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Forums->Australian Bubble Forum->Starting to feel the pressure... could we be wrong?

CrackersKeenan	Starting to feel the pressure... could we be wrong?
	Hi all, Well, our rental place (in Canberra's inner north) is being sold and unless an investor buys it and continues to rent it to us, then we're gonna have to move *again*. Now, my wife has put up with my "we'll buy real estate when it's cheap again" arguments for a long time (I started calling real estate a bubble in 2003), but is understandably sick of having to move. Her longest innings without moving is our current 2.5 years here, and I have to say I'm getting sick of it too. (We're in our early 30s) She's started questioning whether there will ever actually be a fall in prices, and I have to say that I am too. Seven years is a long time to have been waiting for the crash, and if I'd bought in 2003 I am pretty sure I'd have ended up well ahead even by now, and even after a crash if one is coming. This time, she wants us to start looking to see what we could afford, and I'm finding it hard to find good arguments not to I have to say. Now, I know we're all familiar with the price-to-income issues and how out of whack that is with history. Someone in this forum recently pointed out that the great majority of households are now dual income - so surely this means there's effectively been a one-off (assuming polygamy doesn't catch on) increase in this ratio? ie, it might not go from 3x annual income to 6x, but perhaps 5x is a fair call? I know we're higher than that now, but perhaps things aren't so drastically overpriced as we might think based on median house/average individul income basis. Also, what about how much cheaper a lot of things have become with manufacturing in China etc - could it be reasonable that people can spend a greater fraction of their income on housing now because they need less for other things? Also, I have to say, that if this is going to be a slow burn crash with 10 years of very slightly falling prices, I think I'd rather just buy so that I have a place of my own and don't have to move unless I choose to. Ten years would be a long time to wait! Though foolish in the sharemarket, I do believe that paying over the sensible investment price is a valid move in housing because there is definitely a lifestyle benefit (obviously I wouldn't do this for a purely investment property). Is it really so bad to spend, say, an extra $100k above fair investment value for the benefits of ownership? Averaging this out over a couple of decades, it doesn't seem so crazy. I am partly thinking now that we'll go for another rental, and if in a year or two we have to move again, then I'll just have to take the plunge and buy. Right now if I liquidated our shares our deposit would be $110k, so we'd be able to scrape up a decent deposit in a couple more years - assuming the market doesn't continue to run away from us... And we'll need to save hard - if we have kids in a year or so as planned then our household income is likely to drop from its current 170 to about 100, at the same time that life will get more expensive. So, I guess what I'm saying is, despite all the confidence I see here that a crash is coming, prices never actually seem to fall, and what is it that makes everyone here so certain that it's coming? Because if it doesn't soon, I think I'm gonna end up giving in... Crackers
	on: Mon 22 of Feb, 2010 [04:36 UTC] reads: 3320

Posted messages Messages 10 20 30 All Style Plain Threaded Headers Only Sort Newest first Oldest first Find author message MattJCanberra  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [05:33 UTC] Good luck Confusion here as well. I'm fortunate to own a unit that I bought just before the big rise in Canberra. So I am one of those lucky to be paying much less in mortgage than rent. Unfortunately the place is not comfortable enough for more than one person. Due to recent circumstances it is now becoming apparent that I need to seek a different abode. However, with the tight rental market in Canberra and the prospect of an excessive debt if buying is rather worrying. I'm hoping for a correction ASAP so that I can start looking at something affordable. author message bps  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [05:49 UTC] Crackers, I have a very similar story to you, except I have three kids, got a good deposit and have been saying for several years now that we will not buy until after the correction (that never comes). My wife is onboard now with this view but often questions my thinking; lately she asked me, “when I am doing my walk to the top of Kosciusko”. I started the thread Signs of an “Australian House price correction”, but the only signs I am seeing are of prices increasing, like the bunny that keeps going… and going… and going. Huge auction clearance rates last weekend. I look at Realestate.com.au and for my suburb there are usually three pages of houses for sale, been hoping to see an increase but not happening, lots of houses sold very quickly after coming on. A colleague bought a ex commission cottage at auction one year ago for 510k spent about 100k doing it up, last weekend the house next to her went for auction, another ex commission house, two bedrooms, small lot, needing a lot of work, 6 eager bidders at the auction and sold for 575k, amazed everyone including her. On Sunday the young couple who bought it were in the back garden with their friends and family popping champagne in celebration. I feel sometimes my ranting about a correction is tired and maybe I have got it wrong and maybe Australia is different. But if we keep a level head and do our sums the huge debt that we would be buying should scare the pants of anyone who would care to give it more than the