It's a Great Time to Buy a New Home

[evand]

Who are you? And what have you achieved?

While you're typing, please point out the bitter parts? I'd be interested to see them.

Evand. Congrats mate.. this takes your tally to over 94.65% negative posts out of your total posts and you win the "SS grump of the year" challenge

Really evand.. I am not here much but almost every post of yours I have read over the last few months is really negative.. bitter infact..

Wonder how you are like in real life

 

[keithj]

How do you reconcile that statement? Not being provocative, just asking. i.e. If the Westpac Melbourne Institute returns the highest reading in a decade for 'is it a good time to buy a house' then surely that suggests its more than a tiny fraction of the population who've latched on to the merit of property given its current dynamics?

No worries mate. I would agree entirely that sentiment towards housing must be positive before we can expect any upturn. However, I think that we need more than just housing sentiment to be high, there needs to be a lot of other indicators pointing in the right direction. I don't think many people will actually be looking to make big changes to their lives in the current economic environment.

Although housing sentiment is high, general consumer confidence is still only just above the recent 15 year lows.

And you will undoubtedly recall that 6 months ago we had a thread telling us that sentiment towards housing was showing a marked improvement.

More positive news out this month. The Westpac - Melbourne Institute Survey of Consumer Sentiment shows a marked improvement in sentiment towards buying housing.

and the next quarter showed the biggest drop in house prices ever recorded (?).

 

[Red Car]

I reckon the best time to buy a home was 6 to 8 months ago when everyone was saying its a bad time to buy a home

 

[WinstonWolfe]

Conversely, if unemployment rises then rates drop further and affordability gets even better.
Cheers,
Michael

But then, unemployment has blue sky, and lower rates do not.

Consider bank trend not to pass on cash rate decreases, their raising of fixed rates, tighter LVRs and post codes, all in the face of growing unemployment and underemployment as companies cut back on overtime and a 5 day week.

Then consider the yield curve. Despite its softening in the last few weeks, the 2010 trend is still up.

So factors likely to apply downwards pressure on property in next 24 mths:
- unemployment trend up, with no sign of slowing.
- phasing out of the FHOG effect
- domestic rates have little downwards room to move
- yield curve indicates higher cost of credit.

UNEMPLOYED PERSONS

UNEMPLOYMENT RATE

Households in crisis: mortgage stress hits 1.3 million








IMHO, the economies of USA, Europe, and China in this climate, are leading indicators of Aussie property market.


USA
LEI confirms a slowing downtrend, but it is still significantly downwards.

Germany
"The Conference Board LEI for Germany has been generally falling since July 2007 and the pace of this
decline has continued to accelerate in recent months, with the six-month change in the index dropping
to the lowest level in its 44-year history. Likewise, The Conference Board CEI for Germany is
currently experiencing its steepest contraction ever. Taken together, the persistent and deep declines in
the composite economic indexes suggest that the downturn is unlikely to end soon and that the
contraction in economic activity may remain deep in the near term."


China
The relation of the indicators with gdp in this graph highlight the difficulty forecasting China, further compounded by their commodity stockpiling.

So the only support I see for property in the next 18 mths is China, and I doubt their ability to sustain domestic consumption at a level to cover decreased exports to Europe and USA.

I expect next year's turnaround to be revised outwards many times. Why? Woody Brock in John Mauldin's Outside the Box does a good job of explaining why the Debt to GDP ratio has to be reeled in by appropriate government policy. Unfortunately, through ignorance and lack of will, the electorate and politicians don't understand it and don't want to hear it.

Aussie property prices are tied to western consumers consuming, and prices are where they are due to developed nation credit fueled consumption, and 10 years of cheap credit in Australia. Will the west ever get back to the level of credit fueled consumption we had 2000-2006/7? imho, not in the next 10 years at least.

Is now a good time to buy a property? Not if credit gets tighter and unemployment rises.

