State of the Property Market

[china]

This is of course assuming there IS a property market shake out.....

Many things would need to occurr in OZ for there to be a BIG decline in property values in the capital city markets anyway....some of them....

-big hike in unemployment
-interest rates increasing dramatically
-a falling population in the major capitals
-lack of access to any sort of reasonable finance
- people deciding NOT to live around our major capital cities.
- a massive oversupply of dwellings is created by building too many
- a massive mindset shift away from the great Aussie dream of owning your own home and sacrificing other stuff to do it

If a combination of any of them were to occurr at the same time then maybe we would have something to worry about, till then we are all good.

The economy in this country has never been stronger and people so prosperous.

For an "on the ground" report, I would like to offer a differing view to BV's.

There is actually a shortage of labour rather than unemployment. As a small business employer with two permanent part time staff, I have to pay $33 per hour permanent part time rates to two people who have no definable qualifications. They left school aged 15.

I have to pay such high rates because it is hard to find people to fill the job. Six years ago, I used to place an ad in the paper and there would be 30 email applications. Recently, I only received 5 applications.

In contrast, in countries where there are employment issues, there will be applicants who volunteer to come and work for free for a trial period.

Secondly, walking around the local area, I have never seen restaurants been so busy of an evening. As this is discretionary spending, this must be a sign of a booming economy wherein I cannot see any of the above listed factors happening.

Thirdly, I recently had a passing idea of building a deck on top of my free standing garage. I googled "decks + my suburb". I rang the top three search results. All three builders had answering machines with voicemail. I left messages on all three and none have responded. Must be a lot of employment going on if small business owners who have paid good money for their websites to rank highly on google search fail to respond to new business enquiries.

 

[natedog]

I think the volume builder market did really well when the Vic Govt were giving out $32k to build a new house, so I am quite optimistic given what natedog has said for those new build areas. It might also have something to do with the scrapping of the FHOG for established houses - pushing people to go for new builds.

Yes it was crazy busy back when FHOG was that high!

This year has been totally different in the buyer profile though and the total volume of sales is higher than back then!

Much higher percentage of knock down and rebuild client and upgraders.

Not that many FIrst home buyers.

This is a much bigger sign that people feel good about the future I think.

The volume of sales this year has not been driven by super attractive government grants, just good old buyer demand based on them being in a financial position to be able to and having the desire to.

I am guessing low rates are a big factor in this buyer confidence.

With rates not looking like heading north for a while, the outlook for new builds looks pretty good.

 

[BayView]

It's critical to take notice to the right people. The 95% who can only judge the future based on the recent past deserve a much lower weighting than those who are more forward looking & see the bigger picture.

It will take time for the macro effects to filter down to the 95%. Only then will they realise that the big picture has already changed & they've missed the best bit of the upswing/downswing.

What I've been reporting is exactly that - a report.

It's what I hear from other folks in a variety of industries.

In the case of the mechanical industry; it is a discretionary spend, it seems...

Therefore, when things are not so flash for folks - it's one of the things that gets left until last to spend money on. It is not just me being a D&G'er - as you all perceive.

That is the state of the industry right now...folks are spending less on their cars - across the board.

This is the report I hear from all the various aspects of the industry..from the reps.

Will it improve in the next 12 months? I hope so, but what is changing apart from a bit of sentiment? Not a lot.

Make of it what you will, folks.

My prediction though; as we all become more internet focused for buying doodads, the traditional shop front with the staff behind the counter selling goods and wares will diminish and so will the jobs.

How this reflects on the property market? Things seem to be improving as folks say, but the underlying econmic factors are still the same from before the Election as far as I've seen, so it may be a short-lived boom.

 

[MrCrumbpacker]

What I've been reporting is exactly that - a report.



Will it improve in the next 12 months? I hope so, but what is changing apart from a bit of sentiment? Not a lot.

Keep up the dispassionate reporting BayView, we need the type of quality comment from you to counteract some of the vested cheerleading.

You seem to have a good handle on things in your neck of the woods.

 

[Deltaberry]

The car industry could hardly be use as a generalisation for the Australian economy. Automobile industry in Australia is just an old behemoth that has out-lived its used by date.

 

[BayView]

The car industry could hardly be use as a generalisation for the Australian economy. Automobile industry in Australia is just an old behemoth that has out-lived its used by date.

The car manufacturing industry is not really related to the mechanical repairs and tyres and spare parts etc side of the "car industry"...but...