thought “get in now before it’s too late”. I still believe the correction will happen and we are not different. When it will happen is beyond me, thought it would start this year after the ending of the FHOG and the three rate hikes but no, it continues, and its longevity baffles me. Don’t know how people can afford these crazy prises. author message DeloryTheApe  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [06:29 UTC] It seems no matter how you measure it, Aust. property is overpriced. The problem is that it might take 80 years (or more or less) to correct. To selectively (mis)quote Keynes 'The market can remain irrational longer than I can remain' Having saved a (pretty big) deposit, I think that our captial would be better used in establishing a business rather than ploughing into (overpriced) bricks and mortar. Nevertheless, we are still keeping our eyes open and going to the occasional inspection - we just can't find anything we like (usually it is the price!) author message altakoi  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [07:21 UTC] Despite what the REI might say, this is not a cult and no-one has to confess to losing their faith. Unless you can think of better things to do with the money, then buy a house. Its only money, afterall. When all is said and done, my psychic comfort rests a lot more with a postive bank balance than with a brick enclosure to call my own - but then I do not have the wife and kids. Think carefully, though, whether you will need to live on beans and forgo holidays to get into the house of your dreams because I reckon that will get just as old as moving pretty fast. If its any consolation, despite what is being reported in the paper about Canberra property prices if you go to allhomes (the Domain of Canberra for those who are not local) and check out the property report is says that median house prices increased from $452 K to $456 in 2009. That is a real estate backed site, and they are not known for their conservative reporting. So unless you are desperately wanting to live in Yarralumla (and, really, its cheaper to buy a BMW and just drive there. You'll be the only one under 70 who owns their own car outright, let alone the house) then you should be OK. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [07:30 UTC] bps wrote "lots of houses sold very quickly after coming on. A colleague bought a ex commission cottage at auction one year ago for 510k spent about 100k doing it up, last weekend the house next to her went for auction, another ex commission house, two bedrooms, small lot, needing a lot of work, 6 eager bidders at the auction and sold for 575k, " bps did you write that correctly ?? Your colleague made a loss of around 50K (30K + real estate fess + legal fees + holding fess for a year. ) in 1 year ?? This sounds like a deflating market not one that is going up ?? In response to how long it will take, I am not sure either. But it "is different this time". There is an absolutely massive wall of debt being held up by low interest rates and it is already having troubles keeping itself up. The RBA has pretty much said in statements this week that this WILL end shortly. Once the wall begins to crumble I think it will fall pretty quickly. In my area at present there is a growing number of properties on the market for over 2 months. This number is growing steadily. I think once the RBA does a few pushes then it will grow rapidly and then get very very ugly. You should check out the stats on the number of FHBs with LVR in the 90+ range. It is staggering. But as everyone here knows this would go on a long long time. I don't really see the difference between crazy lending and insane lending practices, so technically the banks and govt could keep this going for years. If you are feeling stressed by it and can afford to take the leap then do it for your own health. But I suspect you would be stress far more about a massive mortgage than rent, and with the money you save you can take a lovely cruise to fiji to destress yourself. Happy days. author message bps  Re: Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [08:18 UTC] Hojusaram: my colleague bought one year ago for 510k spent about 100k doing it up to make it liveable and intends to live in the house for a number of years. The house next door was auctioned last weekend, smaller house, two bedrooms, and smaller lot and requires a lot of work to make it liveable, eg. New bathroom, kitchen, and inside/outside revamp, the auction winners bid was 575k so they feel very vindicated about paying 510k over one year ago. I think the crash will come this year with a tipping point of interest rate rises. To get myself back to reality I often read housing blogs from the USA. Before their crash they too believed house prices could only go up, that all changed very quickly. Before the crash they too had the supply/demand theory but as we all know it was really the easy supply of money just like us, except they don’t have kangaroos. Read one interesting blog recently about when US property prices would hit bottom and when was a good time to buy, the responder said to buy when the general consensus is that property is never a good investment and you would never make money from it. