Another slump question

[Lizard King]

It Could be Different in The West

Hi There

I gather all this doom and gloom is about property prices and a looming recession Over East?

Out here in The West it is full throttle; trying to get a One Bedder for our daughter who has just relocated from the ACT.

(We bought a unit for her when she went over at the start of the year on a Grad Program? Gonna keep it and we are in the process of getting a PM to look after it, fill with tenants).

Now here and I cannot believe that all new 1BR units in the CBD are being quoted at around $425K.

This, considering there are so many units coming on line allong Adelaide Terrace, East Perth.

Not so long ago they were chugging along in the mid-350's.


So what I am saying is that it is still, 'business-as-usual' here and there seems to be little or no let-up. It may not be noticeable in a big way; it is only when you try to cut a deal you realise property prices are creeping up slowly, but surely.

Is this then a 2-tier market across Oz? What do the rest of you West Aussies think?

The Lizard King

 

[BayView]

A one bedder for $425K??? O.M.G!

Which city is this? Not even L.A is this expensive.

That price is a total joke. Of course; there will be plenty who will pay it; which I can't understand. Are they O.T.P?

Be very wary of new apartment complexes in the cbd.

I only know the Melb market, and you can still get 1 bedders for under $200k, and in most areas. They are not absolute cbd, but what about looking at suburbs a little further out near the buses and/or trains? A half hour commute is no big inconvenience for most people.

These are the sorts of properties that are going to enjoy good growth as well in the short/medium term i.m.h.o. - affordable, near transport and amenities.

 

[adam31]

Intersting thread folks. With oil prices running rampant(Peak Oil may be taken seriously) I can't wait to see the flow on effect in regards to inflation. If Chindia falls over where will Aus get all it's money from, we don't know how to make anything anymore. I personally think the next 10 years may be a very interesting time. Batten down the hatches!!!! Yeeha bring it on!!

 

[bailz66]

This is where a solid education will pay off in droves.

If we do go into a recession then a university degree should keep me in work no problems and interest rates will fall which should give me the ability to service loans. If house prices fall dramatically then it will really just provide a platform to buy some properties in good locations for a decent price.

What you have to remember currently though is that china has no where near peaked.

China relies heavily on coal with and with hundreds of new power plants gone in i don't see them not using these plants any time soon.

The industry wont see a slow down until at least 2030 but i would expect china to continue to eat up resources for far longer than that.

You may talk about doom and gloom but you have to wonder why you would be thinking about that when Australia's economy is at the strongest it has ever been. A slow down would really just be a correction and not a full blown recession.

Of course i'm young and no expert but I don't see Australia having a big down turn in prices anytime in the next 5-10 years. I wont start to worry a little when you see population growth slow / go down rather than grow / go up.

 

[feihong]

This is where a solid education will pay off in droves.

If we do go into a recession then a university degree should keep me in work no problems and interest rates will fall which should give me the ability to service loans. If house prices fall dramatically then it will really just provide a platform to buy some properties in good locations for a decent price.

What you have to remember currently though is that china has no where near peaked.

China relies heavily on coal with and with hundreds of new power plants gone in i don't see them not using these plants any time soon.

The industry wont see a slow down until at least 2030 but i would expect china to continue to eat up resources for far longer than that.

You may talk about doom and gloom but you have to wonder why you would be thinking about that when Australia's economy is at the strongest it has ever been. A slow down would really just be a correction and not a full blown recession.

Of course i'm young and no expert but I don't see Australia having a big down turn in prices anytime in the next 5-10 years. I wont start to worry a little when you see population growth slow / go down rather than grow / go up.

Uni degree doesn't guarantee you a job anymore (everyone can get one these days), you really have to have a few years of solid experiences relevant to your industry under your belt to consolidate your position in bad times.

Things to watch out for would be the loss of credential of greenback and sudden collapse of credit balloon that had a massive run-up since the end of gold era back in 60's. No countries including China and India can save us from recession/depression if that happens, even if they are growing rapidly. This is when people who are able to hold out the medium/long term pain that will come out on top.

 

[alexlee]

You may talk about doom and gloom but you have to wonder why you would be thinking about that when Australia's economy is at the strongest it has ever been. A slow down would really just be a correction and not a full blown recession.

Because recessions ALWAYS happen right after an economy seems invincible.

The correction and recession difference is a very fine line. The difference is really how fast the market bounces back. I wouldn't be too confident about China and India, though. There are still plenty of risks there and structural issues that have not been resolved. I still don't believe that China and India can make up for a US recession if this credit crisis gets any worse.
Alex

 

[trendsta]

This is where a solid education will pay off in droves.

If we do go into a recession then a university degree should keep me in work no problems and interest rates will fall which should give me the ability to service loans. If house prices fall dramatically then it will really just provide a platform to buy some properties in good locations for a decent price.

What you have to remember currently though is that china has no where near peaked.

China relies heavily on coal with and with hundreds of new power plants gone in i don't see them not using these plants any time soon.

The industry wont see a slow down until at least 2030 but i would expect china to continue to eat up resources for far longer than that.