Tyres, for example, have not been manufactured in Australia - at all - since the Dunlop factory closed down a few years ago, yet tyres are still fitted, and worn out on cars, buses and trucks every day of the year....they are all fully imported now.

Those jobs are gone from Aus...and tyres are pretty much a required commodity for most folks in the 21st century, yet - according to the reps I talk to each week - the industry is down...in all areas.

This is not me having a sook because my joint is not so flash...it's across the board.

One Company I deal with have just experienced their worst 6 months ever - according to their rep.

You cannot make a link between manufacturing of cars (other than car parts - which aren't made here for the most part anyway) and the climate of how little or how much folks spend on maintaining their cars.

Having said that; Holden is indicative of the climate we have set for our Country going forward.

Companies will continue to move all or part of their operations O/S as they can, because of more favourable conditions for their business operations and costs.

We will be left with only service based jobs (assuming they cannot be moved O/S), tourism and retail....and mining.

Mining is a bit on the wane apparently, and we all know the trend in retail shopping at shop front retail stores....less and less over the coming years as online shopping ramps up.

We better hope to christ the dollar changes to suit the tourists, or a few more jobs will be gone there too.

In my view; Holden is the harbinger of things to come...not just car industry either.

 

[tambourineman]

The car manufacturing industry is not really related to the mechanical repairs and tyres and spare parts etc side of the "car industry"...but...

Tyres, for example, have not been manufactured in Australia - at all - since the Dunlop factory closed down a few years ago, yet tyres are still fitted, and worn out on cars, buses and trucks every day of the year....they are all fully imported now.

Those jobs are gone from Aus...and tyres are pretty much a required commodity for most folks in the 21st century, yet - according to the reps I talk to each week - the industry is down...in all areas.

This is not me having a sook because my joint is not so flash...it's across the board.

One Company I deal with have just experienced their worst 6 months ever - according to their rep.

You cannot make a link between manufacturing of cars (other than car parts - which aren't made here for the most part anyway) and the climate of how little or how much folks spend on maintaining their cars.

Having said that; Holden is indicative of the climate we have set for our Country going forward.

Companies will continue to move all or part of their operations O/S as they can, because of more favourable conditions for their business operations and costs.

We will be left with only service based jobs (assuming they cannot be moved O/S), tourism and retail....and mining.

Mining is a bit on the wane apparently, and we all know the trend in retail shopping at shop front retail stores....less and less over the coming years as online shopping ramps up.

We better hope to christ the dollar changes to suit the tourists, or a few more jobs will be gone there too.

In my view; Holden is the harbinger of things to come...not just car industry either.

The dollar is down well over ten percent from where it was.

The dollar is a scape goat.

It's the high input costs including wages and the wage price spiral caused by living costs in Australia relative to elsewhere

 

[roe]

Yoda would say
"Australia Conquered Dutch Disease you must"

http://www.imf.org/external/pubs/ft/fandd/basics/dutch.htm

 

[BayView]

It's the high input costs including wages and the wage price spiral caused by living costs in Australia relative to elsewhere

yes, I realise this.

But, it's not actually the wage on their own that is the problem - it's the myriad of extras that have been gradually added to the wage over several decades which are coming back to bite us all in the bum.

The dollar is but one current factor of course. A massive drop back to 2005/06 levels will change things dramatically - but will they return to that level in the near future? That's the question.

I can't see that occurring.

 

[roe]

The dollar is down well over ten percent from where it was.

The dollar is a scape goat.

It's the high input costs including wages and the wage price spiral caused by living costs in Australia relative to elsewhere

High dollar relative to before the resource boom
High input cost, High Dollar all result of a Dutch Disease.

If we don't have a mining boom our dollar and input cost will be no where near this level.

If you use history as a guide, Manufacturing will be wiped out in Australia in a near distant future .. then we will hit with high unemployment and recession

We then reset the clock and people start accepting lower paying jobs and condition..either that or no jobs...and the foundation will be layed for the next up turn

 

[Trippy]

The economy in this country has never been stronger and people so prosperous.

Hence the record low interets rates...
Hence the rising unemployment rates in the face of declining participation rates...
Hence the retrenched, or soon to be retrenched, staff at Qantas; Holden; Ford; Electrolux; Gove refinery; Simplot and no doubt thousands of other small businesses that just cant make a dollar anymore in the lucky country...
Hence the wind back in mining investment and development...
Hence rising govt deficits that will take decades to eliminate..
Hence the decline in full time employment and rise of the casual work force...

