Forums / Property Investing / General Property / Australian Property Bubble (article on Associated Press)

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  • Profile photo of Richard TaylorRichard Taylor
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    Hi Tim

    Know the Deception Bay are pretty well and financed 3/4 properties up there over the last couple of weeks.
    Agree with a lot of the comments already made. It has water but also has issues so be careful and dont pay over the odds for potential.

    If you want a Residex report run on the property shoot us an email and i can send it back to you.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of coalstarcoalstar
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    bublles burst with underlying oversupply. australia has a 1% vacancy rate with approximately 200,000 houses short

    Profile photo of mickjohnmickjohn
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    i tend to agree that the sentiment here in Australia is changing about with regards to cost of properties. Its funny because none of the fundamentals have really changed that much in my opinion.

    It is also my humble opinion that, as the global economic situation gains more uncertainty then the sentiment in traditional investment classes may be altered. This is not limited to Real estate. In fact take a look at stocks and you will see a correlation as well.
    The real losers at the end of the day are those with cash in the bank and those in over-leveraged positions. Cash in the bank is useless in a high inflationary environment and well…. over-leveraging is a big no no and the banks seem to have curved their policies to reflect that.

    Just out of curiousity. In the past whether it be by overseas property bubbles bursting. What occurs to rent after a bubble 'pops'? Does market rent stay around the same? Does it drop off? Or would demand for rentals and inflation force rent upwards?

    i understand each market would be different, just seeking some opinions.

    Profile photo of casanovawacasanovawa
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    One patriot i tend to think in terms of fundamentals people have not been happy to shell out the amounts of money for houses for a long time but rationalised that they had to for a number of reasons at least at the low end…  fear of missing out as prices continued to climb, constant bombardment by media and RE industry about lack fo homes, increasing migration etc, etc…  but as i said before the only real way to justify the increasing prices was if you knew you could sell it for crazy price plus 30% in the future…   i think people are starting to doubt that they will be have the safety net of continuingly rising house prices and may acutally get caught holding the overpriced asset, to doubt the whole house shortage thing, and at base level they are starting to max out on income available to pay mortgages and daily essentials, and they only have more interest rates and cost of living rises to come…

    Among the reasons i was looking to buy was a) because as i said the price seemed as if it was going to go up every month making it harder and harder to get into the market, and b) my rent on my place (it was too big for one person, like family home admittedly) had gone up several times and was about to go up again and so starting to get in the vicincity of mortgage repyaments…   if i am going to pay the same for rent as to buy, well I may as well buy…

    After a property bust initially more tenants might be selling up homes and looking for rentals perhaps pushing up rents, but then depending on how much prices dropped, if rents were still sky high and houses/mortgages became much more affordable, i imagine it would drive people back into house ownership which would then probably drive rents down somewhat to attract/keep tenants…   although people probably wouldn't start buying homes again until they thought the market had hit bottom and also when the banks were prepared to lend (which would probably be influenced by how hard the financial system had been hit by the downturn and whether the banks also thought the market was reaching bottom and didn't have further to drop)   really depends on how long and severe the bust was as well as levels of unemployment to pay sky high rents….

    but just my thoughts or humble opinions…

    Profile photo of StingrayBirkeStingrayBirke
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    casanovawa wrote:
    After a property bust initially more tenants might be selling up homes and looking for rentals perhaps pushing up rents, but then depending on how much prices dropped, if rents were still sky high and houses/mortgages became much more affordable, i imagine it would drive people back into house ownership which would then probably drive rents down somewhat to attract/keep tenants…   although people probably wouldn't start buying homes again until they thought the market had hit bottom and also when the banks were prepared to lend (which would probably be influenced by how hard the financial system had been hit by the downturn and whether the banks also thought the market was reaching bottom and didn't have further to drop)   really depends on how long and severe the bust was as well as levels of unemployment to pay sky high rents….

    I agree with that, but house prices will fall much further than rents will go up. Anyone holding highly leveraged property is in for a world of pain! The OPs article makes is very clear that prices are extremely overvalued – up to 60% overvalued according to reputable sources.

    TKline wrote:
    Are Australian House Prices Overvalued?

    The question of whether Australian house prices are overvalued has been an extremely polarising issue for some time. Many observers believe property values in Australia are severely overpriced relative to other countries, relative to historic trends, relative to incomes, and relative to rental yields. Such observations have led some people to believe that a speculative housing bubble may be growing in Australia…….

    Australian Property Bubble

    Profile photo of thomsonthomson
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    Let's take a step back and think on the macro scale for a bit.  The population of our planet is increasing at a truly massive rate at the moment, and while it took 120 yrs to go from a population of 1 to 2 billion (from 1800 t o1920), it now increases by a billion every 12 yrs or so.  Now that's ridiculous and will result in severe pressure for every country in the world, no matter their immigration policies.

