Forum Replies Created
- Originally posted by foundation:
Now if we’re not going to get back on topic, could somebody please post the contents of This article as I am unable to get my registration to work![angry2]For your viewing pleasure, Foundation:
Bargains galore as house prices plunge
By Hannah Edwards
March 27, 2005
The Sun-HeraldA list of more than 400 of Sydney’s bargain homes is available in the print edition.
Sydney house hunters looking for quality properties have never been so spoilt for choice.
A report by Home Price Guide exclusively for The Sun-Herald reveals the price of hundreds of properties across Sydney on sale since before September have dropped by as much as 40 per cent.
In Dulwich Hill, a three-bedroom terrace was first listed for sale last May for $980,000. Now it’s a bargain buy for $580,000.
In Double Bay, a luxury apartment on Carlotta Road first listed in March 2003 for $2.79 million is for sale for $1.95 million – a fall of $840,000.
In Hunters Hill, Ellie and Kevin Allen’s Euthella Avenue home is for sale for $1.15 million – $800,000 less than it was first listed last June.
Ms Allen is certain her three-bedroom house has all the right ingredients: it is close to the city and the ferry, and has water views. But like many vendors, she has been left wondering why the house has not sold.
She said: “We have come down a long way and want to sell. We’d never have put it on the market if we had known it would be like this.”
Home Price Guide head of research Louis Christopher said the list showed there were plenty of great buys available – as long as buyers knew where to look.
“A number of these properties are a very good buy at their current asking price,” Mr Christopher said.
He said the huge price drops were a sign many vendors were more willing to listen to the market and price their properties accordingly.
Home Price Guide figures show that it now takes even longer to sell a house by private treaty in Sydney, rising from 95 days in January to 97 days in February. It takes 83 days to sell the average unit, up from 77 days in January.
If the Reserve Bank raises interest rates next month, as many experts predict, the market is expected to slow further.
“Expectations of further increases in interest rates are undermining demand,” said CPM Research chief executive John Wakefield.
“Auction clearance remains low as a result, and sellers are being forced to adjust reserve prices if they wish to sell. These are the ingredients of a buyer’s market.”
While Ms Allen is willing to adjust the sale price, she is adamant they will not be giving the house away. “I just had a call from someone offering $870,000 and that is just ridiculous.”
The Allens are pleased with their new agent, Toni Alexander, from Richardson & Wrench Hunters Hill, who they say is doing “everything she can”.
Ms Allen said the family hadn’t considered an auction as it would be embarrassing, with the neighbours coming through and no one bidding.
Nine properties were taken to auction yesterday with four selling under the hammer.
An older-style Manly apartment passed in at $810,000 while an oceanfront penthouse at Salamander Bay was passed in without a bid.
Hmmm… sounds like Getting There is not very thick-skinned. Appears to be a little sensitive about the initial criticism.
Aw, come-on Getting There, don’t be like that – we’ll try to be a little nicer to you if you come back. Perhaps a little more grovelling from others will convince you to share the details of your grand plan?
[baaa]
Originally posted by Jenny1:Turnby
Why would anyone put that sort of information on this forum,people do their own research to get rewards.
…
What would happen is that the suburb/town would dry up cash flow + properties with all the interest shown from the forum.
…Why would someone share such information you ask? One reason I can think of would be to drum up the demand in an attempt to drive up prices so that you can sell and make a nice profit. If someone was trying to exit the market right now I guess they might be tempted to do such a thing – but that’s the cynic in me talking.
Originally posted by aussierogue:some landlords will be able to increase rents and some wont. landlords must try and tennants must try and avoid it.
this is the free market system at work.
How very true. Just look at the number of young adults still living at home with their parents. There’s a threshold to how much people are willing to pay for rent i.e. tied to wage levels. Tenants will simply make sacrifices if rents are too high e.g. find cheaper accommodation, subleasing, moving back home with the folks etc
Unlike the petrol industry, there is no cartel operating in the rental market. People have a lot more options when it comes to getting a roof over their heads. Landlords can by all means raise rents but tenants don’t necessarily have to pay.
You want to know WHY? Here’s an editorial from today’s SMH that provides one explanation:
Hangover awaits after years of extravaganceDate: March 7 2005
We are seeing the first signs of the pain that will follow a decade of greed, writes Clive Hamilton.
