House prices to keep falling for years

pepperoni · 29 July 2008

Gone a bit quiet on the local property front. Seems Aussie property press are really only interested in printing outrageous growth figures.

Probably because the average Joe is a home owner has no ambition to upgrading to a better home and therefore thinks he is better off with high property growth.

Contrast that with pom and yank press that at least some times tell it how it is.

xoa · 29 July 2008

Rental vacancies are soaring in every capital city. That's good news.

CamKawa · 29 July 2008

This is quote from a buyer advocate company in Melbourne. It’s interesting to see how the REIV figures aren’t lining up with what they are seeing in the market. Could the REIV be stretching the truth? I know who I believe.

"Overall another very negative weekend for auctions evidenced by the fact that only 2 sold from the 16 we attended as a group. The clearance rates at auction for $1m+ homes is nowhere near the reported overall low 60's % of the last month.

Our comment on the market is that is has dropped another 5 to 10% in the last 3 weeks on top of the earlier drop of 10-20% in March and April.

Depending on your nature this is either a half empty or half full glass situation. If you are a half glass full kind of person, then there are opportunities out there. As the upper end market contracts now, it comes closer to the lower end now. If you are buying and selling in this market and you have the right advice then you should be able to trade up on a better overall deal – providing of course you do have the right advice. Meaning in Sep 2007 the price difference between the top properties and the median ones was a lot greater than it is on July 2008. So you may have had a changeover of $1 million in Sep 2007 and that changeover could well now be as low as $500,000 July 2008 for certain properties. Of course this is anecdotal and you do need some luck as well as the good advice. Some homes are still attracting multiple bidding and the drops have been nowhere near as great as made out in the previous sentence."
Source: http://www.jamesbuyeradvocates.com.au/marketnews.html#mal

pepperoni · 29 July 2008

CamKawa said:
Our comment on the market is that is has dropped another 5 to 10% in the last 3 weeks on top of the earlier drop of 10-20% in March and April.

Sounds rich but round here almost ZERO houses have sold in june july, and Id say the ones on the market have dropped priced 10% on average with still no interest and need to drop AT LEAST another ten if they want to sell within another month or 2.

Worst still, Im convinced 50% of properties that would be listed and selling now have been taken off the market for re listing in spring summer - if thats the case and things like rate drops and spuikers donk kick things along, we will easily match US and UK falls for the year.

Really seeming like our property bubble may indeed be susceptible to normal market forces and fundamentals afterall.

gfresh · 30 July 2008

ABS' stats are in contrast with the MBA's estimated 1% gain in approvals..

http://www.businessspectator.com.au...-approvals-fall-07-in-June-H23TR?OpenDocument

Building approvals were much weaker than expected in June, after the construction market was dented by high interest rates, economists say.

Australian building approvals fell by 0.7 per cent to 12,237 units in June, seasonally adjusted, from a downwardly revised 12,326 units in May, the Australian Bureau of Statistics said on Wednesday.

The market forecast was for building approvals to rise by 1.0 per cent in the month.

In the year to June, building approvals fell 7.8 per cent, with the volatile "other dwellings" category that includes apartments diving by 22 per cent.

Some reality:

http://www.businessspectator.com.au...-sided-by-property-GZ5P7?OpenDocument&src=sph

pepperoni · 31 July 2008

Im hearing Melb/Geelong are locations of choice for pommy expats driven away from syd by prices ... could explain some of the resilience down there at the bottom of the market.

As for the rest of the market ...

What a difference a year makes in real estate
Chris Vedelago
A well-maintained Victorian in Albert Park should be a million-dollar property - or at least it would have had a shot at hitting that mark if the auction had been held last year.

Instead, this two-bedroom house at 23 Dundas Place attracted just one genuine bid yesterday, delivered as an opening offer at $700,000 that was well below the quoted price of $930,000 plus. Two vendor bids bumped the price up to that level but with no further interest, the property was quickly passed in. The reserve was $955,000.

"We thought we had a couple of genuine buyers before the day, but they just held back," said Cayzer agent Michael Szulc. "It's a strategy that's being employed a lot this year, with buyers hoping the auction won't be successful and they can swoop in.

"But that doesn't mean there's going to be some massive difference (in the sale price), as they're still going to have to negotiate and pay what the vendor wants for this kind of property."

Negotiations are continuing with one party. The Real Estate Institute of Victoria reported that the median house price in Albert Park was $1,065,000 in March, down 0.9% on last December.

pepperoni · 31 July 2008

More news from today.

The fat lady has sung ... the bears were right and the bulls were wrong ... property prices can and do fall.

http://news.theage.com.au/business/house-prices-fall-in-most-capitals-20080731-3nif.html

pepperoni · 31 July 2008

I always thought the RE bubble was like that "aircraft" pyramid scheme that was around 5-10 years ago in syd ... i sat out of that for the same reason Im sitting out of property now.

This article has a similarly interesting perspective on things.

http://www.theage.com.au/opinion/ho...le-waiting-to-burst-20080730-3ncu.html?page=2

"According to Keen, the (RE) bubble is based on speculation financed by debt. Keen claims it is effectively a "Ponzi scheme" where dividends are paid out of new rounds of capital injected into the scheme instead of the non-existent profits. The scheme collapses when there are no new investors to pay the dividends."