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [09:03 UTC] Whoops... Sorry should have read it better.. Anwyay I think you are right on interest rates. And yes there are heaps and heaps of good site to see how it is in the rest of the world. But we "are different here" right ??? Yes we are. We have far more debt. I am interested in the differing stories coming from differnt areas. I can certainly see things getting steadily pop-worthy here in SEQ. But we have had years of crazy growth here. I am unsure how it is in other parts of OZ. author message pb123  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [09:37 UTC] Melbourne is doing pretty well , more properties on the market compared to last year. All being gobbled up soon. However median price of a house fell by 0.73% units went up by 1+ %. The only way to survive in this climate of waiting for the bubble to burst is take on bigger problems or be a buddhist. The first one will just overwhelm you, that you have no time , the second one ..well the harshness of life does not affect you anymore. In my view more than the external crashes pricking the housing bubble , its the bubble in itself that crashes the economy. author message bps  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [09:53 UTC] This is an excellent thread. I think we all at times start to doubt our belief in the inevitability of a housing price correction or crash when faced everyday with the reality of Australian property prices increasing before our eyes and no end in sight. In this thread we have a wonderful opportunity to help our fellow bloggers, me included from joining the crowd and going mad. (I bought dot com stocks at the high because everyone else was). As I said above I bring myself back by reading about what has happened overseas and the similarities of pre crash stories. We are definitely not any different than every other country that lost touch with reality through their meteoric property price increases. They to believed prices would go up and up and up forever author message erutangis  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [09:59 UTC] Well I've been talking about the housing bubble since about 2003 and have been laughed at. And up it goes... bigger and bigger for ever! Well history is not on the side of anyone who argues that it's different here as there is no precedent for a bubble or for societal indebtedness on this scale. Not Never. I do tend to agree with H4A that when the bubble is this large stability is not an option. I did think that internally we would max out as per 07/08 and this would precipitate the popping. However I now think that while the banks keep spraying the money everything will keep going. Clearly despite paying lip service to cautious lending standards they are still spraying it about. It's clearly in the banks interest to keep it all going too. If anyone of them flinches then it will all crash. So, I'm pretty sure the pin prick will be a shock from OS that curtails lending or pushes the price of debt up. As to timing... it's hard to know. There are so many armed charges strapped to the hull of the financial Titanic it's really hard to know exactly which one will be "the" cause but I think it will be sooner rather than later. Personally I think a sovereign default will be the trigger and I will be astonished if it isn't well on the way by the end of next year. I think once the crash happens one or more of the big 4 will will fail and then they will be nationalised transferring the pain from the private to the public sector, so I'll end up paying for the ponzi despite not being a part of it. For sure I think it will be a long painful death too... over many years. There you go... my prediction on the internets A big shout out to Dan Denning who to seems to think the same way. author message pennypacker  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [10:14 UTC] Crackers, you and your wife should do what we did a couple of years ago. My wife would not shut up about house this and house that. So I worked out all the costs of buying (fees, conveyance, etc.) and the difference between the monthly repayments and the rent we were paying. The hypothetical property was based on the price range we would have bought in. Nothing special. During that month we took the money and locked it in ING, so we could simulate having a mortgage... and it was NOT fun man. I'm pulling a decent 6-figures and we discovered that we would experience: no dvds, nights eating out, movies, etc. brown bag lunch every day no exception no hobbies (unless free) clothes from KMart if one of us lost our job we'd be rooted So try it out.. possibly you will like the experience. If you do it for 3 months and can afford to put a little extra away for emergencies then go for it. Otherwise abort, and you would have saved yourself a lot of stress and sleepless nights. author message chooky  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [10:56 UTC] What a bunch of misfits and non believers,Years ago you could have been seen as pinkos or commos for not going with the flow .Now I know I am in good company.Dont give up and never give in because YOU are just not made the same.Me ?? I think I was dropped on my head or maybe I suffer from lead poisoning, my eyes are not to close together so it can not be lack of iodine, so what, I just cant go with the flow.As they say stick to your guns. author message homes4aussies  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [11:06 UTC] As Papey says (the Barefoot investor) - if you've got a 20% deposit and can handle interest rates going up 4% then you can probably afford to buy. What you do with your cash is a personal choice. For my part, we are starting to look at shifting again after 4.5 years in this home. Our rent was raised excessively about two years ago - but for personal reasons (especially birth of our second child) we stayed put. Now we are in the position of being able to move slightly closer to the city (wife's work), close to my eldest boy's school, into a recently renovated house and save around $50 a week on our current rent. These places are going at 3.5% gross rental yield or less. