the housing bubble

[The_Ruffneck]

Just wondering when do you guys think the housing bubble will pop?
And possible implications.
I'm thinking right now is the worst time to buy a house , better to wait 5 years for the market to bottom out?

Take it easy.

 

[kolchak]

Just wondering when do you guys think the housing bubble will pop?
And possible implications.
I'm thinking right now is the worst time to buy a house , better to wait 5 years for the market to bottom out?

Take it easy.

I was listening to the ABC the other day, and they were basically saying new home buyers were pretty much screwed ATM.

I'm in ur boat as well, Im not sure what to do....I reckon my $$$ are better invested in shares ATM, but I live on the moringington penisiuala and I need to get back to Melb for my work. So I'm not sure what to do.

I guess just be patient and wait for some good news. Can't wait 5 years tho.

 

[bunsen burner]

I think one of you is talking Perth whilst the othe Melb. Very different markets at the moment.

 

[bunsen burner]

Just wondering when do you guys think the housing bubble will pop?

Soon. I'd guess 6 months to a year.

On one hand the resource boom is still going and doesn't look like slowing. On the other hand IR are rising (or have risen) and house (un)affordability is very high.

An average house in Canning Vale is $500k. Can't see it getting much higher.

I'm thinking right now is the worst time to buy a house , better to wait 5 years for the market to bottom out?

I'd say in 3 years those $500k houses will be worth $440k or thereabouts. Still a lot of money in 3 years time!

 

[sabre_ac]

An average house in Canning Vale is $500k. Can't see it getting much higher.

I'd say in 3 years those $500k houses will be worth $440k or thereabouts. Still a lot of money in 3 years time!

Cant see the value going backwards, I agree though in less desireable places where the values have already sky rocketed they will stop.

Specially considering there are massive land releases coming up in the next few years for perth, naturally either on the northern and souther outskirts of perth. I wonder though if the ones down the south that are on the mandurah train line are worth buying if just for the land to hold on to for a while.

 

[bunsen burner]

Cant see the value going backwards, I agree though in less desireable places where the values have already sky rocketed they will stop.

Pretty sure there will be a correction. Almost always is when there's a huge boom.

 

[sabre_ac]

Pretty sure there will be a correction. Almost always is when there's a huge boom.

What do you think about these mass land estates about to be released?

 

[chooke]

What do you think about these mass land estates about to be released?

That will exacerbate any correction.

 

[bunsen burner]

What do you think about these mass land estates about to be released?

In what way? Where are they?

Not sure if they'll make a difference to the boom. Certainly it will ease ration bewteen demand and supply. But it will also attract investors. Hard to tell.

I think the key is affordability which is controlled mainly by housing prices and IR. The resource boom should go on for a while yet but the housing market should slow down. No bust but a slow down and eventual correction. This is all just speculation but I'm pretty confident on this one.

It's also hard to tell when the Perth Property boom will slow or stop. I'm guessing in 6 -12 months but I'm not super confident.

 

[Borscht Mat]

last year in Australia 25% of post codes saw a fall in the median house price. Given that hardly any of these were in WA and QLD, then the Eastern states are not in any sort of boom and havn't been for some time. Also an interesting stat given the propensity of people to claim that property never falls.

 

[bunsen burner]

last year in Australia 25% of post codes saw a fall in the median house price. Given that hardly any of these were in WA and QLD, then the Eastern states are not in any sort of boom and havn't been for some time. Also an interesting stat given the propensity of people to claim that property never falls.

The concept of never falling is usually a long term outlook.

Brisbane went slightly backwards a year or so ago. I had a place go from 320 down to 300. Now it's back up to 340. I'm hoping Brisbane is back on the slow uphill crawl. Has been flat (except that slight dip) for 3 or so years.

 

[CattyBossDog]

last year in Australia 25% of post codes saw a fall in the median house price. Given that hardly any of these were in WA and QLD, then the Eastern states are not in any sort of boom and havn't been for some time. Also an interesting stat given the propensity of people to claim that property never falls.

More unit/apartment sales = median price drop.

 

[Faithful Hawk]

In what way? Where are they?

Not sure if they'll make a difference to the boom. Certainly it will ease ration bewteen demand and supply. But it will also attract investors. Hard to tell.

I think the key is affordability which is controlled mainly by housing prices and IR. The resource boom should go on for a while yet but the housing market should slow down. No bust but a slow down and eventual correction. This is all just speculation but I'm pretty confident on this one.

