Property bust not here yet … worse to come

Welcome to 2009
I see many great opportunities coming up in 12-18 months in RE. With pricing on decline I started sniffing out  RE I am interested in and noted that in reality I can get 10-20% off asking price on the top of official figures of 10% drop for 2008.

We are in for a free fall by the look of thinks. This is great for first home buyers and purchasing IP at the end of cycle.  

Harb, unemployment would have been higher than it is now, actual figures, could not say.

Wealth I can see several scenarios, but they are not as optomistic as yours..though overall I agree..

thanks for the news of the Gold Coast, the thing is not only has that sale carved $40M off that building but has also taken $x off every building withing reasonable reach, and probably carved a couple hundred mill off the gold coast…

any comments from our broking friends are appreciated..

If unemployment rates above 7.5% during 2001 didn't prevent a boom how is now moving up to the same numbers going to cause a crash ?
If you are correct and we only go up to 7.5% by the end of this year  then I think the worst IS over.  Not only that but unlike 2001 this time the IR is going down and the government probably doesn't mind a property mini boom to get the economy moving again.

I think you have to think big picture, not just IR.

Things for 2009

Unemployment up -whether it is 7.5 -8.5 or 4.5 to 5.5 it is still the upward movement not the actual % that is key. It is the changes that occur to that 1-3% that will loose jobs. Some will get employed quickly. For most that will be rare. In 1983 I beat the traps for 2 mths and only got a job when I worked for $5 or 20% less than before. Back in 1991 many bank Johnies pounded the pavement for a year and I will quote " not going to rush out and get a job right now, think I will take some time off, there are a couple of things I have been meaning to get around to…" they were not worried until three months later when they started their search. 

For the working masses many without a house will bail, and head north or south for the coast, if you are on the dole, cut  your overheads and enjoy the beach.

A stack of 417 workers will be going home, as Aussies will now do what they would not do before.
Housing shortage now solved …actually although the REI keeps trying to beat it up, we have not heard much about it for a while..

Of course the ppl who lose jobs will spend less, less money going round will mean guys like my coffee shop owner downstairs will not replace "Mona", and so the slide will go on. More and more business's will slow with job losses, overtime losses creeping up

On top of the unemployment we are going to see the boomers cut spending like we never could have imagined. I have predominatly a boomer client base, and I don't ask but they tell me.
R@#$ how are you
" what do you think"
why what do you mean
"I mean my b#$%ly super went down"

All my wifes friends spend time telling her how they are trying to put together a budget,  "F#$d has got a small part-time job…"

This massive contraction in spending will have a much worse impact than unemployment initially,  although one feeds the other.

In my office a key strategy among my clients was to help out the kids in recent years, by tapping into a bit of super, or equity and giving them a start in the market. Don't think I will here that as  much this year..What effect does that have on the market ???

And it is only just starting as many of my clients in recent months, convinced that 3300 all ords must be followed by a rebound, keep putting money into the markets…..and thank god they do or the ones bailing will really test it..

Think the Funds losses are  understated. I mean these guys get paid for results, now is not the time for honesty, you watch over the next two years everyone super will get worse even if the markets revived (hey a 20% increase next year, wow, 3,960 I can relax again…) Every accountant has chosen the more optomistic option of valuing assets. Only when a whole new group of CEOS and CFOs are in the chairs will we know the truth..

It will take a year of this before it sinks into most ppl.

Banks only have two lending policies (I have mentioned this before ) and they are
a) lend to homeless drunks
b) lend to no-one

Guess which policy is coming up

Right now the RE market is suspended, as sellers are holding back for recovery this year, and newbies are using whatever equity to snatch up a bargain, as they think this is Christmas, low rates, the market dropping, a boom is around the corner. Cannon fodder….Yesterday my favourite image (common we all enjoy seeing pain) was one of the BHP workers getting off the plane following loosing his job. What caught my attention was "and I just bought an investment property"

I mean I work in a mine, the global economy is tanking why not borrow a buckletoad and invest….Come on, who here would have done the same, hand up……..

On the big picture there are a stack of major companies out there some listed and some not, whose expansion helped this boom, sitting on foreign oans no bank in Australia wants to touch unless the Gumnut, guarantees it. Now that is a tricky one, yes the bank should help the good companies and there employees, but should they come to the aid of every Eddie Groves, – that would be political suicide

So far only joke compaies have slid. In 1987 the market crashed, but when did Skase, Bell, Elliot and Bond dive.

maybe we should change this to the Economy Bust is not here yet…..

Ohh and Amex and St. George just announced lay offs

and by way of comparison the top end lead the RE market down in 1991 but everything eventually followed and if you drop was 20% you were lucky..this will be worse.

and Perth will cough up a lung…. ( I have been waiting to say that for so long..)

maybe I should change my name from GMH454 to "Grinch"

In 1983 unemployment was over 10% and yet there were lots of jobs available if you didn't mind what job you took.  I remember not wanting to work and  the social security guys harassing me to take a job or they were going to cut my dole if I refused the third job offer. After taking 3 jobs in as many months I had  no more excuses and decided to try my luck in SA where they supposedly had higher unemployment rates.  I remember the good times I had at Glenelg beach for a whole week before the the social security office found me a job and made me an offer I couldn't refuse. 
As long as jobs are available any upward movement in unemployment rates is artificial and anyone squeezed hard enough will   take whatever job is available rather then the job they would prefer doing. When it comes to jobs I think we are in a much better position now then we were in 1983.
 

I think they got smarter these days, you move to a higher unemployment area and they cut you off the dole. Then when you do get it its off to paining rocks or whatever they do on the  work for the dole program these days.

Not quite, some of the Aussies replacing the 417 workers would come from the mines where they lived in dongas and other  employer provided accommodation and some would be returning expats. The only housing shortage solved  would be in mining towns and very little would change in the cities.

The coffee shop owner will now have to work for a living instead of hanging around chatting to customers and keeping an eye on  "Mona" .  
Mona if unskilled can easily find a job pushing a broom , filleting fish or replacing  some of the backpackers working illegally in orchards and vineyards.

But isn't that exactly what happened after 1983 and 2001? If not for the 18% IR its very likely that it would have happened in 1991 as well.  

I don't remember Perth going down 20% in 1991, more like 5% but anyway I hope you haven't been waiting since then.
Just how long have you been waiting to say that ? This thread has only been going on since 2006 when median prices in most capital cities were $100k lower and rents were almost half they are now. 
…Worse to come ? Maybe for renters and fence sitters.   

Wealth think it would have peaked in NSW in mid 2003 except the "BLOCK" drove it onwards.

Harb good points, but we seem to be meeting at an angle not quite meshing.

Still think all my points will fall into line, though I do see your angles, and they will have some impact, and on Perth been waiting since 2003, and it is very very soon.

Not bragging but if you want a description of this mess go through my posts from the last 4 years..right then, though will say my time expectations were off at times, so I am happy to sit on my current predictions (who knows maybe they will cough up both), although on a micro level I am a very compassionate person on a macro level I will slow down and watch the wreck as I pass by..

Not just a naysayers but called China and the mines as did many others here years ago

Several years when the ABC asked a major long term economic forecaster who predicted the minerals prices peaking (this was around 2006 may be early ) they said "and what we happen to Australia" reply "well Australia is too small to run a model on …but ask yourself what do you sell the world.."

been watching the wreck ever since..