House prices

Blowin's picture
Blowin started the topic in Friday, 9 Dec 2016 at 10:27am

House prices - going to go up , down or sideways ?

Opinions and anecdotal stories if you could.

Cheers

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udo Thursday, 4 Aug 2022 at 9:34am
velocityjohnno's picture
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velocityjohnno Thursday, 4 Aug 2022 at 11:28am
bonza wrote:

“Mr Fraser said…there was very little scientific literature around in 1993,”

“Stiglitz responded: “First let me say, where did that number 2 to 3 per cent come from? It was pulled out of the thin air. “

https://www.afr.com/policy/economy/how-a-nobel-laureate-got-australian-e...

Fuck I find this infuriating

It's a bit like protecting Great White Sharks when you have no idea what the actual population numbers or fecundity rates are. Ah, science in the 90s.

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bonza Thursday, 4 Aug 2022 at 11:45am

Not sure that's the right analogy, but I get your point.

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andy-mac Thursday, 11 Aug 2022 at 7:09am
udo wrote:

https://www.realestate.com.au/news/eyewatering-price-for-beach-shack-bui...

Use to live in Arthur St. Great area in 90's early 000's.

AndyM's picture
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AndyM Monday, 15 Aug 2022 at 11:04am

Florid descriptions of issues which we're already aware of, but what are the consequences beyond rising prices and social instability?
These have been flagged for a long time.

Credit for use of the word otiose.

DudeSweetDudeSweet's picture
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DudeSweetDudeSweet Wednesday, 17 Aug 2022 at 7:05am

Head of Ray White Byron Bay claiming prices in the area are down 10%.

That might not yet eradicate the increases of recent times but it takes the wind out of the theory of East Coast Exceptionalism where prices never go backwards.

https://www.smh.com.au/property/news/the-towns-where-the-sea-change-drea...

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freeride76 Wednesday, 17 Aug 2022 at 8:02am

hhhmmmm, maybe.

When you are talking insane rises over the last 3-5 years of over 100% then a 10% drop looks like a very, very mild correction.

We'll see what happens next year when immigration skyrockets again.

I predict that 10% fall will quickly be erased.

My mate, who is getting divorced is about to put their home on the market, with the real estate still predicting an eye-watering price for it.

we'll see what happens.

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donweather Wednesday, 17 Aug 2022 at 8:22am

https://thenewdaily.com.au/finance/finance-news/2022/08/17/property-pric...

It’s starting and I love how they’re forecasting price rises again in 2024. Wasn’t this supposed to be when rates were starting to rise!!! Lol

The key paragraph in that article is:

“With the cash rate target headed north of 2 per cent, ANZ said mortgage borrowing capacity will decline by more than 20 per cent by the end of the year and by nearly 30 per cent during 2023.”

What do you think a 30% reduction in borrowing capacity will do to the housing market!!!

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velocityjohnno Wednesday, 17 Aug 2022 at 12:04pm

meanwhile in the UK

https://www.thetimes.co.uk/article/50-year-loans-so-normal-people-can-bu...

For The Term Of His Natural Life

AndyM's picture
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AndyM Wednesday, 17 Aug 2022 at 12:53pm

The new serfdom (see Class System)

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donweather Wednesday, 17 Aug 2022 at 8:47pm
velocityjohnno wrote:

meanwhile in the UK

https://www.thetimes.co.uk/article/50-year-loans-so-normal-people-can-bu...

For The Term Of His Natural Life

Paywall

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velocityjohnno Wednesday, 17 Aug 2022 at 10:36pm

title gives it away

more UK, retail inflation 12.8% surprised to the upside, I wonder what blunt stick could be used to combat that

oof

freeride76's picture
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freeride76 Thursday, 18 Aug 2022 at 5:32am

Most of that is energy cost.

so, nothing.

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velocityjohnno Thursday, 18 Aug 2022 at 3:09pm

That could be the case. This source seems to think it's spread beyond fuels into food:
https://www.bloomberg.com/news/articles/2022-08-17/uk-inflation-rises-mo...

"Rising food prices made the biggest contribution to the month’s increase, indicating inflationary pressures are spreading beyond energy. Investors moved to price in 2 percentage points of increases in the BOE’s key rate to 3.75% by May next year."

and

"Core inflation -- excluding energy, food, alcohol and tobacco -- accelerated to 6.2% from a year ago in July, more than the 5.9% reading that economists had expected."

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donweather Thursday, 18 Aug 2022 at 7:51pm

Fuel surely plays a massive part in most prices rising given its used in production and transportation.

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dazzler Thursday, 18 Aug 2022 at 8:42pm
donweather wrote:

Fuel surely plays a massive part in most prices rising given its used in production and transportation.

