Will Property bust next???

[MPmelb]

We've all seen what's happened to the world's sharemarkets this week.

Not a pretty sight for share investors or anybody with super (most of us!)

So what will happen next. Is it property's turn to bust??

If we slide into recession and people start losing their jobs, then it is a definate possibility.

Your thoughts.

 

[BV]

If we slide into recession and people start losing their jobs, then it is a definate possibility.

IMO that's not a likely scenario, the Oz economy is still doing well.

A slowdown in retail spending was to be expected as the cost of petrol and interest rates started to hurt.

IMO the RBA went too far with the interes rate increases but they have no realised their mistake and will stimulate our economy by cutting interest rates.

IMO a blow out of unemployment is an unthinkable event.
Remember that there is still a surplus in the fed budget and most states are spending (or planning to spend) money on infrastructure so this will help keep unemployment low.

At the same time, we have the resources sector where although the commodity prices have fallen so has our $ and this will help their margins.
So from the revenue and profitability point of view resource companies are not worse off than before and are not likely to start reducing staff levels.

Cheers

 

[MPmelb]

IMO that's not a likely scenario, the Oz economy is still doing well.

A slowdown in retail spending was to be expected as the cost of petrol and interest rates started to hurt.

IMO the RBA went too far with the interes rate increases but they have no realised their mistake and will stimulate our economy by cutting interest rates.

IMO a blow out of unemployment is an unthinkable event.
Remember that there is still a surplus in the fed budget and most states are spending (or planning to spend) money on infrastructure so this will help keep unemployment low.

At the same time, we have the resources sector where although the commodity prices have fallen so has our $ and this will help their margins.
So from the revenue and profitability point of view resource companies are not worse off than before and are not likely to start reducing staff levels.

Cheers

I think your being over optimistic.

Australians are highly indebted and lots of companies are sacking staff now due to the slowdown.

Telstra is laying off 800 workers, the car industry is laying off workers, so is manufacturing, banking & finance and retail is really struggling.

How will people pay their debts when they have no job??

 

[Aaron Sice]

they won't.

they'll walk away from their homes with a 2 yr bankruptcy clause and start again.

just like in 1987-91

doesn't make it any easier, but i'd rather just sell for a loss and go rent than take bankruptcy.

 

[Nathan]

tell me, if house prices fall, coz no1 is buying and bankrupt and cant get loans.... i would think there will be less investors? more renters cocorrect me if im wrong doesnt that sound like another rental boom? i reckon we will see rents if we keep heading the way we are, where renting will be same price as owning a house.

 

[MissHoney]

I think your being over optimistic.

Australians are highly indebted and lots of companies are sacking staff now due to the slowdown.

Telstra is laying off 800 workers, the car industry is laying off workers, so is manufacturing, banking & finance and retail is really struggling.

How will people pay their debts when they have no job??

I am wondering, after this week, what the impact of the global credit 'crisis' will have on property. I have been IP house-hunting for a few months now, waiting and watching prices. My perception is to buy when everyone else is selling and we have plans to buy at least 1 property in Adelaide in the next few weeks.

What do you think about the impact on the property market if, as you say, lots of companies are sacking staff etc...? Px of petrol and particularly fresh food will continue to increase and I imagine that there are going to be a lot of people struggling with debt levels.

My instinct is to buy now rather than later ... but is this wise after what happened on Wall St this week?

MH

 

[craigb]

More renters any way as population growth, my gut feeling, and feel free to quote me on this, the share market will have a significant recovery, not total but enough for investers to get their capital plus some, then the RBA will have then lowered interest rates the property market will take a stride the share traders "after the scare" will channel funds to property, in the hope of greater and safer gains!

 

[craigb]

My perception is to buy when everyone else is selling and we have plans to buy at least 1 property in Adelaide in the next few weeks.

If you do what every one else does you only end up like every one else, i like your choice and i belive your doing it the right way,
"when socks are on special buy two pair"

 

[BV]

I think your being over optimistic.

Australians are highly indebted and lots of companies are sacking staff now due to the slowdown.

Telstra is laying off 800 workers, the car industry is laying off workers, so is manufacturing, banking & finance and retail is really struggling.

How will people pay their debts when they have no job??

800 workers is nothing in the scheme of things and the VIC and SA car manufacturing are suffering due to high petrol prices.

Car industries will have to adapt and start making more energy efficient cars
because this is what people want to buy.

