House prices
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dont know if its quite as clear cut as your saying tbh
1) Stock markets are up 50%
sounds dubious
3) Job markets strengthening
are they? under-employment is increasing
4) Domestic economic growth improving
nfi
5) China again buying our 'dirt' in significant quantities
not sure if its any indication but bluescopesteel has been struggling for quite a while, demand is no where near what it use to be
6) Globally markets are on their way up (across developed & developing countries)
early days i would of thought
1) Stock markets are up 50%
sounds dubious
3) Job markets strengthening
are they? under-employment is increasing
4) Domestic economic growth improving
nfi
5) China again buying our 'dirt' in significant quantities
not sure if its any indication but bluescopesteel has been struggling for quite a while, demand is no where near what it use to be
6) Globally markets are on their way up (across developed & developing countries)
early days i would of thought
http://www.smh.com.au/business/markets/analysts-predict-stocks-will-rise-29-in-09-20091002-gfd2.html
pays to be informed Sid... I recommend that you read newspapers once a month
Re your other points, not even worth referencing to put the point across - Obvious as day..
Harris
Yeah you're right, but my rationale is that the economy isn't doing as well as people think it is. Business is still down, unemployment is still a bit higher than normal and these are the sorts of metrics that will dictate upper market property prices.
IR rising from emergency levels isn't a sign that everything is okay yet, and there are still many challenges faced by the bigger players.
I'm just speculating of course, but my feeling is that until the economy improves a lot more and gets close to where it was 24 months ago, top-end housing will still offer good value for money (if you got some spare cash).
E.g. places like this would of sold for a lot more than $810k in late 07 - early 08.
Prices seem to be rising everywhere else, so why not there?
I'm not really sure that it really matters that much to me whether prices go up or down in the short term.
I don’t own any IP's yet, but to me the risk of the house prices going down is far outweighed by the risk of house prices going up again before I've had a chance to purchase… I think If I'm sensible in what I buy and how much I borrow, then I can sit out any short term dip in prices, if that happens… but at least I can take advantage of rising prices, if that happens also.
I don’t own any IP's yet, but to me the risk of the house prices going down is far outweighed by the risk of house prices going up again before I've had a chance to purchase… I think If I'm sensible in what I buy and how much I borrow, then I can sit out any short term dip in prices, if that happens… but at least I can take advantage of rising prices, if that happens also.
Living in top end myself, I can attest to the fact that top end got hit the most like they do in any other recession. During booms, top end far exceeds their fundamental value or should we say, as we do in corporate, their discounted cash flow valuation + the imbedded option value. So naturally the harder you run, the harder you'll hit the wall.
What I'm most intrigued about is what will happen in the low end. As unemployment continues to creep up (this has not stopped), interest rate rises will have a greater impact on Joe Blow who can't really find another job if he does lose one or has his hours cut. And the Government has currently protected these people against defaults for 12 months right?
I don't really want to speculate on something like the ASX or resources industry, but having dealt with both these industries initimately on a commercial and corporate level and in fact continuing to do so (be it local or Chinese), it's not as simple as some are making it out to be.
What I'm most intrigued about is what will happen in the low end. As unemployment continues to creep up (this has not stopped), interest rate rises will have a greater impact on Joe Blow who can't really find another job if he does lose one or has his hours cut. And the Government has currently protected these people against defaults for 12 months right?
I don't really want to speculate on something like the ASX or resources industry, but having dealt with both these industries initimately on a commercial and corporate level and in fact continuing to do so (be it local or Chinese), it's not as simple as some are making it out to be.
Interest Rates
Interesting article here which may help with planning for rate rises considering the lead up figures for Treasury Bonds.
http://gainesville.elliottwave.com/t/81163/3525824/6738/0/
And if you support the proposition that this increase is reactive rather than proactive:
http://news.smh.com.au/breaking-news-business/rba-has-acted-too-hastily-says-acci-20091006-gl2y.html
Interesting article here which may help with planning for rate rises considering the lead up figures for Treasury Bonds.
http://gainesville.elliottwave.com/t/81163/3525824/6738/0/
And if you support the proposition that this increase is reactive rather than proactive:
http://news.smh.com.au/breaking-news-business/rba-has-acted-too-hastily-says-acci-20091006-gl2y.html
Prices will go up, no doubt about it. In 2001, interest rates started to rise and I watched house prices almost double within a few years. I remember back then I was thinking that interest rate rises would scare people off. Yeah, right! Not a chance. The only person that got burnt was me. If I had purchased back then, I would have been much better off now. Ah well, live and learn.