In economist speak “oil push inflation”

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Robwilliams Thursday, 25 Aug 2022 at 4:24pm

300 home builders, families and young couples? The fallout continues.

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velocityjohnno Saturday, 27 Aug 2022 at 6:17pm

Wrap up of Fed Chair Powell's short speech at Jackson Hole:
https://www.zerohedge.com/markets/pain-coming-pro-powell-pivot-positioni...
It seems he does want to follow through on continuing to raise rates hard, as he said in the initial interview I linked here months back. Market positioning for a pivot got pantsed. Important to Oz, as it's the Fed's rate that drags the RBA, kicking and screaming, higher. They own Bartertown, after all.

kaiser's picture
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kaiser Saturday, 27 Aug 2022 at 8:18pm

This is why the commentary that rates will be cut after the tightening phase will actually blunt the impact of the raises in the first place, meaning they may need to go harder or for longer. And to assert that any hikes will overstep to the point they need to be corrected by drastic easing? If anything and by design, rates will hit the level that is required to keep inflation/ growth at the correct pace. Once that happens, the intention is, they’ll stay at that level. The only way they’ll ease after raising is if this state of market and consumer denial endures, and they have to go nuclear to get the message through.

Since the rates went up I’ve only seen an increase in spending on discretionaries eg entertainment and tourism.

0.1, 0.45, even 1.5% is surely not to be seen again for a long time

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velocityjohnno Sunday, 28 Aug 2022 at 7:43pm

Here you go Kaiser, I found these guys' take astute - with some eyebrow raising stats like the 774 CEOs and 89% of revenue ploughed into buybacks (edit: this will look like extremely foolish capital misallocation in hindsight). I also note the energy/70's allegory and the looks back to March 2000.

"Today’s restrictive Fed policies in a rapidly deteriorating economy are the preconditions for a steep recession. Contrary to the unprecedented monetary and fiscal support we had following the last economic downturn, we are currently experiencing a major withdrawal of liquidity at a time when corporate fundamentals are starting to contract. Despite the deepest yield curve inversion in decades, the Fed is raising rates at its fastest pace since 1984 as it prepares to shrink its balance sheet by $90 billion per month, starting next month. Already, in the last three months, M2 money supply also contracted by its largest amount in 63 years!"

https://www.crescat.net/a-vicious-stagflationary-environment/

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sypkan Sunday, 28 Aug 2022 at 10:05pm

"This is why the commentary that rates will be cut after the tightening phase will actually blunt the impact of the raises in the first place, meaning they may need to go harder or for longer. And to assert that any hikes will overstep to the point they need to be corrected by drastic easing?..."

yep

they clearly want (need) a shock effect to get the message through...

then they go and undermine it all talking the effects / course ahead down

gotta get their dudes on the same page

which is almost impossible with biden fantasy land running the show...

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velocityjohnno Monday, 29 Aug 2022 at 10:11am

Just want to clear up the Bartertown allegory - Fed is Master, USD is Blaster and together they run Bartertown. At times it might look like Tina or her sycophants are in control, but MasterBlaster controls the flow, so runs Bartertown. This is all prior to 'two man enter, one man leave' and I can't see a Max who will defeat Blaster at this stage... Max as BTC, Gold, or CNY - I just can't see it at present. 90Bn per month withdrawn from the flow - who runs Bartertown?

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donweather Monday, 29 Aug 2022 at 11:40am

I’m still expecting one last BIG hurrah later this year before the world crashes in 2023.

Oil/energy is the only thing delaying this BIG hurrah. And coming into northern hemisphere winter the Ukraine/Russia debacle needs some form of resolution before the oil/energy stops driving inflation and hence means Fed will have to stop rising interest rates.

AndyM's picture
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AndyM Thursday, 1 Sep 2022 at 9:51am

At the same time, as per the link below, some properties are selling well.
As usual it's hard to know how this will pan out.
FWIW, sale prices round here don't seem to have faltered much at all though I expect volume of sales have dropped.

"While prices are falling fast pretty much across the board, it is not yet stopping homes from changing hands.

In the end, the auction was a contest between two other bidders and the property sold for $1,605,000, which was about $200,000 above the reserve, to an investor who lives nearby."

https://www.abc.net.au/news/2022-09-01/house-price-plunge-continues-core...

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AndyM Thursday, 1 Sep 2022 at 9:54am

..

DudeSweetDudeSweet's picture
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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 9:55am

There’s still a lot of denial out there. Particularly amongst those who had the hardest belief in the exceptionalism of Australian real estate. Some crew don’t accept the ship is going down until their shoes get wet.

freeride76's picture
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freeride76 Thursday, 1 Sep 2022 at 9:55am

Still looks like a mild correction to me, in the context of the last 5 years.

