House prices rise in 2010, unless you're Keen

‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said.

The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’

More http://www.smh.com.au/business/house-prices-set-to-rise-in-2010-20091221-l9pb.html?autostart=1
 
‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said

So based on the abject failure of his last predictions, we should all go out and buy as many IPs as we can afford and ride the growth wave up in 2010? :D
 
HA!

I needed something to entertain me on the computer... Was looking around for jokes, then I stumbled across Prof Keen.

Hmmm... 40% fall, oh a year on.... 20% gain + a 5% fall, sounds like he was on the money :) sell everything and put money in the bank. I better stock up on canned food aswell :)
 
Keen's central thesis is that debt levels have become too high and this is what triggered the global financial crisis. So the housing boom (or bubble) is a symptom of a wider credit bubble, and if the GFC is it deflating then there'll be less money for banks to lend, meaning price falls.

I think that's an interesting idea, though Nomi Prins believes that it wasn't the level of (bad) debt that caused the problems, rather the derivatives market based upon this.

A 5% fall next year isn't a bad prediction. The FHB and low interest rates provided a (now withdrawn) stimulus and brought forward demand. Markets tend to overshoot slightly in either direction.
 
A 5% fall next year isn't a bad prediction. The FHB and low interest rates provided a (now withdrawn) stimulus and brought forward demand. Markets tend to overshoot slightly in either direction.
I agree, I don't think it's that crazy as the factors are there. At best I would only expect a small 5% rise in properties for the year but a drop seems a realistic option. I'm no expert either, just enjoy predicting things. ;)
 
I agree. Predictions by property experts and economists for the UK market next year range from +5% to -10%.

My personal opinion is that no one knows. There are still risks out there.
 
I think the motivating factor for investment will be all the people who've realised that Super may not be a haven in the future - considering what happened this time, if another happens then Super will be quite wobbly indeed.

With that in mind I'd expect 2010 to have more inexperienced buyers grabbing stock 'for the future'. This can only mean more RE activity in 2010

The world appears to be deleveraging from the US dollar so the potential effects of a continuing USA deflation and depression (probably as likely as US dollar depreciation) will be softened, as will it's effect on China - which has started focussing inwards with it's stirring of chinese consumerism.

China seems to be bubbling everywhere so the worry would be them imploding in some way and dropping demand for our resources. Europe also seems to be ready to throw a few more economies on to the bonfire so that may prevent an economic winter there. (I wouldn't forex the dollar OR the euro anytime soon!)

It's pretty evident tho that the old days are done and now one has to be very aware of global potentials, not just the clumsy Government activity that tries to predict it (RBA for instance!)

That said, I'd be a lot happier if our dollar was around 75cents, China growth wasn't over 4% and the USA wasn't looking like a Banana republic ripening.

And when oil gets to $140 a barrel again that's when you'd best stock up on the canned food Nathan.
 
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I think that the interest rate rises and winding back of stimulus/financial incentives will have a negative affect on property prices.

The X factor here is the new federal govt rules allowing foreign ownership. These new rules have opened up an avalanche of buyers from OS, blowing locals out of the water on auction day, targeting the "better" areas.

EVERY auction I have attended recently, has sold to a foriegn buyer. I think this will be the only reason prices will be stable/continue to rise.
 
EVERY auction I have attended recently, has sold to a foriegn buyer. I think this will be the only reason prices will be stable/continue to rise.

Enlighten me. How do you tell the difference between a 'foreign buyer' (the type that needs FIRB approval to buy a place) and a 'non-white' buyer who is a citizen / has a resident's visa and doesn't need FIRB approval?
 
You have to understand Keen's central thesis. His main idea is that a large fraction of the high GDP growth experienced in a boom is due to debt increasing not productivity gains.

So if GDP grows 5%, but debt as a fraction of GDP grows 3% then real growth is only 2%.

But at some point everyone gets uncomfortable with debt levels. Companies and individuals in particular. Then you get the case of real growth equals 2%, debt reduction is 2+% of GDP and so final growth is 0 or negative.

He expects Australia to start de-leveraging which will then kill growth. But this hasn't happened (unlike some OS countries). What he doesn't anticipate is the federal government intervening to prop up confidence and hand-out cash.
 
I tend to agree there is more downside risk than upside risk for the property market for 2010. Time will tell.
 
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a 5% correction would be a good thing - it'd take the shine off the little FHB bubbles around the place.

it won't happen, but it'd be good if it did.
 
You have to understand Keen's central thesis. His main idea is that a large fraction of the high GDP growth experienced in a boom is due to debt increasing not productivity gains.

So if GDP grows 5%, but debt as a fraction of GDP grows 3% then real growth is only 2%.

But at some point everyone gets uncomfortable with debt levels. Companies and individuals in particular. Then you get the case of real growth equals 2%, debt reduction is 2+% of GDP and so final growth is 0 or negative.

He expects Australia to start de-leveraging which will then kill growth. But this hasn't happened (unlike some OS countries). What he doesn't anticipate is the federal government intervening to prop up confidence and hand-out cash.

You have summed it up perfectly Neophyte.
 
I think the motivating factor for investment will be all the people who've realised that Super may not be a haven in the future - considering what happened this time, if another happens then Super will be quite wobbly indeed.

What are you referring to here? The fact that the stock market and listed property market crashed? The change to contribution caps?
 
Keens gone from predicting of 40% drop in property prices to now predicting a 5% drop :rolleyes:.

Well 5% drops happen periodically in the property market so he may well get it right this time.

We all know property doesn't go up 15% every year :p:D.
 
i am sure he will be right ... there will be somewhere in australia that drops by 5% - might be out the back of woopwoop, or in some other strange locale, but he will then point out that he was correct.

somewhere else may go up by 20% but that will be conviniently ignored.
 
Hoffy I'm referring to the quoted 50 percent drop in the value of superannuation over the last two years. That's what I mean about an unsure future if you depend on returns that are totally out of your control, in an increasingly complicated global circumstance.
 
Hoffy I'm referring to the quoted 50 percent drop in the value of superannuation over the last two years. That's what I mean about an unsure future if you depend on returns that are totally out of your control, in an increasingly complicated global circumstance.

50% was the drop in the stock market. 80% was the drop in listed property. Since very few invest 100% in equities or LP, very very few suffered anywhere near a 50% drop in their super over 2 years. In fact a lot of the losses were rapidly recovered over the course of this year.

Remember super is just a tax entity where you have very broad investment choice. Increasingly people are investing in direct property within super.

One thing we can be sure of is that there will be more years like those of the recent past. There always have been. And there will always be a place for investing in productive companies within a balance investment portfolio.
 
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