Economists - Decade of house pain predicted

[bluestorm]

Looks like all the economists and property spruikers are slowly coming to the realisation that property will struggle over the mid-term.

Decade of house pain predicted

I'm just wondering, for all the people on here that believe everything the RBA and economists say, and say why listen to us D&G rather than the experts economists, whether this from leading economists changes your tune. The "experts" have gone from saying 20% gains the next 3yrs, to "continue their single-digit slide into 2012 before stagnating for five to 10 years"

The economists are improving slowly, but are still yet to realise that Australian property is in for a 30% correction. Given they are already changing their tune from CG in the next 3yrs, maybe eventually they will realise what the D&G already forsee.

MELBOURNE'S property market is likely to remain in the doldrums for the next 10 years.

The bleak outlook comes from a group of the country's leading economists who warn the city's bricks and mortar are fundamentally overvalued.

The good news for homeowners is that AMP Capital chief economist Shane Oliver and Grattan Institute program director Saul Eslake - the ANZ's chief number cruncher for close to 14 years - say Victoria will avoid a US-style property crash which saw prices plunge by 30 per cent.

Instead, house prices will continue their single-digit slide into 2012 before stagnating for five to 10 years as wages catch up with a median house price which has climbed 133 per cent since 2000.

 

[random]

Our property was 40 - 50% over valued up until late 10 , there's no doubt about that or any idea on how it will play out as compared to others that have crashed after lesser runs than we've had. The shortage is also a load of hogwash.
Doubt it'll be up though if nothing else. Springs gonna be the tell tail.

Me I've been molding what I have now and bought into nice CFP 10-15 yr holds , hoping to cash in on the next big boom that I expect at the end of that.
I'm also hoping to scrape the bottom in about 3 yrs time and pick up another gem or two along the way , add em to the cookie jar for the next biggie. Absolutely no idea why any one is rushing in right now , although it is hard to wait if you just wanna get started I admit.

Seems I haven't believed for a second or payed any of the silly prices of this last 7-8yrs , non of it's really a problem for me and I'm "really" looking forward to seeing my theories through that 7-8yrs and now ahead tested and hopefully pay off big time.

Good luck people
Cheers

 

[devo76]

But a crash is still not expected. It will help people get the house they want at a good price instead of grabbing anything.
But the people waiting for a bloodbath so they can swoop in on the bargains may be disappointed.
I also think we are in for a flat period like the 90's.
Good time to build an asset base before the next upswing.

 

[random]

Dunno where they get this 133% crap from either , try 2 and 300% , often much more.
And just for newies , please don't ask us to prove it again , check some old threads , been done dozens of times.

Cheers

 

[pieman]

Our property was 40 - 50% over valued up until late 10 , there's no doubt about that or any idea on how it will play out as compared to others that have crashed after lesser runs than we've had.

Over valued against what? Too many markets in Melbourne without thinking about Australia wide. If Beach rd Hampton is $450 per sqft and Frankston sells for $30 per sqft does that mean Beach rd is "over valued" or does the market determine values? Similarly, if you can buy a 4x2 in vegas for $50k, does that mean our 4x2's should be $50k?
I would say if something sells on the open market, then that is its "fair value".

 

[BuildingBlocks]

Over valued against what? Too many markets in Melbourne without thinking about Australia wide. If Beach rd Hampton is $450 per sqft and Frankston sells for $30 per sqft does that mean Beach rd is "over valued" or does the market determine values? Similarly, if you can buy a 4x2 in vegas for $50k, does that mean our 4x2's should be $50k?
I would say if something sells on the open market, then that is its "fair value".

Spot on.

Something is only ever worth what someone is willing to pay for it at that point of time.

 

[Propertunity]

Looks like all the economists and property spruikers are slowly coming to the realisation that property will struggle over the mid-term.

all? The article quotes one economist who is down on property, Shane Oliver.

.....but are still yet to realise that Australian property is in for a 30% correction.

The other economist aquoted in the article, Saul Eslake, says we will not be in for a 30% correction.

Given they are already changing their tune from CG in the next 3yrs, maybe eventually they will realise what the D&G already forsee.

D&G's always forsee D&G - in any market.

This is just more media 'noise'

On the negative side of property we have:
1. The threat of rising interest rates
2. Global economy not doing well - Greece likely to default etc
3. New loans for new property down
4. 2 speed economy with retail flat
5. Carbon tax affecting big miners decisions, cost of living increases
6. Slightly rising mortgage defaults (90 days in arrears) in some areas
7. A period of higher stock on the market and lower sales (although latest qtr figures in Sydney show this starting to slow and normalise to trend for same period last year)

On the positive side we have:
1. Next interest rate decision likely to be down
2. Immigration still high and planned to become higher in years ahead
3. Wages rises combined with flattening/falling house prices in some areas making property more affordable
4. Rental increases getting to a point in some areas making it as cheap to own as it is to rent
5. Investor activity in housing as share market has gone thru a 'correction'
6. Low new building starts putting pressure on existing stock
7. Credit markets starting to loosen up (a little) and new entrants into the mortgage market

So it is a 6 of one and 1/2 dozen of the other. You have to come to your own views and act on that, in my opinion. For me, I take a longer term view.

 

[TomW]

If property goes sideways for ten years than it will be a pretty poor investment given the yields.

 

[bluestorm]

all? The article quotes one economist who is down on property, Shane Oliver.

The other economist aquoted in the article, Saul Eslake, says we will not be in for a 30% correction.

Yeah, Yeah Propertunity. Keep denying the inevitable.

By the way, the same economists were only recently predicting prices would rise 20% over the next 3yrs.

