Somersoft Leading indicator ticks up

[see_change]

At this stage the somersoft leading indicator is definitly ticking up.

While there is no rush to over capitalise, as there is certainly no perception in the wider community that property market is moving.

It's now close to four years wince Sydney peaked and it has come off since then , though in the last six months the better areas seem to be consolidating.

Does this mean a boom is around the corner ? Nup . Usually each boom is preceeded by several years of fairly modest growth and I think that's what we're starting to move into.

If there was a major shock to the economy , either from OS / US / China , or finding out that the new Labour government is actually no better at managing the economy than previous versions , we still have room for a turnaround , but the reality is ther last slump care of the recession we had to have was fairly nasty , and associated with much economic pain in the community . At the moment the ecomony seems to be ticking over quite nicely ( though that's a worry because historically something always goes wrong eventually ) . Can China maintain a steady growth with out hicoughs , will the US slip into recession ? I don't know .

Maybe a time to start thinking buying modestly if you've been standing on the sidelines , but then I could be wrong.

Cliff

 

[JIT]

Agree with that seachange.

I think in Melbourne too we are clearly moving into a period of moderate growth - I don't see any booms or busts in the near future. I think there's a few years ahead of us to try and catch the ripple effect, wherever you can afford to buy in. From 2009, in Melbourne, I think you will be looking further and further away from the CBD to catch the ripple.

My guess (and this is pure speculation!) is that the tables are going to be turned from a 'buyers market' to a 'sellers market' in a much greater number of suburbs from 2010 onwards.

GSJ

 

[kingchevy]

Well I believe what goes up must come down and with the way everything is ie shares seem to be booming property is still going good we will have a little down period but will we notice it on the radar in 10 years?

 

[twobobsworth]

What about a permanent shift to a fragmented market? Western sydney still seems to be struggling compared with more afluent suburbs.

 

[see_change]

What about a permanent shift to a fragmented market? Western sydney still seems to be struggling compared with more afluent suburbs.

And it will continue to struggle for a while.

That's no different to normal .

Western Sydney did nothing for about five years while the eastern suburbs moved up 50 % in the last cycle.

Cliff

 

[skater]

What about a permanent shift to a fragmented market? Western sydney still seems to be struggling compared with more afluent suburbs.

I tend to dissagree. Living in Western Sydney I have noticed that there are none of the really low low's that I would regularly see in the newspaper each week. While not shooting ahead, there does seem to be a very minor move upwards in the last 12 months. Nothing to write home about though.

If you can afford the more affluent suburbs, then great, go for it & I'm sure your growth will be better than Western Sydney, but I have been quite happy with the stability that I have noticed lately in my little neck of the woods.

 

[traveller]

I will tend to disagree that if peak was 4 years ago in Sydney then its time for prices to move. Due to the higher interest rates the affordability is now a bigger issue then what it was 4 years back. So i see limited growth going forward....

Just my 2cents..

 

[lizzie]

newcastle is creeping up - which is strange as we usually used to follow sydney by around 12-18 months.

it's really quite hot here for investors and fhbuyers squabbling over good properties.

 

[Michael Croft]

Hi,

It appears the top end of the market is (temporarily?) disconnected form the mainstream, not unlike the salaries of those doing the buying. No problem buying when your job and bonus is a dead cert. due to the booming share market.

The bottom end is stagnant and the time effect of money is doing the 'correcting'. If house prices stay static for 4/5 years, it is the equivalent of a 20 % + correction at current rates. This has already happened and continues. Interesting just what is the "bottom end" in housing? $400,000?

The majority on the bell curve are still maxed out with borrowings, so still sensitive to interest rate rises. They borrowed $400,000+ in 2001/2 to buy their McMansion and are committed to 30% of their combined income (30k @ 7%). They ain't going nowhere soon, and the kids need braces!

A change of Govt and some changes to economic policy, interest rates may rise and will precipitate a significant correction in middle Australia (NB. this is not a political statement). That said, the global financial markets are strong with no immediate threats on the horizon (policy responses to climate change notwithstanding). So a poorly educated guess is more time/price correction for a couple of years and then another slow climb. At about 40% things will get interesting.

Michael

 

[tigerGT]

I think I have a very basic way of looking at this and I must say very basic. The share market has been doing extraordinary well for some time. Just like the property market came off the boil in the last cycle I expect that the sharemarket will also soon experience a permanent minor adjustment where returns and share price increases will be very low and volatile. During this time the property market will experinece small growth and eventually a boom. Once the property market boom is crashed and over then the cycle will start again with shares.... and again and again. Ofcourse the average curve is up for both asset classes but its one or the other for me...