It's also hard to tell when the Perth Property boom will slow or stop. I'm guessing in 6 -12 months but I'm not super confident.

There are signs of a slowdown already with prices begining to roll back in some areas. I am currently looking to buy my first home in the 2nd half of this year so have been keeping a close eye on the smarket.

Yes the resources boom will continue for a while yet but don't think this will reflect much more on the housing prices, as lot of the mad scramble by companies and indviduals to the west coast has already occurred.

 

[Scratcher Gillespie]

More unit/apartment sales = median price drop.

Incorrect. Median house prices are based on sales of established houses (ie: houses with land)

Where the measure can be innaccurate is that it doesn't take into account the quality of the housing being sold.

 

[CattyBossDog]

Median house prices are based on sales of established houses (ie: houses with land)

Median house prices are choice figures, paid for by banks, to encourage more borrowing.

 

[FIGJAM]

More unit/apartment sales = median price drop.

Median house prices are choice figures, paid for by banks, to encourage more borrowing.

Incorrect on both counts (at least in Victoria).

1. The median price of units and apartments are separate from dwellings (aka houses).

2. The REIV absorbs a tremendous amount of contract prices through both auction results and their contract processing department.

Within the inner city, they get close to 100%. It fails a little bit in rural areas where the agents often choose not to affiliate with the REIV. They do this because they are hicks and / or wiley bastards who wish to protect their own knowledge of the market. Then you can just get the sales data through the Valuer Generals or the Council, but this information may typically not be within the REIV median price estimates.

There are many issues with median prices. As Scratcher Gillespie said, it never takes into account quality of houses. In essence, people can sight a median house price jump of say 10% in somewhere like Coburg over a year, but then is this because the market's moved 10%, or because many houses have been recently renovated with polished boards, period features, new kitchen and bathrooms etc., adding an extra 10% in value?

There are a number of data related issues, but that's just boring!

In essence though, it's probably the best measure of market movements, but needs to be treated with some degree of skepticism.

The REIV collate and distribute the information themselves, for either a fee, or via professional fees which keep the REIV afloat as a professional body. The banks have literally nothing to do with Median House Prices.

The (major) banks themselves actually have their own in-house research departments who can practically provide superior information to just about anyone. I recently attended a function where the head of NAB's research said that they lend $10 Billion per week! And CBA lend more!! They not only get a wealth of contract prices, but thousands of independant valuations. Put that all together and you have one seriously good snapshot of where the market is at. They have no need to pay REIV money to put median price info out.

 

[shiva25]

Cant see housing prices falling too much when and if the bubble bursts.You can only expect a 5-10% decrease in wealthier areas and probably as much as 20% in lesser areas so waiting 3-5 years isnt going to save you a great deal of money in fact i tend to think the longer you leave it the harder its going to get to purchase a home

 

[Rob]

I'd like to say I know exactly what's going to happen, but i've got absolutely no idea. Most historical statistical evidence suggested Perth house prices were overpriced 2 years ago, and current stats like rental yields and the ratio of median price to average income are so insane at the moment that 5 years ago no-one would have thought them possible. So it's completely plausible that property prices could collapse like a marathon runner after he crosses the finish line, but then again I wouldn't have the confidence to make that sort of prediction.

But I have to ask, with houses in the dregs of Perth going for $400k and houses in average suburbs hitting $600k, who is buying these places? I know there's a few cashed up bogans going around, but it's got to be more than that, otherwise average wages would be much higher. Are people on average wages really borrowing $4-500k and using 80% of their after tax income to pay a mortgage off?

 

[sabre_ac]

But I have to ask, with houses in the dregs of Perth going for $400k and houses in average suburbs hitting $600k, who is buying these places? I know there's a few cashed up bogans going around, but it's got to be more than that, otherwise average wages would be much higher. Are people on average wages really borrowing $4-500k and using 80% of their after tax income to pay a mortgage off?

Crazy mortgage terms must play a big role.

As you said wages havent increased at the rate property values have, I cant see how people could survive by paying 80% or their income on their home.

One thing that angers me is peple getting narky about petrol prices and council rates going up.
Happy to pocket the increases in their property value, but wont tolerate the rest of hte world looking to make money.

