Where's the crash

[audas]

What did you advise your family to do with their 30 acres of coastal subdivision & commercial properties ? And did they do it ?

Keep it and wait to develop in three years - the point I am trying to make here is that we are heading into a period of declining house prices - this is clear - my view is the the correction we saw in 2008 was not enough, we have had artificial market forces propping up prices ( fact none of you can disagree on), Australia has yet to feel the full brunt of the economic woes hitting the rest of the world, that unemployment will impact massively, etc,etc,etc you can read my post, and that all of thsi will combine to force a correction -

This is happening now - I though it would take until at least the end of the FHOG to begin - however it appears to have started earlier which should be setting off alarm bells.

the government is going to realise fairly quickly that things are going to be getting pretty bad - if the rot really starts to set in then you are going to see people falling all over themselves for new social schemes (this is EXACTLY what is happening in the rest of the world) this means no longer trying to push capitalistic solutions which will not work - we will see a return to socially driven policy and the labor government will fall all over themselves to get on board - you may in the next 12 months start to see the idea of removing the negative gearing - SHOCK HORROR !!!

You will see huge government projects for social housing, land released, new initiatives on high density housing (try and buy a house in Johnson street Collingwood people, can also and Melville road and places alike - all going to get turned into medium high density with government going straight over the top of council), and a general push to massively increase the stock of Australian houses.
The prices in Australia are so ridiculous - for anyone who has spent a considerable amount of time overseas - to know that you can buy a reasonable flat in the heart of Milan, Florence, Rome, Paris, London, Quinque Terra, Riviera for less than a run down dog box in the outer suburbs of Melbourne is just plain madness - it is a complete market distortion and is going to get corrected - end of story.

I would be looking to move into sustainable property development (we are) - the technology available has massively come down in cost and availability, the government will be throwing everything it can at this, consumers are already loving it - keep in mind that this will not be an option as I have said for three years.

There is going to be a lull.

 

[willair]

http://www.financialsense.com/fsu/editorials/martenson/2009/0501.html

 

[Bill.L]

Hi all,

If the D&G brigade can only go on what is happening to median prices, then they really have lost the plot....

Here is one definition of median...

The median of a set of data values is the middle value of the data set when it has been arranged in ascending order. That is, from the smallest value to the highest value.

Does everyone have to be Einstein to work out that more lower end properties selling, even at higher prices than the last few years, will lower the median prices. It is the distortion effect of the FHOG, plus cheaper IR allowing the bottom end to be disproportionately active.

bye

 

[Ausprop]

The prices in Australia are so ridiculous - for anyone who has spent a considerable amount of time overseas - to know that you can buy a reasonable flat in the heart of Milan, Florence, Rome, Paris, London, Quinque Terra, Riviera for less than a run down dog box in the outer suburbs of Melbourne is just plain madness - it is a complete market distortion and is going to get corrected - end of story.

dunno about all those dodgy continental cities but if you take London, the 2 bedroom dogbox that we sold as a 76 year remaining lease on the outskirts of london was last worth around the $1m mark. A comparable home can be bought in perth for around $280-300k.

of course if you shelled out a few more million you coul dpick up an attached 5 bedder...

http://www.foxtons.co.uk/search?bed...orm=keyword&search_type=SS&submit_type=search

but alas, no where to park the rolls.

I really think your compass is off here

 

[MichaelW]

the government is going to realise fairly quickly that things are going to be getting pretty bad

Cool! Lower interest rates!! I'm on sub 5% variable today and CF+, any further drops just line my pockets further.

you may in the next 12 months start to see the idea of removing the negative gearing - SHOCK HORROR !!!

You will see huge government projects for social housing, land released, new initiatives on high density housing...

and a general push to massively increase the stock of Australian houses.

Let me get this straight. So government is going for a "general push to massively increase the stock of Australian houses" by "removing the negative gearing - SHOCK HORROR !!!" Yep, that'll do it for sure...

keep in mind that this will not be an option as I have said for three years.

There is going to be a lull.

With interest rates at 5% and falling and rents set to keep rising against a property shortfall backdrop and you reckon this is a "bad" environment for resi property how? Each to their own. But I don't plan on waiting three years...