If we are in such a strong and prosperous position I would hate to see bad times

Just wait for the real drop off in revenue due to the mining capex crash (falling sharply away over the next 3 years). Or maybe the 5000 baby boomers that retire each week for the next 20 years (most of whom will require financial support via govt pensions - read taxes). Our economy is so strong and prosperous that soon we will all have to work until we are 70

As technology and processes improve shouldn't we be working less and retiring earlier? Seems to me we are going backwards, we are working harder and longer in the face of rising living costs and higher taxes. A single wage cannot now support a family, both partners MUST work, not choose to work.

I wish I owned a pair of your rose coloured glasses

 

[SoftBank]

Trippy, the scenario you have painted has a reasonable chance of playing out. Many other countries around the world are also in a much more precarious situation than we are.

The mistake I think you have made is using this macro backdrop to predict prices over the short/medium term. Igniting a property boom is the only viable card Abbott and his band of merry men have if the scenario you have described starts to play out. A similar story is being played out across the world (e.g. the BOJ is praying for a speculative property boom.)

Yep, it will all end in tears, it always does. Before then I think we will see a final capitulation of the property bears and some real panic buying in the next five years.

 

[ok180]

As technology and processes improve shouldn't we be working less and retiring earlier? Seems to me we are going backwards, we are working harder and longer in the face of rising living costs and higher taxes. A single wage cannot now support a family, both partners MUST work, not choose to work.

I wish I owned a pair of your rose coloured glasses

This is very true and well said. Sometimes I almost get the feeling that a lot of people on this forum aiming for financial freedom will never acheive it due to the goal posts rapidly shifting. The cost of living in this country is just spiralling out of control and we have now set such a high standard for ourselves that we are unwilling to just enjoy the simpler things in life.

Kudos trippy.

 

[The Fence]

We had BBQ chops and salad last evening sitting outside admiring our garden and views and the beautiful weather.

Is that high standard of living ? Or are we just enjoying the simple things?

(BTW the chops cost $7.50/kg)

 

[chilliblue]

I'm with Skater with regards to retail sales not going down.

Online sales are booming and these often are not correctly tracked.

People taste change as does they buying. To be frank, how many frozen yogurt companies do you think will be around in 10 years?

In one main street that I have a project these are the 7 in a 800m strip.

 

[sash]

I second this......we Australians have seemed to have lost all perspective. What a bit of whingers we have become. We could get things on track by simply doing the following:

1. Cut our middle class welfare...the Howard government handed out benefits to people who should made do. Now they whinge they don't have enought. This alone could save $15B-30B.

2. People need to move to areas which are affordable rather than spending $1m for areas they can't afford.

3. Wages in some areas are too high ...why should flight attendants earn 95k ..

4. Regulate what doctors can charge like NZ. They still earn a good living but it will also contain health costs.

5. Stop protecting industries like the car industry which will never be competitive here. Besides we will get cheaper cars...as the tax for imports willl lessen. Lower the luxury car tax to cut in at say 50k...that way the prestige brands will need to make a decision to lower their rates or sell less.

6. Tax all church enterprises...they should pay tax like anyone else.

7. Put in a cutoff of 36k for singles and 45k for couple at which pensioners pay tax. It maybe lower but as the population ages this will need to be done.

8. Put in individual workers protection but weaken the hold of unions.

9. Get out of wars which are not winnable. Let the Americans worry about these areas.

10. Nationalise health care...to levels of this currently state and federal. Too much wastage..also a similar thing for eduction....

This is very true and well said. Sometimes I almost get the feeling that a lot of people on this forum aiming for financial freedom will never acheive it due to the goal posts rapidly shifting. The cost of living in this country is just spiralling out of control and we have now set such a high standard for ourselves that we are unwilling to just enjoy the simpler things in life.

Kudos trippy.

 

[BayView]

3. Wages in some areas are too high ...why should flight attendants earn 95k ..

Because of the disruption to their normal lives to do their jobs, and they have to put up with loads of crap from deehead travellers. Good luck to them.

Same as why should a miner get over $100k?

Because, it is dangerous (see; flying in a plane), and dirty, and the hours are not normal hours.

4. Regulate what doctors can charge like NZ. They still earn a good living but it will also contain health costs.

Dumbest idea I've ever heard.