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bonza Thursday, 1 Sep 2022 at 10:03am

yep. nothing to see here.

DudeSweetDudeSweet's picture
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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:07am

Your whole proposition was that East coast house prices don’t go backwards because…reasons.

They’re going backwards. Reasons turned out to be hollow. So what’s your belief that the average punter will soon return to ever-increasing piles of debt beyond their ability to repay?

Pretty sure the 50 year / 100 year / inter generational Al mortgages aren’t far away but I also believe there is impetus to rid the world of private property ownership for the plebs.

Who knows?

All that’s certain is that it’s not a good time to be an average Aussie with $800K of debt hanging over your family.

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freeride76 Thursday, 1 Sep 2022 at 10:09am
DudeSweetDudeSweet wrote:

There’s still a lot of denial out there. Particularly amongst those who had the hardest belief in the exceptionalism of Australian real estate. Some crew don’t accept the ship is going down until their shoes get wet.

I guess we will see.

3 years ago, these tiny blocks were estimated to be worth $350-400 K.

Lot 326, 78 Hutley Drive, Lennox Head, NSW 2478
450

Residential Land
$940,000

Almost a million, just for the block.

SW facing. Cold in winter, hot in summer.

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freeride76 Thursday, 1 Sep 2022 at 10:11am
DudeSweetDudeSweet wrote:

Your whole proposition was that East coast house prices don’t go backwards because…reasons.

I said they don't go backwards long term.

There might be some dips and mild corrections but the $500K family home on the East Coast (5-10 years ago) that is now worth a million, will never be going back to $500K.

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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:17am

You can bet that just as Bernie Madoff was about to get arrested there was still crew desperately trying to round up funds to invest with him.

Faith is like NYPD Detective Lieutenant John McClane ….it dies hard

AndyM's picture
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AndyM Thursday, 1 Sep 2022 at 10:21am

DSDS, what's your definition of the ship going down?
10% dip?
20% dip?
Complete collapse and it's time to buy seeds and fishing lures?

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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:24am
freeride76 wrote:
DudeSweetDudeSweet wrote:

Your whole proposition was that East coast house prices don’t go backwards because…reasons.

I said they don't go backwards long term.

There might be some dips and mild corrections but the $500K family home on the East Coast (5-10 years ago) that is now worth a million, will never be going back to $500K.

After the Victorian land boom/ bust of the 1880’s it took decades for prices to recover., so I suppose you’re correct in saying that prices won’t go backwards LONG term. How long is the question.

Once crew have been seriously decoupled from this confected culture of venerating real estate speculation, it’ll be a slog to rebuild the confidence needed to ever see the sort of outrageous mania experienced over the past twenty years.

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freeride76 Thursday, 1 Sep 2022 at 10:26am

Not faith, facts.

There's plenty of graphs out there which go back decades.

Through depressions, world wars, recessions, Global Financial Crises and pandemics.

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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:26am
AndyM wrote:

DSDS, what's your definition of the ship going down?
10% dip?
20% dip?
Complete collapse and it's time to buy seeds and fishing lures?

I’d call a return to historic norms of 3-4 multiples of annual income for a mortgage as a collapse. Definitely a worthwhile ambition.

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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:32am
freeride76 wrote:

Not faith, facts.

There's plenty of graphs out there which go back decades.

Through depressions, world wars, recessions, Global Financial Crises and pandemics.

It’s all a bit trite if you’re discounting the carnage suffered through real estate wealth destruction during these periods. Of course it’s all good to show a graph which shows a dip in a rising line representing the Great Depression.

This does not do justice to the many people shouldered with debt who literally couldn’t give their houses away during this period as their low worth combined with routine real estate taxes rendered them a negative investment.

Places abandoned. Families on the street. Destitution.

Yet the historical graph shows house price growth on a slow climb when the granular detail is overlooked.

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gsco Thursday, 1 Sep 2022 at 10:45am
freeride76 wrote:

Not faith, facts.

There's plenty of graphs out there which go back decades.

Through depressions, world wars, recessions, Global Financial Crises and pandemics.

Aus property prices and interest rates going back >40yrs:

US real home prices:

US home prices relative to median income:

US (similar scenario in Aus?) appears to be in the most gigantic property price bubble of all time.