 

[Scratcher Gillespie]

Cant see housing prices falling too much when and if the bubble bursts.You can only expect a 5-10% decrease in wealthier areas and probably as much as 20% in lesser areas so waiting 3-5 years isnt going to save you a great deal of money in fact i tend to think the longer you leave it the harder its going to get to purchase a home

Hmmm. so in wealthier areas a 5 - 10% house drop could be say $40,000 to $80,000. Same in lesser areas. Seems like a big saving to me. Although I have no idea what is going to happen in the market - I would have said 3 years ago property was overpriced. Myself and my partner comfortably earn over $100,000pa jointly, we are priced out of the middle class area we live in. A loan of $400,000 would mean we would be spending 50 - 60% of our after tax and hecs income on property, when we can rent in the area we want for $80pw each. Until either rents go up, or property comes down (I think both are likely in the medium term), this is one market I'm staying out of.

Western property prices finally hit the skids

• <LI class=byline>Jo Prichard and Paige Taylor
• January 15, 2007

THE brakes have been applied to the runaway property market in Perth.

House prices in the city for the December quarter are forecast to have grown by about 4 per cent compared with about 8 per cent for the September quarter.

The Real Estate Institute of Western Australia will this week announce a median house price for the December quarter approaching $460,000, up from $440,000 in September.

REIWA president Rob Druitt said the slowing was expected given phenomenal price rises driven by the resources boom.
The median house price in Perth rose 38.7 per cent between September 2005 and September 2006. "That sort of growth really is unsustainable," Mr Druitt said.

"I think September was the end of the property boom."
Mr Druitt said that while most suburbs had continued to grow, prices in some outer Perth suburbs had dropped.

"First-home buyers have been left out of the market and that is a concern ... affordability is going to be the buzzword of 2007," he said.
The West Australian Council of Social Service said the slowing property boom would not help those looking for rental accommodation because the rental market would see an influx of people who could no longer afford to buy.

"What we're seeing is landlords increase the cost of rent every month or every three months, because many rental agreements now allow it," WACOSS executive director Lisa Baker said yesterday.

"An increasing median house price in Perth will only exacerbate affordability problems for renters and buyers."

House and rental prices in Perth had increased way out of proportion to wage earnings, WACOSS said.
Rental prices increased by 27 per cent last year against national wages growth of 2.7 per cent, Ms Baker said.
And industry sources expect rents to increase by a further 20 per cent over the next 12 months.
"That kind of increase has a huge impact on people's ability to access housing and accommodation," she said.

Relief for home buyers must be addressed by the state Government in its May budget, REIWA said yesterday, as the threshold for stamp duty relief was set when property prices were lower.
"When that figure ($250,000) was chosen in 2004, 46 per cent of all houses were under that price," a REIWA spokesman said. "Today less than 5 per cent of all homes for sale in Perth fall under that threshold, so something has got to change.

"It's unacceptable that a first-home buyer in WA is looking at paying $18,000-plus stamp duty on a median-priced house."
Mr Druitt said many first home buyers took out larger home loans than they wanted to because they were unable to otherwise pay stamp duty.
"It's very unfair on young people."


http://www.theaustralian.news.com.au/story/0,20867,21059742-25658,00.html

 

[The_Ruffneck]

One thing that angers me is peple getting narky about petrol prices and council rates going up.
Happy to pocket the increases in their property value, but wont tolerate the rest of hte world looking to make money.

Yes mate but even if their house goes up and they sell it for a large profit they still have to find a new place to live which would have gone up in price too youd imagine so they wouldnt really have made that much moolah so it only really profits people who have more than one house or property developers.

 

[Rob]

4% in a quarter is still a bloody big increase.

 

[Slacker]

4% in a quarter is still a bloody big increase.

Agree. Maybe they are arguing that it is an inflection point?

Plenty of bad news being reported on the WA housing market the moment, today we have the "WA house prices could fall 20pc" article in the Australian.

Might be a good time to start looking around.

 

[theGav56]

I'm interested to see the effect that the Gavernment's legislation which allows people to contribute $1mil into their super this year has on house prices. It wil be (is) tempting to sell an investment property and put it into tax effective super. And if it means an increase in properties on the market, plus a reduction in rental properties, it will be interesting.

 

[Faithful Hawk]

I'm interested to see the effect that the Gavernment's legislation which allows people to contribute $1mil into their super this year has on house prices. It wil be (is) tempting to sell an investment property and put it into tax effective super. And if it means an increase in properties on the market, plus a reduction in rental properties, it will be interesting.

Fingers are crossed in my house hold atm, this combined with a state election later in the year could mean a lot of much needed relief for first homebuyers.