Back to the question. It's cheaper to buy than rent currently, so house prices will rise and so will interest rates. Once it's cheaper to rent, people will stop buying and start to rent again. This will take a few years and then we will see rents rising. Inflation will go up, interest rates will fall, panic will set in, house prices will stagnate and so the housing cycle will begin once again.
Back to the question. It's cheaper to buy than rent currently, so house prices will rise and so will interest rates. Once it's cheaper to rent, people will stop buying and start to rent again. This will take a few years and then we will see rents rising. Inflation will go up, interest rates will fall, panic will set in, house prices will stagnate and so the housing cycle will begin once again.
Couple of points:
1: 2001 was a totally different property market. Yields were higher then now everywhere and there had been little or no growth in most places fro most of the 90s. talk about pent up demand. That boom - which started about 2000 lasted till October 2003.
2: Its only cheaper to rent than to buy in the dodgiest suburbs in major cities. The Sydney Morning Herald had a list a while back and i wouldn't live or invest in any of them.
3: Also, 50 yr. record low rates have created that temporary scenario. They are on the rise, so i hope your not basing your investing practices on those beliefs Bludger.
1: 2001 was a totally different property market. Yields were higher then now everywhere and there had been little or no growth in most places fro most of the 90s. talk about pent up demand. That boom - which started about 2000 lasted till October 2003.
2: Its only cheaper to rent than to buy in the dodgiest suburbs in major cities. The Sydney Morning Herald had a list a while back and i wouldn't live or invest in any of them.
3: Also, 50 yr. record low rates have created that temporary scenario. They are on the rise, so i hope your not basing your investing practices on those beliefs Bludger.
Lucky for me I did purchase back.
I am with Nathan, Propertunity, The Bludger and anyone in between who think prices will rise.
Just my gut feel.... de ja vous (or however it is spelt)
Sunshine
Hmmmm......I must have hit a nerve...no an artery...
Just kidding...
As I said....the media is a very powerful tool....even if rates only went up another 2%. The psychological impact on people is huge...they will clam up an not pay the prices they were paying before.
The other thing is that whilst not everyone bought this cyle ....the ones who did probably did stretch their budgets. Always happens in every cycle without fail.
To put it in perspective, in this cycle the rates going from about 5% to potentially 7.25% represents a 50% increase in repayments. So a young couple who bought a 330K house based on a 10% deposit would be paying about $16,500 in mortgage repayments a year now....when rates top off at say 7.25%...they would be paying $23,500. This represents a 42% increase in repayments.
Last cycle the rates went from 7% to 9%....and that repayment increase as a % was only 28% increase!
I am not saying that everyone will be affected but some will...
Another thing is that the time to repossess homes is now shorter....unless you have an equity position of say 20%...the banks are unlikely to extend a grace period to you!
So when do I get to go on Today Tonight...again?
I have been investing in property for over 10 years...what about you??
Just kidding...
As I said....the media is a very powerful tool....even if rates only went up another 2%. The psychological impact on people is huge...they will clam up an not pay the prices they were paying before.
The other thing is that whilst not everyone bought this cyle ....the ones who did probably did stretch their budgets. Always happens in every cycle without fail.
To put it in perspective, in this cycle the rates going from about 5% to potentially 7.25% represents a 50% increase in repayments. So a young couple who bought a 330K house based on a 10% deposit would be paying about $16,500 in mortgage repayments a year now....when rates top off at say 7.25%...they would be paying $23,500. This represents a 42% increase in repayments.
Last cycle the rates went from 7% to 9%....and that repayment increase as a % was only 28% increase!
I am not saying that everyone will be affected but some will...
Another thing is that the time to repossess homes is now shorter....unless you have an equity position of say 20%...the banks are unlikely to extend a grace period to you!
So when do I get to go on Today Tonight...again?
I have been investing in property for over 10 years...what about you??
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
wow you have been investing for a whole ten years, through the strongest period of growth we have ever seen, a period where every single joe blow has made money out of property-must make you a professunal or sumfink?
So how was the blood in the street when interest rates went from 6% when you started investing back in 1999, to 9.5% in 2008?
Coulda swore we saw a massive increase in house prices?Look of course there will be a point where interest rates are going to wipe some people out, but talking blood inthe street because of a quater of a % is silly..