You may talk about doom and gloom but you have to wonder why you would be thinking about that when Australia's economy is at the strongest it has ever been. A slow down would really just be a correction and not a full blown recession.

Of course i'm young and no expert but I don't see Australia having a big down turn in prices anytime in the next 5-10 years. I wont start to worry a little when you see population growth slow / go down rather than grow / go up.

A few points.. Uni degree doesnt neccessary make a person less suspetible to a recession.. During 02/03 i remember many friends in investment banking etc had trouble getting a job, while tradies were having a field day. When a recession does come many industries shed jobs e.g. finance, travel/leisure, IT, law/accounting etc not just labour intensive ones ... taken to the extreme, given everything else is the same the farmer will still have his job - we all still need to eat .. but we can do without many other occupations.

In terms of emerging nation specifically China.. well with inflation rising, currency valuation problems and pressure to revalue, excees liquidity, govt resorting to fixing prices (food, oil, nergy etc) and bad loans running rampant, its only a matter of time before something bad hits .. im not saying in 30 years china will not grow.. my point is that its not a straight trajectory, with many dips and troughs along the way, including some major ones as the economy starts maturing..

with sharemarket p/e approaching 50 and the attitiude of many chinese that 'shares can never go down' one has to wonder... australias other major partners are faltering US, Japan, Eurpoe and showing signs of so slowing.. it appears australia is excessively banking on china to drive us and the whole world out of disaster - oblivious to the fact they themselves have some huge concerns..

 

[alexlee]

I actually found it VERY disturbing that the Chinese government tried to control inflation by ordering people not to raise prices. One, that doesn't work and you'll just drive commerce onto the black market, and two, it shows that despite everything the government is still trying to dictate its wishes.

Problem is, with that attitude, who knows what else is out there? Say, a bank is actually loaded with bad debts but the local communist party secretary just says 'lend them the interest so they don't default'? That's part of the 'hidden' problems Japan had during their boom, which become painfully clear after the bust.
Alex

 

[trendsta]

I actually found it VERY disturbing that the Chinese government tried to control inflation by ordering people not to raise prices. One, that doesn't work and you'll just drive commerce onto the black market, and two, it shows that despite everything the government is still trying to dictate its wishes.

Problem is, with that attitude, who knows what else is out there? Say, a bank is actually loaded with bad debts but the local communist party secretary just says 'lend them the interest so they don't default'? That's part of the 'hidden' problems Japan had during their boom, which become painfully clear after the bust.
Alex

yup .. there are various economic structural problems in china.. the govt has also tried NOT to pass the recent oil prices on to consumers, but that has erorded any margins for the refiners, all the while you have the biggest of the all PetroChina been driven beyond trillion dallars with p/e of 46 .. it just doesnt make sense ..

They are trying to control inflation, using unconventional means, and also have a deposit rate lower than inflation rate (inflation around 6%, deposit rate around 3-4%)... chinese, are huge savers .. but there is no incentive to save this money as deposits, as it is worth less and less, hence the boom in sharemarkets and property prices ...

This is all looking shaky ..

If you have a 30 year view then all is fine .. but in the short-medium term we all know how exuberance ends .. every time.

 

[feihong]

yup .. there are various economic structural problems in china.. the govt has also tried NOT to pass the recent oil prices on to consumers, but that has erorded any margins for the refiners, all the while you have the biggest of the all PetroChina been driven beyond trillion dallars with p/e of 46 .. it just doesnt make sense ..

They are trying to control inflation, using unconventional means, and also have a deposit rate lower than inflation rate (inflation around 6%, deposit rate around 3-4%)... chinese, are huge savers .. but there is no incentive to save this money as deposits, as it is worth less and less, hence the boom in sharemarkets and property prices ...

This is all looking shaky ..

If you have a 30 year view then all is fine .. but in the short-medium term we all know how exuberance ends .. every time.

Olympics.. it's all about the Olympics, and how can China have any bad news? It's all good news, everyday! (according to People's Daily)

 

[trendsta]

Olympics.. it's all about the Olympics, and how can China have any bad news? It's all good news, everyday! (according to People's Daily)

yup, thats true ..
ive also held that view for a while now .. china wont take any drastic steps until the political games of 08 are over.. oops did i say that , i meant olympic games ..

 

[Lizard King]

A one bedder for $425K??? O.M.G!

Which city is this? Not even L.A is this expensive.

That price is a total joke. Of course; there will be plenty who will pay it; which I can't understand. Are they O.T.P?

Be very wary of new apartment complexes in the cbd.

LA Aussie

You only have do a search on realestate.com.au and you will see what I mean.

Mind you, these 1BRs around the 60m2. Works out to just a bleep over $7,000per square meter.

Work it out for a 90m2 2BR 2BTH.

Lizard King

 

[BV]

Hi There

I gather all this doom and gloom is about property prices and a looming recession Over East?

Out here in The West it is full throttle; trying to get a One Bedder for our daughter who has just relocated from the ACT.

Now here and I cannot believe that all new 1BR units in the CBD are being quoted at around $425K.

This, considering there are so many units coming on line allong Adelaide Terrace, East Perth.

