Once in a Hundred Year Property Slump

With A$160,000 in savings, he would need a A$600,000 mortgage to buy a family home in Australia's biggest city -- double what he can afford. So he plans to buy north of Sydney and commute.

this guy needs to lower his expectations on what he can afford and not.

if he doesnt have the money go 20 mins out of cbd till hills area, or parramatta etc, and buy a house on 600sqm block for 400-500k. i want a lamborghini, however its unwise to do such, so i drive my subaru... i dont walk around all day doing interviews whinging how lamborghini sales are going to slump to never before prices...
 
Most property pundits on SS are still in denial

We personally have no time for the share market. All our assets are invested in property. I've been accused of being a D&Ger but you cannot have 16 years of unprecedented growth and not have a balancing fall.

A drop of 50% in property prices is in order but as it has been pointed out on this site from 2005 in Melbourne in the bayside suburbs property has almost doubled.

The real issue is the world wide credit squeeze and the soft depression that we are entering......:(looking ahead I don't think we will have to worry about interest rates they will be around 2% in oz and in the U.S. and Europe .5%

It will be much more difficult to obtain a mortgage as those cheap funds will not be available due to the liquidity crisis.

We will also see yields on commercial properties back up at 12-20%. The bad news is that you will need 40 or 50% deposit if your are lucky enough to get a mortgage.

Banks will ration funds, if you have lots of unencumbered property the banks will fall over themselves to service you. Banks are in the business of giving loans to those who don't need it:eek:
 
Nathan said:
With A$160,000 in savings, he would need a A$600,000 mortgage to buy a family home in Australia's biggest city -- double what he can afford. So he plans to buy north of Sydney and commute.

this guy needs to lower his expectations on what he can afford and not.
Click to expand...
Why north of Sydney anyway? Does he want to be near the beaches on a 4x2 and maybe have some sea views thrown in as well ? He's only got 1 kid so how about starting with a 2x1 unit in Cabramatta and have NO mortgage at all ?
 
i still don't think we will see a significant drop off, there is a housing shortage at the moment, a rental crisis driving rents up to around 6% return, when you start to see rates come back down around the 6-7% level there will be another wave of investment in property as the spread will be marginal.

the higher end may suffer as people who had a large % of their wealth in the share market may now need to downsize, but otherwise one should be alright. it just means that instead of buying anything and watching it jump 10-20% in a year you have to buy smart - better for us i think.
 
yorke said:
Why north of Sydney anyway? Does he want to be near the beaches on a 4x2 and maybe have some sea views thrown in as well ? He's only got 1 kid so how about starting with a 2x1 unit in Cabramatta and have NO mortgage at all ?
Click to expand...

and lets not mention that it is only based on the one salary - which would be about a $60k wage for a $300k loan.

so he wants to earn $60k, support himself, his wife and at least 1 child, and have a $600k mortgage - even $300k for that matter. bit of a silly analysis to draw on really.
 
Oh really, 2% interest rates?

I read today that BIS Shrapnel have stated in their long term forecasts that they dont believe interest rates will drop to 2001 levels (i.e. 6%).

I'll believe you though, when will we start to see these 2% interest rates? :rolleyes:
 
Hi all,

Peter, You started this thread,

What is your take on it??

Has your opinion on property changed due to all the bad news coming out?? If so how??

bye
 
They talk about prices dropping yet there is a scarsity of rental properties. I feel that some areas are overvalued but they will just stagnate for a few years while wages catch up they won't all of a sudden become undesirable areas to live in causing prices to drop through the floor.

I think the average family income is understated and scewed, what is the average household income of families aged between 30 and 45 they are the ones with the big mortgages.
 
buzzlightyear said:
No.....its September 1929....the depression is coming.....:rolleyes:
Click to expand...

Haven't you heard, its already here. We are all doomed, median property prices have slumped almost 3%. :D

Prices fell in Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Hobart and Canberra by between 0.6 percent and 2.2 percent, according to Residex. The national median house price fell almost 3 percent to A$458,000 ($435,000).

``Australia is headed for a once-in-100-year real-estate slump,'' Edwards said. ``I have never seen the convergence of so many negatives.''
Click to expand...
 
