tag:blogger.com,1999:blog-3179939281280364387.post9193880237728680423..comments2012-10-07T23:00:28.715+11:00Comments on Aussie House Prices: Will property prices plateau?Andyhttp://www.blogger.com/profile/00535576220736853310noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-3179939281280364387.post-6603994423225629692011-02-06T16:54:42.335+11:002011-02-06T16:54:42.335+11:00Andy
Enjoy your work , great read, keep it up, Pe...Andy<br /><br />Enjoy your work , great read, keep it up, Perth is a basket case at the moment yet we are supposed to be the Mining Powerhouse?<br /><br />Listings in Perth are up 47%-50% on this time last year , nobody is buying the dream (nor can the afford it)<br /><br />Land developers are starting to offer "BONUSES" to get sales $10K Visa Cards Pre paid / $30K Harvey Norman "Gift Vouchers" all designed to hide the fact that they are discounting the land. So our sales stats for land show prices steady because the block is still sold for $300K on paper but the buyer scored a $30K Harvey Norman Gift card ....Keep a eye out for this trick in your state?Not The Greater Foolhttps://www.blogger.com/profile/07017076350566919683noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-43860024970008026202011-02-06T11:45:29.471+11:002011-02-06T11:45:29.471+11:00Hi Andy,
I refuse to make a prediction on timing ...Hi Andy,<br /><br />I refuse to make a prediction on timing of the fall for a few reasons. Firstly, there is no reason for me or anybody else to think that my prediction is any better than anyone else's. ie. it's worthless. Secondly, there is a madness out there. Try predicting what a friend with their first manic episode will buy at the shops...<br /><br />I think anyone who can think independently is qualified to have a stab at how overpriced houses are __for them__. When the crazy masses will wake up is another matter.<br /><br />To me a rational rent yield is somewhere between 7 and 12 percent. I currently pay a rent of 1.1% of the price the owner would like to sell the house for (which happens to be anchored at the price he paid over the last decade for it, I probably pay 1.7% of what he could actually get for it). So you can see that for me to buy this house the price the owner is willing to sell it for would have to fall by 80 to 90%! It's a nice house. I'd take it at 80% off. Then again, it's inefficient and a bit too big, so if prices had already fallen 80%...<br /><br />Now, it's not impossible that this would happen in only seven years. It seems like it has happened that rapidly before. The Melbourne bubble of the 1890s may have been even more rapid that that. Parts of Ireland and California and Florida seem to have fallen 50% quite quickly this time, but they may still have 15 years to go for all we know! Japan and Switzerland seem to be still falling twenty years out. So I guess I think that 7 years to bottom is optimistic because there is so far to fall, the rise was more than a generation long and the falls in other places at other times have been very long term.<br /><br />I live in a nice place though. For lower priced dwellings the numbers are less catastrophic, but it is still stark. Spruikers and crazy bankers can write that rent yields are 4.27364523% all they like, but until they can show me the house fit for habitation that has such a "high" rent yield, I'll measure rent yields on the houses I can see around me which rent for 3% for liveable fixer uppers, or 1-2% for fancy houses. One bedroom flats on drug dealing strips by western sydney train stations I don't know and I don't care. <br /><br />So, minimum __real__ price falls for liveable but dodgy houses should be 50%, and for really fancy houses should be 70%. Think of the attitude to Sydney waterfront property. The faith is so strong, that the prices paid are even more whacko, so the losses will be even greater. Ironic isn't it, the better the house the bigger the loss will be.<br /><br />As for when these losses should materialise, it may well take longer than I need a house. I don't care. I'll rent while it's cheaper to rent, and buy if it's both cheaper to buy and my accommodation needs are stable at the time. eg. If I have only two adult children left at the time, I'll keep renting even though it might be a little dearer because of the probable wish to downsize soon.<br /><br />I think a whole generation of today's 10-20 year olds are going to come around to thinking that it's better to rent than to own. Then they will probably discourage their kids from buying even if it becomes stunningly much cheaper to own than to rent. Funny creatures we are.bubblepediahttps://www.blogger.com/profile/07524939059701967344noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-36753416534283461572011-02-03T16:33:37.860+11:002011-02-03T16:33:37.860+11:00Hi bubblepedia,