Also its going to take a while to get back above 8%-you need to remember our economy was barreling full steam ahead at that point. What you think with everythign on a knifes edge they will just put it back there?
Needs to be a reason, and that reason will be inflation and a strong economy, both of which will have a positve effect on housing anyway..
So how was the blood in the street when interest rates went from 6% when you started investing back in 1999, to 9.5% in 2008?
Not in Sydney, where Sash is posting from.
Sorry, misread what you wrote. I thought you were referring to Oct 2003 to present.
http://www.smh.com.au/business/markets/analysts-predict-stocks-will-rise-29-in-09-20091002-gfd2.html
pays to be informed Sid... I recommend that you read newspapers once a month
Re your other points, not even worth referencing to put the point across - Obvious as day..
Harris
just suggesting that you could wrong about a few of the sweeping statements you've made, ABS disagree with your view re employment
also i try and not get carried away by the media, but i must admit, good for idle chit chat
Fixed or variable
Was listening to Mark Bouris (Wizard) this morning on radio. He suggested sticking to variable for the time being or second option was to fix 50% of your loan. For me I'm staying put with variable..my DD was based on IR of 6.5%
Was listening to Mark Bouris (Wizard) this morning on radio. He suggested sticking to variable for the time being or second option was to fix 50% of your loan. For me I'm staying put with variable..my DD was based on IR of 6.5%
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
Low interest rates mean a whole heap of people that couldn't borrow at higher rates could suddenly afford to buy. Add to this the extra stimulus of the boosted FHB grant and you suddenly have a lot more money available to a lot more people to go and buy a house. Throw them all out into the market at the same time and of course it is going to have the effect of increasing prices as there is increased competition. Every tom dick and harry that has thought about buying lately will now have now done so. It is a given that some of these people will have over extended themselves and will experience hardship as rates rise. Some of these people should simply have not have purchased property.
When rates go up and the FHB stimulus goes away the pool of buyers shrinks as as people find they can no longer afford to buy a property. Those buyers left in the market cannot afford what they previously could because their servicability goes down. Prices will fall.
How far? I have to say I agree with Nathan. They will retract at some point and probably stay stagnant for 12 months or so after that. But that wouldn't stop me buying now, that pullback could come in 6, 9 months 12 months or 18 months......I still think there will be an increase between now and then and when it pulls back it will just be returning to where it was a short time before.
Bludger, tot all cycles are the same.
In your version of The Cycle I don't see anything resembling the property crash in the early 90s. Sure things might be different now and I'm not necesarilly advocating that there will be a crash, nor do I hope so, having substantial myself.
The point though is there's no reason to assume this cycle will be the same as 2001 and I think a poster subsequent to you has pointed that out.
On another note, for all the people who think the ASX is rallying mad and we're all going to get rich on the back of it, here's a good read.
http://www.theage.com.au/business/bull-market-now-theres-a-load-of-bull--20091006-glf4.html
I'm naturally a cautious person and that's probably a good minset to have when you're on a forum with investors (aka people who have a peculiar interest and want to look at things on the bright side).
Just my thoughts as someone who likes to take non-orthodox views.
In your version of The Cycle I don't see anything resembling the property crash in the early 90s. Sure things might be different now and I'm not necesarilly advocating that there will be a crash, nor do I hope so, having substantial myself.
The point though is there's no reason to assume this cycle will be the same as 2001 and I think a poster subsequent to you has pointed that out.
On another note, for all the people who think the ASX is rallying mad and we're all going to get rich on the back of it, here's a good read.
http://www.theage.com.au/business/bull-market-now-theres-a-load-of-bull--20091006-glf4.html
I'm naturally a cautious person and that's probably a good minset to have when you're on a forum with investors (aka people who have a peculiar interest and want to look at things on the bright side).
Just my thoughts as someone who likes to take non-orthodox views.
All I can say is that I feel like a kid coming up to christmas time.......
I have 129, 193 and 203 sleeps to go before I get out of my locked in rates of 8.89%..........Yippee
Bring it on,
Will be variable for me in future.
F
Post note.....Oops..we are supposed to be talking about house prices aren't we!! I got carried away reading about all the thoughts on IR's.
I have 129, 193 and 203 sleeps to go before I get out of my locked in rates of 8.89%..........Yippee
Bring it on,
Will be variable for me in future.
F
Post note.....Oops..we are supposed to be talking about house prices aren't we!! I got carried away reading about all the thoughts on IR's.
