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Thank for raising this issue. I think it is very interesting to predict what could possible happen in the property market.
My thoughts on Australian property market are summerised as followed:1. The Australia property market has been booming in the past decade due to the rise of China as a powerful nation. Australia has reaped significant benefits from China development into the richest country in the world in the last decade, thanks to the good trading relationships and favorable immigration rules which have boosted the revenue of Australia's big miners and record number of Asian migrants moving into Australia. Without these factors, I doubt Australia property market could still sustain the high property prices during the 2008 recession period when the US and UK property markets busted due to record high level of household debts. With incomes coming from China demand for Australia natural resources and increased number of Asian migrants, the unemployment rate in Australia has never exceeded 6%, which should be considered the major factor that keeps property price from falling but rising in the last 2 years (not to mention the housing incentives like First Home Buyer Boost, ect)
2. What happen if China suffers from the burst of property boom in the next 2 years and the demand for Australia iron ore falls, commodity price reaches record low, resulted in mining jobs lost and rising unemployment rate (say 8-9%). To make things worst were that US could be hit by the losses in commercial real estate loans during the same period, caused the world economy to slip into a greater recession! In such extreme ecomomic conditons, any county around the world with inflated property market should face the burst of inflated assets like stocks and real estate. As stated in the book of Robert Kiyosaki, one of the new rules of money is to prepare for the bad times ahead and you will only know the good times. I hope the worst times will never come, however, we should have been well-prepared if it did come at last.
No doubt the property prices are high in Australia and It does mean little room for investor to profit from capital gain, and 9 out of 10 properties out there have negative cashflow. I will try my best to look for the 10th property with at least a neutral cashflow , if not a positive cashflow, because opportunities can arise if we keep searching for what we want and learn how to search better as time passes.
superhoops wrote:blogs wrote:Scamp wrote:The truth about the australian housing market :The risks are huge, and will soon become more than clear to a lot of households when their
lowest-ever 5-year-fixed mortgages will go up from 6% to 10% interest rates this september 2008.
This huge increase results in average monthly mortgage repayments increasing from 850$ to 2650$.In september 2008 : 1.000.000 households will be in severe trouble. And this is just the start.
Be prepared and be afraid , this crash will dwarf the 1929 crash.
Agree 100000% mate!!! This post is going into the 'I told you so' file to be brought out in a year or two. Funny how greed and ignorance can blind people to the real story. Your point about people coming out of fixed rate mortgages is what Ive been saying ofr ages-no body listens. Thats o.k, the less they listen the more it will crash and the better value I will be able to buy:)
Bump.
What has happened to these 'experts' – such as scamp and blogs. Where are they now?
LOL – seems to me they were completely wrong in their predictions regarding the property market.
Isn't the mortage interest rate rising every quarter since Q4 2009??? The experts might not get it right at the exact timing (i.e. Sep 2008) due to goverment interventions during GPC. However, the interest rate needs to go up after the GFC due to the shortage of credits in global debt markets. If the mortgage rate becomes 10% in Sep 2010, the experts might turn up when their predictions come true! Let's hope the interest rate never ever reach 10%, otherwise, first-home-buyer mortgage defaults could mark the collapse of Australia property market, thank to government' first home buyer incentives…
EveSydney wrote:Any thoughts re article below?
Home buyers lose out in tax change
Author: Natalie Craig, Property Reporter
Date: May 17, 2008Ironically new home buyers are constituents the Rudd Government has championed since its election.
Property Council of Australia director Trevor Cooke said certain housing developers would now pay a greater proportion of their income in GST and would pass on that cost to buyers.
"In its present form, this change will add to the cost of new housing," Mr Cooke said. "It's hard to imagine developers will be able to absorb the full cost."
The Treasury estimates the changes will reap $620 million in revenue over four years. "That money will have to come from someone," Mr Cooke said.
Under the old scheme, developers would pay GST on the difference between the sale price and the price paid for occupied land that is a "going concern". Under the new scheme, they would pay GST on the difference between the sale price and the price paid to the original land owner.
For example, apartments sell for $10.5 million. A developer bought the apartment site from a factory owner for $5 million. The factory owner bought it from a farmer for $500,000. Under the old scheme, the developer would pay GST on $5.5 million. Under the new scheme, they would pay GST on $10 million.
Prosper Australia director Karl Fitzgerald said the former system was preferable, particularly when houses were demolished to make way for apartments.
"The margin scheme was fair. It was designed to stop GST being applied to the non-GST part of land and dwellings used as exempt housing but later taken over by a developer," Mr Fitzgerald said. "Without the margin scheme . . . GST is being clawed out on the way through as housing goes from a family to a unit dweller via a developer."
But assistant Treasurer Chris Bowen said the impact would be minimal and the changes would make the system fairer.
"The impact on the property sector should be negligible or non-existent," Mr Bowen said. "The very strong advice received from Treasury is that this is simply closing a loophole which is undermining the integrity of the GST system."
The Institute of Public Affairs' Sinclair Davidson said tightening the laws would affect the cost of some new houses, but was a fairer system. "The whole idea is to prevent people from artificially lowering the price of what the land is in order to reduce the GST," Mr Davidson said.
Interesting article explaining the increasing property prices in Australia, even the aftermath of GFC. The new scheme allows the state/federal government to collect higher GST revenues from developers in comparison to the old scheme. It seems obvious the extra collected GST revenues are meant to openly support the public goverment schemes stated to provide affordable housing to Australian people, which should just be a claim from goverment to win votes!
At the same time, developers are selling their properties at higher price tags, and even higher price via various schemes like First Home Owner Boost, reduced stamp duties, FHSA, etc. The schemes are designed to make goverment looking good at helping people to own their first property. In facts, the inflated property prices have factored in the grant money. Thereofore, affordable housing is always just a political bluff to win the votes of Australian ppl. In conclusion, the housing are only affordable for property investors because they know how to generate positive cashflow from the investment properties, while non-property investors are paying for the high cost of the property through interests on mortgages for most of their working years.
I think that is the reality in real estate which has created a large pool of property investors in Australia. I hope by joining this forum, I can adapt myself in the property world made of countless smart property investors from which I like to learn how to avoid paying high proeperty-associated costs for my first investment property in the next two years.
Frankly speaking, I feel this is one of the best property-related forum in Australia! I hope to share useful insights, information, and financial IQ in this forum from 2010 onwards.
