Submitted by Blowin on Fri, 12/09/2016 - 10:27
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Someone said way back there's a reason portland is cheap.
Anyone care to elaborate?
I've always liked portland, and was surprised how cheap it is. About ten years ago apparently robe , beachport area had a bit of price boom as victorians looked over the border due to high prices. Wonder if portland boomed/busted
House prices are slowly increasing. Brick laying is in high demand. Houses are sitting for months waiting to be bricked. Land prices are going up rapidly and lot sizes are getting so small in outer city suburbs i have seen 300 square meter blocks even 150. Wouldn't even call that a house lot. I have a friend the works for a leading company he is finding it so hard to get loans for people the banks are so tight at giving money at the moment. He is even to the point off looking for another job. Cheers
@Sypkan i thought the reason was because the Alcoa Portland smelter looked like it was going to be shut down, i believe they are the main employer of the town, and basically the life blood of the town.
I dont know if it's always been so cheap, but you would assume in the last year a lot of people would have had their houses on the market trying to get out before it closed, now that it's not going to close you would imagine some may decide not to sell and people will be more confident to buy there, giving the market some stability even possibly seeing prices rise as the number of properties for sale reduce and there is more stability in the rental market.
Sypo...... Portland is still dirt cheap.... yes Robe and Beachport have increased.. But compared to the rest of the mainland Australian coastline, its a bargain.... But there are still a few hidden gems between Beachport and the vicco border, most have their own shop or pub. As far as beachside property goes, the prices are unbelievable.... Soooooo cheap... And all are a 1/2 hour drive max from the larger towns of Millicent and Mount Gambier which have all the supermarkets, doctors etc.
I wont name..... Get a map.
Is Alcoa another one of those foreign national rent seekers operating here only because of the massive corporate welfare they are able to extract from jelly backed politicians or do they actually pay company tax?
Would be very interested to know what tax Alcoa has paid in regard to Portland since it started ... its cost Victoria taxpayers 100s of millions in power subsidies during that time.
But all so cold sheepdog ...bbrrrrrr....weird currents around there, seems colder than vicco.
I reckon SA is relatively expensive now due to larger growth through the boom, but yes still much cheaper than elsewhere...not without reason...
Cold, Sypo????? You dont know cold if you think that bro.... lol
Nahhhh mate It's freakn cheap.... 250 to 300k will get you a house that would be 700k near a beach on the east coast.
Nah its fucken cold, then unbearably fucken hot
Yes, but that 250k - 300k used to be a lot lot less when that 700k was only half the price
Sypo.... It's actually been unbelievably nice here for at least a month.. Early 20s to late 20s... Only a couple of stinkers...
Let them think it's too cold and sharky here in SA Sheepdog, we'll keep the uncrowded peaks and long hot days all to ourselves. It's paradise here in SA if you know where to look we have pumping surf in the summer and even more in the winter! It's only cold if you're not catching any waves.
Fuck this shit.
Remember when Pauline Hanson said Australia was going to be swamped by Asians......and everyone took the piss out of her.
In fact they still do over that comment, obviously blind to the reality unfolding before their eyes.
In fact if it wasn't for the outrageous scale of net migration to Australia of all hues of nationality and race acting as a dilution , then the outlandish influx of Chinese would be even more apparent.
Australia is not China.
Australians cannot buy a single square centimetre of China - why in fucks name can they buy here ?
Certainly, to fix or manage the major city real estate prices, you would have to address the Chinese development and purchases. There are now cases where all units are sold off plan as a closed sale. All Aussies are excluded. Don't even get a foot in the door. There are restrictions but you would have to say they are lax. For example, foreign investor can buy as many new properties he /she likes. Both sides of politics are loath to touch this.
Reserve bank : " I don't understand, we are pushing for ridiculous , unsustainable levels of immigration yet wage growth is going backwards and house prices keep increasing . How does that work ?"
Reserve bank = dumb cunts.
recent news suggests the govt to be gearing up for CGT and/or NG reform. add chinese investment to that mix and there might be a soln to slowing prices down.
Blowin I might also add that the whole "skilled migration" definitely adds to the pyramid scheme they have going on too.