    So just playing devils advocate here – maybe the reality is that prices in the US and other depressed markets are at historically low levels rather than Aus is overvalued…

    just a thought, time will tell :) – oh and all data comes from Wikipedia…

    thommo

    Profile photo of Ben KBen K
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    This is a great thread, good debate makes for interesting reading.

    Profile photo of magicbuzzmagicbuzz
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    I personally consider the P/E ratio pretty seriously whenever I buy and it is my opinion that prices have been overinflated for some time. The Irish property bubble article on Wikipedia is an interesting read http://en.wikipedia.org/wiki/Irish_property_bubble and Ireland is now facing an EU bailout. It is very interesting comparing their price increases and the associated factors with that in Australia.

    There is also a rather scrappy Wikipedia article on the Australian ‘bubble’ http://en.wikipedia.org/wiki/Australian_property_bubble. A lot of information but not clearly presented (perhaps hindsight will be 2020 :-)

    Where I am, the market is definitely softening and there are the occasional gobsmacking prices beginning to occur.

    Profile photo of doogs1357doogs1357
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    The article states that approximately 800,000 properties are vacant any one time. This sounds ridiculous. Doing a very rough calculation of an Australian population of 20mil and average household size of 2.4 people this equates to an approximate percentage of 9.5%.

    Are they seriously trying to tell us that circa 9.5% of properties are vacant nation wide. AND who deliberately leaves their property vacant when they have the option of renting it out?

    This article stinks of misinformation.

    Profile photo of Magic MarkMagic Mark
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    Hi all,
    just joined.

    Friendly howdy from Gladstone!

    Fascinated to hear all the thoughts. I guess I will learn a lot from this Forum.

     

     

    Profile photo of casanovawacasanovawa
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    Thomson, couple of things, i work in the agriculture and food industries and repeatedly hear there will be 9 billion people by 2050 and how are we going to feed all of these people with current land and water resources etc etc…  the thought always occurs to me it might be the other way around, if we don't have the food and land and water to feed/house them all, then we probably won't reach 9 billion, or they will be dropping like flies and we will all be paying astronomical amounts or fighting for a multitude of increasingly scarce resources…  i think a bit of it is people looking at a graph and just projecting the line up and saying this is where we will be without taking into account a whole bunch of other fundamentals that will be required to underpin it or assume they will be magically solved…   so yeah we may have a huge world population by 2050 or we may have a bunch of circumstances (including urbanisation and rising living standards that often cap birthrates) which will cause a different result….

    the other thing, i alwats think back to the dot.com boom (businesses who don't have a website won't survive, B2B, B2C, just start anything dot.com related and float it on the stock exchange even if its losing money and become a millionaire etc), the food/oil/mineral/ethanol inflation/hype of 2 years ago (oil will get to $200/bl) and a trend starts, maybe a bubble of some description or maybe not, but everyone starts repeating the same lines until it becomes orthodoxy that this will happen, becomes accepted reaility and no longer questioned as its all you hear the experts/authorities saying (mostly probably just repeat themselves what they just heard)…   then something comes along and pricks the bubbles or upsets the orthodoxy and you find everyone just started suffering from group think, we all wonder what were we thinking and how were we all taken in/when did we stop think rationally/critically???  

    maybe mass migration will flood us, maybe there really are 200,000 short fall in houses, maybe we haven't gotten into some sort of speculative property bubble where people only buy because they expect it will keep going up forever, maybe Australia's economy can keep expanding when the majority of the rest of the world seems to be struggling, maybe in an environment of large numbers of single households because of family breakup or partnering up later you can have a situation where house prices can only be afforded by two well paid people???  maybe we can afford to keep paying more for fuel, for houses, for energy, healthcare, for food etc each year (although i doubt it if they all have increases of 7-10% a year)    if any country should be able to manage these last bits Australia should if we do it smartly and look after our own interests…

    or maybe we (and a bunch of 'authoratative commentators' plus a few vested interests) just keep hearing and repeating this stuff ad nauseum???    i don't have the exact answers myself but worth stopping and thinking about anyway…

    Profile photo of thomsonthomson
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    Without getting too depressing, I agree with casanovawa to the extent that there is obviously a limit of human population.  Thinking back to my biology, there is a pretty strong model of species population growth that shows definite charactersitics of a bubble…

    Human population will, in the end, be self-regulating and will prob come down with a mssive crash of population numbers.  Probably in my opinion from a lack of water (cue world wide wars etc.)

