Australian Property Bubble (article on Associated Press)

Hi Tim

Know the Deception Bay are pretty well and financed 3/4 properties up there over the last couple of weeks.
Agree with a lot of the comments already made. It has water but also has issues so be careful and dont pay over the odds for potential.

If you want a Residex report run on the property shoot us an email and i can send it back to you.

Cheers

Yours in Finance

i tend to agree that the sentiment here in Australia is changing about with regards to cost of properties. Its funny because none of the fundamentals have really changed that much in my opinion.

It is also my humble opinion that, as the global economic situation gains more uncertainty then the sentiment in traditional investment classes may be altered. This is not limited to Real estate. In fact take a look at stocks and you will see a correlation as well.
The real losers at the end of the day are those with cash in the bank and those in over-leveraged positions. Cash in the bank is useless in a high inflationary environment and well…. over-leveraging is a big no no and the banks seem to have curved their policies to reflect that.

Just out of curiousity. In the past whether it be by overseas property bubbles bursting. What occurs to rent after a bubble 'pops'? Does market rent stay around the same? Does it drop off? Or would demand for rentals and inflation force rent upwards?

i understand each market would be different, just seeking some opinions.

I agree with that, but house prices will fall much further than rents will go up. Anyone holding highly leveraged property is in for a world of pain! The OPs article makes is very clear that prices are extremely overvalued – up to 60% overvalued according to reputable sources.

This is a great thread, good debate makes for interesting reading.

The article states that approximately 800,000 properties are vacant any one time. This sounds ridiculous. Doing a very rough calculation of an Australian population of 20mil and average household size of 2.4 people this equates to an approximate percentage of 9.5%.

Are they seriously trying to tell us that circa 9.5% of properties are vacant nation wide. AND who deliberately leaves their property vacant when they have the option of renting it out?

This article stinks of misinformation.

Thomson, couple of things, i work in the agriculture and food industries and repeatedly hear there will be 9 billion people by 2050 and how are we going to feed all of these people with current land and water resources etc etc…  the thought always occurs to me it might be the other way around, if we don't have the food and land and water to feed/house them all, then we probably won't reach 9 billion, or they will be dropping like flies and we will all be paying astronomical amounts or fighting for a multitude of increasingly scarce resources…  i think a bit of it is people looking at a graph and just projecting the line up and saying this is where we will be without taking into account a whole bunch of other fundamentals that will be required to underpin it or assume they will be magically solved…   so yeah we may have a huge world population by 2050 or we may have a bunch of circumstances (including urbanisation and rising living standards that often cap birthrates) which will cause a different result….

the other thing, i alwats think back to the dot.com boom (businesses who don't have a website won't survive, B2B, B2C, just start anything dot.com related and float it on the stock exchange even if its losing money and become a millionaire etc), the food/oil/mineral/ethanol inflation/hype of 2 years ago (oil will get to $200/bl) and a trend starts, maybe a bubble of some description or maybe not, but everyone starts repeating the same lines until it becomes orthodoxy that this will happen, becomes accepted reaility and no longer questioned as its all you hear the experts/authorities saying (mostly probably just repeat themselves what they just heard)…   then something comes along and pricks the bubbles or upsets the orthodoxy and you find everyone just started suffering from group think, we all wonder what were we thinking and how were we all taken in/when did we stop think rationally/critically???  

maybe mass migration will flood us, maybe there really are 200,000 short fall in houses, maybe we haven't gotten into some sort of speculative property bubble where people only buy because they expect it will keep going up forever, maybe Australia's economy can keep expanding when the majority of the rest of the world seems to be struggling, maybe in an environment of large numbers of single households because of family breakup or partnering up later you can have a situation where house prices can only be afforded by two well paid people???  maybe we can afford to keep paying more for fuel, for houses, for energy, healthcare, for food etc each year (although i doubt it if they all have increases of 7-10% a year)    if any country should be able to manage these last bits Australia should if we do it smartly and look after our own interests…

or maybe we (and a bunch of 'authoratative commentators' plus a few vested interests) just keep hearing and repeating this stuff ad nauseum???    i don't have the exact answers myself but worth stopping and thinking about anyway…

So investing in real estate is terrible for the economy eh?…. We should all go out and buy shares so that Goldman Sachs and the rest of the shake down merchants can help the economy grow 

My properties provide the state government with a river of gold in good and bad times called land tax and stamp duty. The councils get money from my rates to provide for many of the services I don't use My newer properties have provided employment to all the trades people and GST to the states yet again. My older properties need maintenance so more jobs and GST.

When I sell a property I pay capital gains tax so the Federal government can employ people like the economist Ken Henry who has a great idea to tax & destroy one of the few things we still export…minerals  My properties provide me with cash flow that is then used to acquire more business assets that then go to employ more tax payers

We should listen to the OECD so that our economy is as rooted as the Europeans and the septic tanks (yanks) who by the way are doing a marvelous job through the Federal reserve printing dollars and exporting inflation to the rest of the world. Us greedy landlords have a lot to answer for. If comrade Henry has his way all the mum and dad investors will be squeezed out of the property market so its fairer

Hi DWOLF;
                    I'm not a blue sky property investor. Times are tough. The last 20 years has been easy to make money in the property market. The next 10 years will sort out the wannabees from the real investors. The reason why I buy pencils with erasors on the end is it helps when I make a boo boo  I call it my investment education fund. I've tipped at least $300,000 into that fund over the years. The key is not to make the same mistake again but to learn from it.

Regards NR

Limited Recourse wrote:

Hi DWOLF;
                    I'm not a blue sky property investor. Times are tough. The last 20 years has been easy to make money in the property market. The next 10 years will sort out the wannabees from the real investors. The reason why I buy pencils with erasors on the end is it helps when I make a boo boo  I call it my investment education fund. I've tipped at least $300,000 into that fund over the years. The key is not to make the same mistake again but to learn from it.

Regards NR

Have you made any mistakes during this gfc

And what were the lessons

My biggest mistake was underestimating govt willingness to prop up the bubble

Hi DWolfe and others,
                                        I know I posted a forum saying that house prices should fall from about Sept 09 I think it was , due to rising interest rates, etc, etc. But I was wrong they didn't, but as I said it's still a chance it may happen soon.
I couldn't help but notice in my area these interesting things just happened over the last week or so.
House been for sale for weeks, started at $490,000 about ( 5 bed but no garage ), just had auction – highest bid was $355,000 vendors bid was $390,00, passed in.
House for sale for weeks started at $480,000 then $460,000 then $430 – $450,000 and sold unsure of price.
House with lots of land – quoted at range of $750 – 850,000, nothing in bids then bid of $700 just before auction – highest bid $450,000 passed in , owners went back to 700 bid people and now say only will pay $460,000.

Just 3 examples I have noted recently, of course people will know of ones going up, but just my observations..interesting times ahead maybe.

DWolfe – no I'm not running down property as an investment for the long term, just an observation of recent sales in MY area not yours.  But please keep up your comments they are always interesting, and you are welcome to comment anytime.