In a previous era, when rich people found themselves in financial difficulty because they were living beyond their means, their plight attracted little sympathy. Today, when the affluent complain about having to repay mortgages taken out to fund extravagant lifestyles, it becomes a matter of public concern.
Thus last week’s interest rate rise has sparked a chorus of whining from wealthy people who believe they deserve sympathy because life is tough.
This newspaper carried the story of a 28-year-old with three properties whose interest bill will go up by $2125 a year after the 0.25 per cent rise in interest rates. That translates into mortgages of more than $1 million, yet he whinged about the “extra burden that young families don’t need” and how he will have to sacrifice the family holiday.
It must be tough being a millionaire unable to afford a holiday.
The papers are full of “ordinary families” saying that the rate rise will make things “that much more difficult”. How difficult is it to live on incomes that have been growing rapidly for more than a decade and are now unprecedented by historical or international standards?
Another paper reported the sorry tale of a Rose Bay divorcee who has borrowed more than $600,000 to live in one of Sydney’s most exclusive suburbs and send her children to private schools and now complains that she won’t be able to shop in Rose Bay but will have to travel “to Maroubra or somewhere like that”. The ignominy of it.
These people need a reality check. They borrowed huge amounts of money to fund profligate lifestyles and want sympathy now life has not turned out exactly as they hoped, even though everyone knew that interest rates would sooner or later rise.
A survey last week found that 28 per cent of Australians with a mortgage said they’d have trouble making payments if rates rose by half a percentage point. Well, that means that 28 per cent of Australians with a mortgage are fools for entering into 25-year contracts while only thinking of the next few months.
We are witnessing the first signs of the pain that will follow a decade of unprecedented greed and luxury fever in which large numbers of Australians have bet their futures in order to meet grossly inflated lifestyle expectations. They wanted it all and they wanted it straight away. This is illustrated by the fact that interest payments on household debt as a proportion of disposable income have now reached their highest level ever.
This has occurred at a time when interest rates have never been lower and incomes have never been higher. The figure is even higher than it was when interest rates were 18 per cent under the Labor government.
For the mortgage whingers this year’s “mortgage stress” is the flip side of last year’s self-indulgence. Ignorant of history and deaf to the warnings, too many believed that the asset-price party would go on forever and that their own position was impregnable. So what was inherently highly risky behaviour seemed safe; after all, everyone was doing it.
The Howard Government has ridden the extraordinary debt binge to resounding political success and has been loath to spoil the party with the sobering advice and policy signals that any responsible government should have dispensed.
As long as it was riding high, it was never going to warn the public that their overspending was unsustainable; that sooner or later spending more than you earn must be matched by earning more than you spend; that the price of one asset – houses – cannot get too far out of kilter with the price of other assets; and that capitalist economies have always been subject to business cycles, and always will be.
The Government has profited from the financial illiteracy of great swathes of Australians blinded by the promise of instant wealth and egged on by tax rules that stimulated massive investment in rental property.
But now the chickens are coming home to roost. For, despite growing incomes and wealth, the lifestyle aspirations and financial benchmarks Australians have set for themselves have grown faster still. As a result, while richer than ever, Australians actually feel more deprived than ever. For those locked in to this way of thinking the psychological impact of interest rate rises will be overwhelming. A recession is unthinkable, but likely nevertheless.
The Government will be under intense pressure to bail out wealthy households in financial difficulty, and it will be the prudent who will be forced to pay for the mistakes of the reckless. This should be resisted at all costs. Not only would it be profoundly unfair, it would send a message to the imprudent that government will save them from their mistakes and they are free to repeat them.
Clive Hamilton is executive director of The Australia Institute, a public interest think tank.
Originally posted by unannounced:There seems to be alot of speculation of what will happen because of the rate rises.
Having read an article or two elsewhere*, there has been the suggestion that the current rate rise may have had little, or no affect at all.
There will always be reports from either side of the fence. Here’s one from the Sydney Morning Herald that spins it the other way:
http://www.smh.com.au/text/articles/2005/03/05/1109958158858.htmlRate rise hurts but there may be worse to come
Date: March 6 2005By Hannah Edwards
The interest rate rise announced last week has had an immediate impact on the property market, with one agent fearing vendors have withdrawn properties from auction to avoid “public humiliation”.