Tysonboss1 · 31 July 2008

xoa said:
Rental vacancies are soaring in every capital city. That's good news.

Where,..... I just re leased one of my IP's for $260 up from $240, There is only one other listed in that price bracket at the RE and it's not available till september.

Tysonboss1 · 31 July 2008

pepperoni said:
the (RE) bubble is based on speculation financed by debt. Keen claims it is effectively a "Ponzi scheme" where dividends are paid out of new rounds of capital injected into the scheme instead of the non-existent profits. The scheme collapses when there are no new investors to pay the dividends."

well the dividends actually come from rent, Rent is that money you have to pay each week to live in your house, So no property is not a "Ponzi" scheme.

wayneL · 1 August 2008

Wow check this one out from the International herald Tribune (International version of The New York Times):

http://www.iht.com/articles/2008/07/31/properties/31reaus-story.php

Australia facing housing slump
Bloomberg News
Published: July 31, 2008

SYDNEY: Australia may be headed for a housing recession similar to those roiling the United States and Britain.

The cause is a combination of rising default rates, the biggest drop in home prices in five years, the highest borrowing costs in a decade and slowing economic growth.

Prices in the property market ”” described by the International Monetary Fund in April as one of the world's most "overvalued" ”” will fall 30 percent by 2010, according to Gerard Minack, senior economist at Morgan Stanley in Sydney. Prices dropped in all of Australia's major cities last month for the first time since just before the Great Depression.

"Australia is headed for a once-in-100-year real-estate slump," Edwards said. "I have never seen the convergence of so many negatives."

"By every metric I can think of, Australian houses are too expensive," Minack said, costing an average of six years' earnings, double what Americans paid before their property market started falling in 2006.

The Washington-based IMF says Australian house prices were overvalued by almost 25 percent in the decade through 2007 when compared with household income and ability to pay debt.

Sean K · 1 August 2008

What property related stocks are there left to short that haven't already been decimated?

The bank morgage insurers is also another, but not sure whose holding those nice little steamers.

bvbfan · 1 August 2008

Chances of interest rates cut up to 298% for Oct 09, which is effectively pricing in 3 cuts by the RBA.

88% for a cut by December.

What with the share market underperforming, smells like just what was happening in 2000-1. Will it happen again? Not a bigger boom but should start to stabilise once cuts start coming in.

http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
For the implied rates

overlap · 1 August 2008

pepperoni said:
"We thought we had a couple of genuine buyers before the day, but they just held back," said Cayzer agent Michael Szulc. "It's a strategy that's being employed a lot this year, with buyers hoping the auction won't be successful and they can swoop in.

"But that doesn't mean there's going to be some massive difference (in the sale price), as they're still going to have to negotiate and pay what the vendor wants for this kind of property."

The buyers with the capacity to pay know there's a high risk (even certainty) the properties are overpriced with what's coming.

The vendors can want all they like. The real market - not the market in the REIV's spin - decides what they get.

wayneL · 1 August 2008

overlap said:
The buyers with the capacity to pay know there's a high risk (even certainty) the properties are overpriced with what's coming.

The vendors can want all they like. The real market - not the market in the REIV's spin - decides what they get.

Hence turnover falling off a cliff like it has here. Buyers just won't/can't pay what vendors are asking ==> No sales... until the vendor drops the price.

Mexican stand-off time.

Tysonboss1 · 1 August 2008

bvbfan said:
smells like just what was happening in 2000-1. Will it happen again? Not a bigger boom but should start to stabilise once cuts start coming in.

http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
For the implied rates

I wouldn't bet on it,...

I don't think it's the time to stock up on property purely for cap gains,... Only buy in if you can find a deal that has other things going for it... I think the share market is much better at the moment if your after short term cap gains.

gfresh · 1 August 2008

UK market looks like it's getting hammered right now in many parts..following the US down the tubes.

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4432554.ece

The housing market slump will wipe £50,000 off the value of the average British home and plunge one in seven homeowners into negative equity, influential new research suggests.

Some 70,000 mortgage-holders already owe more than their homes are worth after the near-10 per cent falls in house prices over the past year, Standard & Poor's (S&P), the credit ratings agency, said. It forecasts that prices will fall by a further 17 per cent, or £30,000, by next April, putting 1.7 million borrowers into negative equity. A 17 per cent fall in prices would take the value of the average house to about £150,000, down from £199,600 in August last year, according to Halifax figures. S&P said that for every further percentage point decline in house prices, between 60,000 and 180,000 extra homeowners could fall into negative equity.

pepperoni · 1 August 2008

More doom and gloom ... comments on glut of properties Im seeing here.

http://www.theage.com.au/national/h...e-in-capital-cities-20080731-3o02.html?page=2

pepperoni · 1 August 2008

Tysonboss1 said:
well the dividends actually come from rent, Rent is that money you have to pay each week to live in your house, So no property is not a "Ponzi" scheme.

His point is that capital gains are a ponzi scheme ... and he is right.

Tysonboss1 · 1 August 2008

pepperoni said:
His point is that capital gains are a ponzi scheme ... and he is right.

Not if the capital gains are backed up by increasing cashflow returns.

When I first started investing in property the returns were between 4 and 5% pa, Today properties are still maintaining returns of about 4 and 5% pa.

House prices to keep falling for years

pepperoni

xoa

CamKawa

pepperoni

gfresh

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Tysonboss1

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wayneL

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