Happy I saw some info on that as well but I doubt anyone will touch NG as it's the backbone that all large & small businesses in Australia are leveraged against. Forever buy property and pay no tax basically. It'd kill the small tradie operations first too I reckon.
No spine in the government as the last one to touch it has to keep it as far as the housing market prices go. CGT 50% share discounts & primary residence CGT exemptions could be cut tomorrow though and rightly so.
On another note, it isn't common knowledge but negative gearing is actually also available to Australians who purchase overseas property as well. It might be a good time to throw down $150k on that Nicaraguan surf property you've been eyeing off for retirement before they close the lid on NG in the next two years.
It's about time we all pulled our fingers out and started offshoring our housing problems at the aussie taxpayers expense and move for world surf property market domination. Who's with me? There must be a few other cheap countries as dumb as Australia with cranking surf that allows foreigners with more money to buy their properties for peanuts.
There's definitely no other country as dumb as Australia that would let the taxpayers subsidize it.
Just to throw a bit more fuel on the fire, whilst we can't own land in China, neither can the Chinese. They can only lease the land with no certainty about happens at the end of the lease, hence mountains of them buying up our properties. Especially the rich ones looking at inter-generational wealth preservation.
Until the gov reigns in foreign ownership on residential property and introduces leases I doubt that the Chinese part of the real estate market will ever fade too much as long as our land continues to abound in nature's gifts.
There are two articles in today's Melbourne Age highlighting why the government does not want house prices to fall at all. More votes in home owners it seems.
...and all those home owners and investors are going to be mighty pissed off with the government when this housing bubble bursts.
both interesting articles smiley. I read another a short while back that said the RBA is beholden to ScoMo on interest rates because he can only stimulate inflation through government spending & the RBA can only crank up interest rates in response to inflation.
Saving money worked for Howard because the economy was booming so people were spending, now Morrison wants to do it again while the economy's knackered and people are saving/paying down debt/flat broke and he'll likely sink us all.
If no one spends then inflation slows, or even deflates and our interest rates follow it.
GS, the only thing the government does not want is mortgage foreclosures. Prices are irrelevant, the market sorts that out.
Hey TonyB, been thinking you have lost your mojo over the last week. You ok?
The day mortgages start foreclosing it will be messy indeed for whatever government is in. The punters will want someone to blame, anything or anybody but themselves of course. All those interest-only loans investors are loaded up on "hoping" for capital gain. The banks will call them in immediately house valuations fall below the mortgage value. Owner occupier punters will go without just about anything to stop mortgage defaults; I have personally seen a lot of that via my various roles in the superannuation industry. Little known fact but people can access their super to stop mortgage foreclosure "on their principle place of residence" meaning not your investment property/ies. Very serious stuff Tony facing off against a steely faced bank.
Prices are irrelevant - are you serious Tony?
GS, prices are irrelevant in the that it is more about the ability to pay the loan. Seems we are in consensus, in that yes those that will have problems with their mortgage may want to blame someone. Same happened with Keatings 'famous' banana republic statement where interests rates were 18% or so. Well, good luck to those that bought off the plan a unit in Sydney or Melbourne. But those that are coping - pay off as much as off the principal - historically low rates.
See your point tb but I think price is still critical in the issue. House value to household income is key. Here a little graph that's charting through the roof to up the ante a bit.
Saw a news article yesterday about old mate selling his Miami beach shack for over a mil that he bought for $6,500 in 1971. Average yearly wage same year was $6,500. In 2016 ave wage is around $80k. Good luck finding a place for under $300k today though, which is still nearly 4 times the ratio from 1971 and that's a cheap house.
Anyone buying an apartment in Sydney or Melb at the moment has to have rocks in their head I reckon, especially with a long term view. Anyone not coping or barely coping with repayments at the moment is in for a rough ride as it'll only get worse.
The Keating comparison is a good one because we're in the opposite scenario now. In the mid 90s interest rates were falling from massive highs as wages and house-growth rose so on a macro scale repayments became more affordable for those already in ownership. Wages loosely followed house-growth too so people weren't left behind.
