Perth house prices drop 30k

[HiredGoon]

http://www.wabusinessnews.com.au/en-story/1/64563/Perth-houses-prices-drop-30-000-

The median house price in Perth has fallen $30,000 down to around $446,000 in the past six months and the rental vacancy has returned to normal for the first time in several years,

30k in 6 months! That means Perth house prices are falling faster than average wages! Save 100% of your pre-tax wage but if you own a house you're behind this year. Ouch!

Mr Druitt said the large number of properties for sale punctured the myth of a housing shortage. "In WA we have a situation of oversupply - not a problem with undersupply, and this is due to the strength of building activity between 2001 and 2007," he said.

Mr Druitt said the once tight vacancy rate for tenants had now returned to normal, with REIWA recording a comfortable 3 per cent vacancy rate, illustrating many new properties had flooded into the rental system as investor/owners now found it a difficult time to sell.
"For the first time in several years tenants should now find it much easier to find a suitable home. There is much more stock available and much more competition amongst owners to secure good tenants.

Perth also has some of the lowest rental yields in the country - which means investors are making a huge cash flow losses for the privilege of making capital losses.

Events unfolding like this is no surprise to me, and the rest of the country will soon follow. Surprise, surprise - Australia doesn't have a shortage of houses - it was all debt based speculative mania after all.

Mining boom? Try a debt bubble.

Who would have thought that the country with the lowest population density on earth shouldn't have the most expensive houses in terms of wages on earth? Shocking, I tell you! Who could have known?

 

[Ausprop]

Events unfolding like this is no surprise to me, and the rest of the country will soon follow. Surprise, surprise - Australia doesn't have a shortage of houses - it was all debt based speculative mania after all.

mostly a fair call but you may be peaking too soon... your timeframe of analysis has been very short to be making such big calls. With the highest rate of population growth, wages still going thru the roof and talk of rate cuts before christmas we could see a match set under the WA market.

 

[INVSTOR]

One of my Perth properties has gone down about 30k and another Perth property has gone up about $100k.

 

[Chris.R_WA]

One of mine has held flat for the last 6 months, and the other is down about 25K. Rents across both IPs up $45pw.

I'm not feeling any pinch or pressure, but the general market sentiment sure is gloomy. Makes me feel like an emo or something...

Saving up for another deposit now.

 

[The_Bludger]

Nice, nice. I hope the same would happen in Melbourne. Looking for my 3rd IP now and hoping to pick up a bargain.

 

[Aaron Sice]

yeah that 30k loss is all of 3% o fmy total value - gee - huge loss compared to the $300k i've made just by paying holding costs.

shame, real shame...

 

[s_t]

A drop in median doesn't even necessarily mean that house prices have fallen! It is only necessarily true if the exact same houses are transacted on.

I watch Narangba, a suburb in which I have an IP. The median has increased by roughly $90k over the last year. I reckon that the median is going to drop significantly over the next month or two though? Why? Because of the standard of houses being transacted.
The typical house in Narangba didn't go up $90k over the last year, but a lot of new and more expensive houses were built and sold, driving up the median. Currently a lot of the older lower priced ones seem to be coming back on the market, which will drive the median back down a lot.

Perth? I wouldn't have a clue if it is an actual fall, or just a change to the standard of property being transacted.

 

[Witzl]

So, HiredGoon... learning to paint a renoir with a rolling pin are we?

 

[devo76]

Just curios about some stats that are touched on above. As stated there has been a decline in value recently. But what percentage of current home owners bought a year ago. They would be the ones that it would affect the most. people that bought years ago would still be laughing as they have made huge gains.So i guess you would have to look at the percentage of people that bought and sold property during that window or decline period compared to larger portion who have bought over say a 5 year window.Im sure the stats still show the majority have done well.

 

[HiredGoon]

You guys don't get it. The price falls have only just begun.

As I have pointed out before, we have consistently built houses faster than population growth but due to speculation and hoarding and using houses as gambling get rich quick schemes there was the appearance of a shortage.

But now nobody wants to hold property without yield so the empties will be rented out, nobody will hold onto property they don't need, people won't panic buy - we're going to have a huge glut of houses.