    However before the doomsday scenario happens, I think good old prime realestate will be high on the list of purchases for people :)

    Of course in the next 5 years anything could happen to prices…

    Profile photo of Limited RecourseLimited Recourse
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    So investing in real estate is terrible for the economy eh?…. We should all go out and buy shares so that Goldman Sachs and the rest of the shake down merchants can help the economy grow 

    My properties provide the state government with a river of gold in good and bad times called land tax and stamp duty. The councils get money from my rates to provide for many of the services I don't use My newer properties have provided employment to all the trades people and GST to the states yet again. My older properties need maintenance so more jobs and GST.

    When I sell a property I pay capital gains tax so the Federal government can employ people like the economist Ken Henry who has a great idea to tax & destroy one of the few things we still export…minerals  My properties provide me with cash flow that is then used to acquire more business assets that then go to employ more tax payers

    We should listen to the OECD so that our economy is as rooted as the Europeans and the septic tanks (yanks) who by the way are doing a marvelous job through the Federal reserve printing dollars and exporting inflation to the rest of the world. Us greedy landlords have a lot to answer for. If comrade Henry has his way all the mum and dad investors will be squeezed out of the property market so its fairer

    Profile photo of DWolfeDWolfe
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    Thank you Limited Recourse,

    I'm too tired of trying to change people minds! All I do now is make plenty of money through property…..

    There are several threads along this same theme, the crash has not happened, the bubble has not happened, no one has called me to tell me it has crashed.

     Baaaa, baaa bubble sheep (bears) have you any properties? No sir, no sir, I was afraid of the improbable. None for the farmer and none for the dame, but plenty for the little developer just down the lane.

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of Limited RecourseLimited Recourse
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    Hi DWOLF;
                        I'm not a blue sky property investor. Times are tough. The last 20 years has been easy to make money in the property market. The next 10 years will sort out the wannabees from the real investors. The reason why I buy pencils with erasors on the end is it helps when I make a boo boo  I call it my investment education fund. I've tipped at least $300,000 into that fund over the years. The key is not to make the same mistake again but to learn from it.

    Regards NR

    Profile photo of Peak DebtPeak Debt
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    Ben K wrote:
    This is a great thread, good debate makes for interesting reading.

    Agree

    Good thread

    Profile photo of Peak DebtPeak Debt
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    Limited Recourse wrote:
    Hi DWOLF;
                        I'm not a blue sky property investor. Times are tough. The last 20 years has been easy to make money in the property market. The next 10 years will sort out the wannabees from the real investors. The reason why I buy pencils with erasors on the end is it helps when I make a boo boo  I call it my investment education fund. I've tipped at least $300,000 into that fund over the years. The key is not to make the same mistake again but to learn from it.

    Regards NR

    Have you made any mistakes during this gfc

    And what were the lessons

    My biggest mistake was underestimating govt willingness to prop up the bubble

    Profile photo of DWolfeDWolfe
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    @dwolfe
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    Oh wow,

    I think I may have a small  idea why a few of you got kicked from the Somersoft forum….

    Maybe banging on about the sky falling constantly (when it isn't) might get a touch boring.

    Smile and the whole world will smile with you

    Welcome to PI.COM (aka the sunny side of life)  where there is always money to be made, somewhere.

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of WJ HookerWJ Hooker
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    Hi DWolfe and others,
                                            I know I posted a forum saying that house prices should fall from about Sept 09 I think it was , due to rising interest rates, etc, etc. But I was wrong they didn't, but as I said it's still a chance it may happen soon.
    I couldn't help but notice in my area these interesting things just happened over the last week or so.
    House been for sale for weeks, started at $490,000 about ( 5 bed but no garage ), just had auction – highest bid was $355,000 vendors bid was $390,00, passed in.
    House for sale for weeks started at $480,000 then $460,000 then $430 – $450,000 and sold unsure of price.
    House with lots of land – quoted at range of $750 – 850,000, nothing in bids then bid of $700 just before auction – highest bid $450,000 passed in , owners went back to 700 bid people and now say only will pay $460,000.

    Just 3 examples I have noted recently, of course people will know of ones going up, but just my observations..interesting times ahead maybe.

    DWolfe – no I'm not running down property as an investment for the long term, just an observation of recent sales in MY area not yours.  But please keep up your comments they are always interesting, and you are welcome to comment anytime.

    Profile photo of DWolfeDWolfe
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    Hi WJ,

    Welcome back long time no see :)

    Yeah we had the old post going and now this seems to be the new breed.

    Please tell us where you are finding these prices as they may be of interest to some people. I know there are quite a few areas where it is a buyers market and when recovery hits these places may be good investments. (Quite a bit of WA)

    As you know I build my CG, so don't worry so much if the market is headed downward as long as I have locked in the price and have done my maths factoring in a price drop.

    I prefer not to speculate but to my eyes there seems to be a few out there who are, both good and bad.

    I am glad you are back WJ and I agree that property is not always a good investment and will not always go up but with the right amount of skill and maybe a bit of foresight you can make a dollar or two :)

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

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