RPData - House prices falling (nation wide) - Q2 2010
- Thread starter hobo-jo
- Start date
Um, property can be exceedingly unforgiving if you get it wrong, I should know, I've personally seen quite a few "riches to rags" scenarios due to property.
It is not a liquid market, and there tends to be no 'out', due to the fact that by the time you have lined your ducks up, the market has moved once again. 'Chasing the market down', tends to be the usual play.
The problem is that this is not a scenario known to many Australians, who quite understandably tend to view property from the rather narrow perspective of the protected Australian experience of the last several decades.
It may well continue in the same vein, but it is always dangerous to be complacent. Learning from other peoples mistakes is also advised.
Lets just hope there isn't some rush to the exits, whilst being aware of the "uniqueness" of the Australian market.
Propertunity, you are starting to remind me of Chemical Ali in Baghdad. Denial and pushing the property spruiker line that all it good with the property market while the markets beings to fall around you.
But it's different here. Australia has a property supply and demand issue. Mind you, this argument was also used in every country where property eventually fell.
I'm loving watching the news. Oil up (will lead to inflation, and slowing economies, and higher interest rates), taxes up (new Carbon Tax next year) will put further screws on working families disposable income (dumb Labor voters deserve it), Europe with more debt issues (Portugal) now at 8.5% for 10yr bond. Bail out coming shortly this month Portugal 10 yr bond
Bad news is good news for the patient investor. All falling into place nicely. The property downward trend is gaining pace, which will burn the overleveraged, and provide very nice buying opportunities in 2013.
But it's different here. Australia has a property supply and demand issue. Mind you, this argument was also used in every country where property eventually fell.
I'm loving watching the news. Oil up (will lead to inflation, and slowing economies, and higher interest rates), taxes up (new Carbon Tax next year) will put further screws on working families disposable income (dumb Labor voters deserve it), Europe with more debt issues (Portugal) now at 8.5% for 10yr bond. Bail out coming shortly this month Portugal 10 yr bond
Bad news is good news for the patient investor. All falling into place nicely. The property downward trend is gaining pace, which will burn the overleveraged, and provide very nice buying opportunities in 2013.
I would suggest that it is not "due to property" but rather due to mismanagement, poor selection, over-leveraging, developing, over paying, overcapitalising, and failure to engage in risk mitigation etc.
This type of scenario would not be the typical play engaged in by the vast majority of owner occupiers or investors.
I can't see why, if you went into it with a long term view, that you'd want to be engaging in a sale, let alone this kind of activity
Most people who buy RE do not watch it rise and fall in value on a month to month or quarter to quarter basis.
On this point we can agree.
70% of RE is owner occupied, largely by people who don't care what its current value is amd who use P&I loans and therefore have some equity by paying down P even if their has been little CG since purchase. 30% is investor owned and some of that without a mortgage. "Rushing to the exits" is perhaps a term more akin to a falling share market. If (or when) the economy takes a hit, very often investors retreat to gold and to their other favourite, bricks and mortar (as it is less volatile).
I would suggest that it is not "due to property" but rather due to mismanagement, poor selection, over-leveraging, developing, over paying, overcapitalising, and failure to engage in risk mitigation etc.
This type of scenario would not be the typical play engaged in by the vast majority of owner occupiers or investors.
I can't see why, if you went into it with a long term view, that you'd want to be engaging in a sale, let alone this kind of activity
Most people who buy RE do not watch it rise and fall in value on a month to month or quarter to quarter basis.
On this point we can agree.
70% of RE is owner occupied, largely by people who don't care what its current value is amd who use P&I loans and therefore have some equity by paying down P even if their has been little CG since purchase. 30% is investor owned and some of that without a mortgage. "Rushing to the exits" is perhaps a term more akin to a falling share market. If (or when) the economy takes a hit, very often investors retreat to gold and to their other favourite, bricks and mortar (as it is less volatile).
True some disasters are without doubt due to mismanagement etc.
On the other hand the UK has has several property wobbles since the sixties (my memory span), that caught out plenty of perfectly capable people.
The last dump, 1990, that saw values in the South east of the UK plummet in nominal terms by an average of 45%, and certainly caught out a few developers and owners that I knew, who were only carrying out business in what was considered to be a "normal" manner. Leveraging is after all part and parcel of the game, and as I mentioned before, you tend to have your nuts in the fire for quite a while when it comes to property deals, not exactly and in an out business.