 

[landlubber]

SeaChange,
Please excuse my ignorance ...what is "Somersoft leading indicator" ?

Thanks
LL

 

[JIT]

Hi,

It appears the top end of the market is (temporarily?) disconnected form the mainstream, not unlike the salaries of those doing the buying. No problem buying when your job and bonus is a dead cert. due to the booming share market.

The bottom end is stagnant and the time effect of money is doing the 'correcting'. If house prices stay static for 4/5 years, it is the equivalent of a 20 % + correction at current rates. This has already happened and continues. Interesting just what is the "bottom end" in housing? $400,000?

The majority on the bell curve are still maxed out with borrowings, so still sensitive to interest rate rises. They borrowed $400,000+ in 2001/2 to buy their McMansion and are committed to 30% of their combined income (30k @ 7%). They ain't going nowhere soon, and the kids need braces!

A change of Govt and some changes to economic policy, interest rates may rise and will precipitate a significant correction in middle Australia (NB. this is not a political statement). That said, the global financial markets are strong with no immediate threats on the horizon (policy responses to climate change notwithstanding). So a poorly educated guess is more time/price correction for a couple of years and then another slow climb. At about 40% things will get interesting.

Michael

Excuse me...is this the same Michael Croft that used to post in the old forums...?

Refer to thread, http://www.somersoft.com/forums/showthread.php?t=31571

GSJ

 

[Michael Croft]

Yes, but don't hold that against me.
Michael

 

[JIT]

Yes, but don't hold that against me.
Michael

Of course not, it's good to see you post here again.

GSJ

 

[Jacque]

Nice to see you back on the forum MC - it's been too long
Hope you have time to contribute and join in the fun yet again......!!

 

[Michael Croft]

Thanks Jacque,
I see you've been busy as usual. We must talk. it's been so long I forgot how I signed off
MC

 

[see_change]

SeaChange,
Please excuse my ignorance ...what is "Somersoft leading indicator" ?

Thanks
LL

I " created " the somersoft leading indicator a few years ago when I realised that we have a fairly clued up group of investors on the forum who tend to be at the front of any property investing trends in Australia. Where we lead , others tend to follow.

Every so often I've made a post when I see a change in the enthusiasm and reported buying patterns on the forum.

My personal opinion is that we are seeing a minor strengthening in the market that is not going to lead to further significant price rise in the short to medium term , but it might indicate a turn around and the start of a longer term build, though I do wonder what might happen with labour , and when MC spoke , I listened. I think he's into his third or ? forth cycle of property investing.

Michael I'll ditto the other thoughts about nice to see you back. When you say 40 % do you mean that you expect the total correction to be 40 % , so in real terms so ,if we've had 20 % to date, then there is another 20% to go ?

I know when we've talked in the past you've talked about some of the bargains you've been able to buy in previous troughs . Have you been out there buying or are you still keeping your powder dry for further motivated buyers to come ?

Cliff

 

[JIT]

When you say 40 % do you mean that you expect the total correction to be 40 % , so in real terms so ,if we've had 20 % to date, then there is another 20% to go ?

Cliff

I thought Michael Croft meant when 40% of combined income is the mortgage commitment of middle income families, which could occur with a rent rise or two - compared to the 30% figures quoted now.

GSJ

 

[JIT]

Hi,

It appears the top end of the market is (temporarily?) disconnected form the mainstream, not unlike the salaries of those doing the buying. No problem buying when your job and bonus is a dead cert. due to the booming share market.

I recall Peter Spann saying something like this some time back. He talked about 'prestige property' and this niche market doing well when the sharemarket is booming with company directors etc. selling their shares/options etc. to finance lavish properties.

GSJ

 

[Chilli]

Brisbane has been going crazy since the begining of 2007. Properties have been selling like hot cakes both inner subs and areas that have "reserved" reputation like Inala.
Have 2 relatives just bought 2 properties in Winsor (a house $480K and a pair of Duplex 540k), they had missed a number of properties because they did not act quick enough !!
House prices in Inala have increased 10-15 % in the last 3-6 months. I have young/starter family members looking at buying there so know very well...Now you can no longer buy a newish 3 beds 2 bath there for under 300K, near 50K up from before Xmas.
Yesterday I saw an old 3 bed 1 bath timber house in Toowong 480K on the net the night before, rang agent in the afternoon and already a few contracts signed , agent told me I need to put a contract in by 5:00pm as he would be presenting offers to vendors at 6:00 and he knew it would be sold.
I don't know what all this means boom or not boom but prices here are certainly moving ! fast !
Does anyone in Bris share this observation ?