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [12:37 UTC] Keep your heads up guys. I am in a position where I could buy a house tomorrow in an area I want to live in but I am not buying. I have a very large deposit and earn very good money. Maybe I am mad, but I read a lot of economic material not just about houses and I can tell you the entire western world is living on vapours right now. There are so many things that are being held up by ponzi accounting that it is only a matter of time before something gives way. And when it does it WILL directly effect the credit availability in Australia. This WILL be an absolute killer for australia as we are the highest indebted people in the world. I don't know about all of you , but to me this seems obvious. It may not seem obvious at this time in your area because as long as the banks keep pushing the money people can get it. But never confuse growth or accumulation of assets with wealth, especially when it is build on debt. Those people celebrating in that backyard with champagne now have a very big number hanging over their heads. They may think they own a property, but actually the bank owns it and they own the responsibility of shovelling piles of cash into a hole every month. In 15 years their loan will be back somewhere around its original value and the bank will still own the house. Go to any banks website and plug numbers into an amortarised calculator and just try and comprehend the numbers. As pennypacker says it is very very hard to live with that sort of debt. It is fine when you can get out of it, but when you can't it is choking. Mr Stevens from the RBA ( who I have suddenly decided I like ) has stated publicly that he thinks property is still in a bubble and he WILL fight it. So we now have a world where our central banker is saying he will raise rates and the banks are saying they will be forced to raise them any way. It is utterly impossible for the new FHBs who have 90% LVR loans to swallow a 150-200 basis point raise. This is going to end badly for many many people. What you are witnessing now is an illusion. The reason you think people can't afford this is because they can't . They just haven't realised it yet. author message TPL001  Re: Starting to feel the pressure... could we be wrong? on: Mon 22 of Feb, 2010 [21:44 UTC] What you are looking for here is credit contraction (CC), which must follow credit expansion (CE)! CE, according to the Austrians, is hidden to the naked eye. However, everyone jumps on board, thinking that cheap money is here to stay. It never does. (And as this post notes, the capacity to predict the timing of a correction is difficult. Austrian economic theory looks for tendencies. Neoclassical economics is barren, with its equilibrium nostrums, and its neutral money and interest rate theories.) The unknown factor is how CC will play out in Australia. I think it will be multi-causal: 1. It could be ignited by the higher price of international credit (e.g. the more that US bonds or any govt bonds are dumped, the higher the price of debt - the cost of international debt onshore in Australia Oz will increase.) 2. As noted the RBA have house prices in their sites. 3. The banks will contract credit, further, if they see a growing inability for holders of debt to service it, and/or the price of it on the markets increases. 4. The democratic-socialists in power at present in Oz are replaced by a more conservative mob. 5. They stop doling out more of our money to the mortgage industry. Etc. It is unfortunate that the interventionist tactics of reprehensible governments are spruiked under the auspices of saving ourselves from ourselves. As market process theory goes, those benefit from government money who act on it first. As it washes through the system, prices rise, as more money chases the same quantity of goods and services. However, grossly high debt, specifically tied up in deteriorating consumption goods (e.g. houses), is an investment in present consumption, not production. What you then see is what you cannot see - the absence of new business starts, extensions of business lines, new production, etc. Credit contraction calls all of this to a halt. author message CrackersKeenan  Re: Starting to feel the pressure... could we be wrong? on: Tue 23 of Feb, 2010 [00:24 UTC] Thanks for the comments all - especially like your idea of living as though we have a mortgage pennypacker, I might give that a go (and could take it further by going down to one income, as might happen if/when we have kids). What are people's opinions on the effect that the prevalence of dual-income households could have on the long-term pricing of houses? I doubt we'll ever go back to the 3x multiple (of individual income) to be honest... -- CK author message squirrell  Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 23 of Feb, 2010 [00:37 UTC] Crackers, yes, the dual income scenario. I look at it from a number of perspectives. The rationalist in me tells me that 1) cars have not skyrocketed in price even though dual incomes can afford to pay more, so if we supply enough houses then we wont have to bid each other up and use 2 incomes to do it 2) whether you CAN afford or not is irrelevant, its whether you SHOULD pay a price given the rental yield differential which is HUGE. So a dual income is an EXACERBATING factor, like low rates and easy credit. It exagerrates a bubble but does not justify it. BUT - people are stupid, they really are. And i think there are plenty out there willing to pay 3 times as much to own v rent due to perceived gains, emotional benefits, stability etc etc. Maybe this will always be the case, in any event it could take a long time to remove this perception. We need to remember that in some cases incomes dont DOUBLE what people can pay, arguably it TRIPLES or QUADRUPLES. WHY? the first income will cover all expenses and then maybe 30-35% goes to the mortgage. In theory, given all costs are paid for, the additional income can put 100% to he mortgage. I