 

[MichaelW]

And you will undoubtedly recall that 6 months ago we had a thread telling us that sentiment towards housing was showing a marked improvement.

and the next quarter showed the biggest drop in house prices ever recorded (?).

I guess they were right then.

i.e. price falls at that time really did substantiate the perception that it was a buyers market. A lot more would-be buyers are now of the same mind. Time will tell whether prices soften further, and Winston makes a good case as to why they might (just flicked him a kudos). But I keep coming back to yield and the fact that an awful lot of properties are now approaching cash flow positive levels.

All a very interesting dynamic that is really exciting to watch unfold.

Cheers,
Michael

 

[tigerGT]

Hi MichaelW,

Dont you mean a aweful lot of properties are now no longer cash flow positive as opposed to around 6 months ago. In fact with recent price increases you would think that the amount of cash flow positive houses would decrease proportionally. There are less of them out there then there was 6 months ago I am finding.
.
Or are you reffering to a particular area?


Regards

 

[HiEquity]

Some good info in that lot WW - thanks and kudos!

Is now a good time to buy a property? Not if credit gets tighter and unemployment rises.

In which case that yield curve is not predicting the future very well! Inflation and high IRs would be driven by high growth in the market. That yield curve is predicting a reasonably quick recovery...

Although it looks to be dropping a bit now - in which case IRs should stay lower.

If there is a recovery, prices will go up along with IRs
If there isn't, IRs will stay low, helping your cash flow, particularly if you buy well in the first place.

Obviously a simplistic way to look at it due to the possibility of getting caught in the transition but I like it as a "high level" view...

 

[Token Funder]

Sour grapes? Did they steal some of your market share TF?



I hear some people are even known to frequent gloomer forums in order to reinforce their gloomer bias...

You're welcome.

 

[chilliaa]

With due regards to the fact that the thread is a generalisation 'is it a good time to buy property', people reading this forum must give due consideration to their own circumstances.

If you do not own ANY property, the longer you leave it (with the exception of reasonably narrow points of time reference), the worse off you will be over the long term.

If you have property and the question is do i stack up more? well thats much harder to answer.

Even Token Funder who i have respect for owns his own house. He might be a property investor bear, but he still has skin in the game through his PPOR.

I first joined this forum in 2007, when i first joined i trolled through old posts:
There have always been D&G'ers, but their reason for not buying changes over time:
2006 and pre: high vacencies, and cheap rent: no need to buy
2007: high interest rates, low affordability
2008: GFC: we are going to see the same as london and Calafornia here in Aus
2009: interest rates are low now, but its only deceptive, wait until interest rates start sky rocketing post 2010, unemployment is going to go through the roof: lots of repossessions comming up post 2010.

The point is: YOU DONT KNOW what the future holds and neither does anyone else. If you have skin in the game, you can afford to be patient and wait for the right opportunity for you, but if you have NO property exposure, and you are trying to pick the perfect entry point (and just remember: the more perfect the entry point the less likely you are going to take it, think about this for a moment) you run a serious risk of being left behind.

Personally i am neutral on residential property within a 5 year view point, but then i already own several properties. I can afford to be inactive. Part of the reason i am neutral is i dont have the skill set of some of the more intelligent (street savvy??) property investors on this forum. They might be able to figure out a profitable angle much faster than i can.

 

[Trogdor]

Great post Chilliaa - couldnt agree more!!

 

[boz]

If you do not own ANY property, the longer you leave it (with the exception of reasonably narrow points of time reference), the worse off you will be over the long term.

nonsense! this is one of the major cause of the property bubble

The point is: YOU DONT KNOW what the future holds and neither does anyone else.
agree
If you have skin in the game, you can afford to be patient and wait for the right opportunity for you, but if you have NO property exposure, and you are trying to pick the perfect entry point (and just remember: the more perfect the entry point the less likely you are going to take it, think about this for a moment) you run a serious risk of being left behind.

nonsense!

the bottom line is that in australia there are around 21 mil. habitant and around 9mil homes, both number increasing, occupancy rate at all time low and decreasing, I don't know what the future hold but I am confident there are and will be enough homes for people living in australia

 

[Trogdor]

the bottom line is that in australia there are around 21 mil. habitant and around 9mil homes, both number increasing, occupancy rate at all time low and decreasing, I don't know what the future hold but I am confident there are and will be enough homes for people living in australia

Sorry boz, if you dont own any property, it really does make sense to buy one now.

