Forum Replies Created
Yeah many people have said that the growth that would support the “never ending Boom” was not supported by fact.
Thing that interests me is the huge number of apartments and town houses that are completed or nearing completion in the Sydney NW (middle class suburb). Should be interesting.
In some cases whole blocks with only a couple sold, and the Ute with the wheel barrow and pile of sand out the front of the sales reps office (that never changes) so as to make it still look like it is under construction.
Timely post.
Have a client going out the back door. Draws down 150K per year and business has made 30K to 90K.
AND we now have problems, ….who would have thought.Last year, owing ATO 100K, creditors 100K more than debtors, Overdraft maxed out, no equity left to borrow on house, bought 2 new 60k cars.
Go figure.Originally posted by kaloni:The index measuring whether now was a good time to buy a major household item fell by 18.2 per cent, Mr Evans said.
Australian consumers were also much less confidence about housing, with the index measuring whether now was a good time to buy a dwelling falling by 13.3 per cent.
“
It might not just be the effect of the expected 1/4% rise, this time, but also the reality that this boom was like all others and has come to the end.
People are now seeing their equity shrink for the first time since 1991, and for many they have never experienced this before, they may now need to readdress their plans for retirement, new cars, kids private schools etc. Part of that planning may invoved marginally cutting spending.
I could go into the next steps but we have done it all before.
Originally posted by MichaelYardney:
“Some areas have dropped in value by 40%” says the article including Frankston South (a drop of 19%) an area mentioned in a number of posts in this forum.We have discussed before how statistics lie and how these figures are skewed by the type of property sold.
Agreed about stats but it works both ways. Selective stats help create the feverish atmosphere of the boom, it will now support the depressed atmosphere of the “gloom”.
It goes both ways.
Originally posted by brisbanescouting:
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However its still very cheapAre you sure, thought the Sth Coast has already dipped.
Vincentia near Batemans Bay is back down to mid 2002 prices, we had a divorce valuation (a lot different to agent valuation ) and it had come down 27% from owners valuation, back down to his 2002 purchase price.
There are differences in area to area, but ….if you wait it might just get cheaper.
Agree that human nature drives the economy. I think supply and demand is too simplistic.
A Russian economist, can’t remember his name came out with a theory in the 1920’s that there is a lifetime cycle (around 70 years for major crashes) and it has mini cycles within each macro cycle.
All cycles were based on human reaction to what people had done in the previous cycle.
Originally posted by femaleage20:so what now?
do all good things come to an end???
Yes the economy has done very well, but what has been the driver. Exports, hardly look at our balance of payments deficit. We (well, not you or me but apparently everyone else ) have been buying cars, luxury goods, doing a reno on our 10 yr old kitchen and generally having a good time. How has this been done. By the profits our economy generates. Not really but thru debt.Lots of money flowing round, mostly borrowed from O/S, but we have not actually been doing anything productive.
We now owe so much to the rest of the world that I’m guesssing they will start jacking up our rates as they down grade our credit.(not dramatically )but enough to make a rate cut harder. Although our rates are at historical lows here, I understand that by international standards our rates are high. As international rater move back to a neutral setting, ours should adjust up, although they will probably let the Dollar slide a little. Problem is that once it slides it tends to freefall.
Now isn’t that an interesting thought, economy starts to slow and what may we get, but higher rates.
Lets all hope the US keeps blowing their deficit then no one will notice us and everything will contine…..
Originally posted by obiwan:People cannot see how the market will move back to equilibrium. They are still focussed on missing out on profits at the turning point rather than preserving capital. It is inconceivable that prices correct in a big way, and yet in the back of their minds they know they cannot remain here. I think their will be some more treading of water, anyone who missed out on the upswing will buy on this dip. There will be a dead bounce, more entrants will enter who have missed out. Until there are no buyers left. People will also continue to move further afield to buy +CF in the few remaining pockets to reduce their cognitive dissonance. This will continue the ripple for awhile but they too will die as the economy craters.