Now we have interest rates to rise from the bottom in the coming 12-18 months, wages falling and house prices rising, having long since outsripped wage growth. Something has to give it's not sustainable. Good luck everyone!
Hey TB, I have no wish to senselessly argue with you but you are talking about two completely different situations comparing today and when interest rates were 17.5%. You know that as do all the statutory authorities and the OECD when they warn of Australia's seriously over inflated housing market.
If you want to go back in time to the effects government decisions can have on the housing market look no further at the statistical tables showing how house prices started to dramatically escalate (and haven't stopped) after Howard introduced 1/2 CGT on housing investments and later allowed Self Managed Super Funds to borrow money for investment purposes. Comparing this data with the long term trend line on house prices in Australia is most compelling and that information in itself is proof enough Australia is due for a major correction in house prices. Just like every other financial crash many/most will not see it coming and a lot of people will be badly hurt. It is highly possible a crash in housing will see it fold over into the general economy and then Tony we will have a genuine recession unlike the one you frivolously refer to above.
When the collapse happens Tony who will people blame? the government in power at the time? themselves? will they want/demand government assistance or will the government be too busy propping up the big 4 like happened in the US with the GFC?
For all of the above reasons I agree paying off as much as possible off the principal under the current interest rates is a very sound thing to do (assuming you haven't been suckered into one of those interest-only loans by a spiv mortgage broker.
GS, maybe read what Gaz has stated (above 10.45). He has explained better than I. Those that have units bought off the plan then good bloody luck. Blame, well, you can't blame the government. They don't set the interest rate. They don't lend the money. You decide what to buy, where to live, how much to pay. There are checks with foreign ownership but it would good if more accurate detail was available.
GS, having a self managed superfund, it is risky and many strings attached re housing investment - for obvious reasons. The rate comparison was simply to state that housing purchases continued despite the high rates.
I think you will find the 'bubble' is very area specific. As mentioned, good luck to those who bought off the plan a unit in Sydney.
gs. people have been comparing sydney prices against long term growth for nearly 15 years and all this while calling a crash......but it never happens. if its a bubble then it a very very well supported and propped up bubble. which then begs the question - why do you expect it to pop anytime soon?
hey happy, lots of people say that and they have a point. there is too much skin in the game for government and the banks but there are many economists and government agencies that are saying the risks are high. I'm not sure I actually said the bubble will pop anytime soon.
The price is only capped by what people are dumb enough to pay. I'd like to think that in Sydney & Melb surely they are pretty close by now. First home buyers are already priced out in these areas so mainly investors left anyway. Even if prices fall the market wont suddenly crash unless rents fall with it. Who would sell at a loss if someone else is dumb enough to keep paying it off in the meantime?
A dip of say 10-20% seems more likely than an all out crash, and it would be more area specific as tb suggested. In the instance of Sydney with 15% growth last year, to lose 20% is a blip on the radar. If there is an all-out crash I reckon its more likely to be caused by the banks knee-jerk reaction to a dip in property prices and calling in repayments of principal to keep their loan/asset valuations at less than 80-90%. As a result I reckon it'd be hard to avoid a house crash without a recession.
Hey Gaz1799, what do you think the reason(s) could be for mortgage interest rates here to increase (off a historical low) and what sort of increase in rates do you think would start to see widespread heartache? Do you have a view on how wage increases are at historic lows and how that might be corrected?
That's a pretty complex question smiley and perhaps above my pay-grade but i'll see how it goes.
In my thinking, interest rates will only increase in response to the RBA or to risk. I doubt the RBA will budge as people tightening their belts will leave inflation stagnant so the house market will continue to boom. They can only respond to inflation as the house market is the government's problem. The banks are already increasing investor interest rates & limiting interest only loans, or even home loans altogether in certain areas.
If there is a drop in house prices of 20% in Sydney it couple ripple right through to regional areas, although perhaps only 5-10% or less. Investor confidence will be shaken and sellers will be keener to negotiate price so it'll be self-fulfilling and the media will end up feeding it one way or the other. Who knows what percentages we could witness from there its very speculative.