People who say bought a house to rennovate will rent it out and live with their parents. Supply up, demand down. Maybe rents will fall. They fell in real terms according to the ABS last CPI figures.

Who would buy a house with a 3% yield with a 9.5% loan while prices are falling? Nobody.

And thus prices will fall until they are no longer negatively geared, probably with an over-correction as so many people will be in negative equity and lenders so burnt there just won't be any buyers.

This would cause everyone to stop taking out debt due to the house price bubble wealth effect, and then our consumer debt based society will pull back massively into debt deflation. Anyone with a LVR over say, 60% is toast.

The last few years of loose lending are a failed experiment which will NOT be repeated again. House prices will never again achieve these prices in real terms for at least a generation.

 

[Shadow]

http://www.wabusinessnews.com.au/en-story/1/64563/Perth-houses-prices-drop-30-000-

30k in 6 months! That means Perth house prices are falling faster than average wages! Save 100% of your pre-tax wage but if you own a house you're behind this year. Ouch!

Hi HG,

You need to be careful with the stats you're using. The REIWA stats are non-stratified, non-hedonic, raw data. They do not account for compositional changes in the sample group.

You are better off using stratified hedonic indexes such as the ABS statistics, or those from Residex. The Residex stats below show that Perth prices are roughly where they were in September, or slightly higher. Prices in Perth have stalled recently, perhaps eased down slightly in the last month, but the market is certainly not crashing.

Residex Index - Perth Median House Price
30-Sep-2007 H Perth 5.75857
31-Oct-2007 H Perth 5.69116
30-Nov-2007 H Perth 5.70946
31-Dec-2007 H Perth 5.65472
31-Jan-2008 H Perth 5.75516
29-Feb-2008 H Perth 5.70365
31-Mar-2008 H Perth 5.87056
30-Apr-2008 H Perth 5.8574
31-May-2008 H Perth 5.78355

I do expect prices in Perth to correct slightly, perhaps 10-15% (in real terms) over a few years. This is inevitable after the recent boom, but your calls of a crash are premature. I don't expect any significant nominal declines. Of course, some areas will be affected more than others, and some areas will probably rise.

Shadow.

 

[DavidMc]

...wages still going thru the roof and talk of rate cuts before christmas we could see a match set under the WA market.

I reckon there is something in this. I've had some very lucrative job offers from Perth.

Anyone with a LVR over say, 60% is toast.

I disagree. Only people who can't pay their loans are toast.

It wouldn't surprise me if Perth dropped a bit. It's had such crazy growth for years. Anyone who bought a few years back would still be miles ahead.

 

[Belu]

Who would buy a house with a 3% yield with a 9.5% loan while prices are falling? Nobody.

OO's? Migration?

 

[devo76]

You guys don't get it. The price falls have only just begun.

As I have pointed out before, we have consistently built houses faster than population growth but due to speculation and hoarding and using houses as gambling get rich quick schemes there was the appearance of a shortage.

But now nobody wants to hold property without yield so the empties will be rented out, nobody will hold onto property they don't need, people won't panic buy - we're going to have a huge glut of houses.

People who say bought a house to rennovate will rent it out and live with their parents. Supply up, demand down. Maybe rents will fall. They fell in real terms according to the ABS last CPI figures.

Who would buy a house with a 3% yield with a 9.5% loan while prices are falling? Nobody.

And thus prices will fall until they are no longer negatively geared, probably with an over-correction as so many people will be in negative equity and lenders so burnt there just won't be any buyers.

This would cause everyone to stop taking out debt due to the house price bubble wealth effect, and then our consumer debt based society will pull back massively into debt deflation. Anyone with a LVR over say, 60% is toast.

The last few years of loose lending are a failed experiment which will NOT be repeated again. House prices will never again achieve these prices in real terms for at least a generation.

Fair enough. Thats one possible outcome.I dont believe it will be a equallised dropping of values country wide.I dont want to start arguing the same story over and over again but i will use my little corner of Australia as a example.

We had fairly flat to modest growth in our area from early 1990 up to 2001. From there we expierianced the same growth that most of the country expierianced with around doubling of house values. Some may call it a bubble but considering the flat decade before you could call it a correction to true value.

