House prices
- Thread starter rafters
- Start date
which house prices
i see the steady eddie approach, there is still a shortage, and the interest rates are still very low, but if folks panic " media related" they will sell !
more homes on the market allows people to negotiate a lower price, as the prices adjust to the buyers market perhaps they will drop slightly, but i don't expect any thing to happen untill the rates get back to 6&7% ish, ?
just my thought on it.
more homes on the market allows people to negotiate a lower price, as the prices adjust to the buyers market perhaps they will drop slightly, but i don't expect any thing to happen untill the rates get back to 6&7% ish, ?
just my thought on it.
A lot of people will panic when they see another rise in Dec. 2009.
The average punter out there is pretty unsophisticated...and will not analyze the underlying fundamentals.
Given previous experience housing price growth will slow next year...till about 2011 when rates slowly head down. late 2011 - early 2012....should be good for growth if the rates come off again.
In the meantime....I sniff blood in the water shortly....
The average punter out there is pretty unsophisticated...and will not analyze the underlying fundamentals.
Given previous experience housing price growth will slow next year...till about 2011 when rates slowly head down. late 2011 - early 2012....should be good for growth if the rates come off again.
In the meantime....I sniff blood in the water shortly....
i see the steady eddie approach, there is still a shortage, and the interest rates are still very low, but if folks panic " media related" they will sell !
more homes on the market allows people to negotiate a lower price, as the prices adjust to the buyers market perhaps they will drop slightly, but i don't expect any thing to happen untill the rates get back to 6&7% ish, ?
just my thought on it.
My best guess = rise steadily
China's demand for Aust raw materials will apparently not stop and increases , migration in any event will not stop and apparently gathers momentum (more skilled workers for the recent increase mine / gas constuctions announced and unskilled to support them in domestic / food services). As these gather pace Aust workers will be back full time on the company payrolls or even into overtime, thus have the abilty to pay for a house. The extra money gives confidence to buy and demand increases, whilst (possibly) developers can't or don't move because of tight money = shortage of housing supply and higher price pressure. (only a side fence chat opinion, not Economics 101)
Rem
In the meantime....I sniff blood in the water shortly....
True Sash. And like all serious investors, we eat what we kill.
The masses just sit on the sidelines and wait to be fed crumbs.
I will go upstream and say something differnt.
I reckon prices will rise in short term, say in sydney dollars $50k more rise.
Then when market *****s itself whenever this may be, retract by this next 50k it goes up by.
Reason for this, being the market has too many buyers and not enough listings in market. I dont like this but its what it is.
There are so many buyers sitting on sidelines for FHB's to retract and there jumping in, also if you were vendor scared of FHB leaving you would have listed already and there still not enough properties.
Agents are buying their listings atm, and there getting the prices aswell.
If you say it cant happen, look at the facts from 2001.
- 19 mill population now 22 mill
- Not enough new property in NSW now (in 2001 there was too much housing and market boomed from this on)
- rates higher then today
- FHOG was $12k before being reduced to $7k
- Unemployment was at around 8% (higher then today)
- Yeilds were lower then today.
here are so many positives being overlooked. I not saying market will boom, but saying i still see rises.
Sydney for example has been through massive lows since 2003, and now time has not been better to buy even past last boom, so why would it fall?
I expect to see good short/medium growth.
Just my opinion however.
I reckon prices will rise in short term, say in sydney dollars $50k more rise.
Then when market *****s itself whenever this may be, retract by this next 50k it goes up by.
Reason for this, being the market has too many buyers and not enough listings in market. I dont like this but its what it is.
There are so many buyers sitting on sidelines for FHB's to retract and there jumping in, also if you were vendor scared of FHB leaving you would have listed already and there still not enough properties.
Agents are buying their listings atm, and there getting the prices aswell.
If you say it cant happen, look at the facts from 2001.