Cheers,
Michael

 

[audas]

dunno about all those dodgy continental cities but if you take London, the 2 bedroom dogbox that we sold as a 76 year remaining lease on the outskirts of london was last worth around the $1m mark. A comparable home can be bought in perth for around $280-300k.

of course if you shelled out a few more million you coul dpick up an attached 5 bedder...

http://www.foxtons.co.uk/search?bed...orm=keyword&search_type=SS&submit_type=search

but alas, no where to park the rolls.

I really think your compass is off here

No need to make an utter fool of yourself - on your own website (and lets face it foxtons is the worst on the planet for rip off merchants - yes I lived in the London for 5 years so don't even think about condescending to me) I simply plugged in 2-3 bedroom houses in London for under 400K Australian with well over 100 results on only one website - shock horror I'm right AGAIN.

http://www.foxtons.co.uk/search?bed...ch_form=map&search_type=SS&submit_type=search

This is one of the biggest most progressive desirable cities on the planet - with prices more accessible than one of the most isolated countries on earth....?! Ridiculous.

oops here is some homes for you ??!
2 bedroom flat in ascot vale....OMG
Cheap at around £300,000 pounds that is !!!

http://www.realestate.com.au/cgi-bi...r=&cc=&c=27901476&s=vic&snf=ras&tm=1241418219

Ohhh - heres another one - a two bedroom DOG BOX commission flat none the less for a poultry quarter of a million pounds -

http://www.realestate.com.au/cgi-bi...r=&cc=&c=27901476&s=vic&snf=ras&tm=1241418219

 

[audas]

Cool! Lower interest rates!! I'm on sub 5% variable today and CF+, any further drops just line my pockets further.

Let me get this straight. So government is going for a "general push to massively increase the stock of Australian houses" by "removing the negative gearing - SHOCK HORROR !!!" Yep, that'll do it for sure...

With interest rates at 5% and falling and rents set to keep rising against a property shortfall backdrop and you reckon this is a "bad" environment for resi property how? Each to their own. But I don't plan on waiting three years...

Cheers,
Michael

Whatever
Anyone who thinks there isn't a serious fall coming is on their own or just likes to hang out with people who wont challenge their view of things no matter how isolated and wrong they are - but yes - each on to their own - for me - I like to at least maintain SOME semblance of normality - though thats tough for others - looking at you - when you don;t even live in reality.


Um - by the way - please provide the data for the actual gap in housing - as this has been repeatedly challenged on every front for the evidence to be provided and has never been done so - in fact the RBA as good as acknowledged this to be moot.

Removing negative gearing reduces investors and returns the market to an essential consumer item as it is in most countries - this will reduce investor interest and drive the price down - it does not remove developer interest. Further the main mechanism for increasing stock and driving down prices will be to remove land banking practices - once again you ahve been owned - you are now educated.

Rental prices are falling - already started - this has been made abundantly clear in numerous posts - please read them.

The RBA has also announced that there will be no further drops in interest rates - in fact with the huge borrowing going on around teh world we are MORE THAN LIKELY heading for STAGFLATION - do some research on this as I am almost positive you would have no idea what that is.
So unfortunately mate - the money supply is global - governments have expanded it beyond all measure and there is going to be a rampant state of inflation without any real growth - the nightmare - this is what is happening to the stock market right now as ther is nowwhere for money to go as there are no real investments to be had - yet there is money just being PUMPED into the economy - any fool knows this -
So pretty much on every point you raised - you failed.

The point is to do some research and understand things - dont just hang around with the same people who think the same way all the time - its called perspective.

 

[MichaelW]

Removing negative gearing reduces investors and returns the market to an essential consumer item as it is in most countries - this will reduce investor interest and drive the price down - it does not remove developer interest.

Thanks for clarifying that for me. Here I was living under this deluded perception that developers required a satisfactory margin dependent on gross realisation at completion prior to commencement. Clearly as stated price drops do not remove developer interest, my bad...

So unfortunately mate - the money supply is global - governments have expanded it beyond all measure and there is going to be a rampant state of inflation without any real growth

Except in gold if the risk of hyper-inflation plays out, hence my significant hedge position in bullion. Oh, and quick question for you: what happens to the value of debt in a hyper-inflation environment where the printing presses are running hot?...

The point is to do some research and understand things - dont just hang around with the same people who think the same way all the time - its called perspective.

Again, clearly my bad. Thanks for the perspective which I'm obviously ignorant of. Maybe I should cancel my Mauldin Thoughts from the Frontline subscription as he's clearly leaving me ill informed...