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DudeSweetDudeSweet Thursday, 1 Sep 2022 at 10:39am
AndyM's picture
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AndyM Thursday, 1 Sep 2022 at 10:43am

DSDS yeah that'd be a collapse, and the end of our current understanding of society.
With an average (not median) national income of $93 500, we can see where 3-4 times that figure gets us.
It's totally unfathomable.
A worthwhile ambition maybe, and one that I was hoping for and pretty much expecting through the 90s.
But it didn't happen, quite the contrary.
And I can't see it now.
And if in doubt, firehose in a couple of hundred thousand migrants a year to prop things up.
It hurts for me to say that, it's ugly but true.
The government and the powers that be will do anything to prop up the housing and building industry.
There will be missteps but even a 20% dip seems unlikely.

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kaiser Thursday, 1 Sep 2022 at 10:46am

A drop in the volume of listings will mute the effect for the short term. Supply side reacts as demand side drops a bit. It’s a symptom of a tightening rather than a collapse. Only when something drastic happens will we see the herd move as one. When selling isn’t a choice but a necessity. Investors will jump first. Think margin calls, currency collapses, business closures, crypto crashes, rampant(er) inflation. Feels like there’s enough in the tea leaves to imply what lies ahead, but nobody is reading them.

The wave of money that has washed across the economy has seen a huge amount of speculation. It’s been a gold rush across EVERY asset class. Even ones that have been invented during said rush (ie crypto).

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AndyM Thursday, 1 Sep 2022 at 10:54am

"Feels like there’s enough in the tea leaves to imply what lies ahead, but nobody is reading them."

What do you reckon kaiser?

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kaiser Thursday, 1 Sep 2022 at 11:14am

I’m baffled that we have seen such an outflow of people from CBDs, with such low immigration to fill those ‘vacated’ properties, that we haven’t seen corrections in capitals sooner. And bigger than what we’ve seen so far. Anecdotally there has been as much investor buying as owner occ in the regions. If they’re leveraged across multiple asset classes, then their fate could be linked to performance in those classes. Equities has already fired a warning shot, crypto stared briefly into the abyss. Prop markets worldwide are feeling the pinch, but we carry on BAU?

I just feel like there’s strong denial. I’m sure people will do whatever necessary to hold property above all, but the cost of holding is gonna suck a lot of money out of the broader economy. And at the same time central banks are pulling money out. The number and variety of discretionary enterprises out there that rely on flippant expenditure is alarming.

To be honest, I don’t know what I reckon, but surely the music stops at some point. It has been a crazy period of ease and excess.

I think it was VJ who pointed out that everything eventually returns to the mean or long term trend. That in itself could be a big correction, given the run we’ve had

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freeride76 Thursday, 1 Sep 2022 at 11:06am

Re: GSCO's graph above.

Clearly shows availability and cost of credit shapes the curve.

Reason that red line keeps going up though, is demand.

People need a roof over their head.

Australia sits - a wealthy, democratic country with education, health, surf, climate, food etc etc- at the bottom of the most populous region on Earth. Asia.

Our fastest growing source of immigrants is India, followed by China.
Expect to see Indonesia join that list as they develop a middle class.

150-200000 people a year entering Aus need a roof.

And most of Aus is barren, and arid.

Which leaves a thin strip around the East Coast.

Demand for this thin strip, especially if you want surf, schools, hospitals, cafes etc etc isn't going anywhere.

Thats why the line keeps going up, despite short term dips and corrections.

Short of Australia shutting down immigration and allowing prices to become tied to wages again, it will remain tied to large demand forces involving billions of our near neighbours.

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kaiser Thursday, 1 Sep 2022 at 11:17am

Canada?
NZ?

Worthy algorithms FR. But it’s playing out right now. I reckon we’re not fully immune

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donweather Thursday, 1 Sep 2022 at 11:21am
freeride76 wrote:

Re: GSCO's graph above.

Clearly shows availability and cost of credit shapes the curve.

Reason that red line keeps going up though, is demand.

People need a roof over their head.

Australia sits - a wealthy, democratic country with education, health, surf, climate, food etc etc- at the bottom of the most populous region on Earth. Asia.

Our fastest growing source of immigrants is India, followed by China.
Expect to see Indonesia join that list as they develop a middle class.

150-200000 people a year entering Aus need a roof.

And most of Aus is barren, and arid.

Which leaves a thin strip around the East Coast.

Demand for this thin strip, especially if you want surf, schools, hospitals, cafes etc etc isn't going anywhere.

Thats why the line keeps going up, despite short term dips and corrections.

Short of Australia shutting down immigration and allowing prices to become tied to wages again, it will remain tied to large demand forces involving billions of our near neighbours.

I agree with your philosophy here Steve but it assumes one big thing. The world economy continues as we know it today. With a world economy crash who can afford to flee Asia and immigrate to Australia AND buy a $1m house?