What is your opinion to the market when TFHG is halved … do you think this will effect the market.
D
Yes,
I admit I am a follower of Steve Keen, eventually Australia will catch up with the rest of the world. Mind you I think that the sharemarket will crash again, so maybe I am too pesimistic a person. I am eager for house prices to crash so I can buy a big pile of them, I predicted a large drop this year, but, interest rates dropped 3% to save people. BUT… as they now start to rise finally we may see some real action.only in some areas, quality property will remain quality property. I not interested in mortgage belt defaults.
I think when you combine a halving of the FHOG, rising interest rates, higher unemployement and tighter lending standards house prices will struggle. The housing market moves quite slowly so I'm interested to see where house prices will be in a year to a year and a half.
Ajay, add to yours: the extent of activity of FHB in the market having brought forward their purchases due to the low cost of funds. We may not see the 20%+ corrections overall however the removal of the incentives will definitely slow the sub-$500k market by 5-10% ie more than the value of the incentives. Mind you, not all of the incentives are lost post-September, only a halving of the Fed funding.
I use to worry about the short term outlook a lot but the old
Buy when you can afford
Buy well
Hold long termrant has really stuck with me know.My latest IP is looking to be cashflow neutral to slightly positve on a full lend on 5 year fixed rates and not including tax deductions.
This with the fact that the earliest im looking at cashing in on my investments is another 20 years. Im no longer worried at all.Neutrally geared on a long term investment is good SANF for me regardless of the short term ups and downs.
Hi all
I can only assume that the federal Labour government in their infinite wisdom believe that other buyers will step in to fill the void as the first home buyers inevitably slow their buying after the FHOG boost is halved, and then halted.
This was always a short term measure to put a floor under the sub-500K properties, and I'm going to assume that the Fed government has done more research than I am able to about when the other buyers will return to the market. I certainly know some investors who are starting to look around seriously again after a good 18 months out of the market.
Originally, when I thought the boost was going to stop all at once on the first of July, I thought that was going to be Christmas time for me, but it seems they're smarter than I give them credit for.
I have written a three hundred word diatribe on all the reasons why the market may drop by 20% in another stream, but I'm not going to repeat that here.
The one thing I WILL say here though, is to not let fear stop you from doing anything!
Good luck.
Andrew
Good question,
Several friends of mine in the commercial management sector are experiencing vacancies around 30% levels as businesses downsize or reinvent themselves.
In the banking sector I am hearing of forced sales of property assets because income and cash flows are tight.
If interest rates rise buy 1.5 points properties will either have to drop or the rents will need to rise in compensation to convince investors to buy.
I think because of this forum and because of the internet that people today are much more intelligent in their investment choices.
The low end of the market will suffer for sure the question is how much more in rental dollars are low income earners willing to pay, there is only so much in their wage packet.
I still think that the top end of the market will suffer because the number of high income earners is less than say 18 months ago … very interesting times still present and for the next 2 years.
Philip Sigglekow
Hi wealth4life, You might find this article interesting from http://lpn.quartileresearch.com.au/index.cfm?newsletterClientid=cli712197196edoras&screen=archive&newsletterPeriodArtLinkid=npa420846500minas !
There will be a dramatic increase in housing starts over the next twelve months, according to economic forecaster and industry analyst, BIS Shrapnel.
The company predicts that a sharp increase of 21 per cent in housing starts, to 160,000, in 2009/10, will be the beginning of a four-year upturn for the sector.
BIS Shrapnel's Building in Australia, 2009 – 2024 report suggests that the strength of the upturn in construction will be dependent on the continuation of very low interest rates.
"We are forecasting interest rates will be kept low until the expansion in housing construction is great enough to offset a deep plunge in business investment, which is only just beginning to become evident," says Jason Anderson, Senior Economist, BIS Shrapnel.
"Some commentators have speculated the phasing down of first-home buyer grants over the remainder of 2009 will mark the end of the housing recovery," continues Anderson.
"We certainly expect first-home buyer numbers will subside from a record number of 200,000 during calendar year 2009 and forecast a drop of 30 per cent to 140,000 first-home buyers in calendar year 2010."
Critical to the equation, says BIS Shrapnel, is that demand from first-home buyers will be waning at the same time as business investment falls sharply. Business investment includes commercial building and engineering projects as well as equipment spending, and it currently accounts for 20 per cent of GDP.