The Lizard King

Lizard King,

Is a recession hits the US which is a massive consumer market it will affect China and our exports of raw material. A made in china recession will also affect the East coast of Oz but not as much as it will affect resource areas.

Think about it. It's not just the US who are in trouble.
Our strong $ has so far protected us from the high petrol prices but its not the same for the US and EU.
The US & the Europeans are going into winter and their petrol prices are at all time high.
Being warm this xmas it will be costly for them and I am sure they won't be buying their plasma TV's or updating their wardrobes at the same rate as they used to.

If our exports of raw materials slow down can you imagine what will happen to all those people who came over to WA to work? If they start to leave it is possible that there will be an oversupply of rentals and rents and property prices can easily go the other way.

IMHO

 

[Ausprop]

your argument is circular BV... Perth is a resouces and energy based economy, if high oil / energy prices cause the problem then Perth has / will continue to benefit.

 

[Ausprop]

A one bedder for $425K??? O.M.G!

Which city is this? Not even L.A is this expensive.

That price is a total joke. Of course; there will be plenty who will pay it; which I can't understand. Are they O.T.P?

Be very wary of new apartment complexes in the cbd.

LA Aussie

You only have do a search on realestate.com.au and you will see what I mean.

Mind you, these 1BRs around the 60m2. Works out to just a bleep over $7,000per square meter.

Work it out for a 90m2 2BR 2BTH.

Lizard King

$425k is sounding cheap... I just read the new cinema city complex will start from $600k for one bedders.

Leighton Beach will have the most expensive apartments in the country with prices ranging up from $25k per square metre, these will walk out the door

 

[buzzlightyear]

A one bedder for $425K??? O.M.G!

Which city is this? Not even L.A is this expensive.

That price is a total joke. Of course; there will be plenty who will pay it; which I can't understand. Are they O.T.P?

Be very wary of new apartment complexes in the cbd.

LA Aussie

You only have do a search on realestate.com.au and you will see what I mean.

Mind you, these 1BRs around the 60m2. Works out to just a bleep over $7,000per square meter.

Work it out for a 90m2 2BR 2BTH.

Lizard King

The missing part to this is the cost of land and the cost of building. You may find $7000 per sqm is actually representative of a reasonable return for the developers!

 

[BV]

your argument is circular BV... Perth is a resouces and energy based economy, if high oil / energy prices cause the problem then Perth has / will continue to benefit.

Possibly but is it the same across WA?
Anyway, any recession IMO will first start OS and it will take time to filter through to our employment here. Therefore we should see it coming and will have time to react.
Cheers

 

[Kennethkohsg]

Problem is, with that attitude, who knows what else is out there? Say, a bank is actually loaded with bad debts but the local communist party secretary just says 'lend them the interest so they don't default'? That's part of the 'hidden' problems Japan had during their boom, which become painfully clear after the bust.
Alex

************************
Dear Alex,

1. As an overseas Chinese myself, I see it as the very political willpower of the Chinese Govt who is trying real hard to try to rein the inflationary pressures of its fast expanding and over-heating Chinese Economy at all costs. It's purely an issue of national pride for the Chinese Govt and its Chinese peoples.

2. However, once the 2008 Beijing Olympics Games is over, I further believe that we can expect to see all kinds of "worms" being openly disclosed by the Chinese Govt and widely reported as major news headlines in the local Chinese press in time to come during late 2008-2010 period.

3. I presently further believe that it will be during this post-2008 Beijing Olympic Games period that the Chinese Government may try to "relax" on its political control and allow its Chinese Economy to run more freely according to the existing market forces. Thus, it is quite likely during this period that the actual "over-heating" of the Chinese Economy is likely to implode itself internally, triggering off a free fall to its own Chinese Economy, thereby causing the Chinese Economy to suddenly deflate itself into a possible Depression scenario.

4. For your further comments and discussion, please.

5. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Well I dont understand either, may RE agents and investors I talk to say it will not go down, just slow down for a while, but I'm seeing more D&G stuff from the US and UK and even here (in the media) ppl are talking about the huge debt we got now and how it could effect us.

So I am trying to come to terms with what will happen.

I dont believe it will GO DOWN but I am worried that it might. This is not as easy as many ppl say it is.

&&&&&&&&&&&&&&&&&
Dear 1 to 10,

1. Do you seriously expect the RE agents to truthfully tell that the housing market is going to bust soon, and at the same time, expect that you will buy their properties?

2. Don't listen to the Re Agents; listen to yourself, rather! Do your own personal research and due diligence and make your own conclusion regarding the present housing market situation.

3. Don't worry about the housing market. It will take care of itself in due course.

4. Think and plan how you are going to manage the various types of risks under the different scenarios that may eventually emerge and the kind of safeguards which you can build into your investing strategie so that when you can safely and profitably invest in the housing market one of these days.

5. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Anyway, any recession IMO will first start OS and it will take time to filter through to our employment here. Therefore we should see it coming and will have time to react.
Cheers

*******************************
Dear BV

"It has just begun....". Do you not see it?

Cheers,
Kenneth KOH