Any comments on what this might do to property prices? This is my take:
– Initially it will push a fair amount of first home buyers out of the market, which I feel will push rents up in the short term for the average house in averageville.
– Home owners and investors of this property price range won’t be burning to sell, so property prices won’t experience a huge ‘drop’My conclusion from the above – there might be a bit of a ‘stand off’ between these two groups, meaning a long period of ‘flat’ prices.
Also worth noting,
– Consumer Debt is still way to high. People are still spending 110% of what they earn, although…
– Unemployement is still very low. This will put pressure on wages, driving them up a bit.
– Lenders are still getting creative with their lending. A few 100+% loans are available now.My conclusion from the above is that overall these factors will have little effect (as they may cancel each other out).
Your thoughts?
Really good insight. The market has been supposed to do this and supposed to do that for so long now, who knows whats going to happen. I think property has been in a sideways holding pattern now for the last 12 months and in the future, I beleive that property will drop, and drop more significantly than anyone is predicting.
what state are you referring to? and is the $5k on top of the $7k… or is $5k all that’s available? If this is NSW I would have thought it was immaterial compared to housing prices anyway.
http://www.megainvestments.com.au
Extensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Originally posted by domcc1:Initially it will push a fair amount of first home buyers out of the market, which I feel will push rents up in the short term for the average house in averageville.
Why would rents go up? Presumably these first time buyers are already renting, so their innability to buy will not increase demand for rental properties, especially given that there is an oversupply of rental property in many areas.
– Home owners and investors of this property price range won’t be burning to sell, so property prices won’t experience a huge ‘drop’
My conclusion from the above – there might be a bit of a ‘stand off’ between these two groups, meaning a long period of ‘flat’ prices.You seem to suggest that the value of these properties will remain high because such houses will not sell? Given that people value their houses by asking “how much could I sell it for if I was forced to sell now†in a rising market, surely the same valuation method should apply in a falling market?
– Consumer Debt is still way to high. People are still spending 110% of what they earn, although……which was very fortunate for the government. Our economy appears to be trundling along quite well of late, but it is largely fuelled by the massive debt bubble of not just consumer debt (personal loans and credit) but mortgage debt also. Of course, debt must be repaid, so this is just delaying the almost inevitable…. Recession.
– Unemployement is still very low. This will put pressure on wages, driving them up a bit.It sure is low. It could perhaps squeeze a little lower, but at some point, it must start to rise again, particularly as there is a limit to the amount of debt consumers can take on before they simply stop spending.
– Lenders are still getting creative with their lending. A few 100+% loans are available now.“Creative†= Desperate & Reckless.
100+% Loan = Instant Negative Equity.My conclusion from the above is that overall these factors will have little effect (as they may cancel each other out).Your thoughts?
My thoughts? We are headed for a period of rising unemployment, falling company profits, rising interest rates, falling house prices, falling US dollar value (and/or substantial US rate hikes forcing more local rate hikes), devalued AUD….
Oh, and record bankruptcies!Cheers,
Foundation.“House prices are a matter of opinion, whereas debt is real.” Merv King, BoE, 2004
AusProp -> I’m reffering to Victoria. It’s a bonus from the State Government, making it a total of $12k. Given a leveraging ability of 95%, 12k can make a big difference to the amount someone can borrow (ignoring DSR).
Originally posted by foundation:Why would rents go up? Presumably these first time buyers are already renting, so their innability to buy will not increase demand for rental properties, especially given that there is an oversupply of rental property in many areas.
I would have thought that there would be pressure on rents as whilst these first time buyers are staying longer in the rental market those entering the rental market (i.e. kids moving out of home) will remain constant (or maybe they’ll stay at home even longer?). Overall this means an increase in the rental population – perhaps this is matched with the additional properities available for rent due to the recent investor boom??
You seem to suggest that the value of these properties will remain high because such houses will not sell? Given that people value their houses by asking “how much could I sell it for if I was forced to sell now†in a rising market, surely the same valuation method should apply in a falling market?I’m unsure about this. I think the question is more like ‘how much could we get for our house (under a regular sales process – rather than a fire sale)”.
I don’t feel there are a huge amount of people who are ‘forced’ to sell, however I do know a few people who ‘would like’ to sell but are not willing to drop there prices, as Joe Smith across the street got $xxxk for his place just last year. My parents first got into ‘property investing’ by accident when we had a house that we couldn’t sell. We just rented it out and held as an investment.
A small number of people will always be forced to sell for whatever reason. However, if sellers have purhcased more than 2 years ago chances are they have a very low LVR, which puts them in a less desparate situation especially with more and more creative financing options (LoC’s etc).
“Creative†= Desperate & Reckless.
100+% Loan = Instant Negative Equity.I Agree 100%! Instant gratification comes at such a huge cost…
My thoughts? We are headed for a period of rising unemployment, falling company profits, rising interest rates, falling house prices, falling US dollar value (and/or substantial US rate hikes forcing more local rate hikes), devalued AUD….
Oh, and record bankruptcies!Overall I agree. I think we are up for some interesting times ahead.
So, I take it you are holding out on your property investing or are you looking for CF+ deals?
Hi domcc1,
I agree that your scenarios hold some weight and that only time will tell for sure. I don’t think you should underestimate the effect of sentiment on the market though, both during a boom and the subsequent bust (/soft landing).So, I take it you are holding out on your property investing or are you looking for CF+ deals?I’m somewhat of an ‘accidental investor’ as a result of circumstance. I am an owner-occupier and also have a small coastal house. It’s mostly a holiday house / lifestyle investment and is lent to friends rather than let. Both are CF neutral (paid off!) thanks to the sale of my 2 investment properties and any CG they make in the future is a bonus.
My investment focus is currently a combination of capital protection with a little highly speculative dabbling. I wouldn’t touch 99.9% of property deals in the current climate even if they were CF+ and especially in country towns. The exceptions would be short term developments with low gearing levels.
I will invest in RE again when the figures stack up, but to me it is a part of a balanced strategy not the ‘one true path’.
I would never play the gearing game which is far too much like trying to beat roullette with a double-plus-one plan. On paper you can’t lose, but somewhere along the line you’ll catch the green…
Sorry, I’m rambling.
[sleepy]Thanks for you comments. I’m at a stage where I’ve done well with 2 x IP’s purchased 2001 and 2003, and now have the equity to go another one or two.
I’m currently torn between ‘it’s time in the market, not timing’ and how badly the figures do stack up right now. I’m sure that over a 10-15 year period another property should perform well however if I were to experience 3-5 years of flat I’m not sure what I’d be thinking/doing then.
Property has been the only thing that I’ve ever tried (I’m 26) and it’s worked very well for me although I know the good times won’t last forever and I’m yet to experience a bust first hand. I guess for me I can’t help but view it as the ‘one true path’. I feel I should really educate myself in what other options are available.
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