- 19 mill population now 22 mill
- Not enough new property in NSW now (in 2001 there was too much housing and market boomed from this on)
- rates higher then today
- FHOG was $12k before being reduced to $7k
- Unemployment was at around 8% (higher then today)
- Yeilds were lower then today.
here are so many positives being overlooked. I not saying market will boom, but saying i still see rises.
Sydney for example has been through massive lows since 2003, and now time has not been better to buy even past last boom, so why would it fall?
I expect to see good short/medium growth.
Just my opinion however.
All things being equal, the current cycle of interest rate tightening will have a very large impact on house prices in some sub-markets.
For some above (like Nathan) who are buying low end stuff that covers itself with rent payments, no real impact.
For more expensive stuff, this cant be good - we'll realistically see 50% increase in repayments for people over the next two years. Thats a lot of potential CG eaten up (or a lot of the recent CG has been due to the cuts).
Im amazed at how expensive some stock (e.g. melb inner) has become, and yet how "affordable" theoretical repayment on such high prices are at 5% variable rates. Not a good combination!!
For some above (like Nathan) who are buying low end stuff that covers itself with rent payments, no real impact.
For more expensive stuff, this cant be good - we'll realistically see 50% increase in repayments for people over the next two years. Thats a lot of potential CG eaten up (or a lot of the recent CG has been due to the cuts).
Im amazed at how expensive some stock (e.g. melb inner) has become, and yet how "affordable" theoretical repayment on such high prices are at 5% variable rates. Not a good combination!!
A lot of people will panic when they see another rise in Dec. 2009.
The average punter out there is pretty unsophisticated...and will not analyze the underlying fundamentals.
Given previous experience housing price growth will slow next year...till about 2011 when rates slowly head down. late 2011 - early 2012....should be good for growth if the rates come off again.
In the meantime....I sniff blood in the water shortly....
gives us great opportunities
In the meantime....I sniff blood in the water shortly....
Wow.....interest rates are still well under what they were less than 12 months ago and people are talking of 'blood in the water'.....interesting
Explain to me why you think even another 1% increase would get people bleeding? Interest rates were around 9.5% only 12 months ago, yet a .25% increase from current 5% rates prompts talk of histeria and forced selling? Hmmmm maybe Im missing something here...? You guys need to apply to Today Tonight
great thread, very imformative !
i have a question for those paying a mortage..
with the rate rise yesterday, what is the better; fixed or variable loans?
I just purchased first house and have opted to go variable, so i could pay it off as much as possible..
would anyone go different and why?
or would you also go variable, ands why?
i have a question for those paying a mortage..
with the rate rise yesterday, what is the better; fixed or variable loans?
I just purchased first house and have opted to go variable, so i could pay it off as much as possible..
would anyone go different and why?
or would you also go variable, ands why?
I think they will continue on their present path - which is continue to rise.
IR rises do 'spook' the market. This lasts all of about 2 weeks before people realise that the sky did not cave in after all. Then they get back to business as usual.
When banks assess a borrower's capacity to service a loan, they do so with a rate of 2% higher than the current variable rate (the "assessment rate"). Therefore, FHBs and others who have taken out loans when home loan IR was 5% should be able to tolerate IRs of 7%. That is years away into the future at the moment, (that is, getting to 7%).
For those of us that already had loans past 2 years ago - we were already paying 7, 8 & 9% back then. If our loans are still the same value now, we know we can already handle an increase of 2 - 3 % as we've been there, done that.
The underlying fundamentals have not changed. Immigration is still high. We still are not building enough houses. Rents will increase. Demand is still exceeding supply. etc etc
If you want to look for an excuse as to why not to buy now or to hold off buying now, you can always find one. Here's a couple I've heard:
1. Wait until the FHOB expires - less competition from FHBs. Yes, but more competition from other investors
2. Wait till interest rates drop further. Well they just went up by 0.25% yesterday
3. Wait for prices to fall 40%. Well they went up by around 10% in the last 9 months
4. Wait to see if I still have a job. Well unemployment did not get anywhere near what was predicted. etc etc
At the risk of being labelled a 'property bull', 2 years ago we were all paying a minimum 2% more in IRs than we are paying today....and it looked like we were heading towards 10% IRs by 2011. Some people started locking in fixed rates of 8.5% & 9% because, amongst other things, they could afford it. Nothing has really changed as far as I can see.