Home Price Guide figures show yesterday’s auction clearance rate dropped to 47.9 per cent, down from the 54.1 per cent recorded the previous week. The number of properties withdrawn before auction rose from 22 to 34.
The midweek auction clearance rate also fell, plummeting to 35 per cent – significantly lower than the 46.4 per cent registered the week before.
Home Price Guide’s Louis Christopher said yesterday’s auctions were indicative of worse to come, particularly if the Reserve Bank raised interest rates again next month as predicted.
“So far the response to interest rate rises hasn’t been too positive,” Mr Christopher said.
“There is talk there could be another one [rate rise] and that’s the worry. If the RBA goes for another rise, and they have a history of consecutive rate rises, that could break the camel’s back.”
While house hunters may be faced with higher mortgage repayments, sellers are also feeling worried about the rise, John Greig Real Estate agent David Greig said.
He said that as soon as the rate rise was announced on Wednesday his phone started ringing with concerned vendors asking whether they should revise their sale strategies.
Mr Greig said that he had heard of one property that had been withdrawn from its scheduled Saturday auction and put on the private treaty market, a trend that increased in Sydney last week.
He said by doing this vendors were able to avoid the “public humiliation” of an unsuccessful auction.
“Vendors are very nervous and worried,” Mr Greig said. “The reality is that a quarter of a per cent won’t hurt anyone but it will give buyers an excuse to belt vendors harder again.”
The rise was a hot topic of conversation at the auction of a dilapidated house in Lilyfield in the inner west yesterday. The large crowd was made up mainly of bargain-hunting renovators, builders and developers who were keen to transform the home and sell it for a profit.
While some house hunters expected they would change their strategies in response to the rate rise, others took it in their stride.
“If you were buying the house to live in, the rate rises would be a killer,” house hunter Sean Holst said.
“But we have just started a renovate-for-profit business and we shouldn’t be too affected by interest rate rises because we only plan to pay a few months of the mortgage.”
After 29 bids the Californian bungalow on Joseph Street sold for $600,000, breaking its reserve by $100,000.
The part I find most true regardless of how borrowers will cope with the rate rise is the following:
“Vendors are very nervous and worried,” Mr Greig said. “The reality is that a quarter of a per cent won’t hurt anyone but it will give buyers an excuse to belt vendors harder again.”That about sums it up, in my opinion.
Originally posted by foundation:I think the following article contains valuable information about true house values, the factors that have lead to excessive house price inflation and what the future may hold:
Link appears to be broken. Managed to Google for it (“Andrew Farlow” “University of Oxford”) and found the correct link:
http://www.economics.ox.ac.uk/members/andrew.farlow/Farlow%20Housing%20and%20Consumption.pdf
Also found some other interesting articles on the same page under the title “The UK Economy, Housing, Banking”, all of which relate to the UK housing market but still of relevance here, I believe:
- Part One: UK House Prices: A Critical Assessment
- Part Two: The UK Housing Market: Bubbles and Buyers
- Part Three: UK House Prices, Consumption and GDP in a Global Context
- Presentation: UK House Prices, Consumption and GDP in a Global Context
- Part Four: Risk Premia and House Prices
- Part Five: Mortgage Banks and House Prices
- A further short paper: The UK House Price Bubble
Originally posted by Ronulas:Secondly, regardless of what the stats say, where I invest very few own their own homes so stats are meaningless. The reality of the situation is that there are large pockets of people can not afford to get into the market and therefor must rent.
If you invest in areas where “very few own their own homes” then doesn’t that mean there is likely more competition between rental properties? Would that not serve to keep rent prices down? Sounds like it’s all swings and rounabouts to me.
Originally posted by Ronulas:An exodus of investers means a glut of homes on the market.This reduces prices which allows homeowners back into the market which then causes rental properties to be scarce again. Causing high rents. Supply and demand.
Oh, and I forgot to add that foundation has already countered that point with the following:
Originally posted by Ronulas:
And conversely a lower demand, as those houses are now homes to ex-renters.Once again, if the flood of dditional ‘investors’ didn’t have an impact on rents, why would an exodus?
It would be nice if we could all make an effort to read what others have posted before repeating the same argument.