We may not see the extent of subprime here in Oz simply because lenders weren't giving the unemployed 100% loans at 1% interest rates. Theres been a decent pick up in low and no docs in recent years but I would suggest the lending has been far from predatory. Whats probably a concern for us investors to IP values is rate of defaulting rents. I've just got news of one this week and the rent increases are starting to hit the wall so I'm told by my PMs. Rental stress could be the start of investor's forced sales, which is generally more prevalent with home owners. Yes, we could reduce our rents but tenants are already in debt to their eyeballs, no way of catching up, bankruptcy proceedings...etc... Interesting times ahead for us all.
 
asdf said:
We may not see the extent of subprime here in Oz simply because lenders weren't giving the unemployed 100% loans at 1% interest rates. Theres been a decent pick up in low and no docs in recent years but I would suggest the lending has been far from predatory. Whats probably a concern for us investors to IP values is rate of defaulting rents. I've just got news of one this week and the rent increases are starting to hit the wall so I'm told by my PMs. Rental stress could be the start of investor's forced sales, which is generally more prevalent with home owners. Yes, we could reduce our rents but tenants are already in debt to their eyeballs, no way of catching up, bankruptcy proceedings...etc... Interesting times ahead for us all.
Click to expand...
What you've said isn't clear - you have defaulting tenants?
 
I have had the odd tennant default at various intervals in the last 4 years, unrelated to any specific rent rise or macro situation. It sucks when it happens but I dont see any reason that all tennants are suddenly going to default on rent. If they do they will be kicked out and have a mark on ticka. Then they will find it harder to find another place. If they (like me) value their rental reference they will keep paying the rent (like I do) and most tennants aren't in debt up to their eyeballs like I am (with ip loans). Several friends and family are tennants with no debt and 30k+ savings, looking for a place to buy but holding off because of all the uncertainty. Will they default? Nope. My rent just went up, will I pay it? Yep. Will some people struggle? Yep. What will they do? Go to smaller housing or cheaper areas or both. I know because a few years ago I was in that situation (realising I was several months out from defaulting after a rent rise) and I left before I hit the wall and went to a smaller place in a cheaper suburb. Did I like it? No, but it worked. ABS data says percentage of income on rent is NOT at all time highs, and we as a nation can afford more. (pretty sure its linked somewhere else if not I will have a look see if I can find it and put a link in)
 
Peter Spann said:
This was sent to me by a colleague...

http://www.bloomberg.com/apps/news?pid=20601068&sid=aViK6htPFKgM&refer=home

It's fairly dire and would have wide sweeping ramifications for property investors.

I thought you might like to debate it.
Click to expand...

A housing recession may also trigger losses at lenders including Commonwealth Bank of Australia and Westpac Banking Corp., whose stock has fallen more than 20 percent this year.

Makes you think what it will be like in Australia in the property game in one years time,and as most high end Banks are down over 30%,not 20%/BNB:rolleyes:THE LIST IS ENDLESS, and as all those former investors in various M-F ,share markets,LPT'S,several other investment area's run for the safety of 8% fixed term in any Bank the like,all i can see is over 25% of the people that work in the F-P game will be wiped out and umemployed from the cleaners too the high flying-FAST DRIVING TILL THE BACK TYRES BLOW OUT management teams that up too now still don't know what's happening in the real world..willair..IMHO..http://www.financialsense.com/transcriptions/2008/0112.html
MARC: I think that it is difficult to say that we don’t have, let’s say, excesses in capital spending because we live in a globalized world. In other words, capital spending may not have been excessive in the United States – although I could argue that home building is some kind of capital investment; the whole commercial real estate market is some kind of capital investment. And what we have is we have excesses in capital spending in other countries such as in China and in other emerging economies. So basically, the US has outsourced largely it’s production, and that’s where the excesses in capital spending are occurring.
 
``It's like a debt tsunami out there,'' said Sandra Saker, who manages a Salvation Army service for families in Sydney overwhelmed by financial problems. ``Five years ago, the maximum debt people came in with was about A$200,000. Now we see people coming in with over A$1 million.''
Click to expand...

That is so scary:eek:
From borrowing $1 mill to Salvation Army assistance.:eek:
 
nonrecourse said:
We personally have no time for the share market. All our assets are invested in property. I've been accused of being a D&Ger but you cannot have 16 years of unprecedented growth and not have a balancing fall.

A drop of 50% in property prices is in order but as it has been pointed out on this site from 2005 in Melbourne in the bayside suburbs property has almost doubled.

The real issue is the world wide credit squeeze and the soft depression that we are entering......:(looking ahead I don't think we will have to worry about interest rates they will be around 2% in oz and in the U.S. and Europe .5%

It will be much more difficult to obtain a mortgage as those cheap funds will not be available due to the liquidity crisis.

We will also see yields on commercial properties back up at 12-20%. The bad news is that you will need 40 or 50% deposit if your are lucky enough to get a mortgage.

Banks will ration funds, if you have lots of unencumbered property the banks will fall over themselves to service you. Banks are in the business of giving loans to those who don't need it:eek:
Click to expand...


Why is a drop of 50% in order? because you say its so???
A 2% interest rate in OZ would make borrowers VERY happy, home loan affordability would increase massively.
12-20% commercial ylds implies inflation at 8%+, interest rates at 12%+
Why will you need a 40-50% deposit, even in the dark days of the early 90's you didnt need this level of deposit.
 
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