So what have we all been doing with the extra cash we've had? Some will have saved, some will have paid down debt - both good and bad, some will have purchased consumer goods like TVs & cars etc. These last things are the items that will suffer with an IR increase IMO. If people have less disposable income then the discretionary spending gets hit - not housing. Australians (and their politicians) love housing. We'll do anything to 'save the house', take a second job, whatever.
When some households were in mortgage stress they took the decision to sell. Most of these 'mortgage stress' sales have happened now. I think if you wait to
, you'll be waiting a very long time
Meanwhile, there are risk minimisation strategies that can be engaged in. My personal favourite is buying in metro & large regional areas - but properties with 7-8% yield.
Wow.....interest rates are still well under what they were less than 12 months ago and people are talking of 'blood in the water'.....interesting
Explain to me why you think even another 1% increase would get people bleeding? Interest rates were around 9.5% only 12 months ago, yet a .25% increase from current 5% rates prompts talk of histeria and forced selling? Hmmmm maybe Im missing something here...? You guys need to apply to Today Tonight
I've seen prices rise quite decently in certain parts of the inner west over the last 8-9 months. So, my guess would be that those who over-committed themselves to get into the market at higher prices will be those who may be forced to sell in the next 6 months when IRs hit around 3.75 - 4.00%.
The other factor would be purely psychological, people will see raising interest rates and reduce the most they're willing to pay. In turn, prices should come down by a very small amount as there would be a slight decrease in demand and certain price points.
I'm sure there is a graph somewhere that shows a correlation between IRs and average house prices.
Having said that, I still think the best value will be at the upper end of the market, higher IRs should cause prices to fall further as there will be even less demand than there has been in the last 12 months.
/2 cents
Agree with this commentary from Propertunity.
No 'sniffing' blood whilst the interest rates are almost 400 basis points below what they were just 18 months ago..!
Remember also that inner Melbourne experienced historical high increase in values during 2007 when the rates were 300 basis points higher from today... (including the latest rate rise).
I dont believe that we will either see a softening or blood in the water for a good 12-18 months or even longer.
Unanimous commentary from economists and RBA suggests that the rates in 12 months will be sitting around 6% against cash rate of 4.5%, so effectively even at the peak of the interest rates cycle, rates will be far below where they are meant to cause severe buyer distress and affordability blues.
The housing markets have started recovering lately and the cycle takes time to emerge, form and consolidate (12-18 months or longer) rather than just up and down based on the slightest movement of interest rates.
Also remember that it took close to 6 - 8 interest rate rises in the past cycle before they started affecting prop values with the prices consolidating or softening.
Talk of picking up bargains soon is pre-mature. It wont happen - not with the population growth rate, strong economic indicators and the recovering job market.
Harris
No 'sniffing' blood whilst the interest rates are almost 400 basis points below what they were just 18 months ago..!
Remember also that inner Melbourne experienced historical high increase in values during 2007 when the rates were 300 basis points higher from today... (including the latest rate rise).
I dont believe that we will either see a softening or blood in the water for a good 12-18 months or even longer.
Unanimous commentary from economists and RBA suggests that the rates in 12 months will be sitting around 6% against cash rate of 4.5%, so effectively even at the peak of the interest rates cycle, rates will be far below where they are meant to cause severe buyer distress and affordability blues.
The housing markets have started recovering lately and the cycle takes time to emerge, form and consolidate (12-18 months or longer) rather than just up and down based on the slightest movement of interest rates.
Also remember that it took close to 6 - 8 interest rate rises in the past cycle before they started affecting prop values with the prices consolidating or softening.
Talk of picking up bargains soon is pre-mature. It wont happen - not with the population growth rate, strong economic indicators and the recovering job market.