Originally posted by Ronulas:There will always be more renters than home owners. Thus the rental demand will always be there.
Sorry Ronulas, I must correct you there. According to the ABS it is actually the other way around:
More than two-thirds of Australian households owned or were buying their dwelling at the time of the August 2001 Census.Home ownership is an aspiration for many Australians and has widely been referred to as “the great Australian dream”. This desire for home ownership is consistent with relatively high home ownership rates in Australia compared with many other developed countries.
http://www.abs.gov.au/Ausstats/[email protected]/0/9bc82f7e8a1ed7c7ca256d39001bc35f?OpenDocument
Originally posted by foundation:
Anyway, I think there’s some confusion here between inflation & gearing/ leveraging. Leveraging adds risk and potential return regardless of consumer price inflation. The reason CPI is good for PIs is that wages (and therefore rents) tend to rise roughly in parallel with CPI, eroding the relative cost of a mortgage and placing upward pressure on HPI.Foundation, I could have factored in inflation to make the final figure more realistic but that would have muddied the water a bit. I just wanted to, borrowing from your favourite catch-phrase, debunk the myth about the “doubling of the original $10k” investment [biggrin]
Your leveraging and risk comment would then apply to Jeff’s example about a 20% increase on a $1M property:
Originally posted by Ibuycashflow:
Try some recalcs on a 20% increase in the value of the property or on say a million dollar property.Thanks for making that clear, Jeff. But we all know that in reality the maths isn’t as straight-forward as that:
$100K for house with 10% down.
Price rises 10% after one year = $110KSo to realise the increased equity I would have to sell the property right?
Factor in the following and the numbers don’t look as rosey anymore:
- Stamp duty paid on property ~= $2,000
- Stamp duty paid on loan ~= $300
- Conveyancing fees for buy & sell ~= $1,000
- Mortgage insurance ~= $1,000
- Building + Pest reports ~= $400
- Real Estate Agent’s selling fees ~= $2,000
- Capital Gains Tax* ~= $1300
- TOTAL = $8,000
* All estimates have been taken from http://www.yourmortgage.com.au (with income in highest tax bracket). CGT does not include any negative gearing deductions claimed (figure would be slightly higher if so)
So what is my net equity now?
$110,000 – $8,000 (cost of purchasing/selling) – $90,0000 (mortgage) = $12,000.
That’s a far cry from $20K!. Mind you, if the above scenario was true, the rate of return on a $10K outlay is still pretty good (power of leveraging).
Note: the above estimate assumes the property is cashflow neutral.
If you put down a 10% deposit on a positive or neutral cash flow IP then a 10% increase in the property value would reflect a 100% increase in your deposit, 10 times that of inflation.eg. $10k deposit on $100k property – you own 10% of property.
NOW –
$110k property and now $20k equity – you now own 18% of property.Is this some kind of voodoo maths or have I missed something?
10% deposit on $100K property is $10K
10% increase in property value = $110K
10% of $110K = $11KHow did you get the figure of $20K?
Originally posted by resiwealth:I would like to see the rates up to 10%, bring it on tomorrow.
Phil
Phil, you do realise that the housing market will most likely collapse if interest rates hit 10% tomorrow. Is this something you’ve been wishing for?
Thirdly, I have not read one response from you regarding the Olly’s “not so new” book “The Day the Bubble Bursts”, only criticism of my post.Settle down there, Jeff. You seem awfully sensitive about my criticism towards your unabashed dislike of this particular author. I merely made the simple point that you shouldn’t dismiss a book altogether because:
a) You didn’t agree with what the author published in a previous book
b) The author, by your mere assertion “has already proven he can be wrong”. You did not bother to elaborate why.
c) You haven’t even read the book!!
Have you read the book? Do you have an opinion on the book? Do you have something constructive to offer?You are most certainly correct, I have not read the book, nor have I passed judgement or offered an opinion. By not having read the book I am not in a position to provide a constructive and credible critique as such. And the same would go for you too, I might add.
It appears I have offended you by not idolising and agreeing with anyone who writes such books, and for that I am sorry, but I am entitled to my opinion.No, you haven’t offended me in any way. I just took exception to your unqualified statements about a book you have not even laid eyes on. I would not give a toss whether you idolised the author or not. Heck, if it was not for Dave7’s original post I would not have even known about the guy.