As far as interest rates & heartache, I'd say there are already a lot of individuals and small businesses out there struggling. A 25 basis point increase may be only worth 70 bucks a week but it adds up & I think it'll be the banks trying to further reduce their exposure by calling in principal that breaks the camels back. Lets not forget that spending is already being reduced by a lot of households so there is less cashflow available for businesses as a result (on a macro level - think retail, renovations, christmas etc). Less available cash makes things worse for everyone.
A lot of small businesses are borrowed against the family home, and a lot of employees of these business are also home loaners. I reckon regional areas will cop it first as when some small businesses fold there's less people to buy the local houses so prices plummet, then it'll unnerve the banks who will ramp things up. In SA its already happening in Roxby Downs & Whyalla to name a few. I reckon regional areas are often the yellow canaries in this respect.
If you're wondering when it may happen, just pay attention to your super fund and other large institutions. Once they start reducing exposure to real estate the balls already rolling. House never loses & all the mum & dad "blockheads" will be left holding the baby while the big guys quietly move on. First home buyers will have buckleys & if their parents went guarantor good luck to them. Already a few jitters in the apartment market in Sydney & Melb.
It's all quite alarmist I know but its quite serious. House prices probably won't crash by much but the banks will make life that hard to buy one that prices will come down one way or the other. So in regards to interest rates rises and heartache its more a question of buyer confidence and lender confidence. If the market appears to be retreating they will begin asking for 30-40% deposits and stupid shit like that to cover them on 20 year+ loans (a bit out-there I know but the logic stands). But then who's buying if it's that risky? Only idiots I reckon.
I can't see any way around the slow wage growth unfortunately. Either wages MUST go up or cost of living MUST come down. It seems cost of living is rising and wages are going down so we either accept a lower standard of living or have a recession & rebuild. I don't think we can avoid a recession now & I'm convinced we've been in one for a long time, at least here in SA.
I'm gonna throw it out there that interest rates will definitely go up when the ALP wins the election next year in response to more government stimulus. They will also begin the wind-back of negative gearing and house prices will drop and we will officially be in a recession.
This will be the second recession we have to have too as I think it'll be the only option available. The libs are making it worse by ignoring it and trying to reduce tax for the rich who will then just keep on negative gearing. Perhaps this is all a bit negative, but the macroeconomic situation we're facing is actually pretty dire.
Gaz, yeah its complex, I really have no idea but I read and RBA independent of government will increase rates subject to domestic and international events no matter what the government says or wants. Don't understand the connection but some economists are saying what the orange muppet does in the US could impact AU rates. Mates in the building trade tell me there are lots of tightly strung mums and dads with debt to the max so I don't think it would take too many rate rises to see them in trouble. Uncertainty in employment doesn't help at all, if hours or job is lost or maybe a lost of penalty rates all could spell trouble for families.
increasing US cash-rates causes a reduction in demand for the aussie dollar which causes a fall in our exchange rate. the RBA can counter that by raising our own domestic cash-rate. and the RBA boss gets paid a tonne to follow a bouncing ball. its hard work....it goes up, it goes down.
NAB cranking up interest rates independent of the RBA - must be in response to risk. Guaranteed the rest will be following soon enough if they aren't already there. They must know something we don't?
Gaz, GS & others, it's been good to read the discussion.
I'd add NAB may be raising in response to Fed tightening on Wednesday, Aussie banks borrow short term overseas and lend long term into our (RE) market, so funding costs for them could be anticipated as rising.
The end of the housing bubble and Australia's 25 years without a recession will be a story for the ages. One happy thing about the 1990s recession was when it all seemed hopeless, you could always go surfing.
Until then, To Infinity and Beyond!!!
I hadn't even considered the compliance or overseas funding costs Johnno that's good food for thought. I wonder if that's where the increase in US interest rates hurts us then? There's too many moving parts in this machine for us mere mortals.
Hey Smiley, If you read this I came across an article that answers one of the points you mentioned last week beautifully.
