Do you believe property prices are going to fall ?
- Thread starter Sim
- Start date
Perhaps a better question to be asking is whether we expect to see interest rates rise even moderately. If that happens, I think there'll be fallout, and the market will possibly drop a'la the late eighties.
Rental vacancies have increased and one reason seems to be couples jumping in and obtaining the FHOG to get their first home. But I suspect many doing this were only able to do so because of the FHOG in the first place meaning they were heavily geared at 90+%. Many will also have bought homes at the peak prices of this growth cycle.
I also think that it doesn't take a lot of homes to start selling for a cheaper price before the market picks up on that and starts to pressure the whole market (in a particular area) downwards. And, once again, an increase in interest rates (if it occurred) would possibly have that very effect.
Rental vacancies have increased and one reason seems to be couples jumping in and obtaining the FHOG to get their first home. But I suspect many doing this were only able to do so because of the FHOG in the first place meaning they were heavily geared at 90+%. Many will also have bought homes at the peak prices of this growth cycle.
I also think that it doesn't take a lot of homes to start selling for a cheaper price before the market picks up on that and starts to pressure the whole market (in a particular area) downwards. And, once again, an increase in interest rates (if it occurred) would possibly have that very effect.
Hi Sim and Others
If we allow that prices over an extended period will rise by an average of 10% pa then the value of investments will approximately double if looked at on a moving decade basis.
A more conservative investors approach may be to consider 7.5% growth or a doubling each 10 years if looked at on a moving decade basis, so let’s not be greedy and take this as the yardstick.
As I see it, current valuations now seem to be soft with little movement either up or down, just a shaking out of some excesses as it were. I also see current valuations remaining approximately as they are today for the next two, maybe three years.
If we then subtract current inflation of 3%, the effect is that there is a net reduction in the value of investment property. Rents will continue to rise at inflation rates or a little quicker so investment valuations will not change greatly until rents are closer to the true valuation of the property, vacancy rates reduce, the stock market gets its act together and the rest of the world solves its problems.
My bet is for number three. Valuations will overall stabilise for a while which means a net loss after inflation.
Regards
Ross
If we allow that prices over an extended period will rise by an average of 10% pa then the value of investments will approximately double if looked at on a moving decade basis.
A more conservative investors approach may be to consider 7.5% growth or a doubling each 10 years if looked at on a moving decade basis, so let’s not be greedy and take this as the yardstick.
As I see it, current valuations now seem to be soft with little movement either up or down, just a shaking out of some excesses as it were. I also see current valuations remaining approximately as they are today for the next two, maybe three years.
If we then subtract current inflation of 3%, the effect is that there is a net reduction in the value of investment property. Rents will continue to rise at inflation rates or a little quicker so investment valuations will not change greatly until rents are closer to the true valuation of the property, vacancy rates reduce, the stock market gets its act together and the rest of the world solves its problems.
My bet is for number three. Valuations will overall stabilise for a while which means a net loss after inflation.
Regards
Ross
Hi Sim
It depends on the stock and the dempgraphic.
I believe we are in for a small queit time for a few months, with the upward trend back by the middle of the year.
This applies to mainly housing stock, and strata stock with unique position.
Ta
Rolf
It depends on the stock and the dempgraphic.
I believe we are in for a small queit time for a few months, with the upward trend back by the middle of the year.
This applies to mainly housing stock, and strata stock with unique position.
Ta
Rolf
Hi
Rolf. You indicate stock and demographics or supply and demand as a major factor to hold the prices of property for a few months and then an upward trend, although you do mention housing and strata stock in a unique position.
I think that supply and demand play a major role along with the vacancy factor. Reports also indicate a surplus of stock (generally, broadly but not specifically) in Melbourne and Sydney for up to 18 months, Adelaide for two years, Canberra for 2 to 3 years and Hobart for up to seven years. Hence my belief that the flattening of the market will run longer than several months.
Kevin. You have probably read the article in the Dec/Jan API written by Michael Carmen comparing interest rates today with the late 80’s. He wrote that when the nominal interest rates in the 80’s were 17%, CPI growth was 8% for a net increase of 9% overall. Today we have a nominal interest rate of 6.55%, CPI growth of 2.9% for a net of 3.5%. (ABS 1350).
Perhaps to state the obvious, a net of 3.5% is a lot less than 9% so I don’t see even a moderate interest rate increase occurring, a la the late 80’s, and having a major effect on housing. Yes, some perhaps, but I suggest not major.