 

[Ausprop]

some markets have already busted e.g outer Perth is down up to 30%. could be further to go the way credit markets are looking. no asset category is safe... deflation of asset prices shows no mercy or discrimination. There is little doubt that property is in for a rough 12 to 18 months and then it will probably just be a long and extended period of tracking inflation or going sideways

 

[BV]

some markets have already busted e.g outer Perth is down up to 30%. could be further to go the way credit markets are looking. no asset category is safe... deflation of asset prices shows no mercy or discrimination. There is little doubt that property is in for a rough 12 to 18 months and then it will probably just be a long and extended period of tracking inflation or going sideways

Perth is probably going through what Sydney has been experiencing since 2005.
There is a support base though and it will be through lower interest rates and higher rents.

As rents and yields increase more people will turn to property because they simply have to live somewhere and there are only 2 options

1. pay rent at market rates or
2. pay a bit more and have a mortgage

 

[Nth Brisbanite]

Some of these comments are over pessimistic. I've just put a property on the market in Brisbane and the buyers are certainly there as evidenced by the number of people going through open inspections. I won't have any problems selling as I've already had a contract but am bargaining hard to get a higher price (agent has said that I'm going to get it).

My case is not isolated. I've talked to a number of agents and buyers who are finding that property is still selling very quickly in inner Brisbane.

 

[Aaron Sice]

yep quality homes are selling well if priced CORRECTLY.

i think John is right - no asset is safe in a deflationary writedown situation.

but then, the Aussie mindset is so strongly tuned to RE ownership that people will always aspire to buy here - at least in the nearterm and forseeable future.

but, that's just my opinion and certainly open to debate.

 

[VYBerlinaV8]

I find it interesting that some companies are wanting to put people off. I work for a large IT company, and we simply can't get enough people (and we pay very well, if you know how to negotiate). In my office alone the executive managers are talking about trying to find another 100 people. And we are one of the smaller offices in Australia.

 

[Aimjoy]

We've all seen what's happened to the world's sharemarkets this week. Not a pretty sight for share investors or anybody with super (most of us!) So what will happen next. Is it property's turn to bust??

Remember in Oct 1987 when the share market had a significant fall? What happened? I was a REA selling at the time and the phones went dead for 2 weeks while ppl got their heads around it. Then ppl burned with the stock market retreated to the relative safety of bricks & mortar which lead to the RE boom of 1988+. So I see this as one possibility. Also IR's coming down might help if this scenario plays out. Rents have been rising to the point now where in some areas I am seeing the "Why rent when you can buy & own for the same money" adverts. This also points to a RE growth (I'm reluctant to say boom) spurt.

 

[RPI]

I think there will be a bust in some areas but inner city areas no. There is currently not enough of a differential between living 5k out and 20k out, there has been for decades and I think that will come again,

Inner brisbane stuff is still selling at a premium and when i drive around the inner east there are a lot less signs than last year, just had a look at the prime ministers suburb, Norman park. Only 58 houses listed in total (and that includes multiples so less actual houses) 5 of those under $500k, 15 over $1m and then there is a $6m and $7.5m to top it off.

 

[Maverik]

(my thoughts from the vote thread)

Very unlikely.

We have a huge undersupply of property and vastly more secure and stable finance. Both the opposite of the US.

It is also a tangible asset that is mostly funded by secure and relatively stable finance and cash. Again vastly different to shares and US property financed by insane lending.

I think most of the fundamentals for residential property are positive ie undersupply, high population growth/migration, extrmely low vacancy, increasing rents and dropping interest rates.

If unemployment changed drastically i would be less optomistic however that appears unlikely.

How much is this current situation going to affect our employment?

 

[topcropper]

Remember in Oct 1987 when the share market had a significant fall? What happened? I was a REA selling at the time and the phones went dead for 2 weeks while ppl got their heads around it. Then ppl burned with the stock market retreated to the relative safety of bricks & mortar which lead to the RE boom of 1988+. So I see this as one possibility. Also IR's coming down might help if this scenario plays out. Rents have been rising to the point now where in some areas I am seeing the "Why rent when you can buy & own for the same money" adverts. This also points to a RE growth (I'm reluctant to say boom) spurt.

Aimjoy, This will be the 4th time I've posted this chart on SS, but here it is again.

Check out the rental yields of property compared to dividend yield of shares in Oct 1987, and tell me that it's relative to today. Also remember that interest rates and inflation were higher than today.

See ya's.

 

[ffc1883_1996]

A rental yield correction is occurring at the moment (upwards).

 

[VYBerlinaV8]

A rental yield correction is occurring at the moment (upwards).

Any estimate as to how long this will take? Anyone have any thoughts about this?