Harris
I think they will continue on their present path - which is continue to rise.
IR rises do 'spook' the market. This lasts all of about 2 weeks before people realise that the sky did not cave in after all. Then they get back to business as usual.
When banks assess a borrower's capacity to service a loan, they do so with a rate of 2% higher than the current variable rate (the "assessment rate"). Therefore, FHBs and others who have taken out loans when home loan IR was 5% should be able to tolerate IRs of 7%. That is years away into the future at the moment, (that is, getting to 7%).
For those of us that already had loans past 2 years ago - we were already paying 7, 8 & 9% back then. If our loans are still the same value now, we know we can already handle an increase of 2 - 3 % as we've been there, done that.
The underlying fundamentals have not changed. Immigration is still high. We still are not building enough houses. Rents will increase. Demand is still exceeding supply. etc etc
If you want to look for an excuse as to why not to buy now or to hold off buying now, you can always find one. Here's a couple I've heard:
1. Wait until the FHOB expires - less competition from FHBs. Yes, but more competition from other investors
2. Wait till interest rates drop further. Well they just went up by 0.25% yesterday
3. Wait for prices to fall 40%. Well they went up by around 10% in the last 9 months
4. Wait to see if I still have a job. Well unemployment did not get anywhere near what was predicted. etc etc
At the risk of being labelled a 'property bull', 2 years ago we were all paying a minimum 2% more in IRs than we are paying today....and it looked like we were heading towards 10% IRs by 2011. Some people started locking in fixed rates of 8.5% & 9% because, amongst other things, they could afford it. Nothing has really changed as far as I can see.
So what have we all been doing with the extra cash we've had? Some will have saved, some will have paid down debt - both good and bad, some will have purchased consumer goods like TVs & cars etc. These last things are the items that will suffer with an IR increase IMO. If people have less disposable income then the discretionary spending gets hit - not housing. Australians (and their politicians) love housing. We'll do anything to 'save the house', take a second job, whatever.
When some households were in mortgage stress they took the decision to sell. Most of these 'mortgage stress' sales have happened now. I think if you wait to , you'll be waiting a very long time
Meanwhile, there are risk minimisation strategies that can be engaged in. My personal favourite is buying in metro & large regional areas - but properties with 7-8% yield.
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Well there you go-will interest rates that are still nearly half what they were 12 months ago equal softening of house prices, let alone 'blood inthe streets'...I think not. Unemplyment will be the factor, interest rates still need to go up a fair bit to cause forced selling IMHO...
I think people are over reacting...
We have very short memories....
It wont affect the top end. The top end got marginally hit when :
1) The biggest global financial crisis hit the world 07/08
2) ASX fell almost 50%
3) Interest rates were 350 basis points higher than today
4) There was doom and gloom written in every nook and cranny
5) The domestic growth slowed dramatically, China stopped buying dirt and started stockpiling it, jobs market experienced massive downturn and basically anything that could go wrong did go wrong.
With all of the above, the top end in most metropolitan cities overall had a 10% on-average softening (which has already been recovered mostly).
When all the above didnt result to a big dent in the residential property values (let alone top end which could be most resilient) why do we suddenly believe that sky is going to fall at the first movement on an interest rate rise, when:
1) Stock markets are up 50%
2) Interest rates at historical lows (still)
3) Job markets strengthening
4) Domestic economic growth improving
5) China again buying our 'dirt' in significant quantities
6) Globally markets are on their way up (across developed & developing countries)
The top end if anything will keep going up. No questions.
Harris
Joe, are you sure you have the correlation around the right way?
The higher end of the market goes poorly when the economy is not doing so well (low interest rate environment). Interest rates will only head seriously north when the economy is better and when the economy is better then so is the available funds for these high end properties due to bonuses, share prices etc.
Poeple don't seem to realise, interest rates wont just head up by themselves. They will only be going up due to inflation. If inflation rises what will house prices do?
Gools
good point !
where have you seen grown ?
have you purchased in the west, on variable or fixed ?