know some guy at work who has got a 700,000 mortgage recently - it would kill him on 1 income, but not 2. author message CrackersKeenan  Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 23 of Feb, 2010 [00:51 UTC] Squirrell, Good points. I guess one difference with cars is that it's easier to increase production of cars than houses, given it's based on commodities and a production line (once you've got a certain model designed). And maybe people don't spend more on cars because all of the second income is going on the house ;) I've seen on this website a few times that it costs three times as much to own as to rent - how is this figure arrived at? The place I live in, assuming I bought it with a 20% deposit, would "only" cost twice as much to own as to rent. Admittedly this is assuming a continuation of low rates, and neglecting maintenance and other non-interest costs... author message squirrell  Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 23 of Feb, 2010 [01:09 UTC] CrackersKeen?, Depends where you live i guess. But assume a 4% yield for a semi decent area, which is probably optimistic in Melboure and Sydney. Ie 500,000 house and 400pw rent and the following: 20% deposit = lossed interest of 100,000 * 4% (after tax assuming long term rates of 6%) = 4000 opportunity cost 8% interest = 32,000 (assuming long term rates of 8%) maintenance costs of 1% = 5000 (Coudl be a lot more if you buy a near new home and want to keep the kitchen/bathroom near new) rates, insurance = 2000 transaction costs (assume you buy/sell house every 8 years as per norm) = 25,000 / 8 (lawyers, rea fees, valuation reports, building inspections, stamp duty) = 3000. SO rent = 20,000 COST = 4000 + 32000 + 5000 + 2000 + 3000 = 46,000 = between 2-3 times as expensive. In most nice suburbs you would be looking at yields of 2-3% (mine is 2.2, Dan says his is 3%), so at these points it beceoms > 3*. Likewise if you buy a house in near new condition, the maintenance costs will skyrocket if you want to maintain this condition (eg bathroom, kitchen refit every 8 years, carpet change, paint the house every 8 years etc etc). And of course there could be majr unforseen issues like a rook replacement. For apartments you are looking at less but most of us want HOMES for our families and that means a house, with a bit of a backyard not an hours commute from work and with some semblence of amenities/schoolds etc. If you are not aiming at the plush suburbs, i think the safe rule of thummb is that it will be 2-3 times as expensive to buy v rent. author message danmm78  Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 23 of Feb, 2010 [02:31 UTC] Another point re the safety of calculating affordability on multiple incomes. Really crude stats, sorry. Consider if 10% of people were to lose their jobs (10%chance of loss of income, leave aside things like what industry you work in). If you calculate it using a single income you have a 10% chance of losing your job. Your spouse would also have a 10% chance of losing her job. The probability that ONE of you will lose your job is 20%. By calculating affordability requiring both incomes the risk of default in a recession is significantly increased. Should be interesting. I also note the proportion of double income households hasn't changed since the 1996 census. Yet look at what happened to prices! author message stumo  Re: Starting to feel the pressure... could we be wrong? on: Wed 24 of Feb, 2010 [12:37 UTC] I was in your shoes a few years ago too, and the thing that really cemented my resolve was this revelation I had one day... If house prices continue as they have in recent times, and even I can't comfortably afford a mediocre house in a reasonable area on a very good income with 20% deposit now.... Then there is no way in hell my kids are going to be able to in 30 years time either. (And if by some miracle they can, then they can bloody well buy me a house then too) So I don't see any harm in this situation happening one generation earlier. You probably need to have kids of your own before the gravity of this statement is fully realised. author message bps  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [04:47 UTC] Another great week for property, prices, competition, auction clearance rates, big hand for property. So we’ve had another great week, another great month making two great months for the year so far, (and dont forget another great decade) makes you proud to be a bubble boy/girl. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [04:56 UTC] bps. Can you explain the source of your information. I can't see anything around that looks good for real estate. I see a whole lot of spruikers desperately spitting out bogus stats to try and confuse the uneducated. ( Which is normal ).. But the level of desperation seems to be getting to a point where it is obvious they are hiding reality. I see very little difference from what is a happening in RE land and what I would expect to see as the wave of ponzi cash laidened secondary buyers wash through the market. If you think we have it wrong then I susggest you jump in now before it goes up any further. But from where I see the bottom of the pyramid is rotting. I wonder if our Reserve Bank is going to have a big swing with a big hammer at the foundations this week?? author message bps  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [05:14 UTC] Source: The Age, SMH usual weekly updates. author message pb123  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [06:22 UTC] Did anyone notice last weeks auction results for Melbourne, it hit a record of a billion dollar of churn. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [07:04 UTC] Yep .. As reported by Enzo "don't like those stats so I made some up" Raimondo from the REIV.. author message agg  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [07:33 UTC] Hi all, I've been lurking on the site for some months now and thought I'd stick my oar in. I listening to a property show on the radio last Friday and they had 2 different RE agents on. One was from Melbourne in Meltone, the other was from Century 21 in Sydney. The host of the show was from RP Data. Basically they totally contradicted each other. One said that they had plenty of listings and saw good times ahead - in Melb. The Sydney guy said that they had very few listings and the market was drying up. He was very downbeat, said that he doesn't see the market growing much over the next 5 years. Surprising for a RE agent. I've been listening to both sides of the arguments. The bubble side says that there will be a major market correction or a decline in prices over the next decade. The RE industry says that there will continue to be growth. I take a middle course. I reckon that increased immigration and demand will keep prices up but there will be stagnation over the next decade. Probably won't be a collapse. author message pb123  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [07:56 UTC] Hi hojusaram There is a possibility of fudging those numbers but to what degree , surely he cant make a 50% clearance look like 85%, not without a potential law suit down the line. The other thing is all the auctioned properties are listed and verifiable. Most of them have prices against them but some do not. My argument is you can fudge, but not a lot. Those numbers even if fudged are indicative that the activity from last year has to a large degree carried on to this year. Some would argue that the prices have gone down and hence people are snapping up the bargains but that would be make it ironic that Melbourne hit a billion dollar churn on prices deflating not inflating. My argument is if the confidence on the market is waning that should reflect on the clearance rates. author message pb123  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [08:39 UTC] Hi agg Prices will have to rise with what the interest rates are , otherwise we have deflating property prices. So when you say stagnation do you mean no YoY growth(this actually means prices are falling) or do you mean prices will keep up with interest rates. From what I can see, Melbourne is playing catch up to Sydney , hence the contrasting bullish and bearish comments. My own view is that the outer suburbs in Melbourne have cooled down , the inner and middle suburbs are in upgrade mode hence the frantic activity. author message Macster  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [10:30 UTC] There's no doubt that Melbourne is heated up and will be for some time. We'll probably see something like the US and Canada emerge here where there'll be noticeable differences between states/cities in affordability. It's already looking like Perth and SE Qld have been topped out and are stagnating. Sydney will feel the pain in the greater western area (the mortgage belt) where the 8 consecutive rate hikes during the Howard years took their toll while the inner areas will feel less impact. Melbourne's current population growth (which I'd deem more dangerous than beneficial) may push it past Sydney in unaffordability in the not too distant future. All of this is of course speculation on my behalf. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [11:47 UTC] pb123 You are either a liar http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/08/05/raimondo-must-resign.aspx http://www.jenman.com.au/news_item.php?id=413 Or your not.. I am not sure I am able to judge the appropriate size of a lie for a liar. Basically if I don't trust someone then I don't listen to anything they say , instead of trying to determine which of the things they say may or may not be a true. As I am not an expert on melbourne I can not really give you a definite answer as to whether the information is correct or not. I live in SE Qld and it would seem it must be like Sydney given Macsters comments. author message pb123  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [11:55 UTC] ..and I am not. I am aware of these links because I follow these things closely. You know what hojusaram people go to this link http://reiv.com.au/home/inside.asp?ID=162&nav1=1226&nav2=162 every sunday morning and then they go sheesh the markets are going nuts , I must get in now or else I am doomed !!. They are not going to google and check if Enzo is lying. As I said he may lie but by how much ? Is he a master magician to make the property market look that great. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [12:04 UTC] Sorry pb123... My post never intended to call you a liar I hope you didn't interpret that way. You are referring to the issue of lack of regulation in RE. This issue is that most ( I would say 99% ) of people have no idea about anything when they buy a house. They have a dream and a bank saying yes , everything else is irrelevant. RE is the only investment product in australia where anyone can claim to be an "expert" and basically say whatever they want without legal recourse. I am not sure what to do about this, and realistically I don't feel it is my responsibility to educate people. It is just important to me that poeple are challenged when they claim something is fact when in fact it may not be. author message r0gue  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [12:17 UTC] A1+ Thread. I came on here for some inspiration and have got it back again. For those of you who don't subscribe to Mish's daily updates http://globaleconomicanalysis.blogspot.com/ I urge you to have a look at some of the recent articles. It is extreemly evident that things in the US are on very unstable ground at the moment. Soverign Debt default of the PIIGS are only the tip