Cheers,
Michael

 

[Rockstar]

Hi Audas,

What is your take on Interest rates over the next few years?

For long term holders like many on this forum a fall in IR's will just be putting more money into their pockets. You don't think the RBA will be increasing rates if property values are falling dramatically do you? If values do fall then there will be increasing CF+ deals which many investors will benefit from by acquiring new property and increasing their portfolio. Long term holders will be in no need to sell as the CF becomes more ++. Property investment is a tweaking game and, depending on the times, one can cope with any scenario if one keeps sensible LVR's and cashflow management.

I just can't see this falling value scenario (if it happens) hurting seasoned investors at all? The next upswing and boom will come in its own time. No one can really tell - so what - we are in for the long term.

Cheers, RS

 

[HiEquity]

Rental prices are falling - already started - this has been made abundantly clear in numerous posts - please read them.

Really? Now that is a corker - please provide real evidence... I didn't see any of that in those posts.

I've been having a straight run of putting the rents up at every review over a number of properties - the latest only a month or two ago. Tenants seemed happy it hasn't been going up anymore given what they see happening around them with rents and vacancy rates. Still pathetically low for a 4x2 + study with DLUG to be renting for only $370pw within 5km of the CBD. Plenty of upside in that one... among others. Rents are far too low in this country - removing -ve gearing would fix that though!

There seems to be a fundamental disconnect between what I am reliably informed is happening to the market and what is happening on my IPs - must be just me I guess...

 

[Ausprop]

No need to make an utter fool of yourself - on your own website (and lets face it foxtons is the worst on the planet for rip off merchants - yes I lived in the London for 5 years so don't even think about condescending to me)

I lived there for 10, does that make me a bigger man?

This is one of the biggest most progressive desirable cities on the planet - with prices more accessible than one of the most isolated countries on earth....?! Ridiculous.

get a grip - its a hole. I like it but its still a hole. now one with no industry.

oops here is some homes for you ??!
2 bedroom flat in ascot vale....OMG
Cheap at around £300,000 pounds that is !!!

http://www.realestate.com.au/cgi-bi...r=&cc=&c=27901476&s=vic&snf=ras&tm=1241418219

Ohhh - heres another one - a two bedroom DOG BOX commission flat none the less for a poultry quarter of a million pounds -

http://www.realestate.com.au/cgi-bi...r=&cc=&c=27901476&s=vic&snf=ras&tm=1241418219

sorry never heard of either places.


As the commodities upswing kicks in your comparisons will shock you even more.

 

[Hooray]

Ohhh - heres another one - a two bedroom DOG BOX commission flat none the less for a poultry quarter of a million pounds -

A 'fowl' little property, 'tis true.

 

[Ausprop]

A 'fowl' little property, 'tis true.

very funny, but I am concerned we have a chicken little on our hands

 

[BoatBoy]

No need to make an utter fool of yourself - on your own website (and lets face it foxtons is the worst on the planet for rip off merchants - yes I lived in the London for 5 years so don't even think about condescending to me) I simply plugged in 2-3 bedroom houses in London for under 400K Australian with well over 100 results on only one website - shock horror I'm right AGAIN.

http://www.foxtons.co.uk/search?bed...ch_form=map&search_type=SS&submit_type=search

Youre ****ting me right

$400k for a hell hole like in the slums like on the Bill and you dare to compare that to a $400k house in Oz

No need to make an utter fool of yourself

Take you're own advise mate

Dave

 

[steveadl]

Wonder how long it will take audas - the latest in a long line of brand new users, here to save us all from ourselves from post 1 - to disappear? They usually only last about 100-200 posts right?

Well that is until a new user magically pops up from nowhere to take their place shouting the evils of the current world and how a crash is imminent. Perhaps they have a set roster of who's turn it is to play around here in any given month? This particular handle is quite agressive in his attitude.

*sigh*

 

[battler]

Rental prices are falling - already started - this has been made abundantly clear in numerous posts - please read them.

Can you provide a link to these posts? I'm not seeing reductions, still getting regular increases.

 

[DeanoC]

I dissagree a 5% or 10% increase is not a bubble.

IMO opportunities have been missed because even if the FHBG dissapears tomorrow we are still in a low interest rate environment and affordability is still good so prices at the bottom end won't fall. Prices will trickle upwards following CPI.