Saul Eslake may be saying there will be no correction as this point. But like all economist, I expect that he'll "revise" his predictions after the fact (that is, once the downward trend sets in).

I think your also pushing it with your list on the positive side of the equation.

 

[random]

Pieman that's all been covered before so I won't go there again.

But my thoughts are just on the way I've been playing it personally.I think we could even head for a 1930's type stint adding the rest of the worls woes but if others think these prices are ok, they can go for their life .

Cheers

 

[Sheryn]

If property goes sideways for ten years than it will be a pretty poor investment given the yields.

I think the decrease in house & unit construction will be good for rental yields over a period of time. If I put up my rent a minimal amount of $5 or $10 per week every 6 months.

In 10 years time my rent could be $200 per week more of course holding costs will go up BUT loan amount will not.


Regards
Sheryn

Now what is your plan or strategy; are you going to sell, buy, hold off, reno, sit tight?

 

[TomW]

I think the decrease in house & unit construction will be good for rental yields over a period of time. If I put up my rent a minimal amount of $5 or $10 per week every 6 months.

In 10 years time my rent could be $200 per week more of course holding costs will go up BUT loan amount will not.


Regards
Sheryn

Now what is your plan or strategy; are you going to sell, buy, hold off, reno, sit tight?

I don't know but if they are right I'd probably be best off selling my investment property and putting it into a bond index fund or something. Problem is I don't know if they are right.

 

[Propertunity]

By the way, the same economists were only recently predicting prices would rise 20% over the next 3yrs.

That's exactly my point.

Yeah, Yeah Propertunity. Keep denying the inevitable.

The RP Data-Rismark Home Value Index for the year ended 30/6/11 - in the attached, proves Sydney is actually growing - the opposite way to what you see as 'inevitable'. I'm sorry the Sydney market is not going to plan for you.

 

[bluestorm]

The RP Data-Rismark Home Value Index for the year ended 30/6/11 - in the attached, proves Sydney is actually growing - the opposite way to what you see as 'inevitable'. I'm sorry the Sydney market is not going to plan for you.

Come on Propertunity. Your holding onto thin straws there. The Sydney figure was at least 3% a few months ago. Given that the figure is a Year on Year amount, then Sydney prices have actually started falling, and the 12mth gain is now only 1%. In another 3mths, Sydney will also be Red and negative.

 

[pennyk]

I think every week there is at least one article in the paper predicting doom and gloom in the housing market, and at least one saying that things are turning around and heading back up again. Same as one economist predicting interest rates will rise and one predicting they will fall. Economic recovery... economic woes. They are all just predictions, and in all likelihood most will be wrong.

You can't live your life based on what the media say or you would go crazy. Look, listen and learn....... but in the end you have to set your own direction and follow what you think. If you make a few mistakes along the way then get up and move on.

For me, I would prefer to be optimistic than to constantly live in D and G, thinking about all the bad things that could happen. Even if house prices fall, they'll come back up. If interest rates rise, they'll come back down. Share market tanks, it will recover. There is a season for everything.......

 

[Propertunity]

For me, I would prefer to be optimistic than to constantly live in D and G, thinking about all the bad things that could happen. Even if house prices fall, they'll come back up. If interest rates rise, they'll come back down. Share market tanks, it will recover. There is a season for everything.......

Same for me x2.

 

[turk]

Yeah, Yeah Propertunity. Keep denying the inevitable.

By the way, the same economists were only recently predicting prices would rise 20% over the next 3yrs.

Saul Eslake may be saying there will be no correction as this point. But like all economist, I expect that he'll "revise" his predictions after the fact (that is, once the downward trend sets in).

I think your also pushing it with your list on the positive side of the equation.

Hi bluestorm

From memory both these economists have been bearish on property for the last 2 or 3 years.

However as you have obviouly taken an interest in their predictions would you please post the links where they have recently predicted a 20% increase over the next 3 years?

 

[devo76]

Now I still consider myself a newbie and will continue to do so until I have a few cycles under my belt.
But even right from the start I understood that it could take several years or more to see good CG and it's highly likely that this CG will mostly come in only a few of these years. Investing 101 you could say.

So here we have ecconomists suggesting a flat spell that could last 5 to 10 years. Is this not normal and expected ????
I know its cool to be down on property now but I find it a little funny sometimes when what you call normal cycle stages are shown in a different light to add drama.

Just a thought.

 

[bluestorm]

I know its cool to be down on property now but I find it a little funny sometimes when what you call normal cycle stages are shown in a different light to add drama.

Just a thought.

That is if you believe we are in a "normal cycle". There was nothing normal about 200-300% increases in 10-15yrs . I don't think we'll see a flat market like these economists. I think we will see a 30-40% correction. Nothing normal about this cycle.
The worlds is still in a mess. We shall see over the next 17mths to the end of 2012 how normal this cycle is.

 

[devo76]

That is if you believe we are in a "normal cycle". There was nothing normal about 200-300% increases in 10-15yrs . I don't think we'll see a flat market like these economists. I think we will see a 30-40% correction. Nothing normal about this cycle.
The worlds is still in a mess. We shall see over the next 17mths to the end of 2012 how normal this cycle is.

This is your opinion. And I guess you have as much luck as anybody of getting it right. And I mean luck. You don't know. I don't know. And some people getting paid big money to actually know sure as he'll don't know.
200-300% is a massive generalization and if the initial growth come of the back of another flat spell the this would warp things also.
I don't argue that property is expensive both locally and when compared internationally.
But what happens from here can be many things. I don't think you will get your crash as much as you preach and preach in the hope that it does. You say you have three properties yet expect a 30% + drop. Appears you have some doubt also.
I think this will be a normal cycle although a recovery could take a little linger due to the size. But a cycle it is and better times will return.