Australian Real Estate prices - the future?

[Property Dude]

Hi everyone! New to the forums. :)

Thought we could use a thread on the future direction of property prices. You can be as specific or as non-specific as you like.

This from Yesterday's Herald Sun:

House prices fall in September quarter
November 03, 2008 12:21pm

A DIVE in Australian house prices is unlikely to improve housing affordability as dire economic conditions discourage building activity, economists say.

The national house price index fell 1.8 per cent in the September quarter, the Australian Bureau of Statistics said today.

That compared with an upwardly revised 0.2 per cent fall in the June quarter.

In the year to September, the house price index increased 2.8 per cent.

Economists had expected a fall of 0.5 per cent for the September quarter and a rise of 4.0 per cent in the year to September.

http://www.news.com.au/heraldsun/story/0,21985,24593440-664,00.html

[2BAD4U]

The future, who knows? Here are some of my thoughts.

Will we experience a fall in housing prices like America, some are even predicting 50% - I seriously doubt it.

My expectations (for WA atleast), prices to come back a bit more 5-10%(?) with a return to steady growth next year.

[Wildkactus]

property prices in my mine will increase over the long term at what rate and if it will beat inflation thats the question.

In the short term (next 6-12 months), I think they will fall a little as they were well above being resonable and market entry got to out of reach, even for some investors.

I think if you buy right in the first place you will 95% of the time do ok with your ROI, But again this will be up to the person buying the property.

[2BAD4U]

Read an article today that supports my beliefs. The article also points out that housing growth is returning to it's longer term trend of 3.1%.

You can read it here (http://www.aireview.com.au/index.php?act=view&catid=8&id=9412), and make up your own mind.

[bluelabel]

Just found this on news.com.au. The reporter obviously didn’t have much on last night filing the story at 7:40 am this morning.

It talks about auction clearances falling dramatically over the last twelve months. Read the article here: http://www.news.com.au/business/story/0,27753,24696467-5013951,00.html

Is this a sign of an over inflated market returning to normal pricing through the regular cycle and people are realising that they are not willing to fork over the exorbitant amounts that vendors wish for their properties?

:pimp:

Or is it a sign of overall market confidence slipping and folks just aren’t willing to take a gamble on such an investment at this point in time?

:fortunesmilie:

:bier:

blue

[bluelabel]

The OECD has predicted that house prices will take a 'sharp dive'. There was no explanation for this that's all the quote was. source:ABC News (774am)

If anyone has some more info on this, particularly why the OECD thinks house prices will take a 'sharp dive', please post :thumbs:

:bier:

blue

[bluelabel]

Well there are contradicting stories everywhere arent there. This in the australian this morning saying property prices have hit the bottom and are on the way back up. http://www.theaustralian.news.com.au/story/0,25197,24723428-601,00.html

Personally i can't see that this is the bottom of the cycle yet even though it looks like the stock market may have hit the bottom and is panning out. Just because figures for one month say there is an increase after 3-4 months of falls doesnt mean that it is the end...or does it? I know in my area agents have been slashing prices. One example was we went to an open for inspection on a saturday, on the monday i got a phone call with the agent saying the price had dropped $30,000, not bad i thought, still wasnt interested.

With Christmas around the corner then the hangover from that in january and february, and consumer confidence still low, I feel it still may take a few months for the real bottom to hit.:2twocents:

:bier:

blue

[2BAD4U]

Do some of you sometimes trust your gut feel in a situation?

I'm there now with property. Obviously like most of you (I assume) I keep an eye on prices and the houses for sale just to get that feel for what is happening rather than relying on statistics which lag in timing.

My gut is now telling me that buying is coming back into the market. Houses in areas I am watching seem to be selling a lot quicker. Listening to the average man in the street, you get a feel for their sentiments. Someone I work with just sold their house and had two people basically fighting over the property and they ended up getting $15k MORE than the listed price, and in my opinion the property wasn't undervalued.

A house 3 doors down from me went on the market 3 weeks ago at a price that I thought was at the top end for the area, and it's already sold.

So I will wait and see if my gut is right or just a bad case of constipation. :thumbs:

[Wildkactus]

Sometime times gut feel has been my best indicator, other times it has got me into a lot of trouble.
but when used with other indicators normally never fails.

but yes talking to the people on the ground and using my own gut tells me in some area's things are moving, but looking at others there's still some downward / sideways move to go.

This is a good time IMO for people who are looking to build to rent, there are some good deals on land around with some developers having excess stock and there is plenty of builders around looking for work.

so happy hunting

[Passive]

Sometime times gut feel has been my best indicator, other times it has got me into a lot of trouble.
but when used with other indicators normally never fails.

but yes talking to the people on the ground and using my own gut tells me in some area's things are moving, but looking at others there's still some downward / sideways move to go.

