Here is an interesting article i just read which coincides with what ive been saying for a few years. Australlia has been fed propaganda by the real estate industry to try to keep them in jobs and feed their thirst for money. Australia has an oversupply of properties and the latest numbers just prove it. here is the link to the article
http://www.crikey.com.au/2010/07/12/housing-shortage-myth-keeps-bubble-talk-on-the-agenda/
I love broad generalizations. Yes, there may be a huge oversupply in the bush but no one wants to live there or it is in the wrong place or otherwise unsuitable.
Conversely, we have a shortage of land released for development which in turn puts pressure on arable land/market gardens/food basket.
There is also a reluctance to embrace med/high density solutions in many areas either inappropriate, heritage or too expensive
well you say its a generalisation but i work in the construction industry in sydney and i can tell you there are a high number of new properties unsold on the market. Killara is just one place that i know had a significant number of develepments come into the market this year and last year and half are still to be sold. eastern suburbs of sydney have had the same problem with a high number of new dwellings come into the market and they arent able to sell them. south east queensland is flooded with unsold properties and even old properties cant be sold. now you answer me this, if the was such a thing as an undersupply then wouldnt these properties be snapped up off the plan and wouldnt properties on sale be snapped up first days. like this article says. when real estate people say an undersupply due to the high number of immigration they never tell you how they calculate the numbers. they say 200000 people migrated to australia but they dont tell you that those 200000 consist of kids, grandparents, parents, partners. all these people with the exception of the kids will only be buying one property for them selves and not one each, also the kids will only be buying properties after many many years into the future which by then the population of australia might actually be decreasing due to the aging population of australia by where the majority of the baby boomers will be going into retirment homes of passing away. You say we shouldnt beleive what everyone tells us but thats exactly what your doing. read all the numbers for your self and you will see that there is actually an oversupply in australia and it will only get worse with the new immigration policies coming into place. in regards to rental market, well i live in coogee and there is ussually no available properties for rent because they quickly get snapped up but just driving around now and you will see a high number of advertisments for rental properties available and this isnt just coogee its whole eastern suburbs and inner west. so go out there read the numbers and then come and reply again.
Just to let you know. In america, spain, ireland etc etc they too where saying they had an undersupply of dwellings from 2003 until 2007. now they have a huge oversupply. hahaha. did 20mil people just dissapear into thin air in amercia and over 2 mil in spain and etc etc etc. because thats the number of dwellings vacant in those countris.
Just had a drive around our area. Yep still short of properties. They are there but still well below trend. I think it’s still way to early to call an oversupply at this stage. Everytime there is a bit of a move with anything in Realestate people exagerate and amplify/twist the results. It goes both ways and it’s quite funny.
eloi wrote:Just to let you know. In america, spain, ireland etc etc they too where saying they had an undersupply of dwellings from 2003 until 2007. now they have a huge oversupply. hahaha. did 20mil people just dissapear into thin air in amercia and over 2 mil in spain and etc etc etc.
Yes they did disappear straight into nursing homes or aged care !
There is a theory that economic recession and depressions occur due to large demographic groups aging like baby boomers.
It is roughly a 30 year cycle. 1939, 1969, 2009This theory comes from this book I have read
http://www.hsdent.com/purchase-the-great-depression-ahead/[/quote]
Yes they did disappear straight into nursing homes or aged care !
There is a theory that economic recession and depressions occur due to large demographic groups aging like baby boomers.
It is roughly a 30 year cycle. 1939, 1969, 2009
[/quote]Yes, duckster, I agree with the idea that demographics drive the economy entirely. Always have.
One of the main reasons we have had such prolonged credit expansion of late is the BBs kids leaving home. BBs have had more to spend and, representing such a signifigant portion of the population, this has lead to debt creation levels not experienced (relative to population) since the 20s.
