House Prices Slump

[DreamzUnlimited]

Hi all :

Just came out in The Age :

http://www.theage.com.au/national/murky-statistics-cloud-slump-in-house-prices-20081103-5h0c.html

Any comment on this.

Thanks
LIW

 

[wylie]

It is just part of the cycle. House prices fall, house prices rise.

For us, unless we HAD to be selling right now, it makes no difference to our long term plans.

 

[buzzlightyear]

The recent pattern has been for the headline-grabbing preliminary reports to show weak house prices and later less-publicised revisions to show improvements. The bureau says this is because it gets its preliminary information from the banks, which collect house price data when they approve loans.

It later replaces this with more comprehensive data collected by land titles offices.

Recently the make-up of the banks' loans has changed. The banks have acquired customers who would have once borrowed from non-bank lenders, many of them for lower-value houses. It is making preliminary estimates less reliable and usually more negative than they should be

Statistics, lies and damned lies.

I'd rather look at comps for similar properties and make an assessment what has happened to my portfolio accordingly.

I purchase individual properties not a national or state index of properties.

 

[Aimjoy]

Any comment on this.LIW

Perth was expected to drop 5% pa for a few years (following the ridiculous situation where its median price exceeded that of Sydney at one stage). BUT it only dropped 4.1% - soft landing.....

Sydney fell 0.4% all year - geeze we'd all better sell now
My $1.5M portfolio just fell $6,000 - yes you read right SIX THOUSAND DOLLARS out of ONE POINT FIVE MILLION - eeeeeek! the sky is falling sell, sell, sell now at any cost.

Oh wait, interest rates are falling on my borrowings, rents are going up raising my income, immigration is still high, we are not building enough housing by 45,000 homes pa. and the Feds are handing out free money to FHB'ers. I wonder what might happen now?................mmmm

All the other cities bar Canbra at 0% actually went up all year. (I have zero interest in quarterly figures as Buzz says - statistics need careful handling).

Well that's my 2c

 

[sash]

I don't think the low end is going to fall....it is going to be propped up the FHOG.

I do think that some high end stuff can come off 40%...particularly the stuff which did ridiculous gains....like 400-500% gains in 6 years. Investors who got in late watchout!

cheers
Sash

Sydney fell 0.4% all year - geeze we'd all better sell now
My $1.5M portfolio just fell $6,000 - yes you read right SIX THOUSAND DOLLARS out of ONE POINT FIVE MILLION - eeeeeek! the sky is falling sell, sell, sell now at any cost.

Oh wait, interest rates are falling on my borrowings, rents are going up raising my income, immigration is still high, we are not building enough housing by 45,000 homes pa. and the Feds are handing out free money to FHB'ers. I wonder what might happen now?................mmmm

 

[Witzl]

Sydney fell 0.4% all year - geeze we'd all better sell now
My $1.5M portfolio just fell $6,000 - yes you read right SIX THOUSAND DOLLARS out of ONE POINT FIVE MILLION - eeeeeek! the sky is falling sell, sell, sell now at any cost.

OMG GTFO now!!!!!!!1111eleven

 

[Aimjoy]

OMG GTFO now!!!!!!!1111eleven

We are all really sarcastic b@st@rds aren't we? But probably deservedly so with this media noise served up to the heard on a daily basis.

 

[Aimjoy]

I don't think the low end is going to fall....it is going to be propped up the FHOG.

I think that is a distinct possibility Sash.

I do think that some high end stuff can come off 40%...particularly the stuff which did ridiculous gains....like 400-500% gains in 6 years. Investors who got in late watchout!

Yep, agree and that is the danger of buying high end stuff for IPs. In the case of PPOR's and OO not needing to sell - then no problems.

Probably the reason why all the property gurus have been harping on about only buying IP's AT or BELOW the median price for the suburb.......and I'm grateful to Peter Spann for that piece of teaching that now has me in good stead.

 

[Peter 14.7]

http://www.smh.com.au/news/national...--so-will-rates/2008/11/03/1225560738014.html

Sydney Morning Herald running the same storey but with less D&G.

The line I noted was Average rents fell 1 per cent, taking the annual pace of rental increases back to 12 per cent, from a July peak of 15 per cent.

And this,

Some economists are tipping that large interest rate cuts, along with tumbling share prices, will spark another housing boom such as the one that followed the 1987 sharemarket crash.

And this:

Meanwhile, in a sign that inflation may have peaked, a survey by TD Securities and the Melbourne Institute found consumer prices fell 0.2 per cent last month - the first drop since February 2006. This was due to lower prices for produce, holidays and household services.
which I subscribe to:

Perfect storm for another boom. Yes, I say boom. We are yet to see job losses big time from where I sit. Everone is talking about cutting back but not many actually doing.

