The bubble

[Bigtone]

http://www.theaustralian.com.au/new...-load-of-hot-air/story-fn6njxlr-1226038298131

Don't agree with everything TR says however i think this article is pretty spot on

 

[Intrinsic_Value]

It depends in which light one views the article.

Yes i think it provides very credible reasons as to why housing wont crash (at least not on average accross all major capital cities).

But just because something wont crash, doesnt mean that future investment returns (ie within 10 years) will justify holding the asset unless the asset is already significantly cash flow positive.

 

[hobo-jo]

Let's take a look at some of the points from the article:

* Low Arrears Rate
* Low Unemployment

We've already confirmed that UK/US had both of these as properties started their respective falls:
http://www.somersoft.com/forums/showpost.php?p=781205&postcount=19

* Tight lending practices

Personally I wouldn't call putting $14k-21k+ deposits into the hands of the most uninformed and unprepared buyers and then leveraging them up 20:1 "tight lending practices", might need to agree to disagree on this one.

* Population growth

Similar comments were made about UK immigration and population growth (prior to their correction in prices): http://www.workpermit.com/news/2007...astics-report-britain-population-increase.htm
I think this will be a driver of prosperity in Australia over the long term (assuming trend continues), but it's by no means a reason that Australian property can't fall in value shorter term.

Some comments I found amusing:

Most of Australia's leading property analysts and, notably, Reserve Bank governor Glenn Stevens, agree we don't have a price bubble, nor an affordability crisis, nor exceptional price levels by world standards.

So on one hand we have the RBA & a bunch of analysts with vested interests (conversely the RBA also has an interest in avoiding panic) who say there is no bubble, on the other hand we have Jeremy Grantham, The Economist, IMF, Goldman Sachs, OECD, senior officials within the Treasury and others who all say we have overpriced housing... hmmm which to believe...

"As long as our unemployment rate stays below 8 per cent (it's currently around 5 per cent and steady), then falls in property values are unlikely," he says.

There still seems to be some people that are in denial... at what point will these people admit that we already have falling property values??

I don't know how we are expected to take this article seriously.

 

[annie lumen]

The lowest decile of properties has increased massively in price, particularly in Melbourne. I'm amazed that much maligned North Frankston has gone up $23,000 in this so-called bad market. But, to be fair, most older homes in Frankston/North Frankston are on development blocks and are being snapped up by investors and developers.

The future: those who overpay for apartments, units and properties with small land content will not do as well as those who buy cheap grungy old homes on development sized blocks.

 

[Melbournian]

to be honest - the median has not moved much or at all for frankston north.

Development in frankston north unlikely - mid level overseas developers are buying in south yarra, caulfield, malvern and other suburbs.

Apartments - yes for many investors who lack the local knowledge, finance, marketing, accounting and building knowledge. many get burned by off the plan Eitherway i can churn a 70-120K in just over a year from a 2 bedder. Done this more times that i can remember with only 15-18K outlay in reno costs.

 

[annie lumen]

to be honest - the median has not moved much or at all for frankston north. .

In the last 3 months, when everyone proclaimed the end of the property investment market, North Frankston has gone up $23,000. Not a bad gain at all. Contrast that to a consolidation in the greater Melbourne market to levels that were last seen in April 2010.

See for yourselves: http://data1.reiv.com.au/trendchart/Default.aspx

In theory, half of all North Frankston homes will be selling at less than the current median of $303,000. When you consider that the bulk of these houses are on dual occ sites and ripe for redevelopment, it's only a matter of time before more developers move in.

The 8.25% gain that North Frankston has seen in the last 3 months is more than sustainable given the low price base and relatively high rental yields. The downside: get used to dealing with bogan tenants for awhile, until they move to other environs. The sort of people who don't go to the Opera and have never read Shakespeare. Some even skip on the rent and may trash your IP. But I can live with that.....at an annualized gain of 32% (based on the last quarter's numbers), I'd put up with the devil himself.

 

[Token Funder]

In the last 3 months, when everyone proclaimed the end of the property investment market, North Frankston has gone up $23,000. Not a bad gain at all. Contrast that to a consolidation in the greater Melbourne market to levels that were last seen in April 2010.