"The RBA's reticence about further increases in household debt-to-income ratios is clear when you begin to consider how potent interest-rate rises might be from a debt-servicing perspective,'' McIntyre said. ``At the current level of debt-to-income, we estimate that three to four 25 basis-point rate hikes would deliver a bigger increase in debt-servicing costs for households than 10 to 11 rate hikes did in the mid-1990s.''
Yep Gaz, that will certainly hurt us, or provide pressure to do so. How AUD responds then presents further potential for whammy.
Imagine the world's financial flows as a body, a circulatory system. New York and The City are the heart and lungs. When warm (lowering interest rates), blood flows to the extremities like Australia (maybe a forearm) and they boom. When cold (increasing interest rates), the body constricts and blood flows back to the core and the extremities go cold (think of loans being called in, increasing costs of obtaining capital, higher risk required for a similar yield). That's how I picture it in very simple terms, anyway. Sucks to be on the periphery.
2008 was a cardiac arrest, and I can vividly remember 20+ ships off the NW all swinging idly around their anchors as none could get a letter of credit for a load of ore...
1893 or 1894 IIRC, all loans lending for land/farms in westward expansion in the US were called in... it has happened before...
Also, when someone above says the RBA has a pretty easy job, taking a look at the 90 day bill on the SFE (price inverse to yield) gives a reasonable guesstimate for what may happen next! Chicken or egg, which sets the other?
Slightly off topic, let the housing leviathan roll on.
Gaz, what we are hearing is that house prices in Sydney and Melbourne are crazy high while there are big question marks over apartments everywhere with banks actually not lending on them in some markets (Brisbane, Sydney & Melbourne) and in places likes WA house prices have fallen. We also know that people are in debt to their eyeballs and wage increases are at historical lows and with the penalty rates decision will most definitely fall for many casualised low income workers.
So your article/advice of 3 to 4 x 0.25% increases before mortgage stress kicks in rings true.
Further, the NBA just increased rates but more so for investors/speculators. The other banks will follow.
If there is a property crash I'm thinking it might start in apartments or certain say Perth suburbs where people have seen the value of their (over priced) purchase evaporate and with job loss or uncertainty the owners cannot meet the repayments or the bank just calls in the loan. The trick will be to limit the damage but if the market smells blood all hell will break loose.
Old mate worked in Brisbane for a big accounting firm in the receiverships team until two years ago. Worked full-time on selling commercial properties in SE Queensland and the Goldy after prices crashed and the property valuation was less than the book value of the mortgage. But get this, many mortgage holders had there properties sold from under them even thou they could continue to meet the monthly repayments. Many mum and dad businesses went broke needlessly all because the banks were protecting their loans/profits.
Do you think they will act differently with house mortgages if valuations drop 5-20%? I'm figuring not, they have a legal responsibility to their shareholders and the chaps in the government love letting the market decide these things.
Johnno I've noticed a lot of volatility in the 5-10 year forecasts over the last 12 months as I normally check a few banks/RBA etc after each rate change to see how the mood changes. The big institutions normally give their future intentions away one way or the other and you're right about the tail possibly wagging the dog!
Smiley I've actually seen some of that stuff first-hand as I've had clients/friends that borrowed interest only in the 90's on commercial property then rode the real estate boom to the top who are now facing calls from the bank to rein in their principal/loan ratios.
Saw a story today about people bulk buying houses from developers instead of apartments to get a better price as apartments are now on the nose. So they invest $600-$700k with their trustworthy developer instead of $300-$400k. What could possibly go wrong there?
Now heard banks have a "black list" of certain postcodes where they have determined the likelihood of mass mortgage defaults is high. The banks are either now not leading for property in those postcodes or requiring a much higher deposit.
Gaz, developers! old mate has lost his contracting job of 10 years to a crew of foreign workers who have no trade qualifications. The recalls are so high old mate is getting calls from the developer to "please" come back and fix stuff ups. Old mate told them to get stuffed. Those spec houses areas 70 kms down a freeway from the CBD are full of people with debt to the eye balls, reckon buying there would be as risky as apartments and the build quality would be very poor with so many foreign unqualified people working on them.