Eloi, There might be a couple of points in there:- and I personally think the under supply is a bit overstated. However; there has always been bull markets, there has always been bear markets, always been booms and recessions. Some people make money in shares and property; long bull markets generate false confidence and a flood of mum and dad investors run to investment and then everyone gets burnt. This regular crash and rebuild is just normal life… Normal cycles… There are also always people that think the next one is the big kahuna e.g. The end of the world / the shy falling on our heads… The US will colapse, property will be worth nothing. To assume this is the big kahuna might be right – but like all the skeptics in every other recession they are most likley wrong (albeit they will claim to be right if we have a 10 year depression). Like Nostradamus, the revelations chapter of the bible, year 2000 and all the other end of world theories – they are all correct to assume everything comes to an end – I don't think anyone thinks we will all live forever… Out world economy is no different. Personally I don't think the big kahuna will be in our life times – the US is down financially but that's just part of life, we might have a drop in property prices. If your debt level if low and income stable you are fine. It is the people that are geared high (over 80%) at risk – hence banks take out insurance when they lend to them… If you are going to worry about the next recession. You may as well also start making preparation for the sun going out…
hey banker.
well for someone to not worry in these times would be very fullish of them. if we where having a standard recession then i would agree with ur cycle theory but the circumstances in this recession are very different. The problem began with easy money and thus the sub prime problems which created high debt in the banking system which then triggered the gfc and now the debt is still there for the banks but the governments have also accumulated umprecidented amounts of debt to the point where some people have questioned the viability of countries like america, japan england, spain, and the rest of europe. They say it will take over 2-3 generations with high taxes to be able to pay this debt and now to top it off household debt in australia is also at an all time high so we have to ask ourselves will there be a big kahuna in the near future.
just going back to the main topic. i beleive sydney and melbourne properties will be able to hold up on prices for the medium to long term due to high demand for inner city living and the divercification of jobs but outer suburbs will take and are all ready taking a hit. in the short term sydney and melbourne will also take a hit because of the price to earning ratio of property prices. Not many people can afford to pay a 1+ million mortgage so its only logical prices will come down or stagnate for a long time until peoples earnings increase in line with affordability. just last week the auction clearences dropped to %50 in sydney and %55 in melbourne so its all ready began and this is supposed to be the busiest time of the year ( spring). im just getting into the mortgage brokering business so for myself i want people to keep purchasing but if i was a finacial planner i would be telling people to sell there properties now, deposit there money into either an online saving interest accoutn ( %6) or a term deposit (%7) for the next few years. the income on there $1 million property will fetch them $700 a week then deduct expenses its prob around $600 a week but in a savings account it will earn them $1100 a week with no expenses. but this is another topic all together. hey banker who do u actually work for?
Well, eloi I must be foolish, but I dont see the point in worrying about something that may or may not happen. If the sky falls there is nothing I can do about it any way. Australia is having a commodity boom that will only get stronger in the next few years. The only thing holding us back is lack of workers this will cause wages to rise, and tax deductions to be sort.(investment Properties) Dont under estimate the financial revoltion in China, with land now being able to be used as colateral,resulting in millions of chinese having a huge increase in spending power. Australia has relative low debt and record high wages and record high savings. Debt can be good depends what it is used for. It is obvious why your not a financial planner , if you got you got 6% interest you would loss 2.5 in tax and 3% with inflation.
Even if there is a recession so what, I am sure most of us will survive manage to fill our tummy and have a roof over our head. And there will be lots of oppurtunities and it will pass, so bring it on. I like a challenge life is more satisfying meeting challenges. So meet it head on or go and put your head in a gas oven.hahaha yes your right. earning $42000 a year after tax with no headaches in a time of uncertainty and possibly, thats a high possibility, of your asset depreciating in value and only returning $21000 in rent after tax, you also pay tax on your rent, is a very silly idea. Obviuoulsy your one of those people who only started looking at poroperties in the last 10 years and have this idea that property always goes up and u never lose. hahahah maybe yu should go to south east quuensland, western australia, or outer sydney and ask the people there what they think about my idea. No im not a financial planner unfortunatly id love to be but i have to be patient and with time i will get there. <moderator: delete abuse>. China is pulling back on its housing boom, its telling its banks to reign its its lending because they have a huge huge huge housing bubble and they know its going to pop soon so if that happens what do you think is going to happen to our mining jobs. Australia will and can not survive on its own that the problem. we depend on china, america, europe and if they go then we go even depper. but what do i know im just a fool.