From around 2002-2003 values flatlined again and brobably slid down a little depending on each sale.Its for this reason i feel our area is not overvalued. We have a very tight rental market and with our biggest local spec home builder going tits up that shouldnt change anytime soon.Sure there may be some more room to drop but thats to be expected just as its to be expected that things will improve and lost ground will be gained back in preperation for the next upswing.

50% drops in my area make no sense. That would drop a lot of realestate below the replacement cost of the building let alone the land.

So while i agree that prices will drop in many areas. the magnitude of the drop will vary greatly with pockets of property still posting gains.

As many have told me before.Buy well and hold on long term you will do well.
As for buying now or waiting a year or two. I guess that comes down to what property you are looking at.

 

[Harris]

You have been saying that since eternity HG....

heard the saying..? Broken clock tells correct time twice a day..?

You guys don't get it. The price falls have only just begun....

 

[sash]

They said that during the 1990s recession....faintly recall that they also said that during the 1980s recession.....yet prices doubled or trebled.

Based on your statements.....I think now would be a good time to buy no?

The only reason house prices are falling in Australia is due to our rates being out of kilter with other countries. My feeling is that once rates come down to say 7% the pent up demand will being back boom conditions.....

The only caveat is if unemployment goes up significantly....there is no sign of this yet....but will acknowledge that this is a lagging indicator (economic speak). If we still have under 5% unemployment by this time next year....then there is a real chance that 2008 was setting of the next boom!

Time will tell.......

The last few years of loose lending are a failed experiment which will NOT be repeated again. House prices will never again achieve these prices in real terms for at least a generation.

 

[HiredGoon]

Based on your statements.....I think now would be a good time to buy no?

Now is a terrible time to buy a house. Pay far, far more than renting to make massive capital losses? No thanks.

pent up demand

I love this phrase. It is economic nonsense. It doesn't matter how much people want something, what matters is how much they can borrow. I expect lenders will require much larger deposits soon, or will charge a MUCH higher interest rate premium for low deposits.

We've consistantly built houses faster than population growth yet prices went up. What does that tell you? It means that demand rose significantly PER PERSON over the last few years. And hey, why wouldn't it - house prices always go up and are a ticket to riches! Buy as many as you can. Don't want to miss the boat!

In a speculative mania, increased prices fuel extra demand. Now the mania is ending and everyone gets to find out who the greatest fools were. Wait - it was you guys!

After the mania dies down we're going to see demand fall to more reasonable levels. No more panic buying, no more flippers, no more people watching TV rennovation shows then flippantly borrowing decades worth of their wage to spruce up a house as a get rich quick scheme.

You have been saying that since eternity HG....

heard the saying..? Broken clock tells correct time twice a day..?

I have consistantly said:

-There is no housing shortage, in fact we have had a construction boom
-House prices are massively overpriced and will fall
-Credit will tighten, debt securitisation will collapse taking down non bank lenders
-Financial shares will fall, followed by consumer discretionary as the wealth effect decreases.

I said this from August 2007 when I joined. I have proven to be correct, and almost everyone on Somersoft didn't see it coming and was wrong, wrong, wrong.

And they will be wrong, wrong, wrong calling the bottom all of the way down.

 

[The_Bludger]

Hi HiredGoon, when do you think a good time to buy will be? Are there a set of conditions you prefer or do you not invest in property at all?

Sorry, have not been around long enough to know your investment strategy.

 

[JIT]

Let's be honest HG, the only thing that's crashing right now is your randomly picked share ''portfolio'' !

Catching falling knives is hard work...

 

[Alex P Keaton]

Who would buy a house with a 3% yield with a 9.5% loan while prices are falling? Nobody.

I will

I plan to buy - (FHB) at the end of this year or early next year, and because of the low yields in Perth, I have decided to use the property as a ppor for 1-2 years until the yields pick up.

I will claim first home owners grant and stamp duty exemption. Then move out further down the track once a bit of equity has built up and the yields have improved, then I will rent and turn my ppor into an ip.

I think that is the way to go!!

win win for me