Australia would avoid one. There was not one forecast of 2Q08 GDP so it is simply false to say that the tone of the thread implied a worse result than we got.

Beej said:
Anyway - you believe what you want to believe. I personally am more optomistic in the ability of Australia as it currently stands to avoid the worst, but having people running around talking everything down is certainly not going to help....it's all glass half full/glass half empty stuff.

PS - re household consumption growth, while yes those numbers are bad in terms of potential GDP figures, isn't that also exactly what you would expect given the recent monetary tightening plus the level of mortgage stress etc? Our interest rate cycle has just peaked remember....

Yes it is what you would expect, but it's interesting that it hasn't happened for 15 years. It certainly didn't happen during the last interest rate cycle peak.

Beej · 3 September 2008

pepperoni said:
Its the average!!!!

IE the bears on this thread are paying 0%, and the property hype victims are living on rice bought in 20kg bags ... and cant afford the bandwidth to out argue us on this thread .

It is NOT the average mortgage payment cost for all NSW home owners! The figure you are quoting is the percentage of an average income required to service the AVERAGE FIRST HOME BUYER MORTGAGE right now at this point in time.

So IN FACT, as a percentage of total home owners in NSW, a minority of people are actually paying the 40% figure.

Nice try though!

PS I'm obviously not a bear here but I pay 0% of my income to into mortgage payments as well! So, no 20kg rice bags needed in my house thanks! Now, where did I put down that single malt I was enjoying??

Cheers,

Beej

House prices to keep falling for years

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