Brinkdude. A good question. How long? My bets are on for a period of soft prices for the rest of this year less CPI rowth. This will allow the rental market to catch up.
My feeling is that the vacancy factor must fall. The rental yields must close on housing sale prices to nearer to 5% to 5.5%. The supply of housing must reduce.
Externally, the stock market must cease its downward trend both locally and internationally. George Bush’s new trillion dollar economic program must bite and the rest of the world stock markets must stabilise.
But then I guess we don’t as individuals have much influence on any of these factors. We can only bob around like corks in a whirlpool and make the most of the situation.
Regards
Ross
Rolf. You indicate stock and demographics or supply and demand as a major factor to hold the prices of property for a few months and then an upward trend, although you do mention housing and strata stock in a unique position.
I think that supply and demand play a major role along with the vacancy factor. Reports also indicate a surplus of stock (generally, broadly but not specifically) in Melbourne and Sydney for up to 18 months, Adelaide for two years, Canberra for 2 to 3 years and Hobart for up to seven years. Hence my belief that the flattening of the market will run longer than several months.
Kevin. You have probably read the article in the Dec/Jan API written by Michael Carmen comparing interest rates today with the late 80’s. He wrote that when the nominal interest rates in the 80’s were 17%, CPI growth was 8% for a net increase of 9% overall. Today we have a nominal interest rate of 6.55%, CPI growth of 2.9% for a net of 3.5%. (ABS 1350).
Perhaps to state the obvious, a net of 3.5% is a lot less than 9% so I don’t see even a moderate interest rate increase occurring, a la the late 80’s, and having a major effect on housing. Yes, some perhaps, but I suggest not major.
Brinkdude. A good question. How long? My bets are on for a period of soft prices for the rest of this year less CPI rowth. This will allow the rental market to catch up.
My feeling is that the vacancy factor must fall. The rental yields must close on housing sale prices to nearer to 5% to 5.5%. The supply of housing must reduce.
Externally, the stock market must cease its downward trend both locally and internationally. George Bush’s new trillion dollar economic program must bite and the rest of the world stock markets must stabilise.
But then I guess we don’t as individuals have much influence on any of these factors. We can only bob around like corks in a whirlpool and make the most of the situation.
Regards
Ross
B
brains
Guest
In my opinion the buying frenzy of the last 2 years has pulled a lot of demand from the market for quite a while, so i expect the market to be soft for a couple of years, till the balance evens out.
The stock market can only go up from here (i think) so i expect a lot of investor money to go from property to the stockmarket and that will add to the lack of demand.
I think its becoming a buyers market so you can negotiate harder regardless of what the market is doing.
just my $0.02 worth
The stock market can only go up from here (i think) so i expect a lot of investor money to go from property to the stockmarket and that will add to the lack of demand.
I think its becoming a buyers market so you can negotiate harder regardless of what the market is doing.
just my $0.02 worth
So if I have read some of these posts correctly, what some expect to happen is that demand has/is falling and investments will move to the stock market also lessening demand. So if this is the case, I'm thinking that there willing also be a lessening of rental properties available so rents would rise. Is this correct?
So as I see it, while we won't get as much capitial gain in the short term, our yeilds will rise with the rents catching up with the new property values!
Seems to me that owning property always has an up side to it!
So as I see it, while we won't get as much capitial gain in the short term, our yeilds will rise with the rents catching up with the new property values!
Seems to me that owning property always has an up side to it!
It seems to me that whatever the market is doing, there always be some that are gaining, some losing and some staying steady.
As an example, over the last 2-3 years most of the sharemarket has been in decline yet shares in our major banks have grown in value and provided good yields.
During the last 3 years, there are some areas that have had the value of residential property stay steady or fall, such as Newman in north-west of WA.
As I intend to keep my properties for ever, I value them for my own purpose based on yield.
My target tenant is 23-35 years of age, white collar and unmarried. Over the next 2-3 years, I see the rents increasing in line with the strength in the local services industry which are the employers of my tenants.
Glenn
As an example, over the last 2-3 years most of the sharemarket has been in decline yet shares in our major banks have grown in value and provided good yields.
During the last 3 years, there are some areas that have had the value of residential property stay steady or fall, such as Newman in north-west of WA.
As I intend to keep my properties for ever, I value them for my own purpose based on yield.
My target tenant is 23-35 years of age, white collar and unmarried. Over the next 2-3 years, I see the rents increasing in line with the strength in the local services industry which are the employers of my tenants.