This is a good time IMO for people who are looking to build to rent, there are some good deals on land around with some developers having excess stock and there is plenty of builders around looking for work.

so happy hunting

Was given the chop on Hotcopper over some technicality and used to post regularly on the property thread. This in turn has become dominated by share traders who have done their dough on the sharemarket and sniping at Aus property predicting some huge drops based on alarmist thinking. Apparently our market is going to collapse like USA and UK. These countries are having huge issues with unemployment / credit squeeze etc etc. We apparently will follow the wave. My question is why has the property market not already done so? Why is it that our stockmarket got battered in tandem with the US/UK market. Additionally there is the presumption that unemployment is going to hammer us because the retail sector will get massacred. Anecdotal and early evidence is showing that the Aussie shopper is still spending reasonably well this Xmas:thumbs:.

As a long time property investor, and I might add one who consolidated in the boom years -as I do not have the risk profile to carry massive debt in times such as these- I am moving into a position where most my IPs were marginally negative geared or almost neutral. Now suddenly with the drop in rates and increase in rents I am positively geared, and comfortably so on my portfolio. When most IP holders wake up fully to the changed world an increasing number of these IPs will be pulled off the market and many will be buyers again as in many places in Aust you will have tons of positively geared stuff in major centres ensuring an income for the next 5 years if you can fix a rate low enough.

The amount of alarmist crudd floating around is amazing / some have sold homes and hoping top score - imagine being in a family where dad or mum buys and sells real estate like a share. How unsettling and costly and what a risk. The longer the months tick by , the greater pressure eases on fuel and rates and the skies don't fall in the greater will be the shift to real estate. Many prognostications about major drops perhaps - maybe - will - all speculative but one thing is sure the ASX has crashed not real estate and I like many off you trust my gut more than statistics and economic bs. As I always say show me just 1 economist that has correctly predicted a real estate boom, or has had the guts to , more concerned with scholarly acceptance and fraternity peer pressure, then I will listen until then viva property in Australia.

[kincella]

Hi there passive....good post...you are so right about stock investors doing their dough.....
and most of the lefties are from WA anyway....must have missed the last boom and wanting in again....but at low prices....
Me, I have decided to stay in Melb..will be my first xmas here ever....

and I have someone wanting one of my props to rent...he is being ousted due to an impeding prop sale and wants to stay close by.....and daughter looking to come to Melb...so it all just goes around and around again...

shoppers have spent 38 billion so far this xmas... are they silly, dont they know there is a recession and they will lose their jobs next year.....??? obviously they have a plan B..

Govt talking about the very fast train from syd to melb....that will do wonders for my regional city props....then can live there and commute to Melb...up go the prices again.....although we did have to wait 30 years for the city bypass...and it finally happened in Mar 07...so there is hope...rudd backing it this time.....
see others the other site still wanting proof...and charts..then refute them anyway
when are you going away for chrissy ?
cheers

[Passive]

Hi there passive....good post...you are so right about stock investors doing their dough.....
and most of the lefties are from WA anyway....must have missed the last boom and wanting in again....but at low prices....
Me, I have decided to stay in Melb..will be my first xmas here ever....

and I have someone wanting one of my props to rent...he is being ousted due to an impeding prop sale and wants to stay close by.....and daughter looking to come to Melb...so it all just goes around and around again...

shoppers have spent 38 billion so far this xmas... are they silly, dont they know there is a recession and they will lose their jobs next year.....??? obviously they have a plan B..

Govt talking about the very fast train from syd to melb....that will do wonders for my regional city props....then can live there and commute to Melb...up go the prices again.....although we did have to wait 30 years for the city bypass...and it finally happened in Mar 07...so there is hope...rudd backing it this time.....
see others the other site still wanting proof...and charts..then refute them anyway
when are you going away for chrissy ?
cheers

Will be leaving Perth 3/1/ till 15/1.
Recession? Notice many say this word but officially it is not there. I mentioned once that Xmas may be the circuit breaker and it seems I may be right. This downturn, and there has been has led to a confidence crisis and as people start to see the benefits of low rates etc there will be ongoing economic activity. Will mean WA out of the spotlight but is still vibrant in many areas -just not as much as b4. The Eastern seaboard has to be the new driver in the next 2/3 years and then WA will rocket again!
That fast train seems a winner for you. Someone on this thread spoke of gut feel and so right. The average person does not give a .... about economic charts - herd mentality and the herd will soon return to saner living - discount the alarmist with their endless charts and the communication media we have today has resulted in an overload of negativity. People will get immune to this, bad news will go to page 2 of the paper, Channel 10 has had to cut back staff due to a drop in advertising revenue - hello watch the otherTV stations and 10 become more positive. No gumption in many of the posters. Some speak of 480% increases - on what ? Most of it is fiction - real world shows real estate is a survivor and the scene is being set for a good resurgence well before the 10year period you predict -but I know you are being cautious.

Have a top time over the Festive season and may Melb weather be kind to you. I have my Melb based daughter in Europe on an extended tour so will avoid your fair city.

