Thursday, February 9, 2012

Sentiment on Housing in Australia Seems to be Shifting

Comments are from this article:
A property crash? Don't bet on it.
For me, the main fundamental of any investment is RETURN. I am flabbergasted on how little attention is given in the RE debate here in AUS on the fact that property investments that show negative returns (as is widely the case because of our high interest rates) would have to be a NO-GO investment at times of flat or falling property values!
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Commenter ReneThalmann
I have never seen things this bad before. I work for a major bank and am noticing some really bad signs. The bank is in the process of cutting the number of lenders back from 1-2 per branch to 1 for every 3 branches - that is how slow the mortgage business is. Professional valuations are coming in lower than purchase prices - which is virtually unprecedented. Applicants can't borrow as much as they could previously so this is taking buyers out of the higher segments of the market and having a downward concertina effect on pricing. Properties that could have fetched $1.5m in the boom are now NOT selling at $900,000. I am not saying that every property has or will drop by 40% in value - but many of us know of examples -particularly Gold Coast & Sunshine Coast - where this has already happened. So I find it hard to really believe the crux of the article & so question the credibility of the views expressed. There will be many more jobs lost in a variety of sectors so unfortunately I think there is worse to come. All the money that fled the US & Europe in 07 & 08 got sunk into Chinese assets - looking for the next big thing - so although China will grow (similar to the tech sector) their assets are overvalued. When that money comes back out of Asia then we will be at the bottom of the cycle.
Commenter mich2210
Ian, surely you are aware that the rises in unemployment in other countries (US, Ireland, Spain, etc.) occurred AFTER house prices started dropping and hence contributed to the acceleration in price falls.
The equation is simple. Less demand for (or availability of) credit leads to less money in the economy which leads to a contraction of demand and a rise in unemployment.
This feedback loop started to kick in around 18 months after house prices started falling in most countries. ...
Commenter AB
There is only so much of the pie we can pay towards a mortgage and still buy pie to feed ourselves, so the view that property values can continue to increase is ridiculous. But that doesn't necessitate big falls, given the supply side. Hence we are in for a slow grind. until yields inevitably draw investors back in. With an ageing population more dependent on income generation from their assets it makes sense that investors shift focus to steady income streams rather than capital growth anyway.
Commenter Mike
So your sideways slide may struggle keeping its sidewaysness if you actually needed to sell right now or in the short or medium term (hope your properties are fully paid off, or your income remains steady, you don't fall sick, don't divorce, don't have any accidents, have good insurance). In the current climate only property holders that must sell or wish to offload depreciating assets are in the market offering stock. It's bad news to have to join them in the hussle right now.
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Commenter Mega Fox
Hasn't this been the role of the media through the entire boom though? Placate the mindless masses and act as unofficial advocates of the property market interests, talking up ANY potential market gain (no matter how dubious the source) whilst downplaying any market swing?
The entire global housing bubble was one born of two major contributors; cheap debt and propaganda.
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Commenter Educated Cititzen
5% this year, 5% last year, 5% the year before, it just keeps going down, and we haven't hit the really tougth times yet. Keep going China or we'll be up to our eyeballs in it.
Commenter Deano
you forgot to subtract the loss to inflation, which was about 3%. So its not 5%, its more like 8%.last year, 8% thist year, 8% next year......
Commenter That Sinking Feeling
If the average fall was 4.8%, add in inflation of 3% - that's nearly 8%- in one year? One or two more years of that and we'll be crash territory...
Commenter Paddy
So it's finally come to this has it?
We're at the stage of debating a 'pop' v 'an orderly retreat'. And then we're supposed to digest talk of 'a sideways slide' and of course the real big one, "negative growth'.
The only people who really have skin in the property game are buyers and sellers and those considering buying or selling. I can 100% guarantee that if you're a seller it matters not one single jot if it's an orderly retreat or a disorderly retreat. The direction is the same...DOWN!
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Commenter pp
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As the old line has it : 'My real estate agent and bank manager sold me a two story house- one story before the sale, another after.'
Commenter Reality versus real estate

Sentiment is a key part of a bubble. I'd say the myth structures have shifted. Note that it took somewhere between 10 and 18 months for this to happen.

[VREAA does this sort of post to great effect (so I admit I'm stealing the idea).]

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