How many people would survive a 45% drop in Australian values?, most I would assume, just as most who owned property in the UK were fine, when all was said and done.
That doesn't mean there wouldn't be casualties, even those who are principally owners, who may have drawn down on their asset, find themselves in negative equity, have difficulty meeting increased rates?
Truth is I unfortunately know of a couple of people in exactly this scenario as we speak(write). I also know of others who have used equity in their properties to leverage into the share market, or fund their businesses.
What does worry me a little about the Australian situation, is the amount of people in the market as speculators, and how many of those I talk to are a little stretched.
The crystal ball is in place! It's 2013!!!!
Darwin has a very large military garrison, which strengthens the local economy
Darwin has an over represented mining/resource sector, which again strengthens the local economy
Darwin has other infrastructure projects which are approved and going forward, the resulting infrastructural stimulus effect will hence strengthen the local economy
Darwin has a very high replacement cost for housing, because of cyclone coding regulations, transport/skilled labour costs, which puts a bit of a floor underneath house prices because they cost so much to build in the first place (40% more than southern cities).
Darwin has an over represented government sector, with much of the income generated locally coming from a disproportionately large government
All in all, I feel that there are more fundamental economic reasons that cumulatively strengthen the Darwin property market to a greater degree than southern cities.
To give you an example, I was having a conversation with a property developer yesterday who had been advised by his agent to build high rise properties with a sticker price in the low $400k mark. We did the numbers, and what the agent was suggesting was that the developer build something that had a construction cost of 350k, and a parcel land component of 100k, with a total land plus construction price of 450k, not taking into account overheads, interest, contingency, agent fees, and PROFIT for the developer, and yet deliver a product for sale at tens of thousands less than the price of production.
I laughed at the idea myself. Ultimately the replacement cost of property in Darwin is so high that it puts a floor under property prices - unless anyone here would be so bold as to predict that material and labour costs are going to fall by 30-40% alongside a similar reduction in land parcel price, in a city built on a penninsula of land.
A softening of the market? Yes. A flight towards quality properties with greater intrinsic value? Yes. A flight away from properties with low intrinsic values, and exhausted depreciation schedules? Yes. A change in the design of houses and apartments towards quality and rationale, and away from mcmansions and dogboxes? Yes. A crash in nominal prices? No.
All the above are fine reasons for property to do ok in Darwin over the longer term. I would be more interested in hearing how the population stacks up against the amount of housing already available.
SQM Research shows sale listings have been increasing for 12 months.
There is plenty of housing available in the US for less than construction cost.
SQM Research shows sale listings have been increasing for 12 months.
There is plenty of housing available in the US for less than construction cost.
Latest RPData index is out... http://www.rpdata.com/images/stories/content/pressreleases/rpdatarismarkhomevalueindexsep30.pdf
Prices still falling.
More at: http://www.macrobusiness.com.au/2011/09/the-not-so-slow-melt-of-housing
Prices still falling.
More at: http://www.macrobusiness.com.au/2011/09/the-not-so-slow-melt-of-housing
I guess it softens the blow of the .7% fall over the quarter
A 0.7% blow is about as painful as being hammered over the head with a marshmallow.
Sydney prices are up (very slightly) year-on-year, year-to-date, and also in the past month.
After costs?
i think medians are shocking use for statistics.
all that says to me is that the activity in the selling sector has been mostly at values under median - which is no surprise.
all that says to me is that the activity in the selling sector has been mostly at values under median - which is no surprise.
The RP Data-Rismark Home Value Index is not simply a median price:
http://www.rpdata.com/property_indices/property_indices.html
Neither is the Residex series which also shows falling prices:
http://www.residex.com.au/index.php?content=why_indices&from=get_indices
http://blog.residex.com.au/2011/09/22/australia-as-a-whole-8/
Latest RPData index is out... http://www.rpdata.com/images/stories/content/pressreleases/rpdatarismarkhomevalueindexsep30.pdf
Prices still falling.
More at: http://www.macrobusiness.com.au/2011/09/the-not-so-slow-melt-of-housing
I replied to the macrobusiness post refered to there. Here's the reply:
Someone pointed out that it's a comparison not correlation. Which may be true, but what else are comparisons for than implying positiove or negative correlation?!
