"Melbourne house prices are likely to decline by 36 per cent in the next three years"

[murtagh]

I have been trawling for some D&G from years past, to compare with the D&G now running rampant.

My favourite is this one:

http://www.theage.com.au/articles/2002/09/28/1032734371850.html

"This suggested that any further impact on people's incomes, confidence or spending capacity would result in a lot less people with the same capacity to pay. "When those people leave the market, that should lead to quite a large fall in prices," he said."

And this is good too:

http://www.theage.com.au/articles/2002/06/03/1022982670710.html

"On Friday, in his testimony to a parliamentary committee hearing, Mr Macfarlane voiced fears that too many home buyers were overextending themselves, borrowing heavily to invest at the top of the market without considering the consequences of being locked into high debt. What would be their fate if house prices were to fall?"

Points I think are interesting about those two articles:
- Did prices in Melbourne fall in the twelve months after September 2002? I don't think so, but the REIV charts don't go back that far.

- If you had bought in Melbourne in June 2002, and managed to hold until now .. would you regret buying "at the peak" as the article puts it?

 

[murtagh]

Found some stats..

http://www.theage.com.au/articles/2003/03/06/1046826486991.html

"The annual growth in Melbourne prices slowed from 20.6 per cent in 2001 to 12.5 per cent in 2002, and was running at just 7 per cent in the second half of the year, confirming industry views that Melbourne's market is off the boil."

I guess they got it wrong

 

[Belu]

wasnt it back to like 25% in 2003?

 

[jingo]

- If you had bought in Melbourne in June 2002, and managed to hold until now .. would you regret buying "at the peak" as the article puts it?

Great links murtagh. It does put things into perspective with all the D&G that is circulating at the moment.

I bought my first IP in 2001, and still have it. I haven't regreted it one little bit!!!! In fact, not only has it more than doubled in value, but after the next rental increase it will be neutrally geared!!

I remember all the d&g around the time we bought too. The Asian crisis was underway. Interest rates were about to rise again! It was to be the end of property as we knew it.

In today's climate I would be saying wait for prices to drop, and try and find some distressed sales. They will be coming up sooooooon...........

Regards Jason.

 

[dave99]

If there are substantial foreclosures, prices will fall. In Australia, this is not happening and unlikely to happen unless we have a severe recession.

So I think that prices will not fall, but rather remain static for a period of time. Just as they did between 1994-1997. Hopefully a similar boom as occurred from 1997 will happen again

 

[murtagh]

I bought my first IP in 2001, and still have it. I haven't regreted it one little bit!!!! In fact, not only has it more than doubled in value, but after the next rental increase it will be neutrally geared!!

I thought the CG would be the case - the neutral gearing is fantastic. They tell me that happens over time

I remember all the d&g around the time we bought too. The Asian crisis was underway. Interest rates were about to rise again! It was to be the end of property as we knew it.

Good to hear! I have been looking at the reasons that people say this bust will be the end of property as an investment. Can't find anything unusual about this bust to be honest!

Was there anything in particular that got you interested in property at the time?

 

[Andrew_A]

http://www.theage.com.au/articles/2003/03/06/1046826486991.html

"The annual growth in Melbourne prices slowed from 20.6 per cent in 2001 to 12.5 per cent in 2002, and was running at just 7 per cent in the second half of the year, confirming industry views that Melbourne's market is off the boil."

I guess they got it wrong

If you are into top calling, then call it often. Once you are going to nail it.

 

[Francesco]

http://www.theage.com.au/articles/2003/03/06/1046826486991.html

"The annual growth in Melbourne prices slowed from 20.6 per cent in 2001 to 12.5 per cent in 2002, and was running at just 7 per cent in the second half of the year, confirming industry views that Melbourne's market is off the boil."

I guess they got it wrong

Typical sensationalist journalism with emotional wording but hedging integrity with actual statistics. Notice that all the figures quoted are growth figures albeit decreasing trend. Any investor would have been glad with CG at minimum of 7 per cent. On a $400k house say it translates to $28k CG. And that is off the boil?

 

[Ausprop]

Steven Keen is saying 50% within 2 years, so 36% in 3 years would be a good result!

 

[jingo]

I have been looking at the reasons that people say this bust will be the end of property as an investment. Can't find anything unusual about this bust to be honest!

I think that what is unusual is that it has been a looong period of time since we have had a recession. A recession will certainly slow property growth and cause many people to loose their jobs. But the cycle will eventually end and the economy will stabalize. I believe property prices will continue to grow again.

Was there anything in particular that got you interested in property at the time?

I bought the first IP as it was in an inner city suburb. We lived in an outer suburb and I could (at the time) see the difference in prices between the outer and inner areas. We bought the IP to hedge against further discrepencies in value in case we wanted to live in the city in the future.

Since then we have accumulated more IP's in that particular location, together with IP's in outer areas. Each IP has done well!! Have a read Harris' posts regarding buying in the outer areas. His posts are fantastic and relate to buying IP's in outer areas.

Regards Jason.