See for yourselves: http://data1.reiv.com.au/trendchart/Default.aspx

In theory, half of all North Frankston homes will be selling at less than the current median of $303,000. When you consider that the bulk of these houses are on dual occ sites and ripe for redevelopment, it's only a matter of time before more developers move in.

The 8.25% gain that North Frankston has seen in the last 3 months is more than sustainable given the low price base and relatively high rental yields. The downside: get used to dealing with bogan tenants for awhile, until they move to other environs. The sort of people who don't go to the Opera and have never read Shakespeare. Some even skip on the rent and may trash your IP. But I can live with that.....at an annualized gain of 32% (based on the last quarter's numbers), I'd put up with the devil himself.

If Frankston is such an awesome investment opportunity, why

• are so many keen to let others in on the secret
• is there is always more than a whiff of desperation around any post that mentions the joint?

.

 

[Melbournian]

demographics - average
income levels - low

location : good near to water + too far out from the melbourne city.

Haven't heard any big players buying major developments there.

 

[Melbournian]

In the last 3 months, when everyone proclaimed the end of the property investment market, North Frankston has gone up $23,000. Not a bad gain at all. Contrast that to a consolidation in the greater Melbourne market to levels that were last seen in April 2010.

See for yourselves: http://data1.reiv.com.au/trendchart/Default.aspx

In theory, half of all North Frankston homes will be selling at less than the current median of $303,000. When you consider that the bulk of these houses are on dual occ sites and ripe for redevelopment, it's only a matter of time before more developers move in.

The 8.25% gain that North Frankston has seen in the last 3 months is more than sustainable given the low price base and relatively high rental yields. The downside: get used to dealing with bogan tenants for awhile, until they move to other environs. The sort of people who don't go to the Opera and have never read Shakespeare. Some even skip on the rent and may trash your IP. But I can live with that.....at an annualized gain of 32% (based on the last quarter's numbers), I'd put up with the devil himself.

well it median is 290K over the last 15-20 sales best you look closely at the figures.
generalizing on a chart is dangerous investing practice.

 

[annie lumen]

If Frankston is such an awesome investment opportunity, why

• are so many keen to let others in on the secret
• is there is always more than a whiff of desperation around any post that mentions the joint?

.

Hey I'm just using retrospective figures for the last three months to give some hope to those who are consumed by all the negativity on this property forum. I'm not recommending that anyone go in and pay more than $300,000 for an older house on a development sized block.

SS is a peculiar property forum where anyone who predicts the stagnancy or end of the property market is lauded as a visionary. And when anyone has the temerity to suggest that the lowest decile of ALL non innercity Melbourne property is looking cheap, they get accused of spruiking and talking up the market.

There are still bargains to be found out there, as Melbournian has pointed out. He's kindly shown us a list of homes, a few of which could be had for around $250,000 - a bargain for any major city, let alone for a rentable 3br home on a development sized block. Thanks again Melbournian. Whatever the median, you've certainly shown us a few cheapies for sale.

 

[Melbournian]

i don't think there bargains atm - my analysis indicates more downside to come in frankston north

 

[annie lumen]

Melbournian, you posted a list of addresses of houses for sale for less than $300,000, including one that was selling for below $250,000. You seemed to have removed/edited the post. Can you please be a sweetie and repost the list? Even if you aren't interested in the current market yourself, at least let mugs like me have a peek at your list?

 

[Melbournian]

Melbournian, you posted a list of addresses of houses for sale for less than $300,000, including one that was selling for below $250,000. You seemed to have removed/edited the post. Can you please be a sweetie and repost the list? Even if you aren't interested in the current market yourself, at least let mugs like me have a peek at your list?

Annie - i would love to help you but the list was of "properties that were sold"
i was analyzing historical trends.

 

[Ridin-High]

Let's take a look at some of the points from the article:

* Low Arrears Rate
* Low Unemployment

We've already confirmed that UK/US had both of these as properties started their respective falls:
http://www.somersoft.com/forums/showpost.php?p=781205&postcount=19

* Tight lending practices

Personally I wouldn't call putting $14k-21k+ deposits into the hands of the most uninformed and unprepared buyers and then leveraging them up 20:1 "tight lending practices", might need to agree to disagree on this one.