So the next time you offer an opinion about a book you have not read be prepared to back up your commentary with plausible arguments rather than just mere conjecture.
Originally posted by yack:Wages figures blew out in the Dec quarter. Rates may be on the rise. i would love to see a .5 to 1% rise over the next 18 months.
I was just reading about that! Here’s a link to a related news article for those who are interested:
Wage creep adds to rates chatter
http://www.abc.net.au/news/newsitems/200502/s1309121.htmIt’s probably a better idea to have half your home loan fixed and the other half variable. It provides more flexibility that way. Some fix interest loans can incur penalties so it’s best to tread carefully before diving in head-first.
Here’s an article from the Sun-Herald that’s of interest to those thinking about fixed interest rates:
http://www.smh.com.au/news/Australian-Capital-Territory/How-to-ease-the-pain-of-rate-rises/2005/02/22/1108834767644.htmlHow to ease the pain of rate rises
February 20, 2005
The Sun-HeraldInterest rates may be on the way up, but for once the horse doesn’t seem to have bolted for home loan borrowers.
Usually the money markets are way ahead of the pack when it comes to interest rate rises and quickly factor them into the cost of fixed-rate home loans so that by the time borrowers actually focus on the problem there is no real advantage in switching.
But this time around the financiers seem to be a little slower and some fixed-rate home loans still have lower rates than variable loans. So quick borrowers can lock in an advantage, but you don’t have a second to lose, because 15 lenders have already moved to rectify the situation and the others will soon follow.
An interest rate rise of a quarter of a percentage point is tipped for next month, which would increase the monthly cost of a loan by $32.15 for a borrower with a $200,000 mortgage and assuming a borrower’s interest rate rises from the average standard variable rate of 7.07 per cent to 7.32 per cent.
The average home loan in NSW was $263,000 as of last December. It was above $400,000 in Sydney. The worry is the rate rises will continue with many predicting another quarter percentage point in April and another a few months later.
Some economists think this cycle will result in rates going up by 2 percentage points before they stop.
By itself, this doesn’t seem like much. But think about it. If your variable home loan is 7 per cent at the moment, that rise on top is a whopping 30 per cent increase in monthly repayments. Do the sums.
While the average standard variable is 7.07 per cent, the average rate for a three-year fixed-rate loan is 6.7 per cent, and it’s 6.74 per cent for one year. The financial nerds call it an “inverse yield curve”, which is mumbo jumbo for the fact that rates now are higher than those in the future. Usually it’s the opposite way round, which is the premium imposed for having a longer term loan.
So look at your finances and determine the impact of a worst-case 2 percentage points rise in your home loan rate and the impact it will have on the household budget.
If it looks like being a squeeze, start to take action now and maybe lock in at least part of your home loan.
Many borrowers have a bet each way, fixing half their home loan and leaving the rest variable. This gives them some protection against any rate rise while leaving them the ability to get ahead by paying down the variable portion faster if they can afford to.
But make sure you talk to your financier to establish what is best for you.
Not all fixed-rate loans are the same and they can come with a few nasty surprises. It’s all about educating yourself.
Originally posted by Ibuycashflow:You really are missing the point.
I don’t think you were making much of a point in the first place. The original post was asking for comments on Newland’s new book, “The Day The Bubble Bursts”. You responded by making a broad generalisation based on his previous book. How can you fairly judge something you have not read?
Jenny1 is absolutely right. Compromise is the key here. I once had a tenant make the same request. I asked them nicely if they wanted to go halves in installing a security door. They happily obliged, we agreed on a budget and they chose the design.
Originally posted by Ibuycashflow:
I will now wait until Rodney Adler writes a book on how to run an insurance company before I comment on that one.You know, if he ever did write a book I wouldn’t write him off immediately. I’d be looking forward to a chapter titled “How to Not to Get Busted While Swindling an Insurance Company”.
Ibuycashflow, if that’s your criteria for judging an author then you’d probably not recommend any of Robert Kiyosaki’s material either. He was once a homeless bum and a bankrupt back in the 80’s. Try expressing the same sentiments towards Kiyosaki, but be prepared to for the wrath of his many supporters.