Cut the wage incentive of medical personel, and see what happens. Yes; some do it for a passion, but not all. We all have to eat and live a decent life, so if they have to do the study and sacrifice; they should get the reward I reckon.

6. Tax all church enterprises...they should pay tax like anyone else.

Absolutely. And allow these silly Priests to get married and/or get a root so they might leave the kids alone.

 

[china]

Hence the record low interets rates...
Hence the rising unemployment rates in the face of declining participation rates...
Hence the retrenched, or soon to be retrenched, staff at Qantas; Holden; Ford; Electrolux; Gove refinery; Simplot and no doubt thousands of other small businesses that just cant make a dollar anymore in the lucky country...
Hence the wind back in mining investment and development...
Hence rising govt deficits that will take decades to eliminate..
Hence the decline in full time employment and rise of the casual work force...

If we are in such a strong and prosperous position I would hate to see bad times

Just wait for the real drop off in revenue due to the mining capex crash (falling sharply away over the next 3 years). Or maybe the 5000 baby boomers that retire each week for the next 20 years (most of whom will require financial support via govt pensions - read taxes). Our economy is so strong and prosperous that soon we will all have to work until we are 70

As technology and processes improve shouldn't we be working less and retiring earlier? Seems to me we are going backwards, we are working harder and longer in the face of rising living costs and higher taxes. A single wage cannot now support a family, both partners MUST work, not choose to work.

I wish I owned a pair of your rose coloured glasses

My observations:

1. I offer $33 per hour permanent part time for people with no formal qualifications but find it hard to get responses to my recruitment ads in the newspaper - a few years ago, there was five times the volume of applicants

2. I ask my staff to work overtime or Saturdays but they tell me they are not interested. One even told me that they are cashed up.

3. Some of my job applicants tell me that they are happy with whatever hours I can offer. Even if I have no hours some weeks, that would be fine because they work not for money but for enjoyment - this is at the job interview!

So clearly, there is minimal unemployment and people are pretty cashed up when I as an employer find it hard to find staff.

 

[china]

Cut the wage incentive of medical personel, and see what happens. Yes; some do it for a passion, but not all. We all have to eat and live a decent life, so if they have to do the study and sacrifice; they should get the reward I reckon.

.

Good point BV. There is no point cutting wage incentive for medical personnel as it does not help the health system.

When the surgeon gets paid $2k for 20 mins work in fixing a cataract, you can be sure he wants to fix as many cataracts as he can. He will work as many hours as he possibly can. This is the best explanation as to why doctors work long hours. However, this leads to a productive health system which can only be good the community and patients.

What really wastes money in the health system is that other staff, often unionised, are on fixed wages and want to go as slow as possible leading to massive inefficiencies and non-productivity. This is what leads to massive public hospital waiting lists and a bottomless pit of wasted health dollars.

Health systems where both doctors and other staff are all on fixed wages are the most non-productive and inefficient of all. Fee per service for the doctor combined with user pays systems are the best health systems of all.

 

[BayView]

Good point BV. There is no point cutting wage incentive for medical personnel as it does not help the health system.

When the surgeon gets paid $2k for 20 mins work in fixing a cataract, you can be sure he wants to fix as many cataracts as he can. He will work as many hours as he possibly can. This is the best explanation as to why doctors work long hours. However, this leads to a productive health system which can only be good the community and patients.

What really wastes money in the health system is that other staff, often unionised, are on fixed wages and want to go as slow as possible leading to massive inefficiencies and non-productivity. This is what leads to massive public hospital waiting lists and a bottomless pit of wasted health dollars.

Health systems where both doctors and other staff are all on fixed wages are the most non-productive and inefficient of all. Fee per service for the doctorcombined with user pays systems are the best health systems of all.

Quite true.

The other thing that is becoming insidious in our Country is the " dead wood" syndrome.

This is where there are folk working within teams/organisations who everyone knows is/are useless, clock punching and simply doing as little as possible as often as possible.

And they basically can't be sacked.

Any highly Unionised industry will be rife with it.

But, they will get theirs eventually hopefully.

When I worked in the Health industry, I saw loads of dead wood, and they drag down the morale of the really good staff.

Some of the dead wood was in the higher ranks too...sponging off the taxpayer's gravy train.

I have no probs with folks earning lots of money - I want to earn lots of money too - but we should have to actually work and earn it if we are employed to do that.