The market when it does recover will be in melbourne rather than sydney as they seem to be about 2 years ahead in the cycle. I do not expect prices to trough in Melbourne until at least 2007 and in Sydney until 2009. I expect that prices will correct and go below the historical averages. At the next turning point people will be fixated on preserving gains, they will be vomitting at the thought of property and wondering, how can it possibly go up in the next 5 years ?
A bubble breeds many geniuses, the children of the bubble will need to die in the wilderness before another one can emerge.
Very nice, agree that right now ppl cannot conceive it going down.
Also beleive that when the dust eventually settles this may breed a young generation who will view property investment as poison after seeing so many shovel money into big mortgages, who many years later fold at break even or loss.
The saying will then be “I should have rented ” and it’s the governments fault, … but lets not go there.
Agree a very unusual boom, and will not be a “usual” correction.
However this boom had some wonderful moments.One of my other favourites always was “property doubles every seven years ” yeah…
What can I say but very good, six months ago on this forum you would have been buried by the avalanche of arguments backed by the rationale that you argue against.
It will be interesting to see the respnse.
Welcome to the board (or is it really Yack under a new name ).Just joking Yack.
I really like 3. as if the market stalls the collaspe of the investment, building, broking industries will trigger a big shift in public sentiment and should cut consumption dramatically.
Overseas they have been saying for two years now we face a recession between 2005-2008, caused by our debt to GDP ratio.
What the recession does to sliding property and confidence .. won’t be pretty.
Overall can’t arguwe with one of em. My favourite always was “Real Estate can’t go down ” Yeah….
Originally posted by marsden:It would be interesting to hear the research that puts the next boom at 2010 or thereabouts! There are many factors to the contrary; baby boomers retiring, birth rate low, shifting world economy, migration factor and Australian’s very low retirement savings. The NSW govt has placed a land tax on property other than a PPOR and we are all aware of the constant threat of a interest rate increase.
I am unable to support the property cycle theory blindly and suggest there must be a reason for it to trigger if, in fact, we are ever likely to experience another boom.
We all hope that things will go well but with many thousands of dollars involved there must be a reason for the optimism.Thank you. Agree totally.
This was NOT a normal cycle. It had several unusual factors.
1. Historically low rates.To a market conditioned to 8.50-12 %2.The property investment marketeers, sending a horde of naive investors in search of the promised pot of gold
3. Special incentives to stop the building industry collasping after GST
4. And the biggest, the dereugulation of the banking sector.
8 years ago I could only borrow 450K on 180K income. Now I have seen ppl borrow 360K on 65k and probably many who haved borrowed significant amount with very little real income.
Interest is now a greater % of household incomes than ever before, and we are facing the years when at least some of the boomers must unload.
Some say the market has adjusted softly. It hasn’nt started to adjust. It will only adjust when the perception is that the boom is definitley gone. With the REI talking of a bounce in September many thought the correction was finished. Dream on.It will only adjust when the media realises that doom and gloom will sell more papers than “how much your suburb has gone up this year”. That time is just around the corner.
Will be interesting times ahead.
Originally posted by Monopoly:I’d suggest you hold onto it for at least another 4 months to take you over the 12 month threshold, which will make you eligible for the 50% CGT discount. If you sell under 12 months, you will be liable for the full 100% CGT bill.
If you hold for another 4 mths a Cap Gain will be the least of your worries.
And I’m not talking Sydney this time. Big house two Storey modern . Client bought just outside Jervis Bay, Great Water views etc. Bought 550K mid 2002 spent 10K on it got it valued for a divorce sep, and it came out at 580K.
We were pushing for a high value but valuer said on comparable sales that was tops, and from what we saw could not argue.
Waterfront at 700K. Great time to buy, but guessing it will get better.
Originally posted by Lucifer_au:MMmmm….
A bust in 2008… I don’t think so, mainly because of the baby boomers. Right then they will be earning quite a high income so why would they sell their properties?
Call a redundacy, doubt more than 50& of BBers will have the luxury to choose when they retire, the other form of redundancy is to little work em till they break.
I’m an accountant BBers are my clients and in recent months seen two big income earners (250 + 150 )phased out 5 yrs before they wanted to, and one just give up.