Peter

 

[Ausprop]

Perth was expected to drop 5% pa for a few years (following the ridiculous situation where its median price exceeded that of Sydney at one stage). BUT it only dropped 4.1% - soft landing.....

Sydney fell 0.4% all year - geeze we'd all better sell now

why ridiculous... NSW is in recession, WA is still flying. Given the clean out of the NSW economy I would say stormy waters lay ahead there. May do for WA too if commodities collapse, but in that case the whole country will suffer.

incidentally why are high medians worn as a badge of honour? take Karratha - median about twice that of Sydney. does nothing than prove the place is a bigger basket case than the other

 

[Aimjoy]

why ridiculous... NSW is in recession,

Only ridiculous from the point of view that SYD has always (to that date) had a higher median than PER. Don't get me wrong PER is a great city - I travel there for work frequently BUT it isn't SYD.

Yes, commodity booms come and commodity booms go but SYD has always (to date) been the engine room of RE pricing in this country. (long term)

 

[evand]

Stats out yesterday showing a 5.9% drop in jobs advertised in October! That is massive and apparently the largest one month fall since the 70s.

The impact of results like that will take a while to be felt in the wider economy.

This is only the beginning of the decline in property prices.

 

[MichaelW]

Or maybe they aren't slumping at all?...

http://www.theage.com.au/national/murky-statistics-cloud-slump-in-house-prices-20081103-5h0c.html

Whether they are, or they aren't doesn't really matter. As long as it influences potential buyers and forces them to sit on their hands a bit longer then it will also force the RBA to move on rates. I'd actually love to see a 20% drop as the RBA would freak and cut rates significantly. Prices would rebound soon enough, but the sharp drop and massively lower rates would make for fantastic opportunities for property investors.

Please let the D&G prevail for a bit longer! I want rates at the banks sub-6% before this easing cycle is done.

Cheers,
Michael

 

[urchin]

Or maybe they aren't slumping at all?...

I'd actually love to see a 20% drop as the RBA would freak and cut rates significantly.

heh heh, something we can agree on at last ))

but yes, i do think that the next few years will represent a really good buying opportunity for people with the cash to do it. if we have a major crash then there will be overselling and blood in the streets. just as all reason goes out the window in a bubble, it goes out the window in a crash too. for an informed investor with ready cash, it is a fantastic opportunity--like buffett on the stock market.

however my goals are much more modest. just a decent home at a reasonable price. 20% down would make that happen.

 

[Peter 14.7]

I don't think the low end is going to fall....it is going to be propped up the FHOG.


cheers
Sash

Agree. Unless prices to develope land, build, employ trades drop and drop a lot, the base cost of a new home can not drop, regardless of demand.

Peter

 

[Peter 14.7]

Hello All

To those in WA seemingly upset that Perth is reported to have dropped 4% and Sydney only 1% I think you are missing the fact that Sydney has effectively been flat since mid 2003.

That is no growth up for 5 years. It has gone up a bit here and down a bit there but for the sake of measuring a city, it has flatlined.

So where Perth has probably gone up 50% and now down 4%, it is still 46% above Sydney in relative % terms since 2003.

Hope that cheers you up.

And that is why Sydney is ripe for growth.

Demand is outstripping supply and despite the claims NSW/Sydney is basket case, which it is, it still has very high incomes and restricted housing. People have to live somewhere.

Peter

 

[BayView]

Probably the reason why all the property gurus have been harping on about only buying IP's AT or BELOW the median price for the suburb.......and I'm grateful to Peter Spann for that piece of teaching that now has me in good stead.

This is also the mantra of Jan and also Marg Lomas, and we have followed their advice so far - mostly cheapies.

We bought one mid-range townhouse in a decent postcode early on, but have since sold it due to crap yields, and more difficulty getting tenants. Not only that; the quality of the tenants didn't always match the rent level.

It makes perfect sense if you think about it; the majority of humanity are middle-class or poor.

This means that the biggest pool of renters and buyers are in the below-median price bracket.

Higher demand means more stability of prices and rents over the longer term.

This is certainly our experience so far.

 

[lizzie]

damn bayview - you fixed the horrendous spelling in your post before i could quote and ask how many champanges you've had on cup day ...

 

[MarkandTina]

I thought the mantra was buy a 3/10 property in a 8/10 suburb, renovate it (spending equivalent of 1/10) to be a 6/10, get renters to pay 6/10 prices and repeat using the equity from the 3/10 -> 6/10 to finance the next one.

 

[WinstonWolfe]

imho, a better leading indicator of future house prices is job advertisements.