Take care but will speak b4 then

Cheers

[2BAD4U]

Was given the chop on Hotcopper over some technicality and used to post regularly on the property thread. This in turn has become dominated by share traders who have done their dough on the sharemarket and sniping at Aus property predicting some huge drops based on alarmist thinking. Apparently our market is going to collapse like USA and UK. These countries are having huge issues with unemployment / credit squeeze etc etc. We apparently will follow the wave. My question is why has the property market not already done so? Why is it that our stockmarket got battered in tandem with the US/UK market. Additionally there is the presumption that unemployment is going to hammer us because the retail sector will get massacred. Anecdotal and early evidence is showing that the Aussie shopper is still spending reasonably well this Xmas:thumbs:.

If people cared to do their research rather than just listening to the media, they would find the answer as to why Australia is different. The key being that Australia's pouplulation continues to grow which creates demand for housing. The US and UK continued to build houses while their populations was stagnate or falling. Another key point is in the US you can just hand back the keys and walk away from your debt, you can't do that in Australia. This means that Australian's would be more prepared to tough it out in hard times rather than go bankrupt. The other problem is many share investors look at property with the same eyes and see negative equity as being some major problem. Yes, it is a problem but only if you sell, if you don't sell there is no problem especially once property starts to rise again. A fact that some people find hard to accept.

[Passive]

Thumbing my way through the latest API.

Mortgage Choice reckons that a survey reveals 2/3rds of the 1006 respondents said property a safer bet than other asset classes.

To consumers the property market appears more stable.

The scenario is a little like this. I buy CBA at $40 after extensive research, good divvy, etc etc - suddenly dose of bad news re default - bam down goes the price - suddenly the media unearths 500 eminent economist and commentators who say what is a good share is bad - and always - the worst is to come and what is still hiding in the closet? Then divvys may come down. Now we are talking about the CBA not some resource speccie. Down - way down goes the price. Those who afford the CBA type shares commit something more than 1 paltry share we all know.

However with real estate someone defaults - then what - one house goes - is there a rush to the exit door? Hardly. The people on the same street come home to the houses neighbouring the defaulter - will they run like the lemmings on the ASX - hardly? Do most care whether houses are selling for less in US/UK - hardly! Herein lies the stability of houses -many have homes paid for, many have low finance and few have high debt and that is now becoming cheaper and will do so increasingly as rates drop. Even if under stress because of foolish loc use they will fight to keep. This is peoples home first and foremost - is sacrosanct and the key to good investing is to buy an item of value that has many uses as a home does - therefore the majority are telling us when the alarmist crap is over we will head back to where - the home.

That evokes good values of sensibleness, hard work, long term rewards and for those who expect speccies to keep making themselves a killing - oh dear. Gold has its place - like now with the tensions in the ME - but once those die down the reason for it going up is seen as the only reason and with hostilities easing it has the potential of plunging.

Guess my point is I would rather be in something that is not prone to daily scrutiny and that is not affected by so much manipulation and many of us know that the foundations of property rising again is being laid and the only way to benefit is not to view your own home as an investment but to buy a second one for then it becomes an investment with all the tax and lurks. When that realisation sinks in woe betide those that dallied.

[kincella]

I had a load of fun on the other site yesterday...antaganastic posters...after weeks of explanations about my research and why it has worked for me....and then the heading, look back to see the future....I just responded by saying I just look at the map on the wall every now and again to remind me of where I am going.....and then I added my dog looks at the map too......

something like a saying I heard many years ago...a ships captain uses a compass to guide him across the world, sometimes the view is covered by seas, or fogs and travelling in the dark.....but regardless of the lack of guideposts out there in the ocean....he will arrive at his destination...

the history graphs for property show a steady rise year after year...except for the marked incline the past couple of years.....its as safe a bet as anyone could wish.....but not all properties follow the exact path....some may stagnate for awhile and for a reason..but eventually they catch up....

interesting to note stocks rose on average way over and above property..if one was comparing each for investment purposes only.....which the prop bears do not compare...they talk about wages and population...and dismiss the massive rises in stocks....but only a very few stocks sustained the 50% drop...most of them took a beating of 80%
property rose 5 times from 80,000 to 400,000 over a 20 year period after adjusting for inflation....but stocks rose about 14 times...until the 50% crash...
I have never lost money in property, but lost a heap on stocks....new years resolution for me...stay away from stock
cheers

[2BAD4U]

Here's a look into the future. (http://www.reia.com.au/documents/Final_Report_Focus_Group_16_Sep_08.pdf) Made for some interesting reading if you have the time.

[kincella]

Here's a look into the future. (http://www.reia.com.au/documents/Final_Report_Focus_Group_16_Sep_08.pdf) Made for some interesting reading if you have the time.

hmmm...8.5 year cycles...and land is worth 2/3 of value and building 1/3....may be too general for me....one house I own, the land cost 125,000 and the new building 175,000.....that was 2004, I also thought new suburbs Melb the land cost about 200,000 and the building about the same.....

geez...all these generalisations...lets be more specific and explain the detail

they are generalizing about older established houses in the inner cities...friend has a house inner Melb, purchased house and land in the 60's for 12000 (more workman cottage style) now the land is worth 1 million alone, friend demolished old and built a new one for 700.000 completed mid year...so this example fits the description of the 2/3rd 1/3rd rules
grrrrrrrrrrrrrrr