 

[vincenzo]

I don't waste money on buying newspapers, investment magazines, or anything like that. There is way too much available, completely free to read, everywhere you go. From banks, to real estate angencies, to waiting rooms of things like hairdressers, dentists, etc Like most things, propaganda is best taken in moderation.

All i know, is that Australia's population is increasing rapidly. There are plenty of immigrating students & working adults & the baby bonus is increasing the number of families that will be only able to afford to pay for the place they live in, be it rent or buy. The baby bonus also increases the number of young couples that are getting hitched, moving out of home into thier new place & starting a family, again, rent or buy.

I must admit i don't know what was happening with the australian population last recession, i imagine there wasn't a fast increase going on, but maybe my guess is wrong?

 

[alexlee]

I don't waste money on buying newspapers, investment magazines, or anything like that. There is way too much available, completely free to read, everywhere you go. From banks, to real estate angencies, to waiting rooms of things like hairdressers, dentists, etc Like most things, propaganda is best taken in moderation.

It's all free on the net.........

All i know, is that Australia's population is increasing rapidly. There are plenty of immigrating students & working adults & the baby bonus is increasing the number of families that will be only able to afford to pay for the place they live in, be it rent or buy. The baby bonus also increases the number of young couples that are getting hitched, moving out of home into thier new place & starting a family, again, rent or buy.

Ah, here's where I don't see the logic. What determines how much a person pays for a home? What the house is worth? Not really: it's about how much that person can borrow.

Home prices are supposedly already coming down. They certainly have in Western Sydney. So why has affordability fallen? Because interest rates are up and banks are tightening lending criteria. If the amount you can borrow falls, you won't be able to offer as much to buy a property. If this happens up and down the curve, EVERYONE offers less.
Alex

 

[vincenzo]

It's all free on the net.........

OMG i can't believe i didn't list the internets

All these first home buyers can afford to pay good money to get thier peice of land, rent or buy. They may have to resort to smaller and/or outer areas tho. So maybe higher priced properties could suffer, but nothing a subdivision or apartment complex couldn't fix (STCA )

 

[murtagh]

moar moar moar!

Some more bits and pieces I've unearthed, in case they are useful to someone else...

I figured I'd go looking for Melbourne's median house price in 2001, just to see if we've doubled it yet (I think REIV were claiming recently that it had doubled in seven years?). Didn't find the median from 2001 (anyone got it? Dec preferred), but found some more good articles, from 2002:

It was to the negative gearers, above all, that Macfarlane addressed his warning that house prices will not rise again as they have in the past decade. Prices, he conceded, had soared because the shift from high to low interest rates had allowed households to double their borrowing capacity, and hence increase their bids. Interest rates in future will move in a much narrower band; no big one-off falls will swell our capacity to drive up prices.

from: http://www.theage.com.au/articles/2002/06/10/1022982818188.html

( Ian Macfarlane was from GHPC?! )

People living close to Melbourne paid substantially more in monthly loan repayments - $1316 a month compared with a median of $900 in Melbourne and $867 in Victoria.

from: http://www.theage.com.au/articles/2002/06/17/1023864403482.html


(WOW! $1300pcm in repayments? Sign me up! Sigh. )

According to the Real Estate Institute of Victoria, from 1995-2001 median house prices in Camberwell jumped from $268,000 to $554,000.

from: http://www.theage.com.au/articles/2002/05/06/1019441475530.html

( Currently median : $1,210,000 )

The owner of the Northcote newsagency and treasurer of Ruckers Hill Traders Association, Jean Luc Giummarra, has seen startling changes in his suburb in the past 18 months since housing prices have skyrocketed. Ten years ago, unrenovated, single-fronted weatherboard houses sold for $45,000. Now they sell for more than $300,000.

from: http://www.theage.com.au/articles/2002/07/21/1026898944754.html

( Current median : $685,000 .. don't have time right now to find single-fronted weatherboard houses. The few I've looked at are up around $600k, but that appears to include some internal renovations? )

Hope all that makes sense, and is of use to someone!

 

[GoAnna!]

from: http://www.theage.com.au/articles/2002/07/21/1026898944754.html

( Current median : $685,000 .. don't have time right now to find single-fronted weatherboard houses. The few I've looked at are up around $600k, but that appears to include some internal renovations? )

Hope all that makes sense, and is of use to someone!

Yeah about $600K They tend to range from say $550K to around $700K. I had a revaluation done last week on a Northcote property I bought last year (was D & G going on at that time??) and hopefully will see what it come in 26 to 34% higher. Will report in when I know.

 

[murtagh]

Thanks GoAnna!

I figured you'd know the Northcote numbers

 

[GoAnna!]

Well the bank valuation is in.....up 30%.

Bought March 2007, settled July 2007....so an increase of $19K per month since settlement. Negatively geared but I can live with that.

 

[murtagh]

Well the bank valuation is in.....up 30%.

Bought March 2007, settled July 2007....so an increase of $19K per month since settlement. Negatively geared but I can live with that.

Well done!

I wonder what Jean Luc Giummarra would say about today's vals?

That's why I love reading these "old" clippings. All the same drama and arguments about how unsustainable this whole thing is .. and yet it keeps going.