of the ice berg - most US states need to either be bailed out by the Treasury or declare bankruptcy. Couple that with the looming Commercial property crash - ie the $1.2T of loans which need to be refinanced within the next 3 years (likely when the properties are worth less than the loan!), and phase 2 of 'subprime' as the Alt-A and Option ARM loans also reset. And that is the US. China is looming as the next immediate threat to Aus. Stay educated, be informed. author message agg  Re: Starting to feel the pressure... could we be wrong? on: Mon 01 of Mar, 2010 [13:35 UTC] pb123 I meant that we won't see the massive price increases that we saw earlier this decade and in the last year. I would be very surprised to see prices collapse like they did in the US and UK. What I mean by stagnating is that prices will not rise but only creep up at or below inflation, until wages gradually catch up. Property certainly doesn't make any sense as an investment vehicle, but many people will still invest in it because there are not a lot of options. Super is a joke and a honeypot for politicians. The stock market will become increasingly volatile as this 2nd GFC hits us. I reckon it's a good time to hold cash at the high interest rates they are offering atm. Probably not a bad idea to hold some silver as well. author message dpmartin43  Re: Starting to feel the pressure... could we be wrong? on: Tue 02 of Mar, 2010 [00:30 UTC] On a lighter note A work collegue of mine tagged along to an inspection on a overpriced house in Pyrmont...He was asked to write some feedback back to the agency on the property and the agent, he e mailed the agents boss this: Sexual sales pitch She has the toned, tanned body of middle class success and promises all her clients the opportunity of a lifetime. With a polished and pert persona she escorts a long line of people through a truly mediocre 2 bedroom, brick box. The spiel is all too predictable, yet she almost seems sincere that this property actually holds the key to some strange state of happiness. Although, as usual, the price is way too high, her synthetic smile and slightly altered silicon style distracts some men. Women disengage or subtly detest the obviousness of her cleavage, thinking that more than a property is on display today. As the tour continues and questions are answered with polite clichés, the fundamental law of physical attraction is swept away by the harsh reality of un-affordability. One by one the potential buyers walk out the door, proving that sex can't sell everything. author message bps  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [00:09 UTC] I was speaking with an older couple last night (in their 70s) who sold their house in Sydney 6 months ago deciding to buy a unit. Looking in North Sydney they have went to many inspections and liked a couple but by the time they went to make an offer the units were sold and can’t believe the prices. They are now thinking of renting for a while but are faced with the same problem, they can not believe the amount some landlords are looking for rent and viewings are congested. They told me about one block where there were two units for rent and about 14 couples at the viewings. One basic two bedroom unit, no garage, no storage $500pw, the other similar unit but one storey up with ocean glimpses $650pw, the consensus was that $650pw was outrages but some poor bugger would probably pay it. BTY, an estate agent told them they should definitely buy as property prices always go up. My conclusion: it is hot out there both buying and renting author message altakoi  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [02:08 UTC] I've never seen an entire economy implode from inside it, but I expect that the market will cool from the edges. As people take their profits from less desirable locations they will have the expectation of having 'made it' and a desire to protect their captital - both of which will make them rush to the desirable parts of town. I'm not saying inner city properties don't fall - thats an old REI line - but that they will fall last as the supply of sales from the more outer regions to fund purchases drys up. Rents I find more difficult to understand. In Sydney I think the thing driving rents in the inner city is crap transport infrastructure more than anything - you have to live on top of your job or you will grow old and die in your car. Canberra has an equally mutant sales market and a median price just under 500K, but rents have been more resistant toe rises in the central area because people can always move slightly further out with little cost to their lifestyle. But, yes, the market shows not sign of slowing down. But, like Wylie Ceyote, that doesn't really mean anything about its future direction. author message r0gue  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [03:53 UTC] Don't underestimate the power of Greed Altakoi. Investors may feel they have 'made it' as you say, but if they think they can make more they will try. author message HolderOffer  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [07:19 UTC] ..until they realise they can't/won't. ?? CBA increasing LVR's to 80%, and other likley to follow suit. RBA intent on making our term deposits deliver higher returns through raising interest rates , no more FHB's (demand), houses just being plain unafordable. Each of these things combined, or even in their own right must have a dampening effect on the Ponzi scheme. IE, no new entrants. Cant be too long before people get itchy trigger fingers. Once momentum builds, and there is a glut of properties on the market- POP! author message erutangis  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [09:21 UTC] I wonder if the NZ crash that cometh will affect the Aussie property market ...