Megalania

The Reserve Bank will follow middle of the road policies. They do not decide what happens to the Aus economy - unless they make a mistake.

Watch the Yankees. Likely to be a wild ride.

Herman

To me these all seem to be demand side issues. What about the supply side of the equation? Surely all of these effects would have to combine in significant quantity to curtail housing demand to a level where there is excess supply? The price of anything will rise year on year if supply is severely restricted. The last housing crash was caused by a major shock when interest rates doubled in a short period of time - is such a major shock really likely?

OzTennis

Apologies if this has been pointed out on the rest of the 4 pages of this thread but surely what matters is the particular suburb of the particular city or town and the particular house type you want to buy. A 'guess' that the market is going to drop 20% on average means nothing. My feeling FWIW is that for most house types and most suburbs the rate of increase will slow down compared to what it has been. Don't expect masses of houses to be 1/5 cheaper than they were in 2003.

OzTennis

OzTennis

There you go, my post came in below Herman's which was making a similar point. The answer to the question he poses is surely no.

OzTennis

Goodpubmisser

Some of us were here in Australia in 1988 when Keating gave us the "Recession that we had to have".

I remember that people were defaulting on their mortgages and no one was buying as they were worried about losing their jobs.

Melbourne went from a nice place to live to being a back stabbing cold place where a new migrant was not welcome. In other words Australia has crashed it's housing market deliberately before and it would not surprise me if they do it again.

OzTennis

Well, we can only see in a few years time who predicted correctly can't we? Self-fulfilling prophecy theory often works - think something will happen, act accordingly and it happens. Keating isn't in power now so probably 'market forces' will have more influence.

OzTennis

sjn2003

I think it is important to distinguish between those who are looking at property prices from an investors viewpoint and those that are looking at property as a home.

If you are looking to buy a home, the only question that you need to answer is can you afford it ? If it's the house of your dreams in the right neighbourhood etc etc and you have the secure income to pay the mortgage, then buy it.

Who cares whether the price goes up or down by 10%? As long as you didn't buy an overpriced turkey, when you want to move everywhere else would have gone up or down by 10%.

Too many people are trying to play the property market with their homes. They should stay out and leave it to the experts - exactly the same as those who tried to play the UK stockmarket boom. There is a saying in London, when a cabbie tells you to get into property its time to get out. And they have been banging on about property for ages.

Those with money to invest can worry about economic theory and supply and demand, but if it was me, I would not go into buy to let in Oz or UK now and I would be in the stock market (as Ossigeno said at the start).

And yes Dotty, London property prices have been falling for the last 12-18 mths from their stupid peaks...good news for you !

OzTennis

Totally agree with what you say. I was really responding to the early part of the thread which was implying 'crash, all prices down 20%, hold off for a while and pick up a bargain' etc. Property prices also are an investment for those who 'buy to live in' because most people will sell at some time in the future. I don't just look at 'buy to let' as investment, but you are right it is a different market. Reports I've read suggest there will be many bargains to be had in the buy to let market (in Melbourne anyway) provided you can take a sufficiently long term view.

OzTennis

sjn2003

I know so many people though who are selling their 'homes' and moving into rental accom to try and lock in a profit, or remortgaging to release equity to buy-to-let just because they read it in the Daily Mail 'things to do in 2004' column or some other crappy business advice paper. Some of them may pull it off, but these are the people who will get into trouble because this ship has well and truly sailed.

For property prices to crash I think there would have to be a trigger (like the interest rate/ERM fiasco). That's the UK. Not too sure about Oz which is why I will be renting until I have a better idea. I've read that the boom has been largely fueled by the property sector which suggests the govt will not hit the brakes too hard, but they have showed they are not scared to raise rates.

Parts of Sydney or/and units will fall if they are overpriced compared to affordability. Good property in good locations will always attract top dollar though. If they are not building in these locations, I can only assume there are more people with money are moving into the area...must be all those bloody British expats!

OzTennis

Agree again! Renting to begin with is a good idea because it gives you time to have a look around, pick out nice suburbs and type of house, get a feel for prices, hopefully save up to reduce the size of the mortgage and so on - and with the collapsing buy to let market you are bound to pick up something for a reasonable rent in Sydney.

One thing I would suggest for anyone is to go along to some auctions and properties open for inspection (OFI and a date and time in the proprerty ads) - you get a feel for prices, can have a 'sticky beak' in houses to get some ideas for what you would like etc. Just don't scratch your head or something like that at an auction because you could end up spending mega bucks without knowing it!

As well as the 'Daily Mail' things like Location, Location, Location; A Place in the Sun and all those house and garden make-over shows have a lot to answer for too. I must admit we watch the first two (not the make-overs) but we wouldn't make a rash decision on the basis of what we see there!