"The decrease in business investment is expected to wipe $32 billion, or 2.8 per cent, from GDP during 2009/10," says Anderson.
"To put this decrease in context, it is equivalent to the annual value of national new housing construction."
BIS Shrapnel says the decrease in commercial building activity will be particularly sharp. The national value of commercial and industrial building commencements is expected to show a cumulative decline of 55 per cent during 2008/09 and 2009/10.
To compensate for the plunge in business investment the nation will depend on a strong and sustained recovery in residential building activity throughout 2009/10 and 2010/11. To stimulate housing demand from upgraders and investors low interest rates will need to persist for an extended period.
If this is the case, BIS Shrapnel forecasts a further nine per cent rise in building starts, to 174,500, in 2010/11.
"Standard variable housing rates are expected to remain below six per cent throughout 2010," says Anderson. "With interest rates staying very low, housing demand from upgraders and investors is expected to increase enough during the first half of 2010 to compensate for the drop-off in first-home buyers.
"However, a by-product of this is that median house prices will continue to show moderate increases of about five per cent in most cities during calendar year 2010, which is consistent with long-run growth in prices. We think the Reserve Bank will be comfortable with price growth at that level."
BIS Shrapnel says the housing construction upturn will have a wide range of effects across the states.
New South Wales is best placed to benefit from low interest rates, given the undersupply of housing is far greater in that state.
In other states, the housing upturn will be considerable, but offset by a sharp decline in commercial building. The New South Wales building sector is likely to gradually emerge as a relatively attractive location for construction workers for the first time since the Sydney Olympics boom of 2000.
BIS Shrapnel were saying a year ago that house prices were about to jump by 40%. I don't trust them at all. If they're right about increased construction of new homes, then this will be bad for house prices because you need a supply shortage for prices to go up.
Yes always the big argument supply, demand, and increasing prices …
So lets say prices jump by 30% tomorrow we still have a few problems
1 … Affordability
2 … Borrowing from the banks
3 … Interest rates
4 … Rising unemployment
5 … Commercial sector implosion
Philip Sigglekow
There is a building shortage but even if that needs to build up momentum it wasn't long ago it was a skills shortage. Since that slow down there has been people loosing jobs and not as much building gong on. Whats the government going to pull out of the hat? Train chippies, sparkies, plasterers etc to be fully qualified in one year.
I put that article up but it's not my opinion it's got some interesting reading. Interest rates are already increasing and that article was based on them staying low for long periods. That's what actually needs to happen if banks were not so greedy and wanted Australia to be a better place. But there is no such thing as a fair go with banks.
My opinion is that it will be a lag year again next year from my situation i prefer that the market goes back to it's previous lag slump and agents/vendors are still VERY negotiable.
WJ Hooker… you are too pessimistic….
Sharemarket hits the 12 months high… go go go All ords..
Property market also recovers very well recently… whether or not it is due to FHOG.. remains to be seen…
It is an oportunity to buy blue chips at "BARGAIN" PRICE… !!!!!god_of_money,
Well maybe so, I hope you are right, I will make lots of money if all goes up. I think you missed your chance at blue chips in Feb 09, but if all goes as I think it might, it will be cheaper than Feb 09 next time ( in a few months ?? ).
I have been buying shares since Dec 08 and left my super in cash ( since nov 07 ), so I have an each way bet…WJ Hooker…
I luv my banks stocks… that I have been buying since late last year and early this year and keep buying the 15k SPP entitlements
Time to offload half of my stocks … I always disagree with the stockbroker commentators… I always buy when their recommendation is SELL" I admit I am a follower of Steve Keen "…. seems like you are contradicting your comment
I hope you did what you saidCheers
Hi, interest rates rise? When did that happen?
KY
Sorry kum maybe it was the locked rates i was thinking of! Was there no effect to the current Interest rate? I mixed them up i guess!
Fixed rates have risen which is an important event. It's a signal of where variable rates are going.
Hi, my variable rate is still 5.09% I'd decided earlier not to fix because I don't know when I'd sell.
My view is that rates will remain low at least to the end of this year. I don't do much until it goes above 8% and then I pay off large chunks of the principal. In absolute amounts, I actually paid less interest when the rates were high. The exception was last year when I had a very large loan.
Ajaydee 73, some of your pronouncements are diametrical to the views held by some very experienced investors. You might want to give that some thought.
KY
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