When wouldnt it make sense?

If I expected a protracted (i.e. multi-year) recession, with deflation.

Which not many people would expect.

Otherwise you will be left behind.

As for a 2nd, 3rd, nth property as opposed to shares, commercial IP, paying down debt, bonds, art, etc.. thats a seperate discussion.

 

[boz]

Sorry boz, if you dont own any property, it really does make sense to buy one now.

When wouldnt it make sense?

I don't own any property in Australia.
It is probably a cultural thing as well as I come from EU, and everyone is different, but to me buy a house would make sense when I am sure I want to live in that particular property for long time and I have enough money to buy it (unless FHB grants get to 50k or the AU$ to 40 euro cent), I don't mind renting and I don't like the flipping property around that is quite common here in Australia.

 

[Piston Broke]

Evand. Congrats mate.. this takes your tally to over 94.65% negative posts out of your total posts and you win the "SS grump of the year" challenge

I would like to contest that!
My grumpy posts are grumpier than his!

 

[Mindmaster]

Maybe I'm looking at this the wrong way (do that way too often) but the housing affordability chart takes into account FHOG.

From the investers point of view (assuming that is for most if not all of us) the FHOG does not apply so using an analysis that includes the benefit of FHOG is not that relevant.

So who is the first to tell me where I stuffed up here?

 

[sparky23]

I would like to contest that!
My grumpy posts are grumpier than his!

He He if you admit to being grumpy perhaps you're not really!

 

[chilliaa]

I don't own any property in Australia.
It is probably a cultural thing as well as I come from EU, and everyone is different, but to me buy a house would make sense when I am sure I want to live in that particular property for long time and I have enough money to buy it (unless FHB grants get to 50k or the AU$ to 40 euro cent), I don't mind renting and I don't like the flipping property around that is quite common here in Australia.

This is exactly why i am a happy little camper with my property investments. Life moves fast, people dont wont to be tied down with a PPOR and a mortgage, especially if they are a younge professional. Careers and international experience are perceived as more important than owning a home.

All this is perfect for me as i facilitate their lifestyle options by targeting investment properties with high rental demand.

I get the cashflow, they get the lifestyle, its a match made in heaven.

The only problem comes when they do decide to settle down, get married, have kids. Suddenly it becomes a daunting process. Because they never owned property, they have to start at the bottom of the ladder, but they are used to the lifestyle option of premium rental accomodation.

 

[human]

Achievement and money.. lets not go there ! You are guaranteed to get embarrassed.

As in bitter, I find majority of your posts most bitter of anyone that I have seen at SS.. been reading majority of the content here for the past 6 months atleast.

Agreed.. that you might sometime post something of value.. I believe for majority of your posts, they are contrarian for the sake of it.

You pretend to be a hot-shot-know-all type and might have made a mill or 2, but still shine as a beacon of negativity !

Who are you? And what have you achieved?

While you're typing, please point out the bitter parts? I'd be interested to see them.

 

[Piston Broke]

He He if you admit to being grumpy perhaps you're not really!

I'm a happy grump!
I'm grateful for every day I live to enjoy and all that life has brought, and
all the more & better that is to come.

 

[BayView]

I'm a happy grump!
I'm grateful for every day I live to enjoy and all that life has brought, and
all the more & better that is to come.

Sounds like all the old pensioner golfers I've been dealing with for the last 30 odd years. Their favourite saying is:

"any day above ground is a good day"

or second favourite:

"I looked in the births and death notices this morning and didn't see my name, so I got out of bed"

It wears thin after the first million times you hear it, but I guess it's a positive outlook for them.