OzTennis

captaincook

Lets be realistic the total London market is not falling at all at the moment. The top end of the market has fallen but the rest has just stood still. Below £250,000 the market is still strong. Stamp Duty thresholds play a large part in that. Market is SE was very quiet Q2 last year but as soon as the iraq war was resolved the sales took off again. City bonues are expected to be restored this year so expect the London market to take off again soon.

It's better to be in the market than out of it though. The professor at warwick is trying to save his tarnished reputation now but I remember him being very vocal last year and he got a lot of tabloid press which lapped him up. I think he was wrong then and wrong now. Market will need a shock to make it fall and it is difficult to see where that will come from in the short term. Long term inflation has to be the worry and much higher interest rates given the way the us economy is being pumped. Gold is already warning of inflation although change in hedging policies is distorting this to an extent.

sjn2003

Sure I read somewhere recently that less than 50% of properties auctioned where actually sold - I assume that is either due to not reaching the minimum or lack of interest. Whole auction thing seems quite scary but a lot of fun to go to. Not sure about from the sellers point of view though - sounds a bit hit and miss on how many keen buyers turn up on the day !!

sjn2003

Who cares what the total London property market is doing? Nobody is buying the whole market, that's why all these stats are useless when deciding on what to do.

The market where I live (Islington,Hackney) has definitely fallen from what people were paying 12-18mths ago, but then they were silly prices. I agree that they will stay static now for a while. Do you really think that anybody cares about the Iraq war when thinking of moving house? I don't see it.

I agree re City bonuses at the top end but I think the first time buyers are more important as without wage rises who else can afford to move up the ladder? Until prices at the low end are affordable to first time buyers, the market would remain static.

But this will not happen - supply will meet demand as buy to let investors move out partly, or it will be a long time before first time buyers have saved that deposit !

OzTennis

What happens when there is a slowdown or downturn in the property market, at auction, sellers tend to be too optimistic with their 'reserve price'. When the auction is conducted and you don't reach the reserve you have a choice of 'passing in' (PI in the auction results) or negotiating with the highest bidder or taking it off the market. The increase in the % of PI's of late is very much down to 2000-2003 expectations of what a property will bring.

The other thing is that you will find the % of properties sold by auction rises and the % sold by private sale falls as the market is booming and vice-versa for a slowing/falling market. You can therefore reasonably expect the % of property offered by auction to fall in the near future.

It is a bit hit or miss when selling by auction. The clue is to know the market in the area you are selling, to decide whether you want an auction or private sale (and not be pressured by the agent looking for the highest commission rate which often is by auction), to choose your agent wisely (study the results and see which agent is doing best) and so on. At the end of the day with auctions you take your chance it's true. Gazumping (spelling?) happens less than in England so if you have a fixed price for private sale you miss out on the possibility of selling well over reserve that you get at auction (we saw one house sold for $500,000 over reserve in August!)

You hope that the agent gets lots of people inspecting and enquiring, that the weather is good on auction day (Melbourne auctions a risk - I'll get in with the obvious comment some will make), and that you don't set a date that might clash with things eg would you auction on Rugby World Cup day?

You are right, they are interesting. When we are out in Melbourne each year we make a point of going along to some auctions each Saturday afternoon which is the traditional auctioning time - although Sunday auctions are creeping in also.

OzTennis

Herman

The point has been made - there will always be wide variation even in and around the same city and by property type. Flats priced below £250k have suffered as buy to let investors have tried to sell up before interest rates go up and in response to a glut of rental property. Properties above £1 million have also suffered as wealthy foreign investors have moved their funds away from the London market and as investment banking bonuses have been suppressed. However, 3 and 4 bedroom houses in the £300k to £500k price bracket have been booming in many areas. In Wimbledon, where I currently live, houses in this price bracket have increased significantly in value and new instruction prices continue to increase. This has also been true of north Surrey (where we are moving to), with 3 bed houses about 12% more expensive than this time last year and with demand continuing to outstrip supply and prices surging ahead. Like many have said - buy carefully, get the right property in the right area and you'll be OK.

One other point for those who say buying a house is not an investment. Nonsense! Its the biggest investment you will ever make. Without the benefit of a defined benefit pension scheme most people are betting their future on their houses. We certainly pray that our house will provide good growth so that we can one day release that capital and perhaps retire somewhere more affordable. A house is absolutely an investment.

One other thing. Someone mentioned London cabbies. My cabbie on Monday morning told me that he bought his Victorian end of terrace in Clapham for £35,000 in 1975. Since then he has renovated it, paid off the mortgage and the street has been blocked off at one end so its now a cul-de-sac. Anyway, he told me that he had it valued at the weekend - £1.2 million! His plan was to rent it out, move to France and rent a farmhouse and live off the surplus rental income. Like I say, a house is an investment.