Haha yep I know the ones Smiley they have the "rent-to-buy" schemes with just a $2,000 deposit after the first home buyer deals going on. Often on a 300 sqm block or less with a single roller door garage that would barely fit a yaris and the front door is about 6 feet off the footpath!
Articles right now on The Age online about heads of ASIC and APRA calling the housing market "high risK" and a "bubble".
This is a recent article about house prices that gives a short-term future outlook, especially comparing the Sydney/Melbourne housing markets against other capital city housing markets. It examines supply/demand side as well as apartments vs houses. Enjoy.http://www.ampcapital.com.au/article-detail?alias=/olivers-insights/marc...
This morning on ABC Radio Melbourne this is what I heard.
20% of all house sales in Melbourne are Chines buyers
A Real Estate agent from Waverley, an eastern suburb of Melbourne advised that since 2015 40% of all sales in his Real Estate Agency were Chinese buyers and in the last month 15 of 20 (75%) sales have been Chinese buyers.
Canada had similar buying patterns from Chinese nationals and they have now banned Chinese from buying property which is placing even further pressure on Australian markets from Chinese buyers (confirming what I have been told by Canadians I meet last year).
IMO if Turnbull and our Treasurer are so concerned about the supply of houses this is one area that they could do something about right now, today and not accuse the States of causing a supply problem.
Too right GS I hadn't heard the Canadian info before but doesn't surprise me.
Unsurprisingly we won't hear a peep from the libs on this. The person who has the most to lose from all this by banning Chinese rich folk from investing in Sydney is big mal himself with his huge overpriced point-piper waterfront mansion probably soaking up 10-20% of his personal net wealth.
Terrance, interesting article he definitely confirms a few of the points mentioned earlier. I must admit I do find it a bit self-serving for a super fund to say we need to see a recession before a housing crash, as if nothing can ever happen without first experiencing 2 quarters negative growth. AMP want people to invest money in them however no one would be trusting them with their hard-earned cashola if people thought the market was about to collapse. Bank cash is guaranteed not so for managed funds. I also trust ABS stats about as much as thin toilet paper.
If the consensus is that units & apartments are cactus and there's hardly any new land to be supplied in the sought after parts of Sydney & Melbourne then by my logic the bubble must be complete?
If you happen to look at the buyers of Mirvac's development in west of Sydney, then yes, the majority were foreign buyers. Note, that these purchases were specifically reserved for first home buyers.
The reality is that government earn a motza from stamp duty and hence are leaving this alone. Also, note these are not 'investors'.
Gaz, he didn't say that "'we need to see a recession before a housing crash". He said:
"To see a general property crash – say a 20% plus average price fall - we need to see one or more of the following: a recession - which looks unlikely; a surge in interest rates - but rate hikes are unlikely until 2018 and the RBA will take account of the greater sensitivity of households to higher rates; and property oversupply – this would require the current construction boom to continue for several years. However, the risks on the supply front are high in relation to apartments.''
Bit of a difference.
Not so sure it is self-serving, yes AMP have a bank (a very tiny bank compared to the big four (where AMP funds will have exposure). Te property that AMP super/investment funds invest in don't have direct residential property exposure (potentially a small amount on listed developers, etc.) but is primarily office, industrial and retail.
Anyway, hoped the article gave a bit more insight.
i don't pay much attention to the predictions and statements of most or any of these 'economists' and their little articles, i believe nobody really knows whats going to happen and the track record of these guys over the last 10 years shows they don't know whats going on but one point id never thought of is in this recent article in SMH.
'Incompetent state governments have created a premium for inner-city housing, where buyers can avoid paying the indirect costs of long commutes.'
id never really considered the cost of the commute before but without doing any hard calculations, i think this statement has some merit as its a monstrous cost. often overlooked as a car overlaps into personal life but if you actually sat down and worked it out...
first time one of these hacks has said something worthwhile in my experience. i still dont believe they have proved a point but at least we can take something from it.
Geoffrey, bit weird, you don't listen to economists, but Jessica Irvine is an economist. And she pretty much wrote exactly what was in the article I posted here a week ago, from another economist.
I think you might more influenced by economists than you think.
Economists are sneaky that way.