Holy crap Eloi, ever heard of spell checker?
Crusty, you have to compare apples with apples. You mention that money in the bank will be subjected to 3% inflation per year? And what about property, you don't think that inflation will also erode the value of your property? You also need property to go up by 3% a year in value to keep up with inflation. Take stagnant (or falling!) house prices, add in your interest payments, land and water rates, property maintenance fees….
Property prices will need to go up by at least 6-8% per year just to break even. Makes 6% in the bank sound attractive. The reason why you are paying tax on your money in the bank, IS BECAUSE YOU ARE MAKING MONEY. Claiming a deduction from your tax bill via negative gearing MEANS YOU ARE LOSING MONEY.
Property investment is a great idea in a booming market, but I don't think there are many people out there who still believe that prices will continue to boom. And to have the attitude that "if the sky falls, it's Ok, everyone else is also going to get burnt" is not the attitude that will make you wealthy.Wow. It seems our future is already mapped out by forum users. No point going on with life really
Are we really going to start that old savings v property chestnut.
For starters history has shown property is the winner.
To even consider savings you must have cash. You can’t use leaverage.
To sell all your property and put into savings is a very big call. To get it right and come out ahead would require more luck than skilled as so many WRONG economists have prooved already.At this stage a massive collapse/depression is nothing but an educated(or uneducated) guess. Nothing is set in stone. And so far for every correct pick in the current climate we have several wrong ones. For the majority of investors having a buffer, controlling your risk and riding out the slumps is still the best option.
If a planner told me to sell everything and put into a savings account I think I would walk out laughing.
there is one thing i dont understand. If we have a true under-supple of property, then why arnt there buyers fighting for homes in the street.
I must say this whole under-supply statement has some flaws.
James,
If there is an under supply, why is stock rising so quickly of late? There is an under supply of homes advertised at a reasonable price, not an under supply of homes for sale.
All the FHB boost in 2009 did was majorly over value the bottom end. The top end still hasn't recovered and the middle is squished in, well, the middle:) Trouble is, if the bottom end starts to fall away, the middle and top will follow, even though they are much closer to reasonable value.
Devo,
Recent history has shown that property is the winner, not all history. And that is a recent history with sever market distortions.
I agree, however, that selling all of your property and putting it in cash is silly. Best to be hedged against either, if you are well funded enough, and have some property, some cash, some precious metal and some stocks – probably in 25% proportions of each to keep it safe
Ummester. Yes that’s a more rational response. As for the undersupply thing. Who really knows. People push both sides. Must it be one or the other. Can it be above or below trend. I would still say with all the information at hand we are still leaning towards undersupply. I guess we will not know until the future becomes history/statistical fact.
Devo76, I didn't mention anything about selling property. The transaction costs would make that a pretty silly idea, especially when house price falls (or rises) are predictions.
However what I am trying to implicate, is that in the current climate I believe it would be wise to keep your money in the bank (if, that is, you have some money in the bank). Leveraging into the property market at the top of a cycle may not be such a wise move, but holding property for the long term and riding out the cycles would be.Mick12345 wrote:Devo76, I didn't mention anything about selling property. The transaction costs would make that a pretty silly idea, especially when house price falls (or rises) are predictions.
However what I am trying to implicate, is that in the current climate I believe it would be wise to keep your money in the bank (if, that is, you have some money in the bank). Leveraging into the property market at the top of a cycle may not be such a wise move, but holding property for the long term and riding out the cycles would be.Not directed at you mate
eloi wrote:. Australia has an oversupply of properties and the latest numbers just prove it. here is the link to the articlehttp://www.crikey.com.au/2010/07/12/housing-shortage-myth-keeps-bubble-talk-on-the-agenda/
I've read the article twice and fail to see the 'proof' that Australia has an oversupply. Just because rents haven't risen does not prove an oversupply.
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