We then play crunch the numbers.
Originally posted by AusProp:and obviously as the population growth continues and inflation marches on and we experience growth it would be more surprising if gross debt actually reduced. They could have that article printed up and ready to run on a regular annual basis! actually is the billion they talk of 100 million or 1000 million? at 1000 million it is still only $38000 per head of population which sounds very low – do these numbers exclude mortgages or something?
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
Sorry missed this first time but it is relevant, as they are talking about debt as a % of average personal income.
In 20 yrs it has gone from around 45% to 120+&. This is easy to measure as it is apples to apples.
Michael got to agree. Economists call it the wealth effect. When you feel wealthy because you have more RE equity or your share portfolio climbed (US in the 90’s ) you feel more wealthy and spend accordingly. Economy is fine.
Now when the equity shrinks ppl cut their spending and the economy slumps.The US share market peaked at 11,700 back in 2000 and is still bouncing between 10,000 amd 10,700.
Even though yields are up etc. A four year slump has never happened before, but the last boom driven by so much media exposure was also totally new.We slumped before in 1983 ,Gold Coast Unit off the plan at $160K that could not be sold for $80K,
and I remember Carla Zampati buying a Double Bay property for high 3Ms and dropping over a Mil when sold in less than a year.Now this economy is going to struggle with the boomers phasing out, most boomers are underfunded for the lifestyle they wish to enjoy and if property stabilises a lot will have been caught out living beyond their means.How they scramble to make up for it will be interesting.
Originally posted by richmond:
[br they’ll be too far from kids/grandkids/city entertainment etc.HEALTH, most ppl over 60 don’t want to be too far from their specialists, after all, the health of a lot of boomers is pretty poor, once you take their meds away.
anyway Good post,
Sorry missed this, on one property the owner wanted $879K knocked back $810K held out and 9 months later can’t get a sniff at $775K.
Sydney lead the market on the way up and will lead on the way down. Despite the REI saying its the 20klm band from the city that has softened from what clients tell me its pretty wel apread.
Balmain, Menai, the Hills and Campelltown (thats pretty well N S E W ) all have property listed at 10-20% down on either original listed price or original owners expectations, and for severaql of these examples there is still zero interest.You don’t have to sell at these prices amd many ppl are resisting for now and holding out, but next year l0oks like more of the same. Some will have to sell, for reasons of age, family break up job change etc.
Will these then be bargains, or their correct price.As for those investors who bought off the plan and have yet to settle….owch!!
Originally posted by stifla:, . My question is should we hold off on buying an investment property and see how the market goes?
It depends what everyone else does. If they all hold off the market goes down, if they all come back the market goes on. It’s your money and your pick.
Wish I knew.
He has a lot of backers. The industry is is still hyping it won’t be till the negative media hits that a slide will take hold.
Then people will wait.
How steep is the slide will be effected by external factors.
But think about it. If a property in Long island NY has 3 bedrooms and 2 storeys and is worth the same as a smaller house in the outer suburbs of Sydney, (400 US vs 500Aus) either NY has to catch us or we have to go down and meet it.
Have friends who could not sell at their reserve after cutting 10% off what they already thought was a discounted price. Have refinanced and will sell next year, (they will have to as funds will run out … its negative ) then they will have to take the market.
Originally posted by MichaelWhyte:Hi all,
Just read this article in the SMH that I thought might interest…
http://www.smh.com.au/news/Property/Property-bubble-deflates-further/2004/12/01/1101577555296.html
Some key points from the article:
“Hopes that the housing downturn is a blip that will soon correct itself were dampened yesterday, as a Westpac Bank economist predicted that prices would not return to an annual growth rate of 10 per cent a year until 2008.
While owner-occupiers and first-home buyers would be important to the market next year, residential property would not be attractive to investors for up to five years, Bill Evans told a Real Estate Institute of NSW briefing.”
And…
“The biggest falls were in suburbs 10 to 20 kilometres from the city, Mr Kelly said. The median house price in that area fell 7.32 per cent”
Just thought you might like to read this.
Cheers,
Michael.