* Population growth

Similar comments were made about UK immigration and population growth (prior to their correction in prices): http://www.workpermit.com/news/2007...astics-report-britain-population-increase.htm
I think this will be a driver of prosperity in Australia over the long term (assuming trend continues), but it's by no means a reason that Australian property can't fall in value shorter term.

Some comments I found amusing:


So on one hand we have the RBA & a bunch of analysts with vested interests (conversely the RBA also has an interest in avoiding panic) who say there is no bubble, on the other hand we have Jeremy Grantham, The Economist, IMF, Goldman Sachs, OECD, senior officials within the Treasury and others who all say we have overpriced housing... hmmm which to believe...


There still seems to be some people that are in denial... at what point will these people admit that we already have falling property values??

I don't know how we are expected to take this article seriously.

-I would say some major differences in the US/UK property market to Aus, mainly to do with the funding/banking practices (no 125% LVR in Aus) (non recourse lending where the lender can't chase you for outstanding debts vs recourse lending).

- The Economist said out property is overvalued by 63% based on their valuation methods. Honestly.... so for fair valued to be achived my property in Emu plains which is worth 380 in the current market would have to drop to
$139,840 to be fair valued? How far back in time would i have to go to get those prices again early 1990's? im not sure

 

[devo76]

If you want information about property from someone without a vested interest.
Ask a butcher.
Most people who make a comment worth listening to are going to lean the one way.
I also agree that prices in many areas are falling.
But is this s crash or just an expected correction.
When does a correction become a crash. 5% 10% 20%.
I believe over the next few years. Some will se a crash.
Some will see a correction.
Some will go up.
Interesting times.

Let's take a look at some of the points from the article:

* Low Arrears Rate
* Low Unemployment

We've already confirmed that UK/US had both of these as properties started their respective falls:
http://www.somersoft.com/forums/showpost.php?p=781205&postcount=19

* Tight lending practices

Personally I wouldn't call putting $14k-21k+ deposits into the hands of the most uninformed and unprepared buyers and then leveraging them up 20:1 "tight lending practices", might need to agree to disagree on this one.

* Population growth

Similar comments were made about UK immigration and population growth (prior to their correction in prices): http://www.workpermit.com/news/2007...astics-report-britain-population-increase.htm
I think this will be a driver of prosperity in Australia over the long term (assuming trend continues), but it's by no means a reason that Australian property can't fall in value shorter term.

Some comments I found amusing:


So on one hand we have the RBA & a bunch of analysts with vested interests (conversely the RBA also has an interest in avoiding panic) who say there is no bubble, on the other hand we have Jeremy Grantham, The Economist, IMF, Goldman Sachs, OECD, senior officials within the Treasury and others who all say we have overpriced housing... hmmm which to believe...


There still seems to be some people that are in denial... at what point will these people admit that we already have falling property values??

I don't know how we are expected to take this article seriously.

 

[Telejazzer]

I heard somebody say "The market will do what it will do, it doesn't care what you and I think!" Being able to read the market is becoming more and more difficult as information become more readily available to the public.

It all depends on the motivation. The group that has substantial property portfolio wouldn't want the price of property to drop. Of course they will preach to continue buying no matter what the price is so their portfolio will be safe.

The group that wants to build a portfolio or developers that are only interested in the 'margin' would most likely want the panic sell. I would dare say that some if not most developers would thrive more in a down market especially the experienced negotiators.

The group that are savvy and doesn't care where the market goes as long as they position themselves correctly to benefit from either direction are probably just watching and waiting for the right time to strike.

The more you listen to news and so called 'gurus' where one says one thing and the other say something else, it seems like the only people benefiting from it are the people selling the news.

Only my opinion of course.

 

[sash]

Have been a fan of Terry Ryder for many years.

The article is spot on....will be interested to see what people say in 2013 when the next upturn is underway.

http://www.theaustralian.com.au/new...-load-of-hot-air/story-fn6njxlr-1226038298131

Don't agree with everything TR says however i think this article is pretty spot on

 

[Deltaberry]

So some guy who owns a website teaching you how to hot spot is telling you prices won't fall haha

 

[dan c]

So some guy who owns a website teaching you how to hot spot is telling you prices won't fall haha

No he's not. He's telling prices won't fall in certain areas. Big difference.