(sorry... I forgot - it's different here). author message pennypacker  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [10:42 UTC] You have to remember just how gullible Aussies are. They were saying "it's different here" during the mini-crash that occurred in southeast Sydney a few years ago. The crash will still happen but I think it will be fuelled by the boomers and/or a China slowdown. author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [11:12 UTC] I actually had a real estate agent e-mail me today like he was fishing for sales. I haven't seen a real estate agent have to do any sort of pre-emptive approaching for sales for a long long time. I think it is getting pretty bad out there is FHB land. I really wish there was a way to find out volumes by post code or even suburb, because at the moment the median sale price is not very helpful to judge what is really going on because of all the ponzi-fed secondary buyers. Suburbs like this one.. http://www.realestate.com.au/cgi-bin/rsearch?a=sp&s=qld&u=ferny+hills Are prime FHB grant territory , you can see that the median price has moved up and down based on what happened with the FHB, but it in recent months has trended downwards. While the suburb next door which is has much more in the secondary market http://www.realestate.com.au/cgi-bin/rsearch?a=sp&s=qld&u=ferny+grove has trended upwards. So the trend at the bottom looks down from here ( and we all know what that means for the pyramid ) but probably need another months data to be clear on this. If anyone knows of similar suburb comparisons it would be interesting to see if the trend holds. Although I think the CBA may have just put a final nail in the coffin and along with all of the other things HolderOffer? mentioned. We could be on the edge of something quite scary. author message pennypacker  Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [11:27 UTC] > I really wish there was a way to find out volumes by post code or even suburb There is a "supply and demand" tab on those postcode profiles, isn't that what you are after? author message hojusaram  Re: Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [11:36 UTC] Ah ... No.. The supply is the number of houses for sale in the area ( not the number of sold houses ) and the demand is the number of people visting realestate.com.au and looking at houses, which is completely bogus and probably sourced from a formula with a seed from a random number generator. author message erutangis  Re: Re: Re: Re: Starting to feel the pressure... could we be wrong? on: Tue 09 of Mar, 2010 [12:46 UTC] > Ah ... No.. > > The supply is the number of houses for sale in the area ( not the number of sold houses ) and the demand is the number of people visting realestate.com.au and looking at houses, which is completely bogus and probably sourced from a formula with a seed from a random number generator. > > We could possibly pull them out of onthehouse by suburb tomorrow? author message danmm78  Re: Starting to feel the pressure... could we be wrong? on: Wed 10 of Mar, 2010 [01:56 UTC] I want the LVR of all new loans, broken down suburb by suburb. That will determine which direction the price goes in, and is surprisingly difficult to come by. Once that really turns down, "pop" won't be the word for what happens to this bubble. Am feeling just a tiny bit smug to see the CBA also restricting LVRs, after Westpac lead the charge. Another one bites the dust, in the end you can't fight mathematics. 1+1 doesn't equal four no matter how much a bank may want it to. Heard a funny conversation from a sales clerk yesterday. She was chatting to a friend about her new house, and her friend asked her whether she was worried about having so much debt with the economic crisis not too long ago. The response was, "you know things are going well again when somebody on my wage can still get a loan". To use an American abbreviation, LMAO!!! Welfare through debt, and houses for people who can't afford them. Can anyone say "subprime"? author message hojusaram  Re: Starting to feel the pressure... could we be wrong? on: Wed 10 of Mar, 2010 [02:22 UTC] And the pyramid rot continues http://www.businessspectator.com.au/bs.nsf/Article/Australia-housing-finance-falls-79-pct-in-Jan-3E2RB?OpenDocument&src=hp2 I know I have said this before but seriously how is this a revelation to anyone. Take away free money and demand falls. My poodle could have worked this out. author message altakoi  Re: Starting to feel the pressure... could we be wrong? on: Wed 10 of Mar, 2010 [06:16 UTC] The "will it or won't it crash" question always reminds me of the difficulty doctors have in predicting exactly when a terminally ill person will die (about 33% chance of getting within 20% of the actual time of death in one study). On the other hand, they are rarely wrong that a terminally ill person will die of their illness. Sometimes happens, but rarely unless the scanner was broken or the pathologist was on drugs. I think this is because the cause of collapse in complex systems is so dependent on a multitude of variables that it is nearly impossible to see a 'tipping point' (which is bad news for our general survival IMHO, but thats another story). On the other hand, a 'terminal' process can only end one way unless it is reversed. The bubble is going to blow like a bad vessel, or something, but when is a question I try not to get too upset about. author message kodiak  Re: Starting to feel the pressure... could we be wrong? on: Wed 10 of Mar, 2010 [07:09 UTC] It's already blown. The problem is now going to be waiting for the bottom, identifying it (probably an impossibility for every bear on this board) and wading through the resulting carnage while the government does everything that it can to stop the bleeding.

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