Glenn
Property Market
SYD- MELB markets from 400k to $750k may flatten out (no decrease,, this only happens when u have paid to much for your purchase in that price range. Unique Homes will hold strong
Homes under $400k in sydney will continue to grow in strenght
$800k & above will proberly dip up to 10% but bounce back just as fast.. It happened in Nov 2000 to Feb 2001 IN sydney. Market Bouced back in 4 months & increased many points after.
Won't bother with the above Mil mark.. Strong eco growth steers that market.
My view is to keep investing, as History has shown for 180 yrs in this country. JUST BUY smarter!!
Don't bother with units (execpt if it is maybe a rare Multiplex dwelling in a unique area)
.
There will be plenty around. Just follow the retiree market $180k up to $780k. It is quite simple really. I would be shocked if your returns do not stay at 10% Min P/a.
Many Super funds getting ripe on the trees WHICH will G'tee these buys to be the secure INVESTMENTS. Always a good apple in the basket. Investors should be able to smell it from a distance.
cheers ocean
SYD- MELB markets from 400k to $750k may flatten out (no decrease,, this only happens when u have paid to much for your purchase in that price range. Unique Homes will hold strong
Homes under $400k in sydney will continue to grow in strenght
$800k & above will proberly dip up to 10% but bounce back just as fast.. It happened in Nov 2000 to Feb 2001 IN sydney. Market Bouced back in 4 months & increased many points after.
Won't bother with the above Mil mark.. Strong eco growth steers that market.
My view is to keep investing, as History has shown for 180 yrs in this country. JUST BUY smarter!!
Don't bother with units (execpt if it is maybe a rare Multiplex dwelling in a unique area)
.
There will be plenty around. Just follow the retiree market $180k up to $780k. It is quite simple really. I would be shocked if your returns do not stay at 10% Min P/a.
Many Super funds getting ripe on the trees WHICH will G'tee these buys to be the secure INVESTMENTS. Always a good apple in the basket. Investors should be able to smell it from a distance.
cheers ocean
One of the main factors is that interest rates are definitivly going to remain low, demand in Sydney always will exceed supply so if anyone thinks prices of houses with 600 sq mtrs of land are not going to increase they are dreaming. Units are a different story but why would you invest in a unit anyway.
Hi JDI
Units can be a very fine investment if strategically placed or sourced.
In singles or packs I have seen cap growths of 25 % in one year, and in some cases with yields exceeding 14 %.
ta
rolf
Units can be a very fine investment if strategically placed or sourced.
In singles or packs I have seen cap growths of 25 % in one year, and in some cases with yields exceeding 14 %.
ta
rolf
Hi all
I think the media have a bit of a say.
For example, when you see articles on how its not a good time to buy in to realestate at the moment or how the housing market is going to turn and so on, all these and more articles will take a very negative approach and will decide where the market goes.
Peoples fear of buying in to realestate due to poor comments they read or hear can take a negative effect on our property investments.
Regards,
I think the media have a bit of a say.
For example, when you see articles on how its not a good time to buy in to realestate at the moment or how the housing market is going to turn and so on, all these and more articles will take a very negative approach and will decide where the market goes.
Peoples fear of buying in to realestate due to poor comments they read or hear can take a negative effect on our property investments.
Regards,
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The final results are in from the NineMSN poll. It seems the majority (21,352) agree with us formites.
Brinkdude
PS. It also seems that the community is equally divided on HECS and that Steve Waugh should continue to play and be in the World Cup squad.
"Thursday 9 January: Do you think the HECS system is fair?
Yes: 11178 (48%)
No: 11976 (52%)
Wednesday 8 January: Do you believe property prices are going to fall significantly?
Yes: 12142 (36%)
No: 21352 (64%)
Tuesday 7 January: Should Steve Waugh retire from first-class cricket?
Yes: 9706 (28%)
No: 25000 (72%)"
Brinkdude
PS. It also seems that the community is equally divided on HECS and that Steve Waugh should continue to play and be in the World Cup squad.
"Thursday 9 January: Do you think the HECS system is fair?
Yes: 11178 (48%)
No: 11976 (52%)
Wednesday 8 January: Do you believe property prices are going to fall significantly?
Yes: 12142 (36%)
No: 21352 (64%)
Tuesday 7 January: Should Steve Waugh retire from first-class cricket?
Yes: 9706 (28%)
No: 25000 (72%)"
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