Also, as others have said the LVR's are falling and lending is becoming more difficult. Some banks now want to see that you've saved the 10% deposit. Many years ago one of the requirements for getting loan approval was 6 months of savings and 20% deposit.

IMO for young people who don't have much deposit, this is their last opportunity to get in. They are given a decent amount of money and they don't need a big deposit or a savings history.

When the FHBG is removed, the alternative would be to save the equivalent of the FHBG ($14K/21K) plus $10-15K for stamp duty plus the additional 10% of the property value and this could take some people 2 or more years. In those 2 years rents would have gone up and property prices at the low end would have climbed up another 10%

My advise to young people? find a cheap roof and put it over your head because this task will become much more difficult later on.

Im a first home buyer and what you say does not make sense really. Im new to all this and I have a lot to learn but its not that the grant is being canned completely, thats at least the way I understood it? Its just that the additional 7k they offer is gone. Its back down to 7k for an established home, 14k if you build. No stamp duties either, even after June 30th. So the advantage to the FHOG is not really that great. 7k on home that costs 350k equates to about 0.2% of its value. Peanuts really. The real advantage is for people who dont have a deposit. Do we really want these people buying homes just yet?

I have been very tempted to jump in but have decided to rather wait it out a little. My price bracket is seeing a lot of activity with the first home buyers but I do think from the research I have done that property prices in Perth, where I stay, are going to come down a bit. If its only a 5% drop its more then the additional grant put in my pocket. If property prices are dropping across the board and the only thing keeping lower priced properties elevated is the additional grant, then I see no real reason to be running into this now.

Ill keep putting money aside and saving up a healthy deposit for now. Ill review again at the end of the year. While I think that Australia may escape the full onslaught of the GFC I do think we may not have not seen the end of it in the US yet. While I also think we wont see property plummet 40% over the next 24 months, I think we are going to see a correction in most capital cities. Too many things suggest that we have to see prices come down still.

 

[sparky23]

Isn't it funny how angry these little D&G people become when they realise they are all alone over here? Never mind I'm sure this one will pack up and leave just like the others.

I am confused about why anyone would want to make comparisons between London and cities here is Australia. I have never been back to England since I came out 22 years ago and no intention of ever doing so. I win I was born in England. LOL

 

[BV]

Im a first home buyer and what you say does not make sense really.

Deanoc

Welcome to the forum.
I've noticed you are from WA, I am sorry I should have been more clear my post was essentially meant for SE NSW.

Since you are new here, pay attention to the location of each poster because we often report on what we see happening in our area.

For what is worth I didn't say buy before the 30th of June, I said that things are getting harder and young people should use the opportunity to buy something.

Sure, if you are a saver and have a big deposit you will have no problem getting finance now or later. No big deal really. And if you wait the W.A. market could come down a bit more. It's a different story over there though.

Good luck.

 

[chilliaa]

Audas, or should i say Non-recourse,
You have a bit of a nurve buddy, you gallop into the Sunset, when a major deal comes along, that you think will be very financially prosperous to you in the long term.
So in your opinion, holding some coastal area property for future development makes sense over buying property at this point in time.

The point is you are still a believer in property as a LONG TERM CREATION of wealth, otherwise you wouldnt be recommending holding the undeveloped property. If property is not a valid strategy of creating long term wealth, THEN NEITHER CAN THE UNDERLYING LAND.

And this is what gets my goat, some people on this forum, may not have the skillset to do development, or have sufficient capital wealth to just land bank.

I have said it many times over the last 12 months, i think MEDIUM PRICED RESIDENTIAL PROPERTY IN CAPITAL CITIES are REASONABLY PRICED.
I dont anticipate capital growth in the next 10 years being anything like the last 10 years of capital growth, but that does not mean that those of you trying to replicate Jan Somers' strategy of building a long term sustainable portfolio of residential properties to one day replace your working income are INCORRECT (IE NOT INCORRECT).

Residential property is a long term wealth creation strategy. I again emphasise go through Jan Somers old books, there are many insightful views there given 15yrs ago+ that are very meaniful in todays environment.

Those of you madley trying to use short term indicators to gage the direction of the property market, are the same as those people who where using short term indicators to look at the stock market when it was at 3100 with the 'experts' calling for it to go to 2200.

Forecasting doesnt work this way in reality. That is why so many people stuff up with their investments.