It's not often I'm calle...Hi bubblepedia, <br /><br />It's not often I'm called optimistic when it comes to the aussie housing market!<br /><br />So what's your prediction of percent fall (peak to trough) and how long do you think it might take?<br /><br />By the way, for those that don't know about it, bubblepedia is a fantastic resource on the aussie property bubble - <br />www.bubblepedia.net.auAndyhttps://www.blogger.com/profile/00535576220736853310noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-89920330945033303992011-02-02T09:37:19.856+11:002011-02-02T09:37:19.856+11:00Hi Andy,
I would say that seven years to bottom w...Hi Andy,<br /><br />I would say that seven years to bottom would be extremely optimistic. The Japanese bubble was similar in magnitude to ours, and it is not clear if they have reached bottom yet after twenty years and 70% falls. <br /><br />Some parts of the sydney market have already been falling for quite a few years and are still wildly irrational. eg. this one: http://bubblepedia.net.au/tiki-view_blog.php?blogId=4 sold for less last year than it did in 2004.<br /><br />It's possible that we could get down to rational prices in a few years, especially given how high this thing has been pumped. However returning to trend is not necessarily returning to rational. I remember the rule of thumb when a friend was buying an apartment here 20 years ago was that the gross rent yield should be about 5%. <br /><br />5% before expenses depreciation and tax is a wildly irrational low rent yield to return to - it's only about 2.5% after expenses and tax, let alone depreciation. After the 40-60% price fall required to reach it for most places near me, it is highly unlikely investors will want to risk their capital for only 2.5%. The 1% they will be able to get in the bank will be more attractive.bubblepediahttps://www.blogger.com/profile/07524939059701967344noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-40259350485667674282011-01-31T14:21:14.799+11:002011-01-31T14:21:14.799+11:00Good questions David. As you indicate, predicting...Good questions David. As you indicate, predicting the market is extremely difficult, due to its irrational nature. But I’ll have a go anyway:<br /><br />Bubble theory shows that prices fall back to their long-term trend, and often below it (during the “despair” phase). If the turnaround has already started (which I think it has), prices need to fall about 40% to get back to trend, so a total fall of around 40%-50% is likely. <br /><br />As to the duration, unlike the share market, property is slow moving. The property boom lasted around 15 years. I think that the bust will be quicker (because fear is more powerful than greed) and will take around 6-7 years to hit the trough.<br /><br />Your thoughts?Andyhttps://www.blogger.com/profile/00535576220736853310noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-89161268956205044382011-01-31T08:42:33.342+11:002011-01-31T08:42:33.342+11:00I guess the million dollar questions are:
* How fa...I guess the million dollar questions are:<br />* How far may prices fall before they turn around again -- ie what do you think would be an appropriate trough to ensure market stability in the long run? And...<br />* How long do you expect it to take before that trough is encountered?<br /><br />Of course this last question is an incredibly difficult thing to predict, particularly given the QLD / East coast floods meaning certain factors are at play:<br />* building/construction industry will be thriving for a while, and<br />* I'd expect interest rates to go up as economic spending increases.<br />But I would like to know your thoughts...Davidnoreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-62179567645609497402011-01-30T17:41:55.754+11:002011-01-30T17:41:55.754+11:00Jo - some areas will be affected more than others ...Jo - some areas will be affected more than others but I don’t think any area will be spared. As a general rule, the higher the rise during the boom, the larger the fall during the bust.<br /><br />Inner-city suburbs often have a higher proportion of investors compared to owner-occupiers. Take Richmond in Victoria for example. 49% of dwellings are owned by investors (compared to the Melbourne average of 24%).<br /><br />I would say such suburbs are even more susceptible to a correction, as investors are more likely to be the ones to head for the exits.<br /><br />However, before you get too excited, a house price crash of the magnitude I’m predicting will have huge unwanted side effects (just look overseas for examples). So make sure you’re indispensible in your job - because unemployment will rise, and save hard for a deposit in the meantime - because home loans won’t be easy to come by.Andyhttps://www.blogger.com/profile/00535576220736853310noreply@blogger.comtag:blogger.com,1999:blog-3179939281280364387.post-39209767555754904102011-01-29T12:02:17.918+11:002011-01-29T12:02:17.918+11:00As a potential first-home buyer, I'm very exci...As a potential first-home buyer, I'm very excited about your predictions, Andy. What are your thoughts on inner-city houses, though, where demand is always strong